Exhibit 10.1
STANDARD MULTI-TENANT LEASE
 
This Standard Multi-Tenant Lease ("Lease") is made and entered into as of the
19th day of June, 2008, by and between ARDEN REALTY LIMITED PARTNERSHIP, a
Maryland limited partnership ("Landlord"), and SCOLR PHARMA, INC., a Delaware
corporation ("Tenant").
 
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
premises described as a portion of the first floor, as designated on the plan
attached hereto and incorporated herein as Exhibit "A" ("Premises"), of the
project ("Project") now known as Building One of North Creek Corporate Center
whose address is 19204 North Creek Parkway, Bothell, Washington, and located
upon the real property ("Real Property") described on Exhibit "A-1".  All
existing leasehold improvements within the Premises are included in the term
"Premises." The Real Property is a separate legal parcel and a separate tax
parcel.  The Real Property is known as North Creek Corporate Center, including
the parking area for North Creek Corporate Center, and is shown on the Site Plan
attached hereto as Exhibit "F" and made a part hereof (the "Development").  The
restrooms (other than any located within a tenant's rentable space), building
lobby and elevator within the Project are common areas for use by all tenants of
the Project and, during the term of this Lease, Tenant shall have the
non-exclusive right to the use and benefit of such common areas.  The total
rentable square footage of the Project is 49,115 square feet.  The Development
is a contiguous three-building development known as North Creek Corporate Center
owned by Landlord and the other two (2) buildings in the Development are
Building Two (having a total rentable square footage of 18,212 square feet),
whose address is 19310 North Creek Parkway and Building Three (having a total
rentable square footage of 27,356 square feet) whose address is 19102 North
Creek Parkway.  The Project and the other portions of the Development share
connecting driveways, walkways, parking areas and landscaped area (the
"Development Common Areas") and, subject to the terms and conditions of this
Lease, all tenants in the Development have, and during the term of this Lease,
shall have the non-exclusive right to use the Development Common
Areas.  Landlord recognizes that it has been informed by Tenant that Tenant is a
specialty pharmaceutical company that uses its proprietary technology platform
to develop novel pharmaceutical, over-the-counter and nutritional products and
that Tenant's use of the Premises may, subject to the terms and conditions of
this Lease, include production of prototype tablets in the Premises (such uses
are collectively referred to herein as the "Pharmaceutical Development
Uses").  This Lease shall be for the Term and upon the terms and conditions
hereinafter set forth, and Landlord and Tenant hereby agree as follows:
 
ARTICLE 1
 
BASIC LEASE PROVISIONS
 
A. 
Term:
Eighty-eight (88) months.
 
Commencement Date:
The earlier of (i) the date Tenant first commences to conduct business in all of
the Premises, or (ii) the later of (a) September 1, 2008, or (b) the date of
Substantial Completion of Improvements in all of the Premises.  The Commencement
Date is anticipated to be on or about September 1, 2008.
 
Expiration Date:
The date immediately preceding the eighty-eighth (88th) monthly anniversary of
the Commencement Date; provided, however, that if the Commencement Date is a
date other than the first (1st) day of a month, the Expiration Date shall be the
last day of the month which is eighty-eight (88) months after the month in which
the Commencement Date falls, unless extended or earlier terminated pursuant to
this Lease.

 
 
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B. 
Square Footage:
A total of 20,468 rentable square feet consisting of 9,360 rentable square feet
of office space (the "Office Portion"), 8,939 rentable square feet of lab space
(the "Lab Portion") and 2,169 rentable square feet of warehouse space (the
"Warehouse Portion").
C. 
Basic Rental:
 
1.
Office Portion
   
Months
Annual
Basic Rental
Monthly
Basic Rental
Monthly Basic Rental
Per Square Foot
 
1-12
$149,385.60
$12,448.80*
$1.33
13-24
$153,878.40
$12,823.20
$1.37
 
25-36
$158,371.20
$13,197.60
$1.41
 
37-48
$163,987.20
$13,665.60
$1.46
 
49-60
$168,480.00
$14,040.00
$1.50
 
61-72
$174,096.00
$14,508.00
$1.55
 
73-84
$178,588.80
$14,882.40
$1.59
 
85-88
$184,204.80
$15,350.40
$1.64
 
*Subject to abatement as provided in Article 3 below.
2.
Lab Portion
       
Months
Annual
Basic Rental
Monthly
Basic Rental
Monthly Basic Rental
Per Square Foot
 
1-12
$210,245.28
$17,520.44*
$1.96
 
13-24
$216,681.36
$18,056.78
$2.02
 
25-36
$223,117.44
$18,593.12
$2.08
 
37-48
$229,553.52
$19,129.46
$2.14
 
49-60
$235,989.60
$19,665.80
$2.20
 
61-72
$243498.36
$20,291.53
$2.27
 
73-84
$251,007.12
$20,917.26
$2.34
 
85-88
$258,515.88
$21,542.99
$2.41
 
*Subject to abatement as provided in Article 3 below.
3.
Warehouse Portion
     
Lease Year
Annual
Basic Rental
Monthly
Basic Rental
Monthly Basic Rental
Per Square Foot
 
1-12
$16,918.20
$1,409.85*
$0.65
 
13-24
$17,438.76
$1,453.23
$0.67
 
25-36
$17,959.32
$1,496.61
$0.69
 
37-48
$18,479.88
$1,539.99
$0.71
 
49-60
$19,000.44
$1,583.37
$0.73
 
61-72
$19,521.00
$1,626.75
$0.75
 
73-84
$20,301.84
$1,691.82
$0.78
 
85-88
$20,822.40
$1,735.20
$0.80
 
*Subject to abatement as provided in Article 3 below.

4.
Total Premises
       
Months
Annual
Basic Rental
Monthly
Basic Rental
   
1-12
$376,549.08
$31,379.09*
   
13-24
$387,998.52
$32,333.21
   
25-36
$399,447.96
$33,287.33
   
37-48
$412,020.60
$34,335.05
 

 
 
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Months
Annual
Basic Rental
Monthly
Basic Rental
   
49-60
$423,470.04
$35,289.17
   
61-72
$437,115.36
$36,426.28
   
73-84
$449,897.76
$37,491.48
   
85-88
$463,543.08
$38,628.59
   
*Subject to abatement as provided in Article 3 below.
D. 
Tenant's Proportionate Share (ratio of rentable area of the Premises to rentable
area of the Project):
41.67%.
E. 
Security Deposit/Letter of Credit:
A security deposit of $38,628.59 shall be due and payable by Tenant to Landlord
upon Tenant's execution of this Lease.  In addition, concurrently with Tenant's
execution of this Lease, Tenant shall provide Landlord with a Letter of Credit
in the amount of $564,000.00 as further provided in Section 4(b) below.
F. 
Permitted Use:
Pharmaceutical Development Uses and general office, lab, research, development,
distribution and warehouse use and, to the extent reasonably approved by
Landlord, any other legally permitted use for the Project.
G. 
Brokers:
Flinn Ferguson (representing Tenant) and Pacific Real Estate Partners
(representing Landlord).
H. 
Parking Passes:
Tenant shall be entitled to use three point five (3.5) unreserved parking passes
for each 1,000 rentable square feet contained in the Premises, which equals
seventy-two (72) passes.  Each such parking pass shall entitle Tenant to an
unreserved parking space in the parking facility located in the Development on a
first come-first served basis.
I. 
Initial Installment of Basic Rental:
The first full month's Basic Rental of $31,379.09 shall be due and payable by
Tenant to Landlord upon Tenant's execution of this Lease.

 
ARTICLE 2
 
TERM/PREMISES
 
(a) Term.  The Term of this Lease shall commence on the Commencement Date as set
forth in Article 1.A. of the Basic Lease Provisions and shall end on the
Expiration Date set forth in Article 1.A. of the Basic Lease Provisions.  For
purposes of this Lease, the term "Lease Year" shall mean each consecutive twelve
(12) month period during the Lease Term, with the first (1st) Lease Year
commencing on the Commencement Date; however, (a) if the Commencement Date falls
on a day other than the first (1st) day of a calendar month, the first (1st)
Lease Year shall end on the last day of the eleventh (11th) month after the
Commencement Date and the second (2nd) and each succeeding Lease Year shall
commence on the first (1st) day of the next calendar month, and (b) the last
Lease Year shall end on the Expiration Date.  If Landlord does not deliver
possession of the Premises to Tenant on or before the anticipated Commencement
Date (as set forth in Article 1.A above), Landlord shall not be subject to any
liability for its failure to do so, and such failure shall not affect the
validity of this Lease nor the obligations of Tenant hereunder; provided,
however, if during construction of the Improvements in the Premises, Landlord
and Tenant reasonably determine that Substantial Completion of the Improvements
in all of the Premises will not occur on or before October 31, 2008, and
Landlord

 
 
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will promptly instruct Contractor to focus its efforts in such manner so that
Tenant may occupy at least such portions of the Premises prior to October 31,
2008.  Landlord and Tenant agree to reasonably work together, in good faith, to
identify portions of the Premises within which the Contractor may focus its
efforts in order to cause such portions to be in a condition which may be
legally occupied by Tenant prior to October 1.  If Tenant so occupies any
portion of the Premises prior to the Commencement Date, all of the terms and
conditions of this Lease apply during the period of such occupancy and prior to
the Commencement Date including, without limitation, Tenant's obligation to
maintain insurance pursuant Article 14 below; however, (i) Tenant's obligation
to pay monthly Basic Rental and any Direct Costs shall be prorated during such
period based upon the number of rentable square feet so occupied by Tenant (and
as to Basic Rental at the initial rate specified in Section 1(C) above), which
payments shall be due within thirty (30) days after invoice, and (ii) the
Commencement Date for this Lease shall not occur until the date specified in the
definition of Commencement Date in Section 1(A) above occurs.  Tenant's entry
onto the Premises pursuant to Section 6.4 of the Tenant Work Letter to conduct
its fixturization shall not constitute Tenant's conducting business in the
Premises for purposes of the definition of Commencement Date.
(b) Premises.  Landlord and Tenant hereby stipulate that the Premises contains
the number of square feet specified in Article 1.B. of the Basic Lease
Provisions.  Landlord may deliver to Tenant a Commencement Letter in a form
substantially similar to that attached hereto as Exhibit "C", which, if the
completed information therein is accurate, Tenant shall execute and return to
Landlord within five (5) days of receipt thereof.  Failure of Tenant to execute
and deliver the Commencement Letter or object in writing to any inaccuracy
therein within such period shall constitute an acknowledgment by Tenant that the
statements included in such notice are true and correct, without exception.
 
ARTICLE 3
 
RENTAL
 
(a) Basic Rental.  Tenant agrees to pay to Landlord during the Term hereof, at
Landlord's office or to such other person or at such other place as directed
from time to time by written notice to Tenant from Landlord, the initial monthly
sums as set forth in Article 1.C. of the Basic Lease Provisions, payable in
advance on the first (1st) day of each calendar month, without demand, setoff or
deduction, except as expressly provided in this Lease, and in the event this
Lease commences or the date of expiration of this Lease occurs other than on the
first day or last day of a calendar month, the rent for such month shall be
prorated.  Notwithstanding anything to the contrary contained herein, Landlord
hereby agrees to abate Tenant's obligation to pay monthly Basic Rental for the
second (2nd) through and including the fifth (5th) months of the initial Lease
Term.  During such abatement period, Tenant shall still be responsible for the
payment of all of its other monetary obligations under the Lease.  If an Event
of Default occurs that results in early termination of this Lease pursuant to
the provisions of Section 20(a) of this Lease, then as a part of the recovery
set forth in Section 20 of this Lease, Landlord shall be entitled to the
recovery of the unamortized portion of the monthly Basic Rental that was abated
under the provisions of this Article 3.  In addition, notwithstanding the
foregoing, the first (1st) full month's Basic Rental shall be paid to Landlord
in accordance with Article 1.I. of the Basic Lease Provisions and, if the
Commencement Date is not the first day of a month, Basic Rental and Rental Tax
for the partial month commencing as of the Commencement Date shall be prorated
based upon the actual number of days in such month and shall be due and payable
upon the Commencement Date.
 
(b) Direct Costs.  Tenant shall pay an additional sum for each calendar year
during the Term equal to the product of the Tenant's Proportionate Share set
forth in Article 1.D. of the Basic Lease Provisions multiplied by the amount of
Direct Costs.  In the event either the Premises and/or the Project is expanded
or reduced, then Tenant's Proportionate Share shall be appropriately adjusted
based on the ratio of the rentable area of the Premises to the rentable area of
the Project, and as to the calendar year in which such change occurs, Tenant's
Proportionate Share for such calendar year shall be determined on the basis of
the number of days during that particular calendar year that such Tenant's
Proportionate Share was in effect.  In the event this Lease shall terminate on
any date other than the last day of a calendar year, the additional sum payable
hereunder by Tenant during the calendar year in which this Lease terminates
shall be prorated on the basis of the relationship which the number of days
which have elapsed from the

 
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commencement of said calendar year to and including said date on which this
Lease terminates bears to three hundred sixty-five (365).  Any and all amounts
due and payable by Tenant pursuant to this Lease (other than Basic Rental) shall
be deemed "Additional Rent" and Landlord shall be entitled to exercise the same
rights and remedies upon default in these payments as Landlord is entitled to
exercise with respect to defaults in monthly Basic Rental payments.  Basic
Rental and Additional Rent may be collectively referred to herein as "Rent".  At
the same time as any payment of Rent is to be made by Tenant hereunder, Tenant
shall also pay any and all rental taxes, gross receipts taxes, transaction
privilege taxes, sales taxes, and/or similar taxes levied currently or in the
future on the Rent amount then due or otherwise assessed in connection with the
rental activity then occurring (collectively, "Rental Tax").(c) Definitions.  As
used herein the term "Direct Costs" shall mean the sum of the following:
 
(i) "Tax Costs", which shall mean any and all real estate taxes and other
similar charges on real property or improvements, assessments, water and sewer
charges, and all other charges assessed, reassessed or levied upon the Project
and appurtenances thereto and the parking or other facilities thereof, or the
Real Property during the Term which are assessed, reassessed or levied by the
United States, the State of Washington, any applicable county within the State
of Washington, any applicable city, town or other local government authority
within the State of Washington, and/or any other agency or political subdivision
of the State of Washington, and shall include Landlord's reasonable legal fees,
costs and disbursements incurred in connection with proceedings for reduction of
Tax Costs or any part thereof; provided, however, if at any time after the date
of this Lease the methods of taxation now prevailing shall be altered so that in
lieu of or as a supplement to or a substitute for the whole or any part of any
Tax Costs, there shall be assessed, reassessed or levied (a) a tax, assessment,
reassessment, levy, imposition or charge wholly or partially as a net income,
capital or franchise levy or otherwise on the rents, issues, profits or income
derived therefrom, or (b) a tax, assessment, reassessment, levy (including but
not limited to any municipal, state or federal levy), imposition or charge
measured by or based in whole or in part upon the Real Property and imposed upon
Landlord, then except to the extent such items are payable by Tenant under
Article 6 below, such taxes, assessments, reassessments or levies or the part
thereof so measured or based, shall be deemed to be included in the term "Direct
Costs."  Notwithstanding the foregoing, Tax Costs shall not include any income,
business and occupancy, capital levy, franchise, capital stock, gift, transfer,
real estate excise estate or inheritance tax, or any interest, penalties or
damages incurred for late payment of taxes or assessments.  If a tax or
assessment is payable in installments, Tax Costs applicable thereto for a year
shall include only the amount of the installment and any interest due and
payable during that year.
 
(ii) "Operating Costs", which shall mean all costs and expenses incurred by
Landlord in connection with the maintenance, operation, management and repair of
the Project, the equipment, the intra-building cabling and wiring, adjacent
walks, driveways and landscaped and common areas and the parking lot, areas and
facilities of the Project.   Operating Costs shall include but not be limited
to, salaries, wages, medical, surgical and general welfare benefits and pension
payments, payroll taxes, fringe benefits, employment taxes, workers'
compensation, uniforms and dry cleaning thereof for all employees at or below
the portfolio manager level who perform duties connected with the operation,
maintenance and repair of the Project, its equipment, the intra-building cabling
and wiring and the adjacent walks and landscaped areas, including gardening,
security, parking, operating engineer, elevator, painting, plumbing, electrical,
carpentry and window washing, (provided, however that to the extent personnel
perform services for buildings other than the Project, the labor costs
associated with such personnel shall be included in Operating Costs only to the
extent and in the proportion that such personnel perform services for the
Project); a reasonable allowance for depreciation of the cost of acquiring or
the rental expense of personal property used in the maintenance, operation and
repair of the Project, accountant's fees incurred in the preparation of rent
adjustment statements and real estate tax consulting fees pertaining to the
Project; personal property taxes on property used in the maintenance and
operation of the Project; fees, costs, expenses or owners' association dues
payable pursuant to the terms of any recorded covenants, conditions or
restrictions pertaining to the Project; the amortized cost of capital
improvements made to the Project which are performed primarily to reduce
Operating Costs or otherwise improve the operating efficiency of the Project
amortized on a straight line basis over the useful life of such improvements
(but not to exceed the projected annual reduction in Operating Costs) and the
amortized cost of capital improvements to the Project required to comply with
any applicable Laws that are

 
 
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enacted after the Commencement Date ("New Laws"); non-capital maintenance costs
incurred on a regular recurring basis every three (3) or more years for certain
maintenance projects on the Project (e.g., parking lot slurry coat and roof
patching, but not repaving of the parking lot or roof replacement); the cost of
all charges for utilities furnished to the common areas of the Project and
utilities that are not separately payable by tenants of the Project, including
any taxes thereon; the cost of all charges for fire and extended coverage,
liability and all other insurance in connection with the Project carried by
Landlord; the cost of all supplies and materials used in the maintenance and
operation of the Project; the cost of all charges for cleaning, maintenance and
service contracts and other services with independent contractors and
administration fees; a property management fee (which fee may be imputed if
Landlord has internalized management or otherwise acts as its own property
manager) and license, permit and inspection fees relating to the Project.
 
Notwithstanding anything above to the contrary, Operating Costs shall not
include (1) the cost of providing any service directly to and paid directly by
any tenant (outside of such tenant's Direct Cost payments) such as where a
Tenant directly contracts for electric power or other utilities with the local
public services company, provided that in each such case, Landlord shall have
the right to "gross up" such item as if such space was vacant; (2) the cost of
any items for which Landlord is reimbursed by insurance proceeds (or would have
been reimbursed if Landlord maintained the insurance required to be maintained
by Landlord under this Lease), condemnation awards, a tenant of the Development
(outside of such tenant's Direct Cost payments), or otherwise to the extent so
reimbursed; (3) any real estate brokerage commissions or other costs incurred in
procuring tenants, or any fee in lieu of commission; (4) amortization of
principal and interest on mortgages or ground lease payments (if any); (5) costs
of items considered capital repairs, replacements, improvements and equipment
under generally accepted accounting principles consistently applied except as
expressly included in Operating Costs pursuant to the definition above;
(6) costs incurred by Landlord due to the violation by Landlord or any tenant of
the terms and conditions of any lease of space in the Development or any law,
code, regulation, ordinance or the like; (7) any compensation paid to clerks,
attendants or other persons in commercial concessions operated by Landlord
(other than in the parking facility for the Development); (8) costs incurred in
connection with upgrading the Project or Development to comply with disability,
life, seismic, fire and safety codes, ordinances, statutes, or other laws in
effect prior to the Commencement Date, including, without limitation, the then
applicable requirements of the Americans with Disabilities Act ("ADA"),
including penalties or damages incurred due to such non-compliance; (9) bad debt
expenses and interest, principal, points and fees on debts (except in connection
with the financing of items which may be included in Operating Costs);
(10) marketing costs, including those costs described in (3) above, attorneys'
fees in connection with the negotiation and preparation of letters, deal memos,
letters of intent, leases, subleases, assignments, agreements relating to
financing or sale of the Project or Development, space planning costs, and other
costs and expenses incurred in connection with lease, sublease and/or assignment
negotiations and transactions with present or prospective tenants or other
occupants of the Development, including attorneys' fees and other costs and
expenditures incurred in connection with disputes with present or prospective
tenants or other occupants of the Development, or in connection with any
financing or sale transactions pertaining to the Project or Development;
(11) costs, including permit, license and inspection costs, incurred with
respect to the installation of other tenants' or occupants' improvements made
for tenants or other occupants in the Project or incurred in renovating or
otherwise improving, decorating, painting or redecorating vacant space for
tenants or other occupants in the Project; (12) any costs expressly excluded
from Operating Costs elsewhere in this Lease; (13) costs of any items
(including, but not limited to, costs incurred by Landlord for the repair of
damage to the Project or Development) to the extent Landlord receives
reimbursement from insurance proceeds or from a third party (except that any
commercially reasonable deductible amount under any insurance policy shall be
included within Operating Costs); (14) rentals and other related expenses for
leasing an HVAC system, elevators, or other items (except when needed in
connection with normal repairs and maintenance of the Project) which if
purchased, rather than rented, would constitute a capital improvement not
included in Operating Costs pursuant to this Lease; (15) depreciation,
amortization and interest payments, except as specifically included in Operating
Costs pursuant to the terms of this Lease and except on materials, tools,
supplies and vendor-type equipment purchased by Landlord to enable Landlord to
supply services Landlord might otherwise contract for with a third party, where
such depreciation, amortization and interest payments would otherwise have been
included in the charge for such third party's services, all as determined in
accordance with generally accepted accounting principles,

 
 
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consistently applied, and when depreciation or amortization is permitted or
required, the item shall be amortized over its reasonably anticipated useful
life; (16) expenses in connection with services or other benefits which are not
offered to Tenant or for which Tenant is charged for directly but which are
provided to another tenant or occupant of the Development, without charge;
(17) costs incurred in connection with the operation of retail stores selling
merchandise, specialty service facilities and restaurants in the Project or
Development to the extent such costs are in excess of the costs Landlord
reasonably estimates would have been incurred had such space been used for
general office use; (18) costs (including in connection therewith all attorneys'
fees and costs of settlement, judgments and/or payments in lieu thereof) arising
from claims, disputes or potential disputes in connection with potential or
actual claims litigation or arbitrations pertaining to Landlord and/or the
Project or Development, other than such claims or disputes respecting any
services or equipment used in the operation of the Project or Development by
Landlord; (19) costs associated with the operation of the business of the
partnership which constitutes Landlord as the same are distinguished from the
costs of operation of the Project or Development; (20) costs incurred in
connection with the original construction of the Project or Development;
(21) costs of correcting defects in or inadequacy of the initial design or
construction of the Project or Development; (22) costs incurred to (i) remove,
remediate, contain treat or comply with laws relating to the removal of any
"Hazardous Material," as that term is defined in Article 28 of this Lease, which
was in existence on the Project or Development prior to the Commencement Date,
and (ii) remove, remediate, contain or treat or comply with Laws relating to the
removal of any Hazardous Material, which Hazardous Material is brought onto the
Project or Development after the date hereof by Landlord or any other tenant of
the Project or Development or other third party (provided, however, the cost of
removal of de minimis amounts of Hazardous Material customarily found in office
developments (such as cleaners, solvents, lubricants, parking lot runoff, etc.)
as part of the general operation of the Development may be included in Operating
Costs); (23) property management fees and other service fees to the extent they
exceed the amount which would generally be expected to be the cost of such
services rendered by comparably qualified, unaffiliated third parties; and
(24) damages or penalties arising from Landlord's breach of any agreement or
contract.
It is understood that Operating Costs shall be reduced by all cash discounts,
rebates,. trade discounts, or quantity discounts received by Landlord or
Landlord's managing agent in the purchase of any goods, utilities, or services
in connection with the operation of the Project.  Landlord shall make payments
for goods, utilities and services in a timely manner.  Landlord agrees to keep
records of Operating Costs in accordance with a system of accounts and
accounting practices consistently maintained on a year-to-year basis.
 
It is understood that to the extent applicable all Operating Costs shall be
calculated by Landlord in accordance with generally accepted accounting
principles or otherwise in accordance with standard real estate accounting
practices utilized by institutional quality landlords in the State of Washington
and reduced by all cash discounts, trade discounts, or quantity discounts
actually received by Landlord or Landlord's managing agent in the purchase of
any goods, utilities, or services in connection with the operation of the
Project.
 
In the event, during any calendar year, the Project is less than ninety-five
percent (95%) occupied at all times, those components of Operating Costs that
are variable with occupancy shall be adjusted and determined for such calendar
year as if the Project was ninety-five percent (95%) occupied at all times, and
the increase or decrease in the sums owed hereunder shall be based upon such
Operating Costs as so adjusted.
 
(d) Determination of Payment.
 
(i) Landlord shall give Tenant a yearly expense estimate statement (the
"Estimate Statement") which shall set forth Landlord's reasonable estimate (the
"Estimate") of what the total amount of Direct Costs for the then-current
calendar year shall be (the "Estimated Direct Costs"), together with the amount
payable by Tenant for Tenant's Proportionate Share of such Estimated Direct
Costs.  The failure of Landlord to timely furnish the Estimate Statement for any
calendar year shall not preclude Landlord from subsequently enforcing its rights
to collect any Estimated Direct Costs under this Article 3, once such Estimated
Direct Costs have been determined by Landlord.  Tenant shall pay, with its next
installment of Monthly Basic Rental which is due at least twenty (20) days from
the date Tenant receives the Estimate Statement, a fraction of the Tenant's
Proportionate Share of such Estimated Direct Costs for the then-current calendar
year (reduced by any amounts paid pursuant to the last sentence of this
 
 
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Section 3(d)(i)).  Such fraction shall have as its numerator the number of
months which have elapsed in such current calendar year to the month of such
payment, both months inclusive, and shall have twelve (12) as its
denominator.  Until a new Estimate Statement is furnished, Tenant shall pay
monthly, with the monthly Basic Rental installments, an amount equal to
one-twelfth (1/12) of the total of Tenant's Proportionate Share of such
Estimated Direct Costs Estimated Direct Costs set forth in the previous Estimate
Statement delivered by Landlord to Tenant.(ii) In addition, Landlord shall
endeavor to give to Tenant as soon as reasonably practicable following the end
of each calendar year (but not later than one hundred eighty (180) days after
the end of such year), a statement (the "Statement") which shall state the
Direct Costs incurred or accrued for such preceding calendar year.  Upon receipt
of the Statement for each calendar year during the Term, if amounts paid by
Tenant as Estimated Direct Costs are less than Tenant's actual Proportionate
Share of Direct Costs as specified on the Statement, Tenant shall pay, with its
next installment of monthly Basic Rental which is due at least twenty (20) days
from the date Tenant receives the Estimate Statement, the full amount of
Tenant's actual Proportionate Share of Direct Costs for such calendar year, less
the amounts, if any, paid during such calendar year as Estimated Direct
Costs.  If, however, the Statement indicates that amounts paid by Tenant as
Estimated Direct Costs are greater than Tenant's actual Proportionate Share of
Direct Costs as specified on the Statement, such overpayment shall be credited
against Tenant's next installments of Rent.  The failure of Landlord to timely
furnish the Statement for any calendar year shall not prejudice Landlord or
Tenant from enforcing its rights under this Article 3, once such Statement has
been delivered.  Even though the Term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's Proportionate Share
of the Direct Costs for the calendar year in which this Lease terminates, Tenant
shall immediately pay to Landlord (or Landlord shall reimburse to Tenant) an
amount as calculated pursuant to the provisions of this Section 3(d).  The
provisions of this Section 3(d)(ii) shall survive the expiration or earlier
termination of the Term.
 
(iii) If the Project is a part of a multi-building development, those Direct
Costs attributable to such development as a whole (and not attributable solely
to any individual building therein) shall be allocated by Landlord to the
Project and to the other buildings within such development on an equitable and
commercially reasonable basis.
 
(e) Audit Right.  Within one hundred eighty (180) days after receipt of a
Statement by Tenant ("Review Period"), if Tenant disputes the amount set forth
in the Statement, Tenant's employees or an independent certified public
accountant (which accountant is a member of a nationally or regionally
recognized accounting firm and is not retained on a contingency fee basis),
designated by Tenant, may, after reasonable notice to Landlord ("Review Notice")
and at reasonable times, inspect Landlord's records at Landlord's offices in the
Seattle metropolitan area, provided that Tenant is not then in default after
expiration of all applicable cure periods and provided further that Tenant and
such accountant or representative shall, and each of them shall use their
commercially reasonable efforts to cause their respective agents and employees
to, maintain all information contained in Landlord's records in confidence,
provided such information may be disclosed to Tenant’s lawyers, advisors,
lenders and others who have a legitimate need to know such
information.  Notwithstanding the foregoing, Tenant shall only have the right to
review Landlord's records one (1) time (which review may occur over a period of
more than one day, as reasonably required) during any twelve (12) month
period.  If after such inspection, but within sixty (60) days after the Review
Period, Tenant notifies Landlord in writing ("Dispute Notice") that Tenant still
disputes such amounts, a certification as to the proper amount shall be made in
accordance with Landlord's standard accounting practices, at Tenant's expense,
by a neutral, independent certified public accountant selected by Landlord and
who is a member of a nationally or regionally recognized accounting firm which
has no affiliation or contractual relationship with Landlord or
Tenant.  Landlord shall engage such independent accountant within thirty (30)
days after Landlord receives the Dispute Notice.  Tenant's failure to deliver
the Review Notice within the Review Period or to deliver the Dispute Notice
within sixty (60) days after the Review Period shall be deemed to constitute
Tenant's approval of such Statement and Tenant, thereafter, waives the right or
ability to dispute the amounts set forth in such Statement.  If Tenant timely
delivers the Review Notice and the Dispute Notice, Landlord shall cooperate in
good faith with Tenant and the independent accountant to show Tenant and such
accountant the information upon which the certification is to be
based.  However, if such certification by the independent accountant proves that
the Direct Costs set forth in the Statement were overstated by more than four
percent (4%), then the cost of the independent accountant and the cost of such
certification shall be paid for by Landlord.  
 
 
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Promptly following the parties receipt of such certification, the parties shall
make such appropriate payments or reimbursements, as the case may be, to each
other, as are determined to be owing pursuant to such certification.  Tenant
agrees that this section shall be the sole method to be used by Tenant to
dispute the amount of any Direct Costs payable by Tenant pursuant to the terms
of this Lease, and Tenant hereby waives any other rights at law or in equity
relating thereto.
 
ARTICLE 4
 
SECURITY DEPOSIT/LETTER OF CREDIT
 
(a) Security Deposit.  Tenant has deposited or concurrently herewith is
depositing with Landlord the sum set forth in Article 1.E. of the Basic Lease
Provisions as security for the full and faithful performance of every provision
of this Lease to be performed by Tenant.  If an Event of Default occurs and is
continuing, Landlord may use all or any part of this security deposit for the
payment of any rent or any other sums in default, or to compensate Landlord for
any expense actually and reasonably incurred by Landlord as a result of Tenant's
default or if Landlord has terminated the Lease, the damages to which Landlord
is entitled pursuant to Article 20 of this Lease.  If any portion of said
deposit is so used or applied, Tenant shall, within five (5) business days after
written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the security deposit to its full amount.  Tenant agrees that Landlord
shall not be required to keep the security deposit in trust, segregate it or
keep it separate from Landlord's general funds but Landlord may commingle the
security deposit with its general funds and Tenant shall not be entitled to
interest on such deposit.  At the expiration of the Term, and except to the
extent Tenant owes Landlord money due to a default by Tenant hereunder, the
security deposit or any balance thereof shall be returned to Tenant (or, at
Landlord's option, to Tenant's "Transferee", as such term is defined in
Article 15 below), provided that subsequent to the expiration of this Lease,
Landlord may retain from said security deposit (i) an amount reasonably
estimated by Landlord to cover potential Direct Cost reconciliation payments due
with respect to the calendar year in which this Lease terminates or expires
(such amount so retained shall not, in any event, exceed ten percent (10%) of
Estimated Direct Cost payments due from Tenant for such calendar year through
the date of expiration or earlier termination of this Lease and any amounts so
retained and not applied to such reconciliation shall be returned to Tenant
within thirty (30) days after Landlord's delivery of the Statement for such
calendar year), (ii) any and all amounts reasonably estimated by Landlord to
cover the anticipated costs to be incurred by Landlord to remove any signage
provided to Tenant under this Lease, to remove cabling and other items required
to be removed by Tenant under Section 29(b) below and to repair any damage
caused by such removal (in which case any excess amount so retained by Landlord
shall be returned to Tenant within thirty (30) days after such removal and
repair), and (iii) any and all amounts permitted by law and this Article 4.
Tenant hereby waives any provisions of law, now or hereafter in effect, which
provide that 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 Tenant or to clean the Premises, it being agreed that Landlord may, in
addition, claim those sums specified in this Article 4 above, and all of
Landlord's damages under this Lease and Washington law including, but not
limited to, any damages accruing upon termination of this Lease and/or those
sums reasonably necessary to compensate Landlord for any other actual damage,
foreseeable or unforeseeable, caused by the acts or omissions of Tenant or any
officer, employee, agent, contractor or invitee of Tenant.
 
(b) Letter of Credit.  Concurrently with Tenant's execution of this Lease,
Tenant shall deliver to Landlord an unconditional, irrevocable and renewable
letter of credit ("Letter of Credit") in favor of Landlord substantially in the
form attached hereto as Exhibit E, issued by Silicon Valley Bank or other bank
reasonably satisfactory to Landlord with a branch which will honor draws located
in the Seattle area or permitting draws electronically or by mail, overnight
courier or facsimile, in the principal amount ("Stated Amount") specified below,
to be held by Landlord in accordance with the terms, provisions and conditions
of this Lease.  Tenant shall pay all expenses, points and/or fees incurred by
Tenant in obtaining the Letter of Credit.  If the Letter of Credit delivered by
Tenant is inconsistent with the form attached hereto as Exhibit E (including,
without limitation, the wrong name or address for the Beneficiary), Landlord may
so notify Tenant in writing, in which case Tenant shall cause the Letter of
Credit to be corrected within five (5) business days after such notice.  The
Stated Amount shall initially be Five Hundred Sixty-Four Thousand Dollars
($564,000.00); provided, however, that, except as

 
 
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hereinafter provided, upon the dates specified below ("Adjustment Dates"), the
Stated Amount shall be reduced to the following amounts:
Date
 
Stated Amount
 
November 30, 2011
  $ 376,000.00  
November 30, 2012
  $ 188,000.00  
November 30, 2013
  $ 0.00  

 
However, if Tenant does not utilize the entire Improvement Allowance by the
earlier of (i) the date Tenant gives Landlord written notice that it will not
seek to obtain any credit for any unused portion of the Improvement Allowance or
(ii) March 31, 2009, then, subject to the next sentence below, Tenant may cause
the Stated Amount to be reduced on such date by the amount of the Improvement
Allowance which is not so utilized by Tenant and the Stated Amount may be
further reduced upon the Adjustment Dates on a proportionate basis (i.e., on the
first (1st) Adjustment Date, the Stated Amount may be reduced to two-thirds
(2/3rds) of the revised original Stated Amount, on the second (2nd) Adjustment
Date, the Stated Amount may be reduced to one-third (1/3) of the revised
original Stated Amount, and upon the third (3rd) Adjustment Date, the Stated
Amount may be reduced to zero dollars).  Furthermore, if (i) a default by Tenant
occurs under this Lease, or (ii) circumstances exist that would, with notice or
lapse of time, or both, constitute a default by Tenant, and Tenant has failed to
cure such default within the time period permitted by Article 19 or such lesser
time as may remain before the relevant Adjustment Date as provided above, the
Stated Amount shall not thereafter be reduced unless and until such default
shall have been fully cured pursuant to the terms of this Lease, at which time
the Stated Amount may be reduced as hereinabove described.  Upon any change to
the Stated Amount, the Letter of Credit shall be concurrently amended or
replaced by a Letter of Credit in the new reduced Stated Amount, and Landlord
and Tenant shall take the steps reasonably necessary to cause the existing
Letter of Credit to be delivered to the issuing bank and the issuing bank to
amend the Letter of Credit or issue a new replacement Letter of Credit in the
new reduced Stated Amount on the date the Stated Amount is required to be
adjusted.  The Letter of Credit shall state that an authorized officer or other
representative of Landlord may make demand on Landlord's behalf for the Stated
Amount of the Letter of Credit, or any portion thereof, and that the issuing
bank must immediately honor such demand upon presentation to it of the original
Letter of Credit, without qualification or satisfaction of any conditions,
except the proper identification of the party making such demand and such
party's certification that Landlord is entitled to draw on the Letter of Credit
pursuant to this Lease.  In addition, the Letter of Credit shall indicate that
it is transferable in its entirety by Landlord as beneficiary to any transferee
of Landlord's interest under this Lease who assumes Landlord's obligations under
this Lease or to a lender under any mortgage or deed of trust encumbering the
Project (provided that such lender agrees that draws may be made on the Letter
of Credit only as permitted by this Lease, the drawn amounts shall only be used,
applied or retained as permitted by this Lease, the drawn amounts shall be
returned to Tenant to the extent required by this Lease, and that no further
assignments shall be made by such lender of the beneficiary's interest in the
Letter of Credit except as permitted by this Lease) and that upon receiving
written notice of transfer along with such party's certification confirming that
the transfer meets the above requirements, and upon presentation to the issuing
bank of the original Letter of Credit, the issuer or confirming bank will
reissue the Letter of Credit naming such transferee as the beneficiary.  Tenant
shall be responsible for the payment to the issuing bank of any transfer costs
imposed by the issuing bank in connection with any such transfer.  If (A) the
term of the Letter of Credit held by Landlord will expire prior to the last
Adjustment Date specified above and the Letter of Credit is not extended, or a
new Letter of Credit for an extended period of time is not substituted, in
either case at least (30) days prior to the expiration of the Letter of Credit,
or (B) an Event of Default has occurred and is continuing, including the filing
of a voluntary petition under Title 11 of the United States Code (i.e., the
bankruptcy Code), or Tenant otherwise becomes a debtor in any case or proceeding
under the Bankruptcy Code, as now existing or hereinafter amended, or any
similar law or statute, Landlord may (but shall not be required to) draw upon
all or any portion of the Stated Amount of the Letter of Credit, and the
proceeds received from such draw shall constitute Landlord's property (and not
Tenant's property or the property of the bankruptcy estate of Tenant) and
Landlord may then use, apply or retain all or any part of the proceeds (1) for
the payment of any sum which is in default, (2) to reimburse Landlord for any
expense actually and reasonably incurred by Landlord as a result of Tenant's
default, and (3) if Landlord has terminated this Lease, the damages to which
Landlord is entitled

 
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pursuant to Article 20 of this Lease.  If any portion of the Letter of Credit
proceeds are so used or applied, Tenant shall, within ten (10) days after demand
therefor, post an additional Letter of Credit in an amount to cause the
aggregate amount of the unused proceeds and such new Letter of Credit to equal
the Stated Amount required in this Article 4 above.  Landlord shall not be
required to keep any proceeds from the Letter of Credit separate from its
general funds.  Should Landlord sell its interest in the Premises during the
Lease Term, Landlord shall transfer the Letter of Credit and any unapplied
proceeds of the Letter of Credit to the purchaser, and if Landlord transfers the
Letter of Credit and deposits with the purchaser thereof the Letter of Credit
and any unapplied proceeds of the Letter of Credit and such purchaser assumes in
writing Landlord’s obligations with respect thereto, thereupon Landlord shall be
discharged from any further liability with respect to the Letter of Credit and
said proceeds and Tenant shall look solely to such transferee for the return of
the Letter of Credit or any proceeds therefrom.  The Letter of Credit or any
remaining proceeds of the Letter of Credit held by Landlord after expiration or
earlier termination of the Lease Term, after any deductions described in this
Article 4 above, 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 Lease Term; provided, if the Stated Amount is reduced
while Landlord is holding any such unapplied proceeds, Landlord shall promptly
return to Tenant (so long as no Event of Default is continuing) the amount by
which such proceeds and the remaining balance of the Letter of Credit exceeds
the reduced Stated Amount.The use, application or retention of the Letter of
Credit, the proceeds or any portion thereof, shall not prevent Landlord from
exercising any other rights or remedies provided under this Lease, it being
intended that Landlord shall not be required to proceed against the Letter of
Credit, and such use, application or retention of the Letter of Credit shall not
operate as a limitation on any recovery to which Landlord may otherwise be
entitled.  No trust relationship is created herein between Landlord and Tenant
with respect to the Letter of Credit.
 
Landlord and Tenant acknowledge and agree that in no event or circumstance shall
the Letter of Credit, any renewal thereof or substitute therefor or the proceeds
thereof be deemed to be or treated as a "security deposit" within the meaning of
any laws or statutes.  The parties hereto (A) recite that the Letter of Credit
is not intended to serve as a security deposit and any laws, rules and
regulations applicable to security deposits in the commercial context ("Security
Deposit Laws") shall have no applicability or relevancy thereto and (B) waive
any and all rights, duties and obligations either party may now or, in the
future, will have relating to or arising from the Security Deposit
Laws.  Notwithstanding the foregoing, to the extent any Security Deposit Law in
any way: (a) is applicable to this Lease or the Letter of Credit (or any
proceeds thereof); or (b) controls Landlord's rights to draw on the Letter of
Credit or apply the proceeds of the Letter of Credit to any amounts due under
this Lease or any damages Landlord may suffer following termination of this
Lease, then Tenant fully and irrevocably waives the benefits and protections of
such Security Deposit Law, it being agreed that Landlord may recover from the
Letter of Credit (or its proceeds) amounts expressly provided in this Article 4.
 
ARTICLE 5
 
HOLDING OVER
 
Should Tenant, without Landlord's written consent, hold over after termination
of this Lease, Tenant shall, at Landlord's option, become either a tenant at
sufferance or a month-to-month tenant upon each and all of the terms herein
provided as may be applicable to such a tenancy and any such holding over shall
not constitute an extension of this Lease.  During such holding over, Tenant
shall pay in advance, monthly, Basic Rental at a rate equal to one hundred fifty
percent (150%) of the rate in effect for the last month of the Term of this
Lease or one hundred percent (100%) of Landlord's then asking rate for
comparable space in the Project, whichever is greater, in addition to, and not
in lieu of, all other payments required to be made by Tenant hereunder including
but not limited to Tenant's Proportionate Share of any increase in Direct
Costs.  Nothing contained in this Article 5 shall be construed as consent by
Landlord to any holding over of the Premises by Tenant, and Landlord expressly
reserves the right to require Tenant to surrender possession of the Premises to
Landlord as provided in this Lease upon the expiration or earlier termination of
the Term.  If Tenant fails to surrender the Premises upon the expiration or
termination of this Lease, Tenant agrees to indemnify, defend and hold Landlord

 
 
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harmless from all costs, loss, expense or liability, including without
limitation, claims made by any succeeding tenant and real estate brokers claims
and attorney's fees and costs.
 
ARTICLE 6
 
OTHER TAXES
 
Tenant shall pay, prior to delinquency, all taxes assessed against or levied
upon trade fixtures, furnishings, equipment and all other personal property of
Tenant located in the Premises.  In the event any or all of Tenant's trade
fixtures, furnishings, equipment and other personal property shall be assessed
and taxed with property of Landlord, or if the cost or value of any leasehold
improvements in the Premises exceeds the cost or value of a Project-standard
buildout as determined by Landlord and, as a result, real property taxes for the
Project are increased, Tenant shall pay to Landlord, within ten (10) days after
delivery to Tenant by Landlord of a written statement setting forth such amount,
the amount of such taxes applicable to Tenant's property or above-standard
improvements.  Tenant shall assume and pay to Landlord at the time Basic Rental
next becomes due (or if assessed after the expiration of the Term, then within
ten (10) days), any excise, sales, use, rent, occupancy, garage, parking, gross
receipts or other taxes (other than net income taxes) which may be assessed
against or levied upon Landlord on account of letting of the Premises to Tenant
or the payment of Basic Rental or any other sums due or payable hereunder, and
which Landlord may be required to pay or collect under any law now in effect or
hereafter enacted.  In addition to Tenant's obligation pursuant to the
immediately preceding sentence, Tenant shall pay directly to the party or entity
entitled thereto all business license fees, gross receipts taxes and similar
taxes and impositions which may from time to time be assessed against or levied
upon Tenant, as and when the same become due and before
delinquency.  Notwithstanding anything to the contrary contained herein, any
sums payable by Tenant under this Article 6 shall not be included in the
computation of "Tax Costs."
 
ARTICLE 7
 
USE
 
Tenant shall use and occupy the Premises only for the use set forth in
Article 1.F. of the Basic Lease Provisions and shall not use or occupy the
Premises or permit the same to be used or occupied for any other purpose without
the prior written consent of Landlord, which consent may be given or withheld in
Landlord's sole and absolute discretion, and Tenant agrees that it will use the
Premises in such a manner so as not to unreasonably interfere with or infringe
upon the rights of other tenants or occupants in the Project.  Subject to
casualty, condemnation and repairs, Tenant shall have the right to use and have
access to the Premises and the common areas serving the Premises on a seven (7)
days a week, twenty-four (24) hours a day basis throughout the Term without
obtaining any consent from or giving notice to Landlord.  Except to the extent
such compliance obligations are otherwise those of Landlord as provided herein,
Tenant shall, at its sole cost and expense, promptly comply with all applicable
laws, statutes, ordinances, governmental regulations or requirements
(collectively, "Laws") now in force or which may hereafter be in force relating
to or affecting (i) the condition, use or occupancy of the Premises or the
Project (excluding structural changes to the Project not related to Tenant's
particular use of the Premises), and (ii) improvements installed or constructed
in the Premises by or for the benefit of Tenant.  Tenant's use of the Premises
shall be subject to all applicable Laws including, without limitation, any
applicable zoning laws.  Tenant shall not knowingly do or permit to be done
anything which would invalidate or increase the cost of any insurance policy
covering the Project and/or the property located therein and Tenant shall comply
(but without obligation to install any improvements or additions or make any
upgrades) with all rules, orders, regulations and requirements of any
organization which sets out standards, requirements or recommendations commonly
referred to by major fire insurance underwriters, and Tenant shall promptly upon
demand reimburse Landlord for any additional premium charges for any such
insurance policy assessed or increased by reason of Tenant's failure to comply
with the provisions of this Article.  Tenant agrees not to keep any trash,
garbage, waste or other refuse on the Premises except in sanitary containers and
agrees to regularly and frequently remove same from the Premises.  Tenant shall
keep all containers or other equipment used for storage of such materials in a
clean and sanitary condition.  Tenant shall keep the sewage disposal system in
the Premises free of all obstructions and in good operating condition.  If the
volume of Tenant's trash
 
 
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becomes excessive in Landlord's judgment, Landlord shall have the right to
charge Tenant for additional trash disposal services and/or to require that
Tenant contract directly for additional trash disposal services at Tenant's sole
cost and expense.  Tenant shall, at its own cost, retain a licensed, bonded
professional pest and sanitation control service to perform inspections of the
Premises not less frequently than quarterly for the purpose of eliminating
infestation by and controlling the presence of insects, rodents and vermin and
shall promptly cause any corrective or extermination work recommended by such
service to be performed.  Such work shall be performed pursuant to a written
contract, a copy of which shall be delivered to Landlord by Tenant upon request.
 
ARTICLE 8
 
CONDITION OF PREMISES
 
Tenant hereby agrees that except as otherwise expressly provided in this Lease
or as provided in the Tenant Work Letter attached hereto as Exhibit "D" and made
a part hereof and without limiting Landlord’s repair and maintenance obligations
set forth in this Lease, the Premises shall be taken "as is", "with all faults",
"without any representations or warranties", and Tenant hereby agrees and
warrants that it has investigated and inspected the condition of the Premises
and the suitability of same for Tenant's purposes, and except for any
obligations of Landlord expressly set forth in this Lease, Tenant does hereby
waive and disclaim any objection to, cause of action based upon, or claim that
its obligations hereunder should be reduced or limited because of the condition
of the Premises or the Project as of the Commencement Date or the suitability of
same for Tenant's purposes.  Tenant acknowledges that, except as expressly set
forth in this Lease,  neither Landlord nor any agent nor any employee of
Landlord has made any representations or warranty with respect to the Premises
or the Project or with respect to the suitability of either for the conduct of
Tenant's business and Tenant expressly warrants and represents that, except as
expressly set forth in this Lease, Tenant has relied solely on its own
investigation and inspection of the Premises and the Project in its decision to
enter into this Lease and let the Premises in the above-described condition.  In
addition to the existing leasehold improvements in the Premises,  the Premises
shall be initially improved as provided in, and subject to, the Tenant Work
Letter attached hereto as Exhibit "D" and made a part hereof.  The existing
leasehold improvements in the Premises as of the date of this Lease, together
with the Improvements (as defined in the Tenant Work Letter) may be collectively
referred to herein as the "Tenant Improvements."  The taking of possession of
the Premises by Tenant shall conclusively establish that the Premises and the
Project were at such time in satisfactory condition, subject to latent defects,
punch-list items, conditions or items that are not in compliance with Laws, and
conditions or items covered by construction warranties.  Tenant hereby waives
any provisions of law which would otherwise permit Tenant to make repairs
required of Landlord under this Lease.
 
ARTICLE 9
 
REPAIRS AND ALTERATIONS
 
(a) Landlord's Obligation.  Landlord shall maintain and repair the Project-wide
systems and the structural portions of the Project including, without
limitation, the foundation, floor/ceiling slabs, roof, curtain wall, exterior
glass, columns, beams, shafts, stairs, stairwells and common areas.  Landlord
shall also repair at its sole cost and expense, any latent defects in the design
or construction of the Project or Development Common Areas, any defects in the
Improvements which constitute a breach of the one-year construction warranty
provided by the Contractor who installs the Improvements or are not installed in
accordance with the approved drawings, plans and specifications.  Landlord
shall, at no cost to Tenant, make such modifications, repairs and upgrades to
the Project and Development Common Areas as are necessary to comply with
disability, life, seismic, fire and safety codes, ordinances, statutes, or any
other applicable Laws in effect on or prior to the Commencement Date, including,
without limitation, then current requirements of the Americans with Disabilities
Act.  Notwithstanding any provision set forth in this Article 9 to the contrary,
if Tenant provides written notice to Landlord of an event or circumstance which
requires the action of Landlord with respect to repair and/or maintenance of the
Premises only (and not any other portion of the Project), and Landlord fails to
provide such action within thirty (30) days after Landlord's receipt of such
 
 
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notice, or if the nature of the work reasonably requires more than thirty (30)
days to complete, and such work is not commenced by Landlord within thirty (30)
days after such notice and thereafter continuously and diligently pursued by
Landlord to completion within a reasonable time, then Tenant may proceed to take
the required action upon delivery of an additional ten (10) days notice to
Landlord specifying that Tenant is taking such required action, and if such
action was required under the terms of the Lease to be taken by Landlord and was
not taken by Landlord within such ten (10) day period, then Tenant shall be
entitled to prompt reimbursement by Landlord of Tenant's actual and reasonable
costs in taking such action.  However, if the work so performed by Tenant
pertains to items that would otherwise be includable under Direct Costs pursuant
to Article 3 above, then Landlord may include the amount of such reimbursement
in Direct Costs.  In the event Tenant takes such action, and such work will
affect the Project systems or the structural integrity of the Project, Tenant
shall use only those contractors used by Landlord in the Project for work on
such Project systems or structure unless such contractors are unwilling or
unable to perform, or timely perform, such work, in which event Tenant may
utilize the services of any other qualified contractor which normally and
regularly performs similar work in comparable first-class buildings.(b) Tenant's
Obligation.  Except as expressly provided as Landlord's obligation in this
Article 9, Tenant shall keep the Premises, all systems therein exclusively
serving the Premises and the backup generator described in Section 11(e) below
in good condition and repair.  Except to the extent covered by insurance and
subject to the waiver of subrogation provision herein, all damage or injury to
the Premises or the Project resulting from the wrongful act or negligence of
Tenant, its employees, agents or visitors, guests, invitees or licensees, or by
the use of the Premises, shall be promptly repaired by Tenant at its sole cost
and expense, to the reasonable satisfaction of Landlord; provided, however, that
for damage to the Project as a result of casualty or for any repairs that may
impact the mechanical, electrical, plumbing, heating, ventilation or
air-conditioning systems of the Project, Landlord shall have the right (but not
the obligation) to select the contractor and oversee all such repairs.  Landlord
may make any repairs that are Tenant's responsibility which are not promptly
made by Tenant after Tenant's receipt of written notice and the reasonable
opportunity of Tenant to make said repair within five (5) business days from
receipt of said written notice, and charge Tenant for the cost thereof, which
cost shall be paid by Tenant within five (5) days from invoice from
Landlord.  Subject to the provisions of the Tenant Work Letter, Tenant shall be
responsible for the design and function of all non-standard improvements of the
Premises, made by or at the request of Tenant, whether or not installed by
Landlord at Tenant's request.  Except as expressly provided in Section 9(a)
above, Tenant waives all rights to make repairs at the expense of Landlord, or
to deduct the cost thereof from the rent.
 
(c) Alterations.  Tenant shall make no alterations, installations, changes or
additions in or to the Premises or the Project (collectively, "Alterations")
without Landlord's prior written consent.  Notwithstanding anything to the
contrary contained herein, Tenant may make strictly cosmetic changes to the
finish work in the Premises (the "Cosmetic Alterations"), without Landlord's
consent, provided that the aggregate cost of any such alterations does not
exceed $20,000.00 in any twelve (12) month period, and further provided that
such alterations do not (i) require any structural or other substantial
modifications to the Premises, (ii) require any changes to, nor adversely
affect, the systems and equipment of the Project, or (iii) affect the exterior
appearance of the Project.  Tenant shall give Landlord at least ten (10) days
prior notice of such Cosmetic Alterations, which notice shall be accompanied by
reasonably adequate evidence that such changes meet the criteria contained in
this Section 9(c).  As used herein, the term "Alterations" does not include any
of the Tenant Improvements.  Any Alterations approved by Landlord must be
performed in accordance with the terms hereof, using only contractors approved
by Landlord in writing and upon the approval by Landlord in writing of fully
detailed and dimensioned plans and specifications pertaining to the Alterations
in question, to be prepared and submitted by Tenant at its sole cost and
expense.  Tenant shall at its sole cost and expense obtain all necessary
approvals and permits pertaining to any Alterations.  Tenant shall cause all
Alterations to be performed in a good and workmanlike manner, in conformance
with all applicable federal, state, county and municipal laws, rules and
regulations, pursuant to a valid building permit (if one is required), and in
conformance with Landlord's construction rules and regulations.  If Landlord, in
approving any Alterations, specifies a commencement date therefor, Tenant shall
not commence any work with respect to such Alterations prior to such date;
provided that Tenant shall be entitled to commence such work within thirty (30)
days after such approval is given.  Tenant hereby agrees to indemnify, defend,
and hold Landlord free and harmless from all liens and claims of lien, and all
other liability, claims and demands arising out

 
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of any work done or material supplied to the Premises by or at the request of
Tenant in connection with any Alterations.(d) Insurance; Liens.  Prior to the
commencement of any Alterations requiring Landlord's consent, Tenant shall, upon
Landlord's request, provide Landlord with evidence that Tenant carries
"Builder's Risk" insurance in an amount approved by Landlord covering the
construction of such Alterations, and such other insurance as Landlord may
reasonably require, it being understood that all such Alterations shall be
insured by Tenant pursuant to Article 14 of this Lease immediately upon
completion thereof.  In addition, for Alterations requiring Landlord's consent,
Landlord may, in its discretion, require Tenant to obtain a payment and
performance bond or some alternate form of security satisfactory to Landlord in
an amount sufficient to ensure the lien free completion of such Alterations and
naming Landlord as a co-obligee.
 
(e) Costs and Fees; Removal.  If permitted Alterations are made, they shall be
made at Tenant's sole cost and expense and shall be and become the property of
Landlord, except that Landlord may, by written notice to Tenant given at the
time of Landlord's consent to such Alteration or Improvement (provided Tenant
requests that Landlord make such determination at the time of Tenant's request
for consent) or in the case of Cosmetic Alterations, by written notice to Tenant
within fifteen (15) days after Landlord's receipt of Tenant's notice of such
Cosmetic Alterations (provided Tenant requests that Landlord make such
determination at the time of Tenant's notice), require Tenant at Tenant's
expense to remove such Improvements and Alterations from the Premises at the
expiration or earlier termination of this Lease, and to repair any damage to the
Premises and the Project caused by such removal.  Any and all costs attributable
to or related to the applicable building codes of the city in which the Project
is located (or any other authority having jurisdiction over the Project) arising
from Tenant's Alterations shall be paid by Tenant at its sole cost and
expense.  With regard to repairs required to be made by Tenant, Alterations or
any other work arising from or related to this Article 9, Landlord shall be
entitled to receive a reasonable administrative/coordination fee (which fee
shall vary depending upon whether or not Tenant orders the work directly from
Landlord) sufficient to compensate Landlord for all overhead, general
conditions, fees and other costs and expenses arising from Landlord's
involvement with such work, provided such fee shall in no event exceed five
percent (5%) of the cost of the work.  The construction of initial improvements
to the Premises shall be governed by the terms of the Tenant Work Letter and not
the terms of this Article 9, except as expressly provided in the first sentence
of this Section 9(e).  Notwithstanding anything to the contrary in this Lease,
Tenant shall have no obligation to remove any of the existing leasehold
improvements in the Premises.
 
ARTICLE 10
 
LIENS
 
Tenant shall keep the Premises and the Project free from any mechanics' liens,
vendors liens or any other liens arising out of any work performed, materials
furnished or obligations incurred by Tenant, and Tenant agrees to defend,
indemnify and hold Landlord harmless from and against any such lien or claim or
action thereon, together with costs of suit and reasonable attorneys' fees and
costs incurred by Landlord in connection with any such claim or action.  Before
commencing any work of alteration, addition or improvement to the Premises,
Tenant shall give Landlord at least ten (10) business days' written notice of
the proposed commencement of such work.  In the event that there shall be
recorded against the Premises or the Project or the property of which the
Premises is a part any claim or lien arising out of any such work performed,
materials furnished or obligations incurred by Tenant and such claim or lien
shall not be removed or discharged by Tenant pursuant to RCW 60.04.161 (or any
successor statute(s)) within ten (10) days after written notice to Tenant of
such filing, Landlord shall have the right but not the obligation to pay and
discharge said lien without regard to whether such lien shall be lawful or
correct, unless Tenant promptly (within three (3) days after demand) deposits
with Landlord in cash, lawful money of the United States, one hundred fifty
percent (150%) of the amount of such claim, which sum may be retained by
Landlord until such claim shall have been removed of record or until judgment
shall have been rendered on such claim and such judgment shall have become
final, at which time Landlord shall have the right to apply such deposit in
discharge of the judgment on said claim and any costs, including attorneys' fees
and costs incurred by Landlord, and shall remit the balance thereof to Tenant.
 
 
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ARTICLE 11
 
PROJECT SERVICES
 
(a) Basic Services.  Landlord shall provide the existing equipment servicing the
Premises in its "as is" but operable condition in order to provide electric
current, heat and air-conditioning therein.  Landlord and Tenant hereby
acknowledge that an independent heating, ventilation and air-conditioning system
("HVAC System") will service the Premises.  Landlord shall be responsible for
the maintenance and repair of the HVAC System and shall, as an Operating Cost,
maintain a service and maintenance contract for such HVAC System with a
contractor reasonably designated by Landlord, which contractor shall perform all
maintenance and repairs on the HVAC System as reasonably determined by Landlord
to be necessary.  Tenant shall be entitled to utilize the existing supplementary
heating, ventilation and air conditioning system for a portion of the Premises
and to install, as an Improvement or as an Alteration, subject to Landlord's
reasonable approval of plans and specifications, other heating, ventilation and
air conditioning units (collectively, "Supplementary Units") within the Premises
at Tenant's sole cost and expense (or as a charge to the Improvement
Allowance).  A submeter will also be installed, at Tenant's sole cost and
expense (or as a charge to the Improvement Allowance) in order to measure the
amount of electricity furnished to the Supplementary Units and Tenant shall be
responsible for Landlord's actual cost of supplying electricity to such units as
reasonably determined by Landlord based upon such submeter, which amounts shall
be payable on a monthly basis as Additional Rent.  Tenant shall be solely
responsible for maintenance and repair of the Supplementary Units and such units
shall be considered to be a fixture within the Premises and shall remain upon
the Premises upon the expiration or earlier termination of this Lease. Except as
otherwise provided in this Lease, the electricity and other utilities furnished
to the Premises shall be included in Operating Costs.  Tenant shall be
responsible for retaining a bonded janitorial contractor, which contractor shall
be reasonably approved by Landlord, and Tenant hereby acknowledges that Landlord
shall have no obligation whatsoever to provide janitorial service to the
Premises.  Tenant shall comply with all rules and regulations which Landlord may
reasonably establish for the proper functioning and protection of any common
systems of the Project.  Landlord shall not be liable for, and except as
expressly provided in Section 11(f) below, there shall be no rent abatement as a
result of, any stoppage, reduction or interruption of any such services caused
by governmental rules, regulations or ordinances, riot, strike, labor disputes,
breakdowns, accidents, necessary repairs or other cause.  In the event of
interruption of services to the Premises, Landlord shall use commercially
reasonable efforts to cause the services to be promptly restored.  Except as
specifically provided in this Article 11, Tenant agrees to pay for all utilities
and other services utilized by Tenant and any additional building services
furnished to Tenant which are not uniformly furnished to all tenants of the
Project at the rate generally charged by Landlord to tenants of the Project for
such utilities or services.
 
(b) HVAC Balance.  If any lights, machines or equipment (including but not
limited to computers and computer systems and appurtenances) are used by Tenant
in the Premises which materially affect the temperature otherwise maintained by
the air conditioning system, or generate substantially more heat in the Premises
than may be accommodated by the system, Tenant shall be responsible for
installing, at Tenant's sole cost and expense, any machinery and equipment
reasonably necessary to restore temperature balance, including but not limited
to modifications to the standard air conditioning equipment.
 
(c) Telecommunications.  Upon request from Tenant from time to time, Landlord
will provide Tenant with a listing of telecommunications and media service
providers serving the Project, and Tenant shall have the right to contract
directly with the providers of its choice.  If Tenant wishes to contract
with  or obtain service from any provider which does not currently serve the
Project or wishes to obtain from an existing carrier services which will require
the installation of additional equipment, such provider must, prior to providing
service, enter into a written agreement with Landlord setting forth the terms
and conditions of the access to be granted to such provider.  In considering the
installation of any new or additional telecommunications cabling or equipment at
the Project, Landlord will consider all relevant factors in a reasonable and
non-discriminatory manner, including, without limitation, the existing
availability of services at the Project, the impact of the proposed
installations upon the Project and its operations and the available space and
capacity for the proposed installations.  Landlord may also consider whether the
proposed service may result in interference with or interruption of
 
 
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other services at the Project or the business operations of other tenants or
occupants of the Project.  In no event shall Landlord be obligated to incur any
costs or liabilities in connection with the installation or delivery of
telecommunication services or facilities at the Project.  All such installations
shall be subject to Landlord’s prior approval, not to be unreasonably withheld,
and shall be performed in accordance with the terms of Article 9.  If Landlord
approves the proposed installations in accordance with the foregoing, Landlord
will deliver its standard form agreement upon request and will use commercially
reasonable efforts to promptly enter into an agreement on reasonable and
non-discriminatory terms with a qualified, licensed and reputable carrier
confirming the terms of installation and operation of telecommunications
equipment consistent with the foregoing.
 
(d) Sole Electrical Representative.  Tenant agrees that Landlord shall be the
sole and exclusive representative to the electrical service provider with
respect to, and shall maintain exclusive control over, the reception,
utilization and distribution of electrical power to the Project, regardless of
point or means of origin, use or generation.
 
(e) Backup Generator.  Throughout the Term of this Lease (as may be extended),
Tenant shall be entitled to utilize the existing backup generator for the
Premises.  Tenant acknowledges that Landlord is providing such backup generator
in its "as is" condition and that Landlord makes no representation or warranty
with respect to the condition of such backup generator or its suitability for
Tenant's use and Landlord shall have no maintenance or repair obligations with
respect to the backup generator.  Such backup generator may be used by Tenant
only during (i) testing and regular maintenance, and (ii) any period of
electrical power outage in the Project.  Tenant shall be entitled to operate the
backup generator for testing and regular maintenance only upon notice to
Landlord and at times reasonably approved by Landlord.  In addition, Tenant
shall ensure that the backup generator does not result in any Hazardous
Materials being introduced to the Project in violation of applicable law, and
Section 28(a) will apply to Tenant's use of the backup generator.  Further,
Tenant shall be responsible for ensuring that the backup generator does not
interfere with the use of the Project by other tenants.  Such backup generator
shall be deemed to be a part of the Premises for purposes of Article 14 of this
Lease.
 
(f) Abatement Events.  An "Abatement Event" shall be defined as an event that
prevents Tenant from using the Premises or any portion thereof, as a result of
any failure to provide services or access to the Premises or as a result of
Landlord's activities pursuant to Section 12(b) below or as a result of the
presence of Hazardous Materials in violation of Environmental Laws not caused by
Tenant, its agents, employees, contractors or invitees, where (i) Tenant does
not actually use the Premises or such portion thereof, and (ii) such event is
not caused by the negligence or willful misconduct of Tenant, its agents,
employees or contractors.  Tenant shall give Landlord notice ("Abatement
Notice") of any such Abatement Event, and if such Abatement Event continues
beyond the "Eligibility Period" (as that term is defined below), then the Basic
Rental and Tenant's Proportionate Share of Direct Costs shall be abated entirely
or reduced, as the case may be, after expiration of the Eligibility Period for
such time that Tenant continues to be so prevented from using, and does not use,
the Premises or such portion thereof, in the proportion that the rentable area
of the portion of the Premises that Tenant is prevented from using, and does not
use, bears to the total rentable area of the Premises; provided, however, in the
event that Tenant is prevented from using, and does not use, a portion of the
Premises for a period of time in excess of the Eligibility Period and the
remaining portion of the Premises is not sufficient to allow Tenant to
effectively conduct its business therein, and if Tenant does not conduct its
business from such remaining portion, then for such time after expiration of the
Eligibility Period during which Tenant is so prevented from effectively
conducting its business therein, the Basic Rental and Tenant's Proportionate
Share of Direct Costs for the entire Premises shall be abated entirely for such
time as Tenant continues to be so prevented from using, and does not use, the
Premises.  If, however, Tenant reoccupies any portion of the Premises during
such period, the Basic Rental and Tenant's Proportionate Share of Direct Costs
allocable to such reoccupied portion, based on the proportion that the rentable
area of such reoccupied portion of the Premises bears to the total rentable area
of the Premises, shall be payable by Tenant from the date Tenant reoccupies such
portion of the Premises.  The term "Eligibility Period" shall mean a period of
five (5) consecutive business days after Landlord's receipt of any Abatement
Notice(s).  Such right to abate Basic Rental and Tenant's Proportionate Share of
Direct Costs shall be Tenant's sole and exclusive remedy at law or in equity for
an Abatement Event.
 
 
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ARTICLE 12
 
RIGHTS OF LANDLORD
 
(a) Right of Entry.  Landlord and its agents shall have the right to enter the
Premises at all reasonable times upon twenty-four (24) hours prior notice
(except that no notice shall be required in the case of an emergency or
regularly scheduled service) for the purpose of examining or inspecting the
same, serving or posting and keeping posted thereon notices as provided by law,
or which Landlord deems necessary for the protection of Landlord or the Project,
showing the same to prospective tenants, lenders or purchasers of the Project,
in the case of an emergency, and for making such alterations, repairs,
improvements or additions to the Premises or to the Project as Landlord may deem
necessary or desirable and are otherwise permitted by this Lease; provided,
however, that except in the case of an emergency, no such entry into the Lab
Portion of the Premises shall be permitted without Landlord permitting Tenant to
have a representative of Tenant present and, if required by Tenant, any such
individuals entering the Lab Portion of the Premises shall wear protective
goggles and such other protective clothing or equipment as Tenant may reasonably
require.  Notwithstanding the foregoing, Landlord shall have the right to enter
the Premises to show the same to prospective tenants only during the last nine
(9) months of the Term or the Option Term, if applicable, or at any time in
which Tenant is in default under this Lease after expiration of applicable cure
periods.  If Tenant shall not be personally present to open and permit an entry
into the Premises at any time when such an entry by Landlord is necessary and
otherwise permitted hereunder, Landlord may enter by means of a master key or
may forcibly enter in the case of an emergency, in each event without liability
to Tenant for such entry and without affecting this Lease.  Notwithstanding the
foregoing, (A) except in the event of the negligence or willful misconduct of
Tenant or its agents, contractors or employees, any entry into the Lab Portion
of the Premises by Landlord or any other party Landlord brings to the Lab
Portion of the Premises shall be at their sole risk and Tenant shall have no
liability for injuries or damage any of them may sustain by reason of such entry
into the Lab Portion of the Premises, and (B) Landlord shall use commercially
reasonable efforts to conduct any such entry with the least inconvenience to
Tenant as is reasonably practicable and so as to minimize, to the extent
reasonably practicable, any disruption of or interference with Tenant's normal
operations in the Premises.  Landlord agrees to use commercially reasonable
efforts not to disclose, use or disseminate or permit the disclosure, use or
dissemination by its employees, agents or contractors of any information
concerning Tenant's prototype tablets, pharmaceutical and nutritional products,
research, development and testing efforts, procedures, methods and results and
other proprietary technology information (collectively, "Confidential
Information") that may be obtained by entry into the Lab Portion of the Premises
by Landlord or its employees, agents or contractors.  Landlord agrees that
Tenant may prohibit the photographing, video taping, photocopying or other
reproduction of any Confidential Information.  Landlord agrees that Tenant shall
be entitled to pursue a temporary restraining order or other injunctive relief
for any breach by Landlord of its obligations with respect to Confidential
Information as described in this Section 12(a) above.
 
(b) Maintenance Work.  Landlord reserves the right from time to time, but
subject to payment by and/or reimbursement from Tenant as may be otherwise
provided herein, at reasonable times and in a reasonable manner: (i) to install,
use, maintain, repair, replace, relocate and control for service to the Premises
and/or other parts of the Project pipes, ducts, conduits, wires, cabling,
appurtenant fixtures, equipment spaces and mechanical systems, wherever located
in the Premises or the Project, (ii) to alter, close or relocate any facility in
the Premises or the common areas or otherwise conduct any of the above
activities for the purpose of complying with a general plan for fire/life safety
for the Project or for repairs, and (iii) to comply with any federal, state or
local law, rule or order.  Landlord shall use commercially reasonable efforts to
perform any such work with the least inconvenience to Tenant as is reasonably
practicable and so as to minimize to the extent reasonably practicable any
disruption of or interference with Tenant’s normal operations in the Premises,
but in no event shall Tenant be permitted to withhold or reduce Basic Rental or
other charges due hereunder as a result of same (except as provided in
Section 11(f) above), make any claim for constructive eviction or otherwise make
any claim against Landlord for interruption or interference with Tenant's
business and/or operations; provided, however, Landlord shall not be entitled to
reduce the useable area of the Premises pursuant to such actions in a manner or
to a degree that would impair Tenant's operations in the Premises.
 
 
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(c) Rooftop.  If Tenant desires to use the rooftop of the Project for any
purpose, including the installation of communication equipment to be used from
the Premises, such rights will be granted in Landlord’s sole discretion and
Tenant must negotiate the terms of any rooftop access with Landlord or the
rooftop management company or lessee holding rights to the rooftop from time to
time.  Any rooftop access granted to Tenant will be at prevailing rates and will
be governed by the terms of a separate written agreement or an amendment to this
Lease.
 
ARTICLE 13
 
INDEMNITY; EXEMPTION OF LANDLORD FROM LIABILITY
 
(a) Indemnity.  Except for matters and claims for which Landlord is obligated
hereunder to indemnify Tenant, Tenant shall indemnify, defend and hold Landlord,
Arden Realty, Inc., their subsidiaries, partners, parental or other affiliates
and their respective officers, directors, employees and contractors
(collectively, "Landlord Parties") harmless from and against any and all claims
arising from (i) Tenant's use of the Premises or the Project (including, without
limitation, Tenant's signage) or from the conduct of its business or from any
activity, work or thing which may be permitted or suffered by Tenant in or about
the Premises or the Project, (ii) any breach or default in the performance of
any obligation on Tenant's part to be performed under this Lease, or (iii) any
negligence or willful misconduct of Tenant or any of its agents, contractors, or
employees in or about the Project and from any and all costs, attorneys' fees
and costs, expenses and liabilities incurred in the defense of any claim or any
action or proceeding brought thereon, including negotiations in connection
therewith.  However, notwithstanding the foregoing, Tenant shall not be required
to indemnify, defend and/or hold Landlord harmless from any claim, loss, cost,
liability, damage or expense, including, but not limited to, penalties, fines,
attorneys' fees or costs (collectively, "Claims"), by, for or to any person,
property or entity to the extent resulting from the negligence or willful
misconduct of Landlord or its agents, contractors, or employees or from
Landlord's breach or default in the performance of any obligation on Landlord's
part to be performed under this Lease or covered by insurance required to be
carried under this Lease by Landlord or actually carried by Landlord.  Landlord
hereby indemnifies Tenant and holds Tenant harmless from any Claims to the
extent resulting from the negligence or willful misconduct of Landlord or its
agents, contractors or employees or from Landlord's breach or default in the
performance of any obligation on Landlord's part to be performed under this
Lease and not covered by insurance required to be carried under this Lease by
Tenant or actually carried by Tenant; provided, however, that (A) because
Landlord maintains insurance on the Project and Tenant compensates Landlord for
such insurance as part of Tenant's Proportionate Share of Direct Costs and
because of the existence of waivers of subrogation set forth in Article 14 of
this Lease, Landlord hereby agrees to indemnify, defend and hold Tenant harmless
from any Claims to any property outside of the Premises to the extent such Claim
is covered by such insurance, even if resulting from the negligent acts,
omissions, or willful misconduct of Tenant or those of its agents, contractors,
or employees, and (B) because Tenant must carry insurance pursuant to Article 14
to cover its personal property within the Premises and the Tenant Improvements,
Tenant hereby agrees to indemnify, defend and hold Landlord harmless from any
Claim to any property within the Premises, to the extent such Claim is covered
by such insurance, even if resulting from the negligent acts, omissions or
willful misconduct of Landlord or those of its agents, contractors, or
employees.  Further, Tenant's agreement to indemnify Landlord and Landlord's
agreement to indemnify Tenant pursuant to this Section 13(a) is not intended to
and shall not relieve any insurance carrier of its obligations under policies
required to be carried by Landlord or Tenant pursuant to this Lease, to the
extent such policies cover the matters subject to such indemnification
obligations.  Except for matters and Claims for which Landlord is obligated to
indemnify Tenant hereunder, (1) Tenant hereby assumes all risk of damage to
property or injury to persons in or about the Premises from any cause, and (2)
Tenant hereby waives all claims in respect thereof against Landlord and the
Landlord Parties.
 
(b) Exemption of Landlord from Liability.  Landlord and the Landlord Parties
shall not be liable for injury to Tenant's business, or loss of income
therefrom, however occurring (including, without limitation, from any failure or
interruption of services or utilities or as a result of Landlord's negligence),
or, subject to the waivers in Article 14(d) below to the extent applicable and
except in connection with damage or injury resulting from the negligence or
willful misconduct of Landlord, its agents  or the Landlord Parties or
Landlord's breach of this Lease or matters or claims for which Landlord is
obligated to indemnify Tenant pursuant to
 
 
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Section 13(a) hereof (provided that in such cases Landlord's liability shall be
limited to amounts not covered by insurance carried by Tenant or required to be
carried by Tenant pursuant to this Lease), for damage that may be sustained by
the person, goods, wares, merchandise or property of Tenant, its employees,
invitees, customers, agents, or contractors, or any other person in, on or about
the Premises directly or indirectly caused by or resulting from any cause
whatsoever, including, but not limited to, fire, steam, electricity, gas, water,
or rain which may leak or flow from or into any part of the Premises, or from
the breakage, leakage, obstruction or other defects of the pipes, sprinklers,
wires, appliances, plumbing, air conditioning, light fixtures, or mechanical or
electrical systems or from intrabuilding cabling or wiring, whether such damage
or injury results from conditions arising upon the Premises or upon other
portions of the Project or from other sources or places and regardless of
whether the cause of such damage or injury or the means or repairing the same is
inaccessible to Tenant.  Except for matters or Claims for which Landlord is
obligated to indemnify Tenant pursuant to Section 13(a) hereof, Landlord and the
Landlord Parties shall not be liable to Tenant for any damages arising from any
willful or negligent action or inaction of any other tenant of the Project.
 
(c) Security.  Tenant acknowledges that Landlord's election whether or not to
provide any type of mechanical surveillance or security personnel whatsoever in
the Project is solely within Landlord's discretion; Landlord and the Landlord
Parties shall have no liability in connection with the provision, or lack, of
such services and Tenant hereby agrees to release Landlord and the Landlord
Parties with regard to any such potential claim.  Landlord and the Landlord
Parties shall not be liable for losses due to theft, vandalism, or like causes.
 
ARTICLE 14
 
INSURANCE
 
(a) Tenant's Insurance.  Tenant, shall at all times during the Term of this
Lease, and at its own cost and expense, procure and continue in force the
following insurance coverage:  (i) Commercial General Liability Insurance,
written on an occurrence basis, with a combined single limit for bodily injury
and property damages of not less than Two Million Dollars ($2,000,000) per
occurrence and Three Million Dollars ($3,000,000) in the annual aggregate,
including products liability coverage if applicable, owners and contractors
protective coverage, blanket contractual coverage including both oral and
written contracts, and personal injury coverage, covering the insuring
provisions of this Lease and the performance of Tenant of the indemnity and
exemption of Landlord from liability agreements set forth in Article 13 hereof;
(ii) a policy of standard fire, extended coverage and special extended coverage
insurance (all risks), including a vandalism and malicious mischief endorsement,
sprinkler leakage coverage and earthquake sprinkler leakage where sprinklers are
provided in an amount equal to the full replacement value new without deduction
for depreciation of all (A) Tenant Improvements, Alterations, fixtures and other
improvements in the Premises, including but not limited to all mechanical,
plumbing, heating, ventilating, air conditioning, electrical, telecommunication
and other equipment, systems and facilities, and (B) trade fixtures, furniture,
equipment and other personal property installed by or at the expense of Tenant;
(iii) Worker's Compensation coverage as required by law; and (iv) business
interruption, loss of income and extra expense insurance covering any failure or
interruption of Tenant's business equipment (including, without limitation,
telecommunications equipment) and covering all other perils, failures or
interruptions sufficient to cover a period of interruption of not less than
twelve (12) months.  Tenant shall carry and maintain during the entire Term
(including any option periods, if applicable), at Tenant's sole cost and
expense, reasonable increased amounts of the insurance required to be carried by
Tenant pursuant to this Article 14 and such other reasonable types of insurance
coverage and in such reasonable amounts covering the Premises and Tenant's
operations therein, as may be reasonably required by Landlord, but Landlord
shall only be entitled to require such increased amounts and/or other coverages
if they are then generally required by owners of comparable office buildings in
the Bothell, Washington area.
 
(b) Form of Policies.  The aforementioned minimum limits of policies and
Tenant's procurement and maintenance thereof shall in no event limit the
liability of Tenant hereunder.  The Commercial General Liability Insurance
policy shall name Landlord, Arden Realty, Inc., Landlord's property manager, and
Landlord's lender(s) (provided Landlord provides Tenant with notice of the names
of such property manager and any such lender(s)), as additional insureds' with
an appropriate endorsement to the policy(s).  All such insurance policies
carried by Tenant
 
 
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shall be with companies having a rating of not less than A-VIII in Best's
Insurance Guide.  Tenant shall furnish to Landlord, from the insurance
companies, or cause the insurance companies to furnish, certificates of
coverage.  The deductible under each such policy shall be reasonably acceptable
to Landlord.  No such policy shall be cancelable or subject to reduction of
coverage below the limits required hereunder or other modification or
cancellation except after thirty (30) days prior written notice to Landlord by
the insurer.  All such policies shall be endorsed to agree that Tenant's policy
is primary and that any insurance carried by Landlord is excess and not
contributing with any Tenant insurance requirement hereunder.  Tenant shall, at
least twenty (20) days prior to the expiration of such policies, furnish
Landlord with renewals or binders.  Tenant agrees that if Tenant does not take
out and maintain such insurance or furnish Landlord with renewals or binders in
a timely manner, Landlord may (but shall not be required to) procure said
insurance on Tenant's behalf and charge Tenant the cost thereof, which amount
shall be payable by Tenant upon demand with interest (at the rate set forth in
Section 20(e) below) from the date such sums are expended.  Tenant shall have
the right to provide such insurance coverage pursuant to blanket policies
obtained by Tenant, provided such blanket policies expressly afford coverage to
the Premises and to Tenant as required by this Lease.
 
(c) Landlord's Insurance.  Landlord shall, as a cost to be included in Operating
Costs, procure and maintain at all times during the Term of this Lease, (i) a
policy or policies of insurance covering loss or damage to the Project in the
amount of the full replacement costs without deduction for depreciation thereof,
providing protection against all perils included within the classification of
fire and extended coverage, vandalism coverage and malicious mischief, sprinkler
leakage, water damage, and special extended coverage on the building; and (ii)
Commercial General Liability Insurance, written on an occurrence basis, with a
combined single limit for bodily injury and property damage of not less than Two
Million Dollars ($2,000,000) per occurrence and Three Million Dollars
($3,000,000) in the annual aggregate covering the Project.  Additionally,
Landlord may carry:  (i) Excess Liability Coverage Insurance; and (ii)
Earthquake and/or Flood Damage Insurance; and (iii) Rental Income Insurance; and
(iv) any other forms of insurance Landlord may reasonably deem appropriate or
any lender may require.  The costs of all insurance carried by Landlord shall be
included in Operating Costs.
 
(d) Waiver of Subrogation.  Landlord and Tenant each agree to require their
respective insurers issuing the insurance described in Sections 14(a)(ii),
14(a)(iv) and the first sentence of Section 14(c), to waive any rights of
subrogation that such companies may have against the other party.  Tenant hereby
waives any right that Tenant may have against Landlord and Landlord hereby
waives any right that Landlord may have against Tenant as a result of any loss
or damage to the extent such loss or damage is insurable under such
policies.  In addition, as between Landlord and Tenant only, each party hereby
waives its immunity with respect to the other under the Industrial Insurance Act
(RCW Title 51), and/or the Longshoreman's and Harbor Worker's Act and/or any
equivalent acts, and each party expressly agrees to assume potential liability
for actions brought against the other party by such waiving parties'
employees.  The parties have specifically negotiated this waiver and each party
has had the opportunity to, and has been encouraged to, consult with independent
counsel regarding this waiver.
 
(e) Compliance with Law.  Tenant agrees that it will not, at any time, during
the Term of this Lease, carry any stock of goods or do anything in or about the
Premises that will in any way tend to increase the insurance rates upon the
Project.  Tenant agrees to pay Landlord forthwith upon demand the amount of any
increase in premiums for insurance that may be carried during the Term of this
Lease, or the amount of insurance to be carried by Landlord on the Project
resulting from the foregoing, or from Tenant doing any act in or about the
Premises that does so increase the insurance rates, whether or not Landlord
shall have consented to such act on the part of Tenant.  If Tenant installs upon
the Premises any electrical equipment which causes an overload of electrical
lines of the Premises, Tenant shall at its own cost and expense in accordance
with all other Lease provisions (specifically including, but not limited to, the
provisions of Article 9, 10 and 11 hereof), make whatever changes are necessary
to comply with all insurance requirements of the insurance underwriters and any
governmental authority having jurisdiction thereover, but nothing herein
contained shall be deemed to constitute Landlord's consent to such
overloading.  Tenant shall, at its own expense, comply with all
industry-standard insurance requirements applicable to the Premises including,
without limitation, the installation of fire extinguishers (but without
obligation to install any improvements or additions or perform any upgrades).
 
 
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ARTICLE 15
 
ASSIGNMENT AND SUBLETTING
 
Tenant shall have no power to, either voluntarily, involuntarily, by operation
of law or otherwise, sell, assign, transfer or hypothecate this Lease, or sublet
the Premises or any part thereof, or permit the Premises or any part thereof to
be used or occupied by anyone other than Tenant or Tenant's employees without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld, conditioned or delayed.  If Tenant is a corporation, unincorporated
association, partnership or limited liability company, the sale, assignment,
transfer or hypothecation of any class of stock or other ownership interest in
such corporation, association, partnership or limited liability company in
excess of fifty percent (50%) in a single transaction shall be deemed a
"Transfer" within the meaning and provisions of this Article 15.  Tenant may
transfer its interest pursuant to this Lease only upon the following express
conditions, which conditions are agreed by Landlord and Tenant to be reasonable:
 
(a) That the proposed Transferee (as hereafter defined) shall be subject to the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, conditioned or delayed  but, without limiting the generality of the
foregoing, it shall be reasonable for Landlord to deny such consent if:
 
(i) The use to be made of the Premises by the proposed Transferee is (a) not
generally consistent with the character and nature of all other tenancies in the
Project, (b) a use which conflicts with any so-called "exclusive" then in favor
of, or for any use which might reasonably be expected to diminish the rent
payable pursuant to any percentage rent lease with another tenant of the Project
or any other buildings which are in the same complex as the Project, or (c) a
use which would be prohibited by any other portion of this Lease (including but
not limited to any Rules and Regulations then in effect);
 
(ii) The financial responsibility of the proposed Transferee is not reasonably
satisfactory to Landlord or in any event not at least equal to those which were
possessed by Tenant as of the date of execution of this Lease;
 
(iii) The proposed Transferee is either a governmental agency or instrumentality
thereof; or
 
(iv) Either the proposed Transferee or any person or entity which directly or
indirectly controls, is controlled by or is under common control with the
proposed Transferee (A) occupies space in the Project at the time of the request
for consent, or (B) is negotiating with Landlord or has negotiated with Landlord
during the six (6) month period immediately preceding the date of the proposed
Transfer, to lease space in the Project.
 
(b) Upon Tenant's submission of a request for Landlord's consent to any such
Transfer, Tenant shall pay to Landlord Landlord's then standard processing fee
and reasonable attorneys' fees and costs incurred in connection with the
proposed Transfer, such processing and attorneys’ fees and costs not to exceed
$1,500 in the aggregate per proposed Transfer, unless Landlord provides to
Tenant evidence that Landlord has reasonably incurred greater out-of-pocket
costs in connection with the proposed Transfer;
 
(c) That the proposed Transferee shall execute an agreement pursuant to which it
shall agree to perform faithfully and be bound by all of the terms, covenants,
conditions, provisions and agreements of this Lease applicable to that portion
of the Premises so transferred; and
 
(d) That an executed duplicate original of said assignment and assumption
agreement or other Transfer on a form reasonably approved by Landlord, shall be
delivered to Landlord within five (5) days after the execution thereof, and that
such Transfer shall not be binding upon Landlord until the delivery thereof to
Landlord and the execution and delivery of Landlord's consent thereto.  It shall
be a condition to Landlord's consent to any subleasing, assignment or other
transfer of part or all of Tenant's interest in the Premises ("Transfer") that
(i) upon Landlord's consent to any Transfer, Tenant shall pay and continue to
pay fifty percent (50%) of any "Transfer Premium" (defined below), received by
Tenant from the Transferee; (ii) any
 
 
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sublessee of part or all of Tenant's interest in the Premises shall agree that
in the event Landlord gives such sublessee notice that Tenant is in default
under this Lease, such sublessee shall thereafter make all sublease or other
payments directly to Landlord, which will be received by Landlord without any
liability whether to honor the sublease or otherwise (except to credit such
payments against sums due under this Lease and the sublease), and any sublessee
shall agree to attorn to Landlord or its successors and assigns at their request
should this Lease be terminated for any reason, except that in no event shall
Landlord or its successors or assigns be obligated to accept such attornment;
(iii) any such Transfer and consent shall be effected on forms supplied by
Landlord and/or its legal counsel; (iv) Landlord may require that Tenant not
then be in default hereunder in any respect; and (v) Tenant or the proposed
subtenant or assignee (collectively, "Transferee") shall agree to pay Landlord,
upon demand, as Additional Rent, a sum equal to the additional costs, if any,
incurred by Landlord for maintenance and repair as a result of any change in the
nature of occupancy caused by such subletting or assignment.  "Transfer Premium"
shall mean all rent, Additional Rent or other consideration payable by a
Transferee in connection with a Transfer in excess of the Basic Rental and
Direct Costs payable by Tenant under this Lease during the term of the Transfer
and if such Transfer is for less than all of the Premises, the Transfer Premium
shall be calculated on a rentable square foot basis.  "Transfer Premium" shall
also include, but not be limited to, key money, bonus money or other cash
consideration paid by a Transferee to Tenant in connection with such Transfer,
and any payment in excess of fair market value for services rendered by Tenant
to the Transferee and any payment in excess of fair market value for assets,
fixtures, inventory, equipment, or furniture transferred by Tenant to the
Transferee in connection with such Transfer.  In any event, the Transfer Premium
shall be calculated after deducting the reasonable expenses incurred by Tenant
for (1) any changes, alterations and improvements to the Premises paid for by
Tenant in connection with the Transfer, (2) any other out-of-pocket monetary
concessions provided by Tenant to the Transferee, and (3) any brokerage
commissions paid for by Tenant and attorneys' fees incurred by Tenant in
connection with the Transfer. Any Transfer of this Lease which is not in
compliance with the provisions of this Article 15 shall be voidable by written
notice from Landlord and shall, if such non-compliance is not cured by Tenant or
such Transfer not rescinded within ten (10) days after notice from Landlord, at
the option of Landlord, terminate this Lease.  In no event shall the consent by
Landlord to any Transfer be construed as relieving Tenant or any Transferee from
obtaining the express written consent of Landlord to any further Transfer, or as
releasing Tenant from any liability or obligation hereunder whether or not then
accrued and Tenant shall continue to be fully liable therefor.  No collection or
acceptance of rent by Landlord from any person other than Tenant shall be deemed
a waiver of any provision of this Article 15 or the acceptance of any Transferee
hereunder, or a release of Tenant (or of any Transferee of
Tenant).  Notwithstanding anything to the contrary in this Lease, if Tenant or
any proposed Transferee claims that Landlord has unreasonably withheld or
delayed its consent under this Article 15 or otherwise has breached or acted
unreasonably under this Article 15, their sole remedies shall be a declaratory
judgment and an injunction for the relief and/or monetary damages, and Tenant
hereby waives all other remedies, including, without limitation, any right at
law or equity to terminate this Lease, on its own behalf and, to the extent
permitted under all applicable laws, on behalf of the proposed Transferee.
 
ARTICLE 16
 
DAMAGE OR DESTRUCTION
 
Within sixty (60) days after the date Landlord learns of the necessity for
repairs as a result of damage, Landlord shall notify Tenant ("Damage Repair
Estimate") of Landlord's reasonable estimated assessment of the period of time
in which the repairs will be completed.  If the Project is damaged by fire or
other insured casualty and the insurance proceeds have been made available
therefor by the holder or holders of any mortgages or deeds of trust covering
the Premises or the Project, the damage shall be diligently repaired by Landlord
to the extent such insurance proceeds are available therefor and provided the
Damage Repair Estimate indicates that repairs can be completed within two
hundred twenty (220) days after the necessity for repairs as a result of such
damage becomes known to Landlord, without the payment of overtime or other
premiums, and until such repairs are completed rent shall be abated in
proportion to the part of the Premises which is unusable by Tenant in the
conduct of its business (but there shall be no abatement of rent by reason of
any portion of the Premises being unusable for a period equal to one (1) day or
less).  However, if the damage is due to the fault or neglect of Tenant, its
 
 
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employees, agents, contractors, guests, invitees and the like, there shall be no
abatement of rent, unless and to the extent Landlord receives rental income
insurance proceeds.  Upon the occurrence of any damage to the Premises, Tenant
shall assign to Landlord (or to any party designated by Landlord) all insurance
proceeds payable to Tenant under Section 14(a)(ii)(A) above, and if Landlord is
required or elects to repair such damage as required in this Article 16,
Landlord shall use such insurance proceeds assigned by Tenant for the repair and
restoration of the Tenant Improvements and Alterations; provided, however, that
if the cost of repair of improvements within the Premises by Landlord exceeds
the amount of insurance proceeds received by Landlord from Tenant's insurance
carrier, as so assigned by Tenant, such excess costs shall be paid by Tenant to
Landlord if this Lease has not been terminated due to such fire or casualty
prior to Landlord's repair of such damage.  If, however, the Damage Repair
Estimate indicates that repairs cannot be completed within two hundred twenty
(220) days after the necessity for repairs as a result of such damage becomes
known to Landlord without the payment of overtime or other premiums, Landlord
may, at its option, either (i) diligently make such repairs and in such event
this Lease shall continue in effect and the rent shall be abated, if at all, in
the manner provided in this Article 16, or (ii) elect not to effect such repairs
and instead terminate this Lease, by notifying Tenant in writing of such
termination within sixty (60) days after Landlord learns of the necessity for
repairs as a result of damage, such notice to include a termination date giving
Tenant sixty (60) days to vacate the Premises.  In addition, Landlord may elect
to terminate this Lease if the Project shall be damaged by fire or other
casualty or cause, whether or not the Premises are affected, if the damage is
not fully covered, except for deductible amounts, by Landlord's insurance
policies or would not have been so covered by Landlord’s insurance policies,
except for commercially reasonable deductible amounts, if Landlord had
maintained the insurance required of Landlord by this Lease.  However, if
Landlord does not elect to terminate this Lease pursuant to Landlord's
termination right as provided above, and the Damage Repair Estimate indicates
that repairs cannot be completed within two hundred twenty (220) days after
being commenced, Tenant may elect, not later than thirty (30) days after
Tenant's receipt of the Damage Repair Estimate, to terminate this Lease by
written notice to Landlord effective as of the date specified in Tenant's
notice.  Finally, if the Premises or the Project is damaged to any substantial
extent during the last twelve (12) months of the Term, then notwithstanding
anything contained in this Article 16 to the contrary, Landlord shall have the
option to terminate this Lease by giving written notice to Tenant of the
exercise of such option within sixty (60) days after Landlord learns of the
necessity for repairs as the result of such damage.  In the event that the
Premises or the Project is destroyed or damaged to any substantial extent during
the last twelve (12) months of the Term and if such damage shall take longer
than sixty (60) days to repair and if such damage is not the result of the
negligence or willful misconduct of Tenant or Tenant's employees, licensees,
invitees or agents, then notwithstanding anything in this Article 16 to the
contrary, Tenant shall have the option to terminate this Lease by written notice
to Landlord of the exercise of such option within sixty (60) days after Tenant
learns of the necessity for repairs as the result of such damage.  A total
destruction of the Project shall automatically terminate this Lease.  Except as
provided in this Article 16, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business or property arising from such damage or destruction or the making of
any repairs, alterations or improvements in or to any portion of the Project or
the Premises or in or to fixtures, appurtenances and equipment therein.  Tenant
understands that Landlord will not carry insurance of any kind on Tenant's
furniture, furnishings, trade fixtures or equipment, and that Landlord shall not
be obligated to repair any damage thereto or replace the same.  Tenant
acknowledges that Tenant shall have no right to any proceeds of insurance
carried by Landlord relating to property damage.  With respect to any damage
which Landlord is obligated to repair or elects to repair, Tenant, as a material
inducement to Landlord entering into this Lease, irrevocably waives and releases
any rights under law to terminate this Lease.
 
ARTICLE 17
 
SUBORDINATION
 
Landlord represents and warrants that the Project is not currently, as of the
date of this Lease,  subject to any ground lease, mortgage or deed of
trust.  This Lease is subject and subordinate to all ground or underlying
leases, mortgages and deeds of trust which affect the property or the Project,
including all renewals, modifications, consolidations, replacements and
extensions thereof, subject, however, to Tenant’s right not to be disturbed so
long as no Event of
 
 
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Default has occurred and is continuing; provided, however, if the lessor under
any such lease or the holder or holders of any such mortgage or deed of trust
shall advise Landlord that they desire or require this Lease to be prior and
superior thereto, upon written request of Landlord to Tenant, Tenant agrees to
promptly execute, acknowledge and deliver any and all documents or instruments
which Landlord or such lessor, holder or holders deem necessary or desirable for
purposes thereof.  Landlord shall have the right to cause this Lease to be and
become and remain subject and subordinate to any and all ground or underlying
leases, mortgages or deeds of trust which may hereafter be executed covering the
Premises, the Project or the property or any renewals, modifications,
consolidations, replacements or extensions thereof, for the full amount of all
advances made or to be made thereunder and without regard to the time or
character of such advances, together with interest thereon and subject to all
the terms and provisions thereof; provided, however, that as a condition thereto
Landlord obtains from the lender or other party in question a written
undertaking in favor of Tenant to the effect that such lender or other party
will not disturb Tenant's right of possession under this Lease so long as no
Event of Default has occurred and is continuing.  Tenant agrees, within twenty
(20) days after Landlord's written request therefor, to execute, acknowledge and
deliver upon request any and all documents or instruments requested by Landlord
or necessary or proper to assure the subordination of this Lease to any such
mortgages, deed of trust, or leasehold estates so long as it contains lender's
agreement not to disturb Tenant's right of possession under this Lease so long
as no Event of Default has occurred and is continuing (hereinafter, an
"SNDA").  Tenant agrees that in the event any proceedings are brought for the
foreclosure of any mortgage or deed of trust or any deed in lieu thereof, to
attorn to the purchaser or any successors thereto upon any such foreclosure sale
or deed in lieu thereof as so requested to do so by such purchaser and to
recognize such purchaser as the lessor under this Lease, provided that as a
condition thereto such purchaser agrees in writing to assume Landlord’s
obligations under this Lease with respect to the security deposit and Letter of
Credit and proceeds thereof.  Tenant shall, subject to the same condition,
within five (5) business days after request execute such further instruments or
assurances as such purchaser may reasonably deem necessary to evidence or
confirm such attornment.  Tenant agrees to provide copies of any notices of
Landlord's default under this Lease to any mortgagee or deed of trust
beneficiary whose address has been provided to Tenant and Tenant shall provide
such mortgagee or deed of trust beneficiary a commercially reasonable time after
receipt of such notice within which to cure any such default; provided, however,
such lender cure period shall not delay Tenant's right under Section 9(a) above
to make repairs.  Tenant waives the provisions of any current or future statute,
rule or law which may give or purport to give Tenant any right or election to
terminate or otherwise adversely affect this Lease and the obligations of the
Tenant hereunder in the event of any foreclosure proceeding or sale.
 
ARTICLE 18
 
EMINENT DOMAIN
 
If the whole of the Premises or the Project or Development Common Areas or so
much thereof as to render the balance unusable by Tenant or to render Tenant’s
use of the Premises materially impaired shall be taken under power of eminent
domain, or is sold, transferred or conveyed in lieu thereof, this Lease shall
automatically terminate as of the date of such condemnation, or as of the date
possession is taken by the condemning authority, at Landlord's or Tenant's
option by notice to the other party.  Landlord shall give Tenant prompt notice
of any condemnation proceedings affecting the Project or any Development Common
Areas that materially affect Tenant's business operations.  No award for any
partial or entire taking shall be apportioned, and Tenant hereby assigns to
Landlord any award which may be made in such taking or condemnation, together
with any and all rights of Tenant now or hereafter arising in or to the same or
any part thereof; provided, however, that nothing contained herein shall be
deemed to give Landlord any interest in or to require Tenant to assign to
Landlord any award made to Tenant for moving or relocation expenses, the taking,
removal or reinstallation of personal property and trade fixtures belonging to
Tenant and removable by Tenant at the expiration of the Term hereof as provided
hereunder or for the interruption of, or damage to, Tenant's business.  In the
event of a partial taking described in this Article 18, or a sale, transfer or
conveyance in lieu thereof, which does not result in a termination of this
Lease, Tenant’s Proportionate Share shall be appropriately adjusted and Basic
Rental for any portion of the Premises taken or condemned shall be abated during
the unexpired Term of this Lease according to the ratio that the part of the
Premises remaining useable by Tenant bears to the total area of the
 
 
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Premises.  Except as expressly herein provided, Tenant hereby waives any and all
rights it might otherwise have under law to terminate this Lease in the event of
a taking under power of eminent domain.
 
ARTICLE 19
 
DEFAULT
 
Each of the following acts or omissions of Tenant or of any guarantor of
Tenant's performance hereunder, or occurrences, shall constitute an "Event of
Default":
 
(a) Failure or refusal to pay Basic Rental, Additional Rent or any other amount
to be paid by Tenant to Landlord hereunder within three (3) business days after
written notice that the same is due or payable hereunder; said three (3)
business day period shall be in lieu of, and not in addition to, any statutory
notice requirements;
 
(b) Except as set forth in items (a) above and (c) through and including (f)
below, failure to perform or observe any other covenant or condition of this
Lease to be performed or observed within thirty (30) days following written
notice to Tenant of such failure or such additional period of time after such
notice as is reasonably required to effect such cure, not to exceed ninety (90)
days from the date of such notice, if the nature of the obligation is such that
the cure cannot reasonably be completed in such thirty (30) day period.  Such
thirty (30) day notice shall be in lieu of, and not in addition to, any
statutory notice requirements;
 
(c) Abandonment or failure (after the Commencement Date) to accept tender of
possession of the Premises or any significant portion thereof;
 
(d) The filing by Tenant or any guarantor hereunder in any court pursuant to any
statute of a petition in bankruptcy or insolvency or for reorganization or
arrangement for the appointment of a receiver of all or a portion of Tenant's
property; the filing against Tenant or any guarantor hereunder of any such
petition, or the commencement of a proceeding for the appointment of a trustee,
receiver or liquidator for Tenant, or for any guarantor hereunder, or of any of
the property of either, or a proceeding by any governmental authority for the
dissolution or liquidation of Tenant or any guarantor hereunder, if such
proceeding shall not be dismissed or trusteeship discontinued within sixty (60)
days after commencement of such proceeding or the appointment of such trustee or
receiver; or the making by Tenant or any guarantor hereunder of an assignment
for the benefit of creditors.  Tenant hereby stipulates to the lifting of the
automatic stay in effect and relief from such stay for Landlord in the event
Tenant files a petition under the United States Bankruptcy laws, for the purpose
of Landlord pursuing its rights and remedies against Tenant and/or a guarantor
of this Lease;
 
(e) Tenant's failure to cause to be released any mechanics liens filed against
the Premises or the Project arising from work contracted for or materials
ordered by Tenant within twenty (20) days after Landlord gives Tenant written
notice that the same has been filed or recorded; or
 
(f) Tenant's failure to observe or perform according to the provisions of
Articles 7, 14, 17 or 25 within five (5) business days after notice from
Landlord.
 
All defaults by Tenant of any covenant or condition of this Lease shall be
deemed by the parties hereto to be material.
 
ARTICLE 20
 
REMEDIES
 
(a) Upon the occurrence of an Event of Default under this Lease as provided in
Article 19 hereof, Landlord may exercise all of its remedies as may be permitted
by law, including but not limited to terminating this Lease, reentering the
Premises and removing all persons and property therefrom, which property may be
stored by Landlord at a warehouse or elsewhere at the risk, expense and for the
account of Tenant.  If Landlord elects to terminate this Lease, Landlord shall
be entitled to recover from Tenant the aggregate of all amounts permitted
 
 
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by law, including but not limited to (i) the worth at the time of award of the
amount of any unpaid rent which had been earned at the time of such termination;
plus (ii) the worth at the time of award of the amount by which the unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Tenant proves could have been reasonably
avoided; plus (iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the Term after the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably
avoided; plus (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom, specifically including but not limited to, tenant improvement
expenses, brokerage commissions and advertising expenses incurred, expenses of
remodeling the Premises or any portion thereof for a new tenant, whether for the
same or a different use, and any special concessions made to obtain a new
tenant; and (v) at Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable
law.  The term "rent" as used in this Section 20(a) shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others.  As used in items (i) and
(ii), above, the "worth at the time of award" shall be computed by allowing
interest at the rate set forth in item (e), below, but in no case greater than
the maximum amount of such interest permitted by law.  As used in item (iii),
above, the "worth at the time of award" shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%).  Notwithstanding the above, if Landlord
relets the Premises for a term (the "Relet Term") that extends past the
Expiration Date of this Lease (without consideration of any earlier termination
pursuant to this Article 20), the costs of reletting which may be included in
Landlord’s damages under this Lease shall be limited to a prorated portion of
such costs, based on the percentage that the length of the Term remaining on the
date Landlord terminates this Lease bears to the length of the Relet Term.  For
example, if there are 2 years left on the Term at the time that Landlord
terminates this Lease and, prior to the expiration of the 2 year period,
Landlord enters into a lease with a Relet Term of 10 years with a new tenant,
then only 20% of the costs of reletting shall be included when determining
Landlord's damages.
 
(b) Nothing in this Article 20 shall be deemed to affect Landlord's right to
indemnification for liability or liabilities arising prior to the termination of
this Lease for personal injuries or property damage under the indemnification
clause or clauses contained in this Lease.
 
(c) Notwithstanding anything to the contrary set forth herein, Landlord's
re-entry to perform acts of maintenance or preservation of or in connection with
efforts to relet the Premises or any portion thereof, or the appointment of a
receiver upon Landlord's initiative to protect Landlord's interest under this
Lease shall not terminate Tenant's right to possession of the Premises or any
portion thereof and, until Landlord does elect to terminate this Lease, this
Lease shall continue in full force and effect and Landlord may enforce all of
Landlord's rights and remedies hereunder.  Accordingly, if Landlord does not
elect to terminate this Lease on account of any default by Tenant, Landlord may,
from time to time, without terminating this Lease, enforce all of its rights and
remedies under this Lease, including the right to recover all rent as it becomes
due.
 
(d) All rights, powers and remedies of Landlord hereunder and under any other
agreement now or hereafter in force between Landlord and Tenant shall be
cumulative and not alternative and shall be in addition to all rights, powers
and remedies given to Landlord by law, and the exercise of one or more rights or
remedies shall not impair Landlord's right to exercise any other right or
remedy.
 
(e) Any amount due from Tenant to Landlord hereunder which is not paid when due
shall bear interest at the lower of eighteen percent (18%) per annum or the
maximum lawful rate of interest from the due date until paid, unless otherwise
specifically provided herein, but the payment of such interest shall not excuse
or cure any default by Tenant under this Lease.  In addition to such
interest:  (i) if Basic Rental is not paid on or before the fifth (5th) day of
the calendar month for which the same is due, a late charge equal to five
percent (5%) of the amount overdue or $100, whichever is greater, shall be
immediately due and owing and shall accrue for each calendar month or part
thereof until such rental, including the late charge, is paid in full, which
late charge Tenant hereby agrees is a reasonable estimate of the damages
Landlord shall suffer as a result of Tenant's late payment and (ii) an
additional charge of $25 shall be assessed
 
 
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for any check given to Landlord by or on behalf of Tenant which is not honored
by the drawee thereof; which damages include Landlord's additional
administrative and other costs associated with such late payment and unsatisfied
checks and the parties agree that it would be impracticable or extremely
difficult to fix Landlord's actual damage in such event.  Notwithstanding the
foregoing, Tenant shall be entitled to notice and the expiration of a five (5)
day cure period prior to a imposition of any late charge or interest charge
under this Section 20(e) one (1) time per calendar year; after such written
notice has been provided to Tenant in a calendar year, Tenant shall not be
entitled to any further notice prior to imposition of a late charge or interest
under this Section 20(e) in such calendar year.  Such charges for interest and
late payments and unsatisfied checks are separate and cumulative and are in
addition to and shall not diminish or represent a substitute for any or all of
Landlord's rights or remedies under any other provision of this Lease.
 
(f) Except as otherwise provided in this Lease, in the event of any default,
breach or violation of Tenant's rights under this Lease by Landlord, Tenant's
exclusive remedies shall be an action for specific performance or action for
actual damages.  Without limiting any other waiver by Tenant which may be
contained in this Lease and without waiving any rights expressly granted to
Tenant under this Lease, Tenant hereby waives the benefit of any law granting it
the right to perform Landlord's obligation, or the right to terminate this Lease
on account of any Landlord default.  Notwithstanding anything in this Lease to
the contrary, (i) except as expressly provided in Article 5 above, neither party
shall be liable to the other, its contractors, agents or employees or to any
Landlord Parties for any indirect, consequential, special or punitive damages or
damages for loss of profits, and (ii) Landlord shall have the duty to use
commercially reasonable efforts to mitigate its damages if an Event of Default
occurs.
 
ARTICLE 21
 
TRANSFER OF LANDLORD'S INTEREST
 
In the event of any transfer or termination of Landlord's interest in the
Premises or the Project by sale, assignment, transfer, foreclosure, deed-in-lieu
of foreclosure or otherwise whether voluntary or involuntary, Landlord shall be
automatically relieved of any and all obligations and liabilities on the part of
Landlord arising or accruing from and after the date of such transfer or
termination, including furthermore without limitation, the obligation of
Landlord under Article 4 above to return the security deposit, Letter of Credit
and proceeds thereof, provided the security deposit, Letter of Credit and any
Letter of Credit proceeds are transferred to said transferee and said transferee
assumes Landlord’s obligations under this Lease in writing, including Landlord’s
obligations with respect to the security deposit, Letter of Credit and proceeds
thereof.  Provided said transferee assumes Landlord’s obligations under this
Lease in writing, including Landlord’s obligations with respect to the security
deposit, Letter of Credit and proceeds thereof, (i) Tenant agrees to attorn to
the transferee upon any such transfer and to recognize such transferee as the
lessor under this Lease and (ii) Tenant shall, within five (5) days after
request, execute such further instruments or assurances as such transferee may
reasonably deem necessary to evidence or confirm such attornment.
 
ARTICLE 22
 
BROKER
 
In connection with this Lease, Tenant warrants and represents that it has had
dealings only with firm(s) set forth in Article 1.G. of the Basic Lease
Provisions and that it knows of no other person or entity who is or might be
entitled to a commission, finder's fee or other like payment in connection
herewith and does hereby indemnify and agree to hold Landlord, its agents,
members, partners, representatives, officers, affiliates, shareholders,
employees, successors and assigns harmless from and against any and all loss,
liability and expenses that Landlord may incur should such warranty and
representation prove incorrect, inaccurate or false.  Landlord agrees to pay the
brokers identified in Article I.G. of the Basic Lease Provisions a commission
for this Lease in accordance with a separate agreement between Landlord and such
brokers.
 
 
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ARTICLE 23
 
PARKING
 
During the Term, Tenant and Tenant's employees and visitors shall be entitled to
use, commencing on the Commencement Date, the number of unreserved parking
passes set forth in Article 1.H. of the Basic Lease Provisions, which parking
passes shall pertain to the parking facility for the Development as currently
shown on Exhibit "F".  Landlord shall not grant a license or any other
contractual right to park on the parking facility for the Development during
normal business hours on business days to anyone other than tenants or other
occupants of the Development and their employees, visitors, guests, vendors and
invitees.  Tenant shall not be obligated to pay any parking fee to Landlord
during the initial Term, however Tenant shall be responsible for the full amount
of any taxes imposed by any governmental authority in connection with the
renting of such parking passes by Tenant or the use of the parking facility by
Tenant.  Tenant shall abide 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 cooperate to see that
Tenant's employees and visitors also comply with such rules and
regulations.  Landlord specifically reserves the right to change the size,
configuration, design, layout and all other aspects of the Development parking
facility at any time so long as such changes do not materially impair Tenant’s
access to the Premises or use of the parking lot on the Development or reduce
the number of parking passes which Tenant is entitled to have under this Lease
(except to the extent such changes are required by law), 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 Project parking facility for purposes of
permitting or facilitating any such construction, alteration or
improvements.  Landlord may, from time to time, relocate any reserved parking
spaces (if any) rented by Tenant to another location in the Project parking
facility.  Landlord may delegate its responsibilities hereunder to a parking
operator or a lessee of the parking facility in which case such parking operator
or lessee shall have all the rights of control attributed hereby to the
Landlord.  The parking passes provided to Tenant pursuant to this Article 23 are
provided to Tenant solely for use by Tenant's own personnel and visitors and
such passes may not be transferred, assigned, subleased or otherwise alienated
by Tenant without Landlord's prior approval, except that Tenant may transfer a
prorata number of such parking passes (based on relative square footage) in
connection with an assignment or sublease made by Tenant pursuant to Article 15
above.
 
ARTICLE 24
 
WAIVER
 
No waiver by a party of any provision of this Lease shall be deemed to be a
waiver of any other provision hereof or of any subsequent breach by the other
party of the same or any other provision.  No provision of this Lease may be
waived by Landlord or Tenant, except by an instrument in writing executed by
such waiving party.  Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to render
unnecessary the obtaining of Landlord's consent to or approval of any subsequent
act of Tenant, whether or not similar to the act so consented to or
approved.  No act or thing done by Landlord or Landlord's agents during the Term
of this Lease shall be deemed an acceptance of a surrender of the Premises, and
no agreement to accept such surrender shall be valid unless in writing and
signed by Landlord.  The subsequent acceptance of rent hereunder by Landlord
shall not be deemed to be a waiver of any preceding breach by Tenant of any
term, covenant or condition of this Lease, other than the failure of Tenant to
pay the particular rent so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such rent.  Any payment by Tenant
or receipt by Landlord of an amount less than the total amount then due
hereunder shall be deemed to be in partial payment only thereof and not a waiver
of the balance due or an accord and satisfaction, notwithstanding any statement
or endorsement to the contrary on any check or any other instrument delivered
concurrently therewith or in reference thereto.  Accordingly, Landlord may
accept any such amount and negotiate any such check without prejudice to
Landlord's right to recover all balances due and owing and to pursue its other
rights against Tenant under this Lease, regardless of whether Landlord makes any
notation on such
 
 
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instrument of payment or otherwise notifies Tenant that such acceptance or
negotiation is without prejudice to Landlord's rights.
 
ARTICLE 25
 
ESTOPPEL CERTIFICATE
 
Tenant shall, at any time and from time to time, upon not less than twenty (20)
days' prior written notice from Landlord, execute, acknowledge and deliver to
Landlord a statement in writing certifying the following information, (but not
limited to the following information in the event further information is
requested by Landlord): (i) that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as modified, is in full force and effect); (ii) the dates to
which the rental and other charges are paid in advance, if any; (iii) the amount
of Tenant's security deposit, if any; and (iv) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
and to Tenant's knowledge, no events or conditions then in existence which, with
the passage of time or notice or both, would constitute a default on the part of
Landlord hereunder, or specifying such defaults, events or conditions, if any
are claimed.  It is expressly understood and agreed that any such statement may
be relied upon by any prospective purchaser or encumbrancer of all or any
portion of the Real Property.  Tenant's failure to deliver such statement within
such time shall constitute an admission by Tenant that all statements contained
therein are true and correct.
 
ARTICLE 26
 
LIABILITY OF LANDLORD
 
Notwithstanding anything in this Lease to the contrary, any remedy of Tenant for
the collection of a judgment (or other judicial process) requiring the payment
of money by Landlord in the event of any default by Landlord hereunder or any
claim, cause of action or obligation, contractual, statutory or otherwise by
Tenant against Landlord or the Landlord Parties concerning, arising out of or
relating to any matter relating to this Lease and all of the covenants and
conditions or any obligations, contractual, statutory, or otherwise set forth
herein, shall be limited solely and exclusively to an amount which is equal to
the sum of the rents, issues and profits from the Development plus the lesser of
(i) the interest of Landlord in and to the Development, and (ii) the interest
Landlord would have in the Development if the Development were encumbered by
third party debt in an amount equal to eighty percent (80%) of the then current
value of the Development.  No other property or assets of Landlord or any
Landlord Party shall be subject to levy, execution or other enforcement
procedure for the satisfaction of Tenant's remedies under or with respect to
this Lease, Landlord's obligations to Tenant, whether contractual, statutory or
otherwise, the relationship of Landlord and Tenant hereunder, or Tenant's use or
occupancy of the Premises.
 
ARTICLE 27
 
INABILITY TO PERFORM
 
This Lease and the obligations of both parties hereunder shall not be affected
or impaired because a party obligated to perform is unable to fulfill any of its
obligations hereunder or is delayed in doing so, to the extent such inability or
delay is caused by reason of any prevention, delay or stoppage due to strikes,
lockouts, acts of God, or any other cause previously, or at such time, beyond
the reasonable control or anticipation of such party (collectively, a "Force
Majeure") and the time for performance of such obligations under this Lease
shall be extended to the extent of the delay caused by any such Force Majeure;
provided, however, that this Article 27 is not intended to, and shall not,
extend the time period for the payment of any monetary amounts due (including,
without limitation, rent payments from Tenant) from either party to the other
under this Lease nor relieve either party from their monetary obligations to the
other under this Lease.
 
 
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ARTICLE 28
 
HAZARDOUS WASTE
 
(a) Except as provided in Section 28(b) below, Tenant shall not cause or permit
any Hazardous Material (as defined in Section 28(d) below) to be brought, kept
or used in or about the Project by Tenant, its agents, employee, contractors, or
invitees.  Tenant indemnifies Landlord and the Landlord Parties from and against
any breach by Tenant of the obligations stated in the preceding sentence and/or
Tenant's use, storage, treatment or disposal of any Hazardous Materials
(pursuant to Section 28(b) below or otherwise), and Tenant agrees to defend and
hold Landlord and the Landlord Parties harmless from and against any and all
claims, judgments, damages, penalties, fines, costs, liabilities, or losses
(including, without limitation, diminution in value of the Project, damages for
the loss or restriction or use of rentable or usable space or of any amenity of
the Project, damages arising from any adverse impact or marketing of space in
the Project, and sums paid in settlement of claims, attorneys' fees and costs,
consultant fees, and expert fees) which arise during or after the Term of this
Lease as a result of such breach.  This indemnification of Landlord and the
Landlord Parties by Tenant includes, without limitation, costs incurred in
connection with any investigation of site conditions or any cleanup, remedial,
removal, or restoration work required by any federal, state, or local
governmental agency or political subdivision because of Hazardous Material
caused or permitted to be brought onto the Project by Tenant which is present in
the soil or ground water on or under the Project.  Without limiting the
foregoing, if the presence of any Hazardous Material on the Project caused or
permitted by Tenant results in any contamination of the Project, then subject to
the provisions of Articles 9, 10 and 11 hereof, Tenant shall promptly take all
actions at its sole expense as are necessary to return the Project to the
condition existing prior to the introduction of any such Hazardous Material and
the contractors to be used by Tenant for such work must be approved by Landlord,
which approval shall not be unreasonably withheld so long as such actions would
not potentially have any material adverse long-term or short-term effect on the
Project and so long as such actions do not materially interfere with the use and
enjoyment of the Project by the other tenants thereof; provided however,
Landlord shall also have the right, by written notice to Tenant, to directly
undertake any such mitigation efforts with regard to such Hazardous Materials in
or about the Project due to Tenant's breach of its obligations pursuant to this
Section 28(a), and to charge Tenant, as Additional Rent, for the costs
thereof.  Tenant's obligations under this Section 28(a) shall survive the
expiration or earlier termination of this Lease.
 
(b) Landlord acknowledges that it is not the intent of this Article 28 to
prohibit Tenant from operating its business for the Permitted Use as described
in Section 1(F) above.  Tenant may operate its business and use Hazardous
Material on the Premises according to the custom of the industry so long as the
use or presence of any Hazardous Material is strictly and properly monitored and
accomplished according to all applicable Environmental Laws.  As a material
inducement to Landlord to allow Tenant to use Hazardous Materials in connection
with its business, Tenant agrees to deliver to Landlord prior to the
Commencement Date a list identifying each type of Hazardous Material to be
present on the Premises and setting forth any and all governmental approvals or
permits required in connection with the presence of any Hazardous Material on
the Premises ("Hazardous Materials List").  Tenant shall deliver to Landlord an
updated Hazardous Materials List at least once each calendar year and shall also
deliver an updated list before any new Hazardous Material is brought onto the
Premises and on or before the date Tenant obtains any additional permits or
approvals for Hazardous Materials.  An Event of Default shall be deemed to have
occurred (notwithstanding anything to the contrary contained herein) in the
event that (i) any use of the Premises by Tenant involves the generation,
storage, use, treatment or disposal of Hazardous Material in a manner or for a
purpose prohibited by any governmental agency or authority if Tenant fails to
cease such prohibited use of Hazardous Material in the Premises within three (3)
business days after notice to Tenant from Landlord to cease such use;
(ii) Tenant has been required by any lender or governmental authority to take
remedial action in connection with Hazardous Material contaminating the Premises
if the contamination resulted from Tenant's actions or use of the Premises
(unless Tenant is diligently seeking compliance with such remedial action); or
(iii) Tenant is subject to an enforcement order issued by any governmental
authority in connection with Tenant's use, disposal or storage of a Hazardous
Material on the Premises (unless Tenant is diligently seeking compliance with
such enforcement order).  At any time prior to the expiration of the Lease Term
and upon Landlord's reasonable belief that certain Hazardous Materials tests are
advisable,
 
 
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Landlord shall have the right following notice (except in the event of an
emergency), to enter upon the Premises at all reasonable times in order to
conduct appropriate tests and to deliver to Tenant the results of such tests to
attempt to demonstrate that contamination has occurred as a result of Tenant's
use of the Premises.  Without limiting the foregoing sentence, Landlord shall
have the right to have an environmental audit of the Premises to be conducted
within ninety (90) days prior to the scheduled expiration date of this Lease, or
at termination of this Lease, if the Lease is terminated on a date other than
the scheduled termination date.  Tenant shall promptly perform any remedial
action recommended by such environmental audit to remediate any Hazardous
Material used, disposed of or stored on the Premises by Tenant in excess of
action levels or governmental standards if the audit reveals that the Hazardous
Materials resulted from the activities of Tenant.  The costs of such audits
shall be borne by Landlord unless the audit discloses the existence of Hazardous
Materials in excess of action levels or governmental standards, that resulted
from the activities of Tenant, in which case the costs of the audit shall be
borne by Tenant.
 
(c) It shall not be unreasonable for Landlord to withhold its consent to any
proposed Transfer if (i) the proposed transferee's anticipated use of the
Premises involves the generation, storage, use, treatment, or disposal of
Hazardous Material (except as permitted as provided in Section 28(b) above);
(ii) the proposed Transferee has been required by any prior landlord, lender, or
governmental authority to take remedial action in connection with Hazardous
Material contaminating a property if the contamination resulted from such
Transferee's actions or use of the property in question; or (iii) the proposed
Transferee is subject to an enforcement order issued by any governmental
authority in connection with the use, disposal, or storage of a Hazardous
Material.  Landlord shall cause all Hazardous Material that is required to be
removed or remediated by applicable Environmental Laws and that was caused or
permitted to be brought onto the Development by Landlord or its agents or any
Landlord Parties, or that existed on the Development as of the Commencement
Date, or that is brought onto the Development after the Commencement Date by
anyone other than Tenant or its employees, agents or contractors, to be promptly
be removed and remediated from the Development at Landlord's sole cost and
without including such costs in Operating Costs (except for the inclusion in
Operating Costs as provided in the qualification to the exclusion in subsection
3(c)(ii)(22)(ii) above).
 
(d) As used herein, the term "Hazardous Material" means any hazardous or toxic
substance, mate`rial, or waste which is or becomes regulated by any local
governmental authority, the State of Washington or the United States
Government.  The term "Hazardous Material" includes, without limitation, any
material or substance which is (i) designated as a "Hazardous Substance"
pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C.
§ 1317), (ii) defined as a "Hazardous Waste" pursuant to Section 1004 of the
Federal Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (42
U.S.C. § 6903), or (iii) defined as a "Hazardous Substance" pursuant to Section
101 of the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. § 9601 et seq. (42 U.S.C. § 9601).
 
(e) As used herein, the term "Environmental Laws" means any applicable Laws
relating to any Hazardous Material affecting the Project, including, without
limitation, the laws, ordinances, and regulations referred to in Section 28(d)
above.
 
ARTICLE 29
 
SURRENDER OF PREMISES; REMOVAL OF PROPERTY
 
(a)           The voluntary or other surrender of this Lease by Tenant to
Landlord, or a mutual termination hereof, shall not work a merger, and shall at
the option of Landlord, operate as an assignment to it of any or all subleases
or subtenancies affecting the Premises.
 
(b)           Upon the expiration of the Term of this Lease, or upon any earlier
termination of this Lease, Tenant shall quit and surrender possession of the
Premises to Landlord in good order and condition, reasonable wear and tear, fire
and other casualty damage resulting in termination of this Lease and repairs
which are Landlord's obligation excepted, and shall, without expense to
Landlord, remove or cause to be removed from the Premises all debris and
rubbish, all furniture, equipment, business and trade fixtures, free-standing
cabinet work, moveable partitioning, telephone and data cabling and other
articles of personal property in the Premises except to the
 
 
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extent (i) Landlord elects by notice to Tenant to exercise its option to have
any subleases or subtenancies assigned to it, and/or (ii) Landlord elects by
notice to Tenant not to require Tenant to remove any data cabling servicing the
Premises.  Tenant shall be responsible for the cost to repair all damage to the
Premises resulting from the removal of any of such items from the Premises,
provided that Landlord shall have the right to either (I) cause Tenant to
perform said repair work, or (II) perform said repair work itself, at Tenant's
expense (with any such costs incurred by Landlord to be reimbursed by Tenant to
Landlord within three (3) business days following written demand therefor from
Landlord).
 
(c)           Whenever Landlord shall reenter the Premises as provided in
Article 20 hereof, or as otherwise provided in this Lease, any property of
Tenant not removed by Tenant upon the expiration of the Term of this Lease (or
within forty-eight (48) hours after a termination by reason of Tenant's
default), as provided in this Lease, shall be considered abandoned and Landlord
may remove any or all of such items and dispose of the same in any manner or
store the same in a public warehouse or elsewhere for the account and at the
expense and risk of Tenant, and if Tenant shall fail to pay the cost of storing
any such property after it has been stored for a period of thirty (30) days or
more, Landlord may sell any or all of such property at public or private sale,
in such manner and at such times and places as Landlord, in its sole discretion,
may deem proper, without notice to or demand upon Tenant, for the payment of all
or any part of such charges or the removal of any such property, and shall apply
the proceeds of such sale as follows:  first, to the cost and expense of such
sale, including reasonable attorneys' fees and costs for services rendered;
second, to the payment of the cost of or charges for storing any such property;
third, to the payment of any other sums of money which may then or thereafter be
due to Landlord from Tenant under any of the terms hereof; and fourth, the
balance, if any, to Tenant.
 
(d)           Tenant shall not be required to remove any improvements existing
in the Premises prior to the installation of the Improvements pursuant to the
Tenant Work Letter.  All fixtures, Tenant Improvements, Alterations and/or
appurtenances attached to or built into the Premises prior to or during the
Term, whether by Landlord or Tenant and whether at the expense of Landlord or
Tenant, or of both, shall be and remain part of the Premises and shall not be
removed by Tenant at the end of the Term unless otherwise expressly provided for
in Section 9(e) of this Lease above.  Such fixtures, Tenant Improvements,
Alterations and/or appurtenances shall include but not be limited to:  all floor
coverings, drapes, paneling, built-in cabinetry, molding, doors, vaults
(including vault doors), plumbing systems, security systems electrical systems,
lighting systems, communication systems, all fixtures and outlets for the
systems mentioned above and for all telephone, radio and television purposes,
and any special flooring or ceiling installations.
 
ARTICLE 30
 
MISCELLANEOUS
 
(a) SEVERABILITY; ENTIRE AGREEMENT.  ANY PROVISION OF THIS LEASE WHICH SHALL
PROVE TO BE INVALID, VOID, OR ILLEGAL SHALL IN NO WAY AFFECT, IMPAIR OR
INVALIDATE ANY OTHER PROVISION HEREOF AND SUCH OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.  THIS LEASE AND THE EXHIBITS ATTACHED HERETO CONSTITUTE
THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH REGARD TO TENANT'S
OCCUPANCY OR USE OF ALL OR ANY PORTION OF THE PROJECT, AND NO PRIOR AGREEMENT OR
UNDERSTANDING PERTAINING TO ANY SUCH MATTER SHALL BE EFFECTIVE FOR ANY
PURPOSE.  NO PROVISION OF THIS LEASE MAY BE AMENDED OR SUPPLEMENTED EXCEPT BY AN
AGREEMENT IN WRITING SIGNED BY THE PARTIES HERETO OR THEIR SUCCESSOR IN
INTEREST.  THE PARTIES AGREE THAT ANY DELETION OF LANGUAGE FROM THIS LEASE PRIOR
TO ITS MUTUAL EXECUTION BY LANDLORD AND TENANT SHALL NOT BE CONSTRUED TO HAVE
ANY PARTICULAR MEANING OR TO RAISE ANY PRESUMPTION, CANON OF CONSTRUCTION OR
IMPLICATION INCLUDING, WITHOUT LIMITATION, ANY IMPLICATION THAT THE PARTIES
INTENDED THEREBY TO STATE THE CONVERSE, OBVERSE OR OPPOSITE OF THE DELETED
LANGUAGE.
 
 
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(b) Attorneys' Fees; Waiver of Jury Trial.
 
(i) In any action to enforce the terms of this Lease, including any suit by
Landlord for the recovery of rent or possession of the Premises, the losing
party shall pay the successful party a reasonable sum for attorneys' fees and
costs in such suit and such attorneys' fees and costs shall be deemed to have
accrued prior to the commencement of such action and shall be paid whether or
not such action is prosecuted to judgment.  Tenant shall also reimburse Landlord
for all costs incurred by Landlord in connection with enforcing its rights under
this Lease against Tenant following a bankruptcy by Tenant, including, without
limitation, legal fees, experts' fees and expenses, court costs and consulting
fees.
 
(ii) Should Landlord, without fault on Landlord's part, be made a party to any
litigation instituted by Tenant or by any third party against Tenant, or by or
against any person holding under or using the Premises by license of Tenant, or
for the foreclosure of any lien for labor or material furnished to or for Tenant
or any such other person or otherwise arising out of or resulting from any act
or transaction of Tenant or of any such other person, Tenant covenants to save
and hold Landlord harmless from any judgment rendered against Landlord or the
Premises or any part thereof and from all costs and expenses, including
reasonable attorneys' fees and costs incurred by Landlord in connection with
such litigation.
 
(iii) TO THE EXTENT PERMITTED BY LAW, EACH PARTY HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION SEEKING SPECIFIC PERFORMANCE OF ANY PROVISION OF
THIS LEASE, FOR DAMAGES FOR ANY BREACH UNDER THIS LEASE, OR OTHERWISE FOR
ENFORCEMENT OF ANY RIGHT OR REMEDY HEREUNDER.
 
(c) Time of Essence.  Each of Tenant's covenants herein is a condition and time
is of the essence with respect to the performance of every provision of this
Lease.
 
(d) Headings; Joint and Several.  The article headings contained in this Lease
are for convenience only and do not in any way limit or amplify any term or
provision hereof.  The terms "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular, the neuter shall include the
masculine and feminine genders and the obligations herein imposed upon Tenant
shall be joint and several as to each of the persons, firms or corporations of
which Tenant may be composed.
 
(e) Reserved Area.  Tenant hereby acknowledges and agrees that the exterior
walls of the Premises and the area (if any) between the finished ceiling of the
Premises and the slab of the floor of the Project thereabove have not been
demised hereby (are not part of the Premises) and the use thereof together with
the right to install, maintain, use, repair and replace pipes, ducts, conduits,
wiring and cabling leading through, under or above the Premises or throughout
the Project in locations which will not materially interfere with Tenant's use
of the Premises and serving other parts of the Project are hereby excepted and
reserved unto Landlord.  Landlord agrees that during the Term Tenant shall have
the nonexclusive right to use the area (if any) between the finished ceiling of
the Premises and the slab of the floor of the Project thereabove to install,
maintain, use, repair and replace any pipes, ducts, conduits, wiring and cabling
Tenant may wish to install to serve the Premises, provided Tenant shall (i)
comply with Landlord's reasonable requirements regarding such use (e.g.,
labeling any wiring and cabling therein); and (ii) not materially interfere with
Landlord’s use of such area.
 
(f) NO OPTION.  THE SUBMISSION OF THIS LEASE BY LANDLORD, ITS AGENT OR
REPRESENTATIVE FOR EXAMINATION OR EXECUTION BY TENANT DOES NOT CONSTITUTE AN
OPTION OR OFFER TO LEASE THE PREMISES UPON THE TERMS AND CONDITIONS CONTAINED
HEREIN OR A RESERVATION OF THE PREMISES IN FAVOR OF TENANT, IT BEING INTENDED
HEREBY THAT THIS LEASE SHALL ONLY BECOME EFFECTIVE UPON THE EXECUTION HEREOF BY
LANDLORD AND TENANT AND DELIVERY OF A FULLY EXECUTED LEASE TO TENANT.
 
(g) Use of Project Name; Improvements.  Tenant shall not be allowed to use the
name, picture or representation of the Project, or words to that effect, in
connection with any business carried on in the Premises or otherwise (except as
Tenant's address) without the prior written consent of Landlord.  In the event
that Landlord undertakes any additional improvements
 
 
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on the Real Property including but not limited to new construction or renovation
or additions to the existing improvements, Landlord shall give Tenant reasonable
notice prior to any such activity if such activity may materially affect
Tenant's business operations in the Premises and Landlord shall use commercially
reasonable efforts to conduct such activity in a reasonable matter so as to
minimize interference with Tenant's use of the Premises; however, Landlord shall
not be liable to Tenant for any noise, dust, vibration or interference with
access to the Premises or disruption in Tenant's business caused thereby.
 
(h) Rules and Regulations.  Tenant shall observe faithfully and comply strictly
with the rules and regulations ("Rules and Regulations") attached to this Lease
as Exhibit "B" and made a part hereof, and such other Rules and Regulations as
Landlord may from time to time reasonably adopt (and which are otherwise
consistent with Tenant's rights under this Lease) for the safety, care and
cleanliness of the Project, the facilities thereof, or the preservation of good
order therein.  Landlord shall not be liable to Tenant for violation of any such
Rules and Regulations, or for the breach of any covenant or condition in any
lease by any other tenant in the Project.  Landlord shall not enforce the Rules
and Regulations in a discriminatory manner.
 
(i) Quiet Possession.  Upon Tenant's paying the Basic Rental, Additional Rent
and other sums provided hereunder and observing and performing all of the
covenants, conditions and provisions on Tenant's part to be observed and
performed hereunder, Tenant shall have quiet possession of the Premises for the
entire Term hereof, subject to all of the provisions of this Lease.
 
(j) Rent.  All payments required to be made hereunder to Landlord shall be
deemed to be rent, whether or not described as such.
 
(k) Successors and Assigns.  Subject to the provisions of Article 15 hereof, all
of the covenants, conditions and provisions of this Lease shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
 
(l) Notices.  Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal service evidenced by a signed receipt or
sent by registered or certified mail, return receipt requested, or via overnight
courier, and shall be effective upon proof of delivery, addressed to Tenant at
3625 – 132nd Avenue S.E., Suite 400, Bellevue, Washington 98006 prior to the
Commencement Date, addressed to Tenant at the Premises from and after the
Commencement Date, or to Landlord at the management office for the Project,
which currently is located at 10675 Willows Road NE, Suite 150, Redmond, WA
98052, with a copy to Landlord, c/o Arden Realty, Inc., 11601 Wilshire
Boulevard, Fourth Floor, Los Angeles, California 90025, Attn:  Legal
Department.  Either party may by notice to the other specify a different address
for notice purposes except that, upon Tenant's taking possession of the
Premises, the Premises shall constitute Tenant's address for notice purposes.  A
copy of all notices to be given to Landlord hereunder shall be concurrently
transmitted by Tenant to such party hereafter designated by notice from Landlord
to Tenant.  Any notices sent by Landlord regarding or relating to eviction
procedures, including without limitation three day notices, may be sent by
regular mail.
 
(m) Intentionally Omitted.
 
(n) Right of Landlord to Perform.  All covenants and agreements to be performed
by Tenant under any of the terms of this Lease shall be performed by Tenant at
Tenant's sole cost and expense and without any abatement of rent.  If Tenant
shall fail to pay any sum of money, other than rent, required to be paid by it
hereunder or shall fail to perform any other act on its part to be performed
hereunder, and such failure shall continue beyond any applicable cure period set
forth in this Lease, Landlord may, but shall not be obligated to, without
waiving or releasing Tenant from any obligations of Tenant, make any such
payment or perform any such other act on Tenant's part to be made or performed
as is in this Lease provided.  All sums so paid by Landlord and all reasonable
incidental costs, together with interest thereon at the rate of specified in
Section 20(e) above from the date of such payment by Landlord, shall be payable
to Landlord on demand and Tenant covenants to pay any such sums, and Landlord
shall have (in addition to any other right or remedy of Landlord) the same
rights and remedies in the event of the nonpayment thereof by Tenant as in the
case of default by Tenant in the payment of the rent.
 
 
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(o) Access, Changes in Project, Facilities, Name.
 
(i) Every part of the Project except the inside surfaces of all walls, windows
and doors bounding the Premises, (including exterior building walls, the
rooftop, core corridor walls and doors and any core corridor entrance), and any
space in or adjacent to the Premises or within the Project used for shafts,
stacks, pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or
other building facilities, and the use thereof, as well as access thereto
through the Premises for the purposes of operation, maintenance, decoration and
repair, are reserved to Landlord.
 
(ii) Landlord reserves the right, without incurring any liability to Tenant
therefor, to make such changes in or to the Project and the fixtures and
equipment thereof, as well as in or to the street entrances, halls, passages,
elevators, stairways and other improvements thereof, as it may deem necessary or
desirable, so long as no such changes materially impair or interfere with
Tenant’s ability to operate in or have access to the Premises or use the parking
area (except to the extent such changes are required by law).  Landlord shall
give Tenant reasonable prior notice prior to any such activity which may
materially affect Tenant's operations and shall conduct such activity in a
reasonable manner so as to minimize interference with Tenant’s use of the
Premises.
 
(iii) Landlord may adopt any name for the Project and Landlord reserves the
right, from time to time, to change the name and/or address of the Project;
however, Landlord shall give Tenant reasonable notice prior to changing the
address of the Project and, if such address change is initiated by Landlord (and
not any governmental authority), Landlord  shall reimburse Tenant for the cost
of stationery replacement necessitated by such change of address (not to exceed
$10,000.00).
 
(p) Signing Authority.  If Tenant is a corporation, partnership or limited
liability company, each individual executing this Lease on behalf of said entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity in accordance with: (i) if Tenant is a
corporation, a duly adopted resolution of the Board of Directors of said
corporation or in accordance with the By-laws of said corporation, (ii) if
Tenant is a partnership, the terms of the partnership agreement, and (iii) if
Tenant is a limited liability company, the terms of its operating
agreement.  Concurrently with Tenant's execution of this Lease, Tenant shall
provide to Landlord a copy of:  (A) if Tenant is a corporation, such resolution
of the Board of Directors authorizing the execution of this Lease on behalf of
such corporation, which copy of resolution shall be duly certified by the
secretary or an assistant secretary of the corporation to be a true copy of a
resolution duly adopted by the Board of Directors of said corporation and shall
be a form reasonably acceptable to Landlord, (B) if Tenant is a partnership, a
copy of the provisions of the partnership agreement granting the requisite
authority to each individual executing this Lease on behalf of said partnership,
and (C) if Tenant is a limited liability company, a copy of the provisions of
its operating agreement granting the requisite authority to each individual
executing this Lease on behalf of said limited liability company.
 
(q) Identification of Tenant.
 
(i) If Tenant constitutes more than one person or entity, (A) each of them shall
be jointly and severally liable for the keeping, observing and performing of all
of the terms, covenants, conditions and provisions of this Lease to be kept,
observed and performed by Tenant, (B) the term "Tenant" as used in this Lease
shall mean and include each of them jointly and severally, and (C) the act of or
notice from, or notice or refund to, or the signature of, any one or more of
them, with respect to the tenancy of this Lease, including, but not limited to,
any renewal, extension, expiration, termination or modification of this Lease,
shall be binding upon each and all of the persons or entities executing this
Lease as Tenant with the same force and effect as if each and all of them had so
acted or so given or received such notice or refund or so signed.
 
(ii) If Tenant is a partnership (or is comprised of two or more persons,
individually and as co-partners of a partnership) or if Tenant's interest in
this Lease shall be assigned to a partnership (or to two or more persons,
individually and as co-partners of a partnership) pursuant to Article 15 hereof
(any such partnership and such persons hereinafter
 
 
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referred to in this Section 30(q)(ii) as "Partnership Tenant"), the following
provisions of this Lease shall apply to such Partnership Tenant:
 
(A) The liability of each of the parties comprising Partnership Tenant shall be
joint and several.
 
(B) Each of the parties comprising Partnership Tenant hereby consents in advance
to, and agrees to be bound by, any written instrument which may hereafter be
executed, changing, modifying or discharging this Lease, in whole or in part, or
surrendering all or any part of the Premises to the Landlord, and by notices,
demands, requests or other communication which may hereafter be given, by the
individual or individuals authorized to execute this Lease on behalf of
Partnership Tenant under Subparagraph (p) above.
 
(C) Any bills, statements, notices, demands, requests or other communications
given or rendered to Partnership Tenant or to any of the parties comprising
Partnership Tenant shall be deemed given or rendered to Partnership Tenant and
to all such parties and shall be binding upon Partnership Tenant and all such
parties.
 
(D) If Partnership Tenant admits new partners, all of such new partners shall,
by their admission to Partnership Tenant, be deemed to have assumed performance
of all of the terms, covenants and conditions of this Lease on Tenant's part to
be observed and performed.
 
(E) Partnership Tenant shall give prompt notice to Landlord of the admission of
any such new partners, and, upon demand of Landlord, shall cause each such new
partner to execute and deliver to Landlord an agreement in form satisfactory to
Landlord, wherein each such new partner shall assume performance of all of the
terms, covenants and conditions of this Lease on Partnership Tenant's part to be
observed and performed (but neither Landlord's failure to request any such
agreement nor the failure of any such new partner to execute or deliver any such
agreement to Landlord shall terminate the provisions of clause (D) of this
Section 30(q)(ii) or relieve any such new partner of its obligations
thereunder).
 
(r) Intentionally Omitted.
 
(s) Survival of Obligations.  Any obligations of Tenant or Landlord occurring
prior to the expiration or earlier termination of this Lease shall survive such
expiration or earlier termination.
 
(t) Intentionally Omitted.
 
(u) Governing Law.  This Lease shall be governed by and construed in accordance
with the laws of the State of Washington.  No conflicts of law rules of any
state or country (including, without limitation, Washington conflicts of law
rules) shall be applied to result in the application of any substantive or
procedural laws of any state or country other than Washington.  All
controversies, claims, actions or causes of action arising between the parties
hereto and/or their respective successors and assigns, shall be brought, heard
and adjudicated by the courts of the State of Washington, with venue in the
County of King.  Each of the parties hereto hereby consents to personal
jurisdiction by the courts of the State of Washington in connection with any
such controversy, claim, action or cause of action, and each of the parties
hereto consents to service of process by any means authorized by Washington law
and consent to the enforcement of any judgment so obtained in the courts of the
State of Washington on the same terms and conditions as if such controversy,
claim, action or cause of action had been originally heard and adjudicated to a
final judgment in such courts.  Each of the parties hereto further acknowledges
that the laws and courts of Washington were freely and voluntarily chosen to
govern this Lease and to adjudicate any claims or disputes hereunder.
 
(v) Office of Foreign Assets Control.  Tenant certifies to Landlord that Tenant
is not entering into this Lease, nor acting, for or on behalf of any person or
entity named as a terrorist or other banned or blocked person or entity pursuant
to any law, order, rule or regulation of the United States Treasury Department
or the Office of Foreign Assets Control.  Tenant hereby agrees to indemnify,
defend and hold Landlord and the Landlord Parties harmless from any and all
Claims arising from or related to any breach of the foregoing certification.
 
 
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(w) Financial Statements.  Within ten (10) business days after Tenant's receipt
of Landlord's written request, Tenant shall provide Landlord with current
financial statements of Tenant and financial statements for the two (2) calendar
or fiscal years (if Tenant's fiscal year is other than a calendar year) prior to
the current financial statement year.  Any such statements shall be prepared in
accordance with generally accepted accounting principles and, if the normal
practice of Tenant, shall be audited by an independent certified public
accountant.
 
(x) Exhibits.  The Exhibits attached hereto are incorporated herein by this
reference as if fully set forth herein.
 
(y) Independent Covenants.  This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent (and not dependent)
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not, except as otherwise expressly provided in this Lease, be
entitled to make any repairs or perform any acts hereunder at Landlord's expense
or to set off of any of the rent or other amounts owing hereunder against
Landlord.
 
(z) Counterparts.  This Lease may be executed in counterparts, each of which
shall be deemed an original, but such counterparts, when taken together, shall
constitute one agreement.
 
ARTICLE 31
 
OPTION TO EXTEND
 
(a) Option Right.  Landlord hereby grants the Tenant named in this Lease (the
"Original Tenant") one (1) option ("Option") to extend the Lease Term for the
entire Premises for a period of five (5) years ("Option Term"), which Option
shall be exercisable only by written notice delivered by Tenant to Landlord as
set forth below.  The rights contained in this Article 31 shall be personal to
the Original Tenant and any "Affiliated Assignee," as that term is defined
below, and may only be exercised by the Original Tenant or an Affiliated
Assignee (and not any other transferee) if the Original Tenant or such
Affiliated Assignee occupies the entire Premises as of the date of Tenant's
Acceptance (as defined in Section 31(c) below).  The term "Affiliate" shall mean
any entity that controls, is controlled by or is under common control with
Tenant (with the term "control" meaning the ownership, directly or indirectly,
of greater than fifty percent (50%) of the voting securities of, or possession
of the right to vote in the ordinary direction of its affairs, of greater than
fifty percent (50%) of the voting interest in, an entity).  The term "Affiliated
Assignee" shall mean any assignee of Tenant's entire interest in this Lease,
where such assignee is an Affiliate.
 
(b) Option Rent.  The rent payable by Tenant during the Option Term ("Option
Rent") shall be equal to the "Market Rent" (defined below).  "Market Rent" shall
mean the applicable Monthly Basic Rental, including all escalations, Direct
Costs, additional rent and other charges at which tenants, as of the
commencement of the Option Term, are entering into leases for non-sublease space
which is not encumbered by expansion rights and which is comparable in size,
location and quality to the Premises in renewal transactions for a term
comparable to the Option Term, which comparable space is located in buildings
comparable to the Project in Bothell, Washington, taking into consideration the
value of the existing improvements in the Premises to Tenant, as compared to the
value of the existing improvements in such comparable space, with such value to
be based upon the age, quality and layout of the improvements and the extent to
which the same could be utilized by Tenant with consideration given to the fact
that the improvements existing in the Premises are specifically suitable to
Tenant.
 
(c) Exercise of Options.  The Option shall be exercised by Tenant only in the
following manner:  (i) an Event of Default shall not have occurred and be
continuing, and an Event of Default shall not have occurred under this Lease
more than once in the preceding two (2) years, on the delivery date of the
Interest Notice and Tenant's Acceptance; (ii) Tenant shall deliver written
notice ("Interest Notice") to Landlord not more than twelve (12) months nor less
than nine (9) months prior to the expiration of the Lease Term, stating that
Tenant is interested in exercising the Option, (iii) within fifteen (15)
business days of Landlord's receipt of Tenant's written notice, Landlord shall
deliver notice ("Option Rent Notice") to Tenant setting forth the Option Rent;
and (iv) if Tenant desires to exercise such Option, Tenant shall provide
Landlord
 
 
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written notice within five (5) business days after receipt of the Option Rent
Notice ("Tenant's Acceptance") and upon, and concurrent with such exercise,
Tenant may, at its option, object to the Option Rent contained in the Option
Rent Notice.  Tenant's failure to deliver the Interest Notice or Tenant's
Acceptance on or before the dates specified above shall be deemed to constitute
Tenant's election not to exercise the Option.  If Tenant timely and properly
exercises its Option, the Lease Term shall be extended for the Option Term upon
all of the terms and conditions set forth in this Lease, except that the rent
for the Option Term shall be as indicated in the Option Rent Notice unless
Tenant, concurrently with Tenant's Acceptance, objects to the Option Rent
contained in the Option Rent Notice, in which case the parties shall follow the
procedure and the Option Rent shall be determined, as set forth in Section 31(d)
below.
 
(d) Determination of Market Rent.  If Tenant timely and appropriately objects to
the Market Rent in Tenant's Acceptance, Landlord and Tenant shall attempt to
agree upon the Market Rent using their best good-faith efforts.  If Landlord and
Tenant fail to reach agreement within thirty (30) days following Tenant's
Acceptance ("Outside Agreement Date"), then each party shall make a separate
determination of the Market Rent which shall be submitted to each other and to
arbitration in accordance with the following items (i) through (vii):
 
(i) Landlord and Tenant shall each appoint, within ten (10) days of the Outside
Agreement Date, one arbitrator who shall by profession be a current real estate
broker or appraiser of comparable commercial properties in the immediate
vicinity of the Project, and who has been active in such field over the last
five (5) years.  The determination of the arbitrators shall be limited solely to
the issue of whether Landlord's or Tenant's submitted Market Rent is the closest
to the actual Market Rent as determined by the arbitrators, taking into account
the requirements of item (b), above (i.e., the arbitrators may only select
Landlord's or Tenant's determination of Market Rent and shall not be entitled to
make a compromise determination).
 
(ii) The two (2) arbitrators so appointed shall within five (5) business days of
the date of the appointment of the last appointed arbitrator agree upon and
appoint a third arbitrator who shall be qualified under the same criteria set
forth hereinabove for qualification of the initial two arbitrators.
 
(iii) The three arbitrators shall within fifteen (15) days of the appointment of
the third arbitrator reach a decision as to whether the parties shall use
Landlord's or Tenant's submitted Market Rent, and shall notify Landlord and
Tenant thereof.
 
(iv) The decision of the majority of the three (3) arbitrators shall be binding
upon Landlord and Tenant.
 
(v) If either Landlord or Tenant fails to appoint an arbitrator within ten (10)
days after the applicable Outside Agreement Date, the arbitrator appointed by
one of them shall reach a decision, notify Landlord and Tenant thereof, and such
arbitrator's decision shall be binding upon Landlord and Tenant.
 
(vi) If the two (2) arbitrators fail to agree upon and appoint a third (3rd)
arbitrator, or both parties fail to appoint an arbitrator, then the appointment
of the third arbitrator or any arbitrator shall be dismissed and the matter to
be decided shall be forthwith submitted to arbitration under the provisions of
the American Arbitration Association, but subject to the instruction set forth
in this item (d).
 
(vii) The cost of arbitration shall be paid by Landlord and Tenant equally.
 
ARTICLE 32
 
RIGHT OF FIRST OFFER
 
Landlord hereby grants to Tenant a right of first offer with respect to all
space (other than the Premises) on the first (1st) floor of the Project ("First
Offer Space").  Notwithstanding the foregoing, (i) such first offer right of
Tenant shall commence only following the expiration or earlier termination of
(A) any existing lease pertaining to the First Offer Space, and (B) as to any
First Offer Space which is vacant as of the date of this Lease, the first lease
pertaining to any portion of such First Offer Space entered into by Landlord
after the date of this Lease
 
 
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(collectively, the "Superior Leases"), including any renewal or extension of
such existing or future lease, whether or not such renewal or extension is
pursuant to an express written provision in such lease, and regardless of
whether any such renewal or extension is consummated pursuant to a lease
amendment or a new lease (the rights described above to be known collectively as
"Superior Rights"), and (ii) such right of first offer shall not be triggered by
the lease of space in the Project by Landlord to an existing tenant in the
Project in connection with the relocation of such existing tenant's premises in
the Project.  Tenant's right of first offer shall be on the terms and conditions
set forth in this Article 32.
 
(a) Procedure for Offer.  Landlord shall notify Tenant (the "First Offer
Notice") from time to time when Landlord determines that Landlord shall commence
the marketing of any First Offer Space because such space shall become available
for lease to third parties, where no holder of a Superior Right desires to lease
such space.  The First Offer Notice shall describe the space so offered to
Tenant and shall set forth Landlord's proposed material economic terms and
conditions applicable to Tenant's lease of such space (collectively, the
"Economic Terms"), including the proposed term of lease and the proposed rent
payable for the First Offer Space.  Notwithstanding the foregoing, Landlord's
obligation to deliver the First Offer Notice shall not apply during the last
nine (9) months of the initial Lease Term unless Tenant has delivered an
Interest Notice to Landlord pursuant to Section 31(c) above nor shall Landlord
be obligated to deliver the First Offer Notice during the last eight (8) months
of the initial Lease Term unless Tenant has timely delivered Tenant's Acceptance
to Landlord pursuant to Section 31(c) above.
 
(b) Procedure for Acceptance.  If Tenant wishes to exercise Tenant's right of
first offer with respect to the space described in the First Offer Notice, then
within five (5) business days after delivery of the First Offer Notice to
Tenant, Tenant shall deliver an unconditional irrevocable notice to Landlord of
Tenant's exercise of its right of first offer with respect to the entire space
described in the First Offer Notice, and the Economic Terms shall be as set
forth in the First Offer Notice.  If Tenant does not unconditionally exercise
its right of first offer within the five (5) business day period, then Landlord
shall be free to lease the space described in the First Offer Notice to anyone
to whom Landlord desires on any terms Landlord desires and Tenant's right of
first offer shall terminate as to the First Offer Space described in the First
Offer Notice.  Notwithstanding anything to the contrary contained herein, Tenant
must elect to exercise its right of first offer, if at all, with respect to all
of the space offered by Landlord to Tenant at any particular time, and Tenant
may not elect to lease only a portion thereof.
 
(c) Lease of First Offer Space.  If Tenant timely and properly exercises
Tenant's right to lease the First Offer Space as set forth herein, Landlord and
Tenant shall execute an amendment adding such First Offer Space to this Lease
upon the same non-economic terms and conditions as applicable to the initial
Premises, and the Economic Terms provided in this Article 32.  Unless otherwise
specified in Landlord's Economic Terms, Tenant shall commence payment of rent
for the First Offer Space and the Lease Term of the First Offer Space shall
commence upon the date of delivery of such space to Tenant.
 
(d) No Defaults.  The rights contained in this Article 32 shall be personal to
the Original Tenant and any Affiliated Assignee, and may only be exercised by
the Original Tenant or an Affiliated Assignee (and not any other transferee) if
the Original Tenant or such Affiliated Assignee occupies the entire Premises as
of the date of the First Offer Notice.  Tenant shall not have the right to lease
First Offer Space as provided in this Article 32 if, as of the date of the First
Offer Notice, or, at Landlord's option, as of the scheduled date of delivery of
such First Offer Space to Tenant, an Event of Default has occurred and is
continuing or an Event of Default has occurred under this Lease more than once.
 
(e) Remedy.  The sole remedy of Tenant for a breach by Landlord of its
obligations under this Article 32 shall be an action against Landlord for a
temporary restraining order, preliminary injunction, injunction, specific
performance and/or other equitable remedy, and Tenant shall have no right to
bring an action for damages for such breach.
 
 
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ARTICLE 33
 
SIGNAGE
 
Landlord shall provide, at Landlord's sole cost and expense, Project-standard
directory and suite entry signage for the Premises.  In addition, subject to
this Article 33, Tenant shall be entitled to install, at its sole cost and
expense, non-exclusive signage on the exterior of the Project ("Signage").  The
graphics, materials, size, color, design, lettering, lighting (if any),
specifications and exact location of the Signage (collectively, the "Signage
Specifications") shall be subject to the prior written approval of Landlord,
which approval may be withheld in Landlord's sole discretion.  In addition, the
Signage and all Signage Specifications therefore shall be subject to Tenant's
receipt of all required governmental permits and approvals, shall be subject to
all applicable governmental laws and ordinances, and all covenants, conditions
and restrictions affecting the Project.  Tenant hereby acknowledges that,
notwithstanding Landlord's approval of the Signage and/or the Signage
Specifications therefor, Landlord has made no representations or warranty to
Tenant with respect to the probability of obtaining such approvals and
permits.  In the event Tenant does not receive the necessary permits and
approvals for the Signage, Tenant's and Landlord's rights and obligations under
the remaining provisions of this Lease shall not be affected.  The cost of
installation of the Signage, as well as all costs of design and construction of
such Signage and all other costs associated with such Signage, including,
without limitation, permits, maintenance and repair, shall be the sole
responsibility of Tenant.  Notwithstanding anything to the contrary contained
herein, in the event that at any time during the Term of this Lease (or any
Option Term, if applicable), Tenant fails to occupy at the entire Premises,
Tenant's right to the Signage shall thereupon terminate and Tenant shall remove
such Signage as provided in this Section 33 below.  The rights to the Signage
shall be personal to the Original Tenant and may not be transferred, except that
the Signage may be transferred to an Affiliated Assignee provided that Landlord
reasonably determines that the name of the Affiliated Assignee is not an
"Objectionable Name," as that term is defined below.  The term "Objectionable
Name" shall mean any name that (i) relates to an entity that is of a character
or reputation, or is associated with a political orientation or faction that is
materially inconsistent with the quality of the Project, or which would
otherwise reasonably offend a landlord of a building comparable to the Project,
taking into consideration the level and visibility of Tenant's Signage, or
(ii) conflicts with any covenants in other leases of space in the
Development.  Should the Signage require maintenance or repairs as determined in
Landlord's reasonable judgment, Landlord shall have the right to provide written
notice thereof to Tenant and Tenant shall cause such repairs and/or maintenance
to be performed within thirty (30) days after receipt of such notice from
Landlord at Tenant's sole cost and expense.  Should Tenant fail to perform such
maintenance and repairs within the period described in the immediately preceding
sentence, Landlord shall have the right to cause such work to be performed and
to charge Tenant, as Additional Rent, for the cost of such work.  Upon the
expiration or earlier termination of this Lease (or the termination of Tenant's
Signage right as described above), Tenant shall, at Tenant's sole cost and
expense, cause the Signage to be removed from the exterior of the Project and
shall cause the exterior of the Project to be restored to the condition existing
prior to the placement of such Signage.  If Tenant fails to remove such Signage
and to restore the exterior of the Project as provided in the immediately
preceding sentence within thirty (30) days following the expiration or earlier
termination of this Lease, then Landlord may perform such work, and all costs
and expenses incurred by Landlord in so performing such work shall be reimbursed
by Tenant to Landlord within ten (10) days after Tenant's receipt of invoice
therefor.  The immediately preceding sentence shall survive the expiration or
earlier termination of this Lease.
 
 
[NO FURTHER TEXT ON THIS PAGE]
 
 
41

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the parties have executed this Lease, consisting of the
foregoing provisions and Articles, including all exhibits and other attachments
referenced therein, as of the date first above written.
 
"LANDLORD"
 
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
 
By:          ARDEN REALTY, INC.,
a Maryland corporation
Its:  Sole General Partner
/s/ Robert C. Peddicord
By: Robert C.
Peddicord                                                                
Its:  Chief Operating
Officer                                                           
 
"TENANT"
SCOLR PHARMA, INC.,
a Delaware corporation
 
By:  /s/ Daniel O.
Wilds                                                                           
Print Name: Daniel O.
Wilds                                                                            
Title: President &
CEO                                                                            
 
By:                                                                             
Print
Name:                                                                             
Title:                                                                             
 

 
 
42

--------------------------------------------------------------------------------

 
STATE OF Washington
COUNTY OF King 
)
) ss.
)

 
On June 20, 2008, before me, Sarah M. Schaeffer, a notary public, personally
appeared Daniel O. Wilds, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument, the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature: /s/ Sarah M.
Schaeffer                                                                          [Seal]
Print Name: Sarah M.
Schaeffer                                                                          
 
 
 
 
 
STATE OF _________________
COUNTY OF ________________
)
) ss.
)

 
On ______________________, before me, ______________________, a notary public,
personally appeared ________________________________________, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument, the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature                                                                           (Seal)
 
Print
Name:                                                                           
 
 
 
 
 
STATE OF _________________
COUNTY OF ________________
)
) ss.
)

 
On ______________________, before me, ______________________, a notary public,
personally appeared ________________________________________, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument, the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature                                                                           (Seal)
 
Print
Name:                                                                           
 
 
43

--------------------------------------------------------------------------------

 
 
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
 
State of California
County of Los Angeles
}

On June 20, 2008, before me, Julieta Soracco, Notary Public, personally appeared
Robert C. Peddicord,
[Seal]
who proved to me on the basis of satisfactory evidence to be the person whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity; and that by his signature on the
instrument the person or the entity upon behalf of which the person acted,
executed the instrument.
 
I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing parapgraph is true and correct.
 
WITNESS my hand and official seal.
 
Signature /s/ Julieta Soracco
                 Signature of Notary Public

 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT A
 
 
PREMISES
[premisesimg.jpg]
 
This Exhibit "A" is provided for informational purposes only and is intended to
be only an approximation of the layout of the Premises and shall not be deemed
to constitute any representation by Landlord as to the exact layout or
configuration of the Premises.
 
 
Exhibit A; 1

--------------------------------------------------------------------------------

 
 
EXHIBIT A-1
 
LEGAL DESCRIPTION OF PROPERTY
 
Lots 32 and 33 of Quadrant Business Park – Bothell, as per plat recorded in
Volume 131 of Plats, Pages 87 through 91, records of King County;
 
Situated in the City of Bothell, County of King, State of Washington
 
 
Exhibit A-1; 1

--------------------------------------------------------------------------------

 
 
EXHIBIT B
 
RULES AND REGULATIONS
 
1. No sign, advertisement or notice shall be displayed, printed or affixed on or
to the Premises or to the outside or inside of the Project or so as to be
visible from outside the Premises or Project without Landlord's prior written
consent.  Landlord shall have the right to remove any non-approved sign,
advertisement or notice, without notice to and at the expense of Tenant, and
Landlord shall not be liable in damages for such removal.  All approved signs or
lettering on doors and walls shall be printed, painted, affixed or inscribed at
the expense of Tenant by Landlord or by a person selected by Landlord and in a
manner and style acceptable to Landlord.
 
2. Tenant shall not obtain for use on the Premises ice, waxing, cleaning,
interior glass polishing, rubbish removal, towel or other similar services, or
accept barbering or bootblackening, or coffee cart services, milk, soft drinks
or other like services on the Premises, except from persons authorized by
Landlord and at the hours and under regulations fixed by Landlord.  No vending
machines shall be installed, maintained or operated upon the Premises without
Landlord's prior written consent.
 
3. The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by Tenant or used for any purpose other than for ingress
and egress from Tenant's Premises; provided, however, that the loading dock and
receiving area serving the Premises may be temporarily obstructed as customary
and reasonable in connection with loading and unloading of materials.  Under no
circumstances is trash to be stored in the corridors.  Notice must be given to
Landlord for any large deliveries that come through the building lobby of the
Project; no such notice shall be required with respect to deliveries through the
loading dock and receiving area of the Project.  Furniture, freight and other
large or heavy articles, and all other deliveries may be brought into the
building lobby of the Project only at times and in the manner designated by
Landlord, and always at Tenant's sole responsibility and risk.  Landlord may
impose reasonable charges for use of freight elevators after or before normal
business hours.  All damage done to the Project by moving or maintaining
furniture, freight or articles shall be repaired by Landlord at Tenant's
expense.  Tenant shall not take or permit to be taken in or out of building
lobby entrances or passenger elevators of the Project, any item normally taken,
or which Landlord otherwise reasonably requires to be taken, in or out through
service doors or on freight elevators.  Tenant shall move all supplies,
furniture and equipment brought into the building lobby as soon as received
directly to the Premises, and shall move all waste that is at any time being
taken from the Premises directly to the areas designated for disposal.
 
4. Toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be
used for any purpose other than for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown therein.
 
5. Tenant shall not overload the floor of the Premises or mark, drive nails,
screw or drill into the partitions, ceilings or floor or in any way deface the
Premises.  Tenant shall not place typed, handwritten or computer generated signs
in the corridors or any other common areas.  Should there be a need for signage
additional to the Project standard tenant placard, a written request shall be
made to Landlord to obtain approval prior to any installation.  All costs for
said signage shall be Tenant's responsibility.
 
6. In no event shall Tenant place a load upon any floor of the Premises or
portion of any such flooring exceeding the floor load per square foot of area
for which such floor is designed to carry and which is allowed by law, or any
machinery or equipment which shall cause excessive vibration to the Premises or
noticeable vibration to any other part of the Project.  Prior to bringing any
heavy safes, vaults, large computers or similarly heavy equipment into the
Project, Tenant shall inform Landlord in writing of the dimensions and weights
thereof and shall obtain Landlord's consent thereto.  Such consent shall not
constitute a representation or warranty by Landlord that the safe, vault or
other equipment complies, with regard to distribution of weight and/or
vibration, with the provisions of this Rule 6 nor relieve Tenant from
responsibility for the consequences of such noncompliance, and any such safe,
vault or other equipment which Landlord determines to constitute a danger of
damage to the Project or a nuisance to other tenants, either alone or in
combination with other heavy and/or vibrating objects and equipment,
 
 
Exhibit B; 1

--------------------------------------------------------------------------------

 

shall be promptly removed by Tenant, at Tenant's cost, upon Landlord's written
notice of such determination and demand for removal thereof.
 
7. Except as provided in Article 28 of the Lease, Tenant shall not use or keep
in the Premises or Project any kerosene, gasoline or inflammable, explosive or
combustible fluid or material, or use any method of heating or air-conditioning
other than that supplied by Landlord.
 
8. Tenant shall not lay linoleum, tile, carpet or other similar floor covering
so that the same shall be affixed to the floor of the Premises in any manner
except as approved by Landlord.
 
9. Tenant shall not install or use any blinds, shades, awnings or screens in
connection with any window or door of the Premises and shall not use any drape
or window covering facing any exterior glass surface other than the standard
drapes, blinds or other window covering established by Landlord.
 
10. Tenant shall cooperate with Landlord in obtaining maximum effectiveness of
the cooling system by closing window coverings when the sun's rays fall directly
on windows of the Premises.  Tenant shall not obstruct, alter, or in any way
impair the efficient operation of Landlord's heating, ventilating and
air-conditioning system.  Tenant shall not tamper with or change the setting of
any thermostats or control valves.
 
11. Tenant shall not, without Landlord's prior written consent, occupy or permit
any portion of the Premises to be occupied or used for the manufacture or sale
of liquor or tobacco in any form, or a barber or manicure shop, or as an
employment bureau.  The Premises shall not be used for lodging or sleeping or
for any improper, objectionable or immoral purpose.  No auction shall be
conducted on the Premises.
 
12. Tenant shall not make, or permit to be made, any unseemly or disturbing
noises, or disturb or interfere with occupants of Project or neighboring
buildings or premises or those having business with it by the use of any musical
instrument, radio, phonographs or unusual noise, or in any other way.
 
13. No bicycles or vehicles (except in the warehouse area portion) or animals of
any kind (except for service animals) shall be brought into or kept in or about
the Premises, and no cooking shall be done or permitted by any tenant in the
Premises, except that lab-related heating/cooking in the lab area portion as may
be reasonable and appropriate for Pharmaceutical Development Uses or other
permitted lab-related uses and cooking for human consumption in the kitchen area
portion in the Premises and contained barbequing in the warehouse area portion
for Tenant and its employees and visitors shall be permitted and the preparation
of coffee, tea, hot chocolate and similar items outside the kitchen for tenants,
their employees and visitors shall also be permitted.  No tenant shall cause or
permit any unusual or objectionable odors to be produced in or permeate from or
throughout the Premises.  The foregoing notwithstanding, Tenant shall have the
right to use a microwave and to heat microwavable items typically heated in an
office.  Hot plates, toasters, toaster ovens or similar open element cooking
apparatus shall be permitted in the Premises so long as used in compliance with
applicable Laws and so long as such apparatuses are UL approved, and subject to
Article 28 of the Lease, freezers, cold rooms, heating plates, flammable
cabinets, flammable liquids, water baths, and other heat generating or
flame-based apparatuses reasonable and appropriate for Pharmaceutical
Development Uses or other permitted lab-related uses are permitted in the lab
portion of the Premises so long as such apparatuses are used in compliance with
applicable Laws.
 
14. The sashes, sash doors, skylights, windows and doors that reflect or admit
light and air into the halls, passageways or other public places in the Project
shall not be covered or obstructed by any tenant, nor shall any bottles, parcels
or other articles be placed on the window sills.
 
15. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in existing locks
or the mechanisms thereof unless Landlord is first notified thereof, gives
written approval, and is furnished a key therefor.  Each tenant must, upon the
termination of his tenancy, give to Landlord all keys and key cards of stores,
offices, or toilets or toilet rooms, either furnished to, or otherwise procured
by, such tenant, and in the event of the loss of any keys so furnished, such
tenant shall pay
 
 
Exhibit B; 2

--------------------------------------------------------------------------------

 

Landlord the cost of replacing the same or of changing the lock or locks opened
by such lost key if Landlord shall deem it necessary to make such change.  If
more than two keys for one lock are desired, Landlord will provide them upon
payment therefor by Tenant.  Tenant shall not key or re-key any locks.  All
locks shall be keyed by Landlord's locksmith only.
 
16. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's opinion, tends to impair the reputation of the Project and
upon written notice from Landlord any tenant shall refrain from and discontinue
such advertising.
 
17. Landlord reserves the right to control access to the Project by all persons
after reasonable hours of generally recognized business days and at all hours on
Sundays and legal holidays and may at all times control access to the equipment
areas of the Project outside the Premises; however, Tenant shall have access to
the Premises at all times in accordance with, and subject to, Article 7 of the
Lease.  Each tenant shall be responsible for all persons for whom it requests
after hours access and shall be liable to Landlord for all acts of such
persons.  Landlord shall have the right from time to time to establish
reasonable rules and charges pertaining to freight elevator usage, including the
allocation and reservation of such usage for tenants' initial move-in to their
premises, and final departure therefrom.  Landlord may also establish from time
to time reasonable rules and charges for accessing the equipment areas of the
Project, including the risers, rooftops and telephone closets.
 
18. Any person employed by any tenant to do janitorial work shall, while in the
Project and outside of the Premises, be subject to and under the control and
direction of the Office of the Project or its designated representative such as
security personnel (but not as an agent or servant of Landlord, and the Tenant
shall be responsible for all acts of such persons).
 
19. All doors opening on to public corridors shall be kept closed, except when
being used for ingress and egress.  Tenant shall cooperate and comply with any
reasonable safety or security programs, including fire drills and air raid
drills, and the appointment of "fire wardens" developed by Landlord for the
Project, or required by law.  Before leaving the Premises unattended, Tenant
shall close and securely lock all doors or other means of entry to the Premises
and shut off all lights and water faucets in the Premises.
 
20. The requirements of tenants will be attended to only upon application to the
Office of the Project.
 
21. Canvassing, soliciting and peddling in the Project are prohibited and each
tenant shall cooperate to prevent the same.
 
22. All office equipment of any electrical or mechanical nature shall be placed
by tenants in the Premises in settings approved by Landlord, to absorb or
prevent any vibration, noise or annoyance.
 
23. No air-conditioning unit or other similar apparatus shall be installed or
used by any tenant without the prior written consent of Landlord.
 
24. There shall not be used in any space, or in the public halls of the Project,
either by any tenant or others, any hand trucks except those equipped with
rubber tires and side guards.
 
25. All electrical ceiling fixtures hung in offices or spaces along the
perimeter of the Project must be fluorescent and/or of a quality, type, design
and bulb color approved by Landlord.  Tenant shall not permit the consumption in
the Premises of more than 2½ watts per net usable square foot in the Premises in
respect of office lighting nor shall Tenant permit the consumption in the
Premises of more than 1½ watts per net usable square foot of space in the
Premises in respect of the power outlets therein, at any one time.  In the event
that such limits are exceeded, Landlord shall have the right to require Tenant
to remove lighting fixtures and equipment and/or to charge Tenant for the cost
of the additional electricity consumed.
 
26. Parking.
 
(a) Automobiles must be parked entirely within the stall lines on the floor.
 
(b) All directional signs and arrows must be observed.
 
 
Exhibit B; 3

--------------------------------------------------------------------------------

 
 
(c) The speed limit shall be 5 miles per hour.
 
(d) Parking is prohibited in areas not striped for parking.
 
(e) Parking cards or any other device or form of identification supplied by
Landlord (or its operator) shall remain the property of Landlord (or its
operator).  Such parking identification device must be displayed as requested
and may not be mutilated in any manner.  The serial number of the parking
identification device may not be obliterated.  Devices are not transferable or
assignable and any device in the possession of an unauthorized holder will be
void.  There will be a replacement charge to the Tenant or person designated by
Tenant of $25.00 for loss of any parking card.  There shall be a security
deposit of $25.00 due at issuance for each card key issued to Tenant.
 
(f) Landlord (and its operator) may refuse to permit any person who violates the
within rules to park in the Project parking facility, and any violation of the
rules shall subject the automobile to removal from the Project parking facility
at the parker's expense.  In either of said events, Landlord (or its operator)
shall refund a pro rata portion of the current monthly parking rate and the
sticker or any other form of identification supplied by Landlord (or its
operator) will be returned to Landlord (or its operator).
 
(g) Project parking facility managers or attendants are not authorized to make
or allow any exceptions to these Rules and Regulations.
 
(h) All responsibility for any loss or damage to automobiles or any personal
property therein is assumed by the parker.
 
(i) Loss or theft of parking identification devices from automobiles must be
reported to the Project parking facility manager immediately, and a lost or
stolen report must be filed by the parker at that time.
 
(j) The parking facilities are for the sole purpose of parking one automobile
per space.  Washing, waxing, cleaning or servicing of any vehicles by the parker
or his agents is prohibited.
 
(k) Landlord (and its operator) reserves the right to refuse the issuance of
monthly stickers or other parking identification devices to any Tenant and/or
its employees who refuse to comply with the above Rules and Regulations and all
City, State or Federal ordinances, laws or agreements.
 
(l) Tenant agrees to acquaint all employees with these Rules and Regulations.
 
(m) No vehicle shall be stored in the Project parking facility for a period of
more than one (1) week.
 
27. The Project is a non-smoking Project.  Smoking or carrying lighted cigars or
cigarettes in the Premises or the Project, including the elevators in the
Project (if any), is prohibited.
 
28. Tenant shall not, without Landlord's prior written consent (which consent
may be granted or withheld in Landlord's absolute discretion), allow any
employee or agent to carry any type of gun or other firearm in or about any of
the Premises or Project.
 
 
Exhibit B; 4

--------------------------------------------------------------------------------

 
 
EXHIBIT C
 
NOTICE OF LEASE TERM DATES
AND TENANT'S PROPORTIONATE SHARE
 
TO:           DATE:                                                      

 

 
 
RE:
Lease dated ________________, 200_, between
("Landlord"), and
("Tenant"), concerning Suite ________, located at
__________________________________________.

 
Ladies and Gentlemen:
 
In accordance with the Lease, Landlord wishes to advise and/or confirm the
following:
 
1. That the Premises have been accepted herewith by the Tenant as being
substantially complete in accordance with the Lease and that there is no
deficiency in construction of which Tenant is aware, except as
follows:  _____________________________..
 
2. That the Tenant has taken possession of the Premises and acknowledges that
under the provisions of the Lease the Term of said Lease shall commence as of
____________ for a term of ________________________ ending on
________________________.
 
3. That in accordance with the Lease, Basic Rental commenced to accrue on
________________________, subject to Tenant's right to abated rent as provided
in the Lease.
 
4. If the Commencement Date of the Lease is other than the first day of the
month, the first billing will contain a prorata adjustment.  Each billing
thereafter shall be for the full amount of the monthly installment as provided
for in said Lease.
 
5. Rent is due and payable in advance on the first day of each and every month
during the Term of said Lease, subject to Tenant's right to abated rent as
provided in the Lease.  Your rent checks should be made payable to
________________________ at ________________________________________________.
 
6. The exact number of rentable square feet within the Premises is 20,468
rentable square feet, allocated as follows:  9,360 rentable square feet in the
Office Portion of the Premises, 8,939 rentable square feet in Lab Portion of the
Premises and 2,169 rentable square feet in the Warehouse Portion of the
Premises.
 
7. Tenant's Proportionate Share, as adjusted based upon the exact number of
rentable square feet within the Premises is 41.67%.
 
AGREED AND ACCEPTED:
 
TENANT:
                                                                       ,
a                                                                     .
By:           
Its:                                                      
 
 
Exhibit C; 1

--------------------------------------------------------------------------------

 
 
EXHIBIT D
 
TENANT WORK LETTER
 
[SCOLR Pharma, Inc.]
 
This Tenant Work Letter shall set forth the terms and conditions relating to the
renovation of the tenant improvements in the Premises.  This Tenant Work Letter
is essentially organized chronologically and addresses the issues of the
renovation of the Premises, in sequence, as such issues will arise.
 
SECTION 1
 
LANDLORD'S INITIAL CONSTRUCTION IN THE PREMISES
 
Landlord has constructed, at its sole cost and expense, the base, shell and core
(i) of the Premises, and (ii) of the floor of the Project on which the Premises
is located  (collectively, the "Base, Shell and Core").  Subject to Landlord's
obligations as provided in this Lease, Tenant has inspected and hereby approves
the condition of the Premises and the Base, Shell and Core, and agrees that,
subject to construction of the Improvements,  the Premises and Base, Shell and
Core shall be delivered to Tenant in its current "as-is" condition.  The
improvements to be initially installed in the Premises shall be designed and
constructed pursuant to this Tenant Work Letter.  Any costs of initial design
and construction of any improvements to the Premises shall be an "Improvement
Allowance Item", as that term is defined in Section 2.2 of this Tenant Work
Letter.
 
SECTION 2
 
IMPROVEMENTS
 
2.1. Improvement Allowance.  Tenant shall be entitled to a one-time space
planning allowance ("Space Planning Allowance") in the amount of $3,070.20
(based on $.15 per rentable square foot of the Premises) for the costs related
to Tenant's space planning for the Premises.  In addition, Tenant shall be
entitled to a one-time improvement allowance (the "Improvement Allowance") in
the amount of $450,296.00 (based on $22.00 per rentable square foot of the
Premises) for the costs relating to the initial design and construction of
Tenant's improvements which are permanently affixed to the Premises (the
"Improvements").  In no event shall Landlord be obligated to make disbursements
pursuant to this Tenant Work Letter in a total amount which exceeds the Space
Planning Allowance and Improvement Allowance and in no event shall Tenant be
entitled to any credit for any unused portion of the Improvement Allowance not
used by Tenant by the earlier of (i) the date Tenant gives Landlord written
notice that it will not seek to obtain any credit for any unused portion of the
Improvement Allowance or (ii) March 31, 2009.
 
2.2. Disbursement of the Improvement Allowance.  The Space Planning Allowance
shall be paid by Landlord within thirty (30) days after invoicing by Tenant's
Architect.  Except as otherwise set forth in this Tenant Work Letter, the
Improvement Allowance shall be disbursed by Landlord (each of which
disbursements shall be made pursuant to Landlord's disbursement process) for
costs related to the construction of the Improvements and for the following
items and costs (collectively, the "Improvement Allowance Items"): (i) payment
of the commercially reasonable fees of the "Architect" and the "Engineers," as
those terms are defined in Section 3.1 of this Tenant Work Letter, and payment
of the commercially reasonable fees incurred by, and the commercially reasonable
cost of documents and materials supplied by, Landlord and Landlord's consultants
in connection with the preparation and review of the "Construction Drawings," as
that term is defined in Section 3.1 of this Tenant Work Letter (including fees
for a preliminary analysis and fit plan); (ii) the cost of permits; (iii) the
cost of any changes in the Base, Shell and Core required by the Construction
Drawings; (iv) the cost of any changes to the Construction Drawings or
Improvements required by applicable building codes (the "Code"); (v) Washington
State Sales Tax; and (vi) the "Landlord Coordination Fee", as that term is
defined in Section 4.3.2 of this Tenant Work Letter.  However, in no event shall
more than Three
 
 
Exhibit D; 1

--------------------------------------------------------------------------------

 

and 50/100 Dollars ($3.50) per rentable square foot of the Improvement Allowance
be used for the aggregate cost of items described in (i) and (ii) above; any
additional amount incurred as a result of (i) and (ii) above shall be paid for
by Tenant as part of the Over-Allowance Amount.
 
2.3. Standard Improvement Package.  Landlord has established specifications (the
"Specifications") for the Project standard components to be used in the
construction of the Improvements in the Premises (collectively, the "Standard
Improvement Package"), which Specifications are available upon request.  The
quality of Improvements shall be equal to or, at Tenant's election in its sole
discretion, of greater quality than, the quality of the Specifications, provided
that Landlord may, at Landlord's option, require the Improvements to comply with
certain Specifications.
 
SECTION 3
 
CONSTRUCTION DRAWINGS
 
3.1. Selection of Architect/Construction Drawings.  Tenant shall retain an
architect/space planner acceptable to Landlord and Tenant (the "Architect") to
prepare the "Construction Drawings," as that term is defined in this
Section 3.1.  Tenant shall also retain the engineering consultants designated by
Landlord subject to Tenant's reasonable approval (the "Engineers") to prepare
all plans and engineering working drawings relating to the structural,
mechanical, electrical, plumbing, HVAC and life safety work of the
Improvements.  The plans and drawings to be prepared by Architect and the
Engineers hereunder for the Improvements shall be known collectively as the
"Construction Drawings."  All Construction Drawings shall comply with the
drawing format and specifications as reasonably determined by Landlord, and
shall be subject to Landlord's reasonable approval.  Tenant and Architect shall
verify, in the field, the dimensions and conditions as shown on the relevant
portions of the base building plans, and Tenant and Architect shall be solely
responsible for the same, and Landlord shall have no responsibility in
connection therewith.  Landlord's review of the Construction Drawings as set
forth in this Section 3, shall be for its sole purpose and shall not imply
Landlord's review of the same, or obligate Landlord to review the same, for
quality, design, Code compliance or other like matters.  Accordingly,
notwithstanding that any Construction Drawings are reviewed by Landlord or its
space planner, architect, engineers and consultants, and notwithstanding any
advice or assistance which may be rendered to Tenant by Landlord or Landlord's
space planner, architect, engineers, and consultants, Landlord shall have no
liability whatsoever in connection therewith and shall not be responsible for
any omissions or errors contained in the Construction Drawings.
 
With respect to any approval required of Landlord under this Tenant Work Letter,
(i) Landlord's approval shall not be unreasonably withheld, conditioned or
delayed, (ii) Landlord shall review and respond to such request promptly, and
(iii) such approval shall be deemed given unless within five (5) business days
after written request for approval is made, Landlord gives Tenant written notice
of the specific reasons for disapproval and suggestions for alternatives that
would be acceptable to Landlord.  Landlord and Tenant shall cooperate in good
faith in connection with their obligations under this Tenant Work
Letter.  Landlord shall use reasonable efforts to cause Substantial Completion
of the Improvements to occur by the anticipated date specified in Section 1(A)
of this Lease or as soon thereafter as reasonably possible.
 
3.2. Final Space Plan.  On or before the date set forth in Schedule 1, attached
hereto, Tenant and the Architect shall prepare the final space plan for
Improvements in the Premises (collectively, the "Final Space Plan"), which Final
Space Plan shall include a layout and designation of all offices, rooms and
other partitioning, their intended use, and equipment to be contained therein,
and shall deliver the Final Space Plan to Landlord for Landlord's approval.
 
3.3. Final Working Drawings.  On or before the date set forth in Schedule 1,
Tenant, the Architect and the Engineers shall complete the architectural and
engineering drawings for the Premises, and the final architectural working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (collectively, the "Final Working
Drawings") and shall submit the same to Landlord for Landlord's approval.
 
3.4. Permits.  The Final Working Drawings shall be approved by Landlord (the
"Approved Working Drawings") prior to the commencement of the construction of
the
 
 
Exhibit D; 2

--------------------------------------------------------------------------------

 

Improvements.  Tenant shall cause the Architect to immediately submit the
Approved Working Drawings to the appropriate municipal authorities for all
applicable building permits necessary to allow "Contractor," as that term is
defined in Section 4.1, below, to commence and fully complete the construction
of the Improvements (the "Permits").  No changes, modifications or alterations
in the Approved Working Drawings may be made without the prior written consent
of Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed.
 
3.5. Time Deadlines.  Tenant shall use its best efforts and all due diligence to
cooperate with the Architect, the Engineers, and Landlord to complete all phases
of the Construction Drawings and the permitting process and to receive the
permits, and with Contractor for approval of the "Cost Proposal," as that term
is defined in Section 4.2 of this Tenant Work Letter, as soon as possible after
the execution of the Lease, and, in that regard, shall meet with Landlord on a
scheduled basis to be determined by jointly by Landlord and Tenant, to discuss
Tenant's progress in connection with the same.  The applicable dates for
approval of items, plans and drawings as described in this Section 3, Section 4
below, and in this Tenant Work Letter are set forth and further elaborated upon
in Schedule 1 (the "Time Deadlines"), attached hereto.  Tenant and Landlord each
agree to comply with the Time Deadlines.
 
SECTION 4
 
CONSTRUCTION OF THE IMPROVEMENTS
 
4.1. Contractor.  The contractor which shall construct the Improvements shall be
a contractor selected pursuant to the following procedure.  Promptly after
Landlord's approval of the Final Working Drawings, Landlord shall submit them to
three (3) general contractors selected by Landlord.  Each such contractor shall
be invited to submit a sealed, fixed price contract bid (on such bid form as
Landlord shall designate) to construct the Improvements.  Each contractor shall
be notified in the bid package of the time schedule for construction of the
Improvements.  The subcontractors utilized by the Contractor shall be subject to
Landlord's reasonable approval and the bidding instructions shall provide that
as to work affecting the structure of the Project and/or the systems and
equipment of the Project, Landlord shall be entitled to designate the
subcontractors.  The bids shall be submitted promptly to Landlord and a
reconciliation shall be performed by Landlord to adjust inconsistent or
incorrect assumptions so that a like-kind comparison can be made and a low
bidder determined.  Landlord shall provide Tenant with copies of the bids and
Landlord's reconciliation.  Landlord shall select the contractor who shall be
the lowest bidder and who states that it will be able to meet Landlord's
construction schedule, unless Tenant notifies Landlord within three (3) business
days after Tenant's receipt of the bids and reconciliation that Tenant desires
that one of the other two (2) contractors perform the work, in which event
Landlord will select the contractor designated by Tenant so long as such
contractor's bid states that it will be able to meet Landlord's construction
schedule.  The contractor selected may be referred to herein as the
"Contractor".  The construction contract with the Contractor shall (i) contain
industry standard warranties and guaranties, (ii) provide for an obligation of
the Contractor to construct the Improvement pursuant to the Approved Working
Drawings, (iii) require the Contractor to construct the Improvements in a good
and workmanlike manner, (iv) contain an obligation to complete construction of
the Improvements not later than October 1, 2008 (subject to Force Majeure), and
(v) require the Contractor, at Landlord's request, to focus and accelerate
construction for certain portions of the Premises should construction be delayed
as contemplated by Section 2(a) of the Lease.
 
4.2. Cost Proposal.  After the Approved Working Drawings are signed by Landlord
and Tenant, Landlord shall provide Tenant with a cost proposal in accordance
with the Approved Working Drawings, which cost proposal shall include, as nearly
as possible, the cost of all Improvement Allowance Items to be incurred by
Tenant in connection with the construction of the Improvements (the "Cost
Proposal").Tenant shall either (i) approve and deliver the Cost Proposal to
Landlord within three (3) business days of the receipt of the same, or
(ii) notify Landlord within three (3) business days after Tenant's receipt of
the Cost Proposal that Tenant will instruct the Architect to revise the Approved
Working Drawings to change the amount of the Cost Proposal, in which case such
changes shall be made to the Approved Working Drawings only in accordance with
Section 3.3 above and the revised Final Working Drawings shall be provided to
the Contractor for repricing whereupon Landlord shall revise the Cost Proposal
for Tenant's approval.  This procedure shall be repeated until the Cost Proposal
is approved by
 
 
Exhibit D; 3

--------------------------------------------------------------------------------

 

Tenant.  The date by which Tenant has approved the Cost Proposal shall be known
hereafter as the "Cost Proposal Delivery Date."
 
4.3. Construction of Improvements by Contractor under the Coordination of
Landlord.
 
4.3.1. Over-Allowance Amount.  On the next business day following the Cost
Proposal Delivery Date, Tenant shall deliver to Landlord an amount (the
"Over-Allowance Amount") equal to the difference between (i) the amount of the
Cost Proposal and (ii) the amount of the Improvement Allowance (less any portion
thereof already disbursed by Landlord, or in the process of being disbursed by
Landlord, on or before the Cost Proposal Delivery Date).  The Over-Allowance
Amount shall be disbursed by Landlord prior to the disbursement of any then
remaining portion of the Improvement Allowance, and such disbursement shall be
pursuant to the same procedure as the Improvement Allowance.  In the event that,
after the Cost Proposal Delivery Date, any revisions, changes, or substitutions
shall be made with Tenant's approval to the Construction Drawings or the
Improvements, any additional costs which arise in connection with such
revisions, changes or substitutions or any other additional costs shall be paid
by Tenant to Landlord immediately upon Landlord's request as an addition to the
Over-Allowance Amount.  Tenant shall have no obligation to pay Landlord for any
costs arising from Landlord's or the Contractor's negligence, willful misconduct
or breach of the construction contract.
 
4.3.2. Landlord's Retention of Contractor.  Landlord shall independently retain
Contractor, on behalf of Tenant, to construct the Improvements in accordance
with the Approved Working Drawings and the Cost Proposal and Landlord shall
coordinate the construction by Contractor, and Tenant shall pay a construction
coordination fee (the "Landlord Coordination Fee") to Landlord in an amount
equal to the product of (i) five percent (5%) and (ii) an amount equal to the
Improvement Allowance plus the Over-Allowance Amount (as such Over-Allowance
Amount may increase pursuant to the terms of this Tenant Work Letter) or if not
all of the Improvement Allowance is used, an amount equal to the Improvement
Allowance minus the unused amount thereof.
 
SECTION 5
 
COMPLETION OF THE IMPROVEMENTS
 
5.1. Substantial Completion.  For purposes of this Lease, "Substantial
Completion" of the Improvements in the Premises shall occur upon (i) receipt of
a certificate of occupancy, temporary certificate of occupancy, or other
indication that the entire Premises may be legally occupied, and (ii) the
completion of construction of the Improvements in the entire Premises pursuant
to the Approved Working Drawings, with the exception of any punch list items
which would not materially affect Tenant's use of the Premises and any tenant
fixtures, work-stations, built-in furniture, or equipment to be installed by
Tenant.
 
5.2. Delay of the Substantial Completion of the Premises.  Except as provided in
this Section 5, the Commencement Date and Tenant's obligation to pay rent for
the Premises shall occur as set forth in this Lease.  However, if there shall be
a delay or there are delays in the Substantial Completion of the Improvements in
the Premises as a result of the following (collectively, "Tenant Delays"):
 
5.2.1. Tenant's failure to comply with the Time Deadlines;
 
5.2.2. Tenant's failure to timely approve any matter requiring Tenant's
approval;
 
5.2.3. A breach by Tenant of the terms of this Tenant Work Letter or the Lease;
 
5.2.4. Changes in any of the Construction Drawings after approval of the same by
Landlord or because the same do not comply with Code or other applicable laws;
 
5.2.5. Tenant's request for changes in the Approved Working Drawings;
 
5.2.6. Tenant's requirement for materials, components, finishes or improvements
which are not available in a commercially reasonable time given the anticipated
date of Substantial Completion of the Improvements in the Premises, or which are
different from, or not included in, the Standard Improvement Package;
 
 
Exhibit D; 4

--------------------------------------------------------------------------------

 
 
5.2.7. Changes to the Base, Shell and Core required by the Approved Working
Drawings; or
 
5.2.8. Any other wrongful acts or omissions of Tenant, or its agents, or
employees which causes a delay in Substantial Completion;
 
then, notwithstanding anything to the contrary set forth in the Lease or this
Tenant Work Letter and regardless of the actual date of the Substantial
Completion of Improvements in the Premises, the date of Substantial Completion
thereof shall be deemed to be the date that Substantial Completion would have
occurred if no Tenant Delay or Delays, as set forth above, had occurred.
 
 
SECTION 6
 
MISCELLANEOUS
 
6.1. Tenant's Representative.  Tenant has designated Stephen J. Turner as its
sole representative with respect to the matters set forth in this Tenant Work
Letter, who, until further notice to Landlord, shall have full authority and
responsibility to act on behalf of the Tenant as required in this Tenant Work
Letter.
 
6.2. Landlord's Representative.  Prior to commencement of construction of
Improvements, Landlord shall designate a representative with respect to the
matters set forth in this Tenant Work Letter, who, until further notice to
Tenant, shall have full authority and responsibility to act on behalf of the
Landlord as required in this Tenant Work Letter.
 
6.3. Time of the Essence in This Tenant Work Letter.  Time is of the essence in
this Tenant Work Letter.  Unless otherwise indicated, all references herein to a
"number of days" shall mean and refer to calendar days.
 
6.4. Early Entry/Fixturization.  Provided that Tenant and its agents do not
interfere with Landlord's work in the Premises, Landlord shall allow Tenant
access to the Premises beginning on the date anticipated by Landlord to be
thirty (30) days prior to the Commencement Date, for the purpose of Tenant
installing furniture and equipment (including telephones, telecommunications
equipment, cabling, security equipment, audio-visual equipment and computers) in
the Premises.  Prior to Tenant's entry into the Premises as permitted by the
terms of this Section 6.4, Tenant shall submit certificates of insurance
reasonably acceptable to Landlord and shall submit a schedule to Landlord (and
the Contractor, if so requested by Landlord), for their approval, which schedule
shall detail the timing and purpose of Tenant's entry.  Tenant shall hold
Landlord harmless from and indemnify, protect and defend Landlord against any
loss or damage to the Project or Premises and against injury to any persons
caused by Tenant's actions pursuant to this Section 6.4.
 
 
Exhibit D; 5

--------------------------------------------------------------------------------

 
 
SCHEDULE 1
 
 
TIME DEADLINES

 
Dates
Actions to be Performed
A. 
June 20, 2008
Tenant to deliver Final Space Plan to Landlord.
B. 
July 7, 2008
Tenant to deliver Final Working Drawings to Landlord.

 
 
Schedule 1; 1

--------------------------------------------------------------------------------

 
 
EXHIBIT E
 
 
LETTER OF CREDIT
 
Arden Realty Limited Partnership
11601 Wilshire Boulevard, Fourth Floor
Los Angeles, California  90025
Attention:  Legal Department
 
Ladies and Gentlemen:
 
We hereby establish in your favor, for the account of SCOLR Pharma, Inc., a
Delaware corporation ("Applicant"), our Irrevocable Letter of Credit and
authorize you to draw on us at sight the aggregate amount of Five Hundred
Sixty-Four Thousand Dollars ($564,000.00) ("Stated Amount").
 
Funds under this Letter of Credit are available to Arden Realty Limited
Partnership, a Maryland limited partnership (the "Beneficiary") as follows:
 
Any and all of the sums hereunder may be drawn down at any time and from time to
time from and after the date hereof by Beneficiary when accompanied by this
Letter of Credit and a written certification signed by an authorized signatory
of Beneficiary certifying that Beneficiary is entitled to make such draw and
that such sums are due and owing to Beneficiary pursuant to that certain
Standard Multi-Tenant Lease dated ________________, 2008 ("Lease") by and
between Beneficiary, as Landlord, and Applicant, as Tenant, together with a
notarized certification by any such individual representing that such individual
is authorized by Beneficiary to take such action on behalf of Beneficiary.  The
sums drawn by Beneficiary under this Letter of Credit shall be payable upon
demand without necessity of notice to the Applicant.  Partial drawings shall be
permitted.
 
This Letter of Credit is transferable in its entirety to any transferee of
Landlord's interest in the Lease who assumes Landlord's obligations under the
Lease or to a lender under any mortgage or deed of trust encumbering the
property which is the subject of the Lease who agrees to abide by the provisions
of the Lease with respect to this Letter of Credit and amounts drawn
hereon.  Should a transfer be desired, such transfer will be subject to the
return to us of this Letter of Credit, together with notarized certifications by
such individuals representing that (i) such transferee meets the above
requirements and (ii) such individuals are authorized by Beneficiary and
transferee, respectively, to take such action on behalf of Beneficiary and
transferee, respectively, and written instructions.
 
The amount of each draft must be endorsed on the reverse hereof by the
negotiating bank.  We hereby agree that this Letter of Credit shall be duly
honored upon presentation and delivery of the certification specified above.
 
This Letter of Credit shall expire on ________________, 200__.
 
Notwithstanding the above expiration of this Letter of Credit, the term of this
Letter of Credit shall be automatically renewed for successive, additional one
(1) year periods unless, at least thirty (30) days prior to any such date of
expiration, the undersigned shall give written notice to Beneficiary, by
certified mail, return receipt requested and at the address set forth above or
at such other address as may be given to the undersigned by Beneficiary, that
this Letter of Credit will not be renewed.
 
This Letter of Credit is governed by the International Standby Practices 1998,
International Chamber of Commerce Publication No. 590.
 
Very truly yours,
 
(Name of Issuing Bank)
 
By:                                                                
 
 
Exhibit E; 1

--------------------------------------------------------------------------------

 
 
EXHIBIT F
 
 
SITE PLAN
 
[siteplan.jpg]
 
Exhibit F; 1

--------------------------------------------------------------------------------

 
 
STANDARD MULTI-TENANT LEASE
 
BY AND BETWEEN
 
ARDEN REALTY LIMITED PARTNERSHIP,
 
a Maryland limited partnership,
 
AS LANDLORD,
 
AND
 
SCOLR PHARMA, INC.
 
a Delaware corporation,
 
AS TENANT
 
NORTH CREEK CORPORATE CENTER
19204 North Creek Parkway
 
 
 

--------------------------------------------------------------------------------

 
 
 
  PAGE 
ARTICLE 1
BASIC LEASE PROVISIONS
1
ARTICLE 2
TERM/PREMISES
3
(a)
Term
3
(b)
Premises
4
ARTICLE 3
RENTAL
4
(a)
Basic Rental
4
(b)
Direct Costs
4
(c)
Definitions
5
(d)
Determination of Payment
7
(e)
Audit Right
8
ARTICLE 4
SECURITY DEPOSIT/LETTER OF CREDIT
9
(a)
Security Deposit
9
(b)
Letter of Credit
9
ARTICLE 5
HOLDING OVER
11
ARTICLE 6
OTHER TAXES
12
ARTICLE 7
USE
12
ARTICLE 8
CONDITION OF PREMISES
13
ARTICLE 9
REPAIRS AND ALTERATIONS
13
(a)
Landlord's Obligation
13
(b)
Tenant's Obligation
14
(c)
Alterations
14
(d)
Insurance; Liens
15
(e)
Costs and Fees; Removal
15
ARTICLE 10
LIENS
15
ARTICLE 11
PROJECT SERVICES
16
(a)
Basic Services
16
(b)
HVAC Balance
16
(c)
Telecommunications
16
(d)
Sole Electrical Representative
17
(e)
Backup Generator
17
(f)
Abatement Events
17
ARTICLE 12
RIGHTS OF LANDLORD
18
(a)
Right of Entry
18
(b)
Maintenance Work
18
(c)
Rooftop
19
ARTICLE 13
INDEMNITY; EXEMPTION OF LANDLORD FROM LIABILITY
19
(a)
Indemnity
19
(b)
Exemption of Landlord from Liability
19
(c)
Security
20
ARTICLE 14
INSURANCE
20
(a)
Tenant's Insurance
20
(b)
Form of Policies
20
(c)
Landlord's Insurance
21
(d)
Waiver of Subrogation
21
(e)
Compliance with Law
21
ARTICLE 15
ASSIGNMENT AND SUBLETTING
22

 
 
(i)

--------------------------------------------------------------------------------

 
 

    PAGE
ARTICLE 16
DAMAGE OR DESTRUCTION
23
ARTICLE 17
SUBORDINATION
24
ARTICLE 18
EMINENT DOMAIN
25
ARTICLE 19
DEFAULT
26
ARTICLE 20
REMEDIES
26
ARTICLE 21
TRANSFER OF LANDLORD'S INTEREST
28
ARTICLE 22
BROKER
28
ARTICLE 23
PARKING
29
ARTICLE 24
WAIVER
29
ARTICLE 25
ESTOPPEL CERTIFICATE
30
ARTICLE 26
LIABILITY OF LANDLORD
30
ARTICLE 27
INABILITY TO PERFORM
30
ARTICLE 28
HAZARDOUS WASTE
31
ARTICLE 29
SURRENDER OF PREMISES; REMOVAL OF PROPERTY
32
ARTICLE 30
MISCELLANEOUS
33
(a)
SEVERABILITY; ENTIRE AGREEMENT
33
(b)
Attorneys' Fees; Waiver of Jury Trial
34
(c)
Time of Essence
34
(d)
Headings; Joint and Several
34
(e)
Reserved Area
34
(f)
NO OPTION
34
(g)
Use of Project Name; Improvements
34
(h)
Rules and Regulations
35
(i)
Quiet Possession
35
(j)
Rent
35
(k)
Successors and Assigns
35
(l)
Notices
35
(m)
Intentionally Omitted
35
(n)
Right of Landlord to Perform
35
(o)
Access, Changes in Project, Facilities, Name
36
(p)
Signing Authority
36
(q)
Identification of Tenant
36
(r)
Intentionally Omitted
37
(s)
Survival of Obligations
37
(t)
Intentionally Omitted
37
(u)
Governing Law
37
(v)
Office of Foreign Assets Control
37
(w)
Financial Statements
38
(x)
Exhibits
38
(y)
Independent Covenants
38
(z)
Counterparts
38
ARTICLE 31
OPTION TO EXTEND
38
(a)
Option Right
38
(b)
Option Rent
38
(c)
Exercise of Options
38
(d)
Determination of Market Rent
39
ARTICLE 32 RIGHT OF FIRST OFFER  39

 
 
(ii)

--------------------------------------------------------------------------------

 
 

    PAGE
(a)
Procedure for Offer
40
(b)
Procedure for Acceptance
40
(c)
Lease of First Offer Space
40
(d)
No Defaults
40
(e)
Remedy
40
ARTICLE 33
SIGNAGE
41
     
Exhibit "A"
Premises
 
Exhibit "A-1"
Legal Description of Real Property
 
Exhibit "B"
Rules and Regulations
 
Exhibit "C"
Notice of Lease Term Dates and Tenant's Proportionate Share
 
Exhibit "D"
Tenant Work Letter
 
Exhibit "E"
Letter of Credit
 
Exhibit "F"
Site Plan
 

 
 
(iii)

--------------------------------------------------------------------------------

 
 

DEFINED TERMS   PAGE
Abatement Event
 
17
Abatement Notice
 
17
ADA
 
6
Additional Rent
 
5
Adjustment Dates
 
10
Affiliate
 
38
Affiliated Assignee
 
38
Alterations
 
14
Applicant
 
Exhibit F
Approved Working Drawings
 
Exhibit D
Architect
 
Exhibit D
Base, Shell and Core
 
Exhibit D
Basic Rental
 
2
Beneficiary
 
Exhibit F
Brokers
 
3
Claims
 
19
Code
 
Exhibit D
Commencement Date
 
1
Confidential Information
 
18
Construction Drawings
 
Exhibit D
Contractor
 
Exhibit D
control
 
38
Cosmetic Alterations
 
14
Cost Proposal
 
Exhibit D
Cost Proposal Delivery Date
 
Exhibit D
Damage Repair Estimate
 
23
Development
 
1
Development Common Areas
 
1
Direct Costs
 
5
Dispute Notice
 
8
Economic Terms
 
40
Eligibility Period
 
17
Engineers
 
Exhibit D
Environmental Laws
 
32
Estimate
 
7
Estimate Statement
 
7
Estimated Direct Costs
 
7
Event of Default
 
26
Expiration Date
 
1
Final Space Plan
 
Exhibit D
Final Working Drawings
 
Exhibit D
First Offer Notice
 
40
First Offer Space
 
39
Force Majeure
 
30
Hazardous Material
 
32
Hazardous Materials List
 
31
HVAC System
 
16
Improvement Allowance
 
Exhibit D
Improvement Allowance Items
 
Exhibit D
Initial Installment of Basic Rental
 
3
Interest Notice
 
38
Lab Portion
 
2
Landlord
 
1
Landlord Coordination Fee
 
Exhibit D
Landlord Parties
 
19
Laws
 
12
Lease
 
1
Lease Year
 
3
Letter of Credit
 
9
Market Rent
 
38

 
 
(iv)

--------------------------------------------------------------------------------

 
 

    PAGE
New Laws
 
6
Objectionable Name
 
41
Office Portion
 
2
Operating Costs
 
5
Option
 
38
Option Rent
 
38
Option Rent Notice
 
38
Option Term
 
38
Original Tenant
 
38
Outside Agreement Date
 
39
Over-Allowance Amount
 
Exhibit D
Parking Passes
 
3
Partnership Tenant
 
37
Permits
 
Exhibit D
Permitted Use
 
3
Pharmaceutical Development Uses
 
1
Premises
 
1
Project
 
1
Real Property
 
1
Relet Term
 
27
Rent
 
5
Rental Tax
 
5
Review Notice
 
8
Review Period
 
8
Rules and Regulations
 
35
Security Deposit Laws
 
11
Security Deposit/Letter of Credit
 
3
Signage
 
41
Signage Specifications
 
41
SNDA
 
25
Space Planning Allowance
 
Exhibit D
Specifications
 
Exhibit D
Square Footage
 
2
Standard Improvement Package
 
Exhibit D
Stated Amount
 
9
Statement
 
8
Substantial Completion
 
Exhibit D
Superior Leases
 
40
Superior Rights
 
40
Supplementary Units
 
16
Tax Costs
 
5
Tenant
 
1
Tenant Delays
 
Exhibit D
Tenant Improvements
 
13
Tenant’s Acceptance
 
39
Tenant's Proportionate Share
 
3
Term
 
1
Time Deadlines
 
Exhibit D
Transfer
 
22
Transfer Premium
 
23
Transferee
 
23
Warehouse Portion
 
2

 
(v)

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