Exhibit 10.4

LEASE

BETWEEN

MICROSOFT CORPORATION,

AS LANDLORD

AND

GENERAL AMERICA CORPORATION,

AS TENANT

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LEASE BETWEEN

MICROSOFT CORPORATION,

AS LANDLORD

AND

GENERAL AMERICA CORPORATION,

AS TENANT

INDEX

 

          Page SECTION I - LEASE DATA AND EXHIBITS    1     1.    Lease Data   
1     1.1    Premises    1     1.2    Commencement Date    1     1.3    Term   
1     1.4    Minimum Rent    2     1.5    Use    2     1.6    Notice Addresses
   2     1.7    Project    3     1.8    Exhibits    3 SECTION II - PREMISES    3
    2.1    Premises    3     2.2    Landlord’s Reserved Parking Rights    3
    2.3    Reductions in Office Space and Warehouse Space    3     2.4   
Consequences of Space Reductions    4     2.5    Agreed Net Rentable Square
Footage    4     2.6    Parking    5     2.7    Reserved to Landlord    5
    2.8    Changes to Project    5 SECTION III - TERM    5     3.1    Term    5
SECTION IV - RENT    5     4.1    Minimum Rent    5     4.2    Additional Rent
   6     4.3    Tenant’s Contributions to Operating Expenses and Real Property
Taxes    6     4.4    Interest    11 SECTION V - CONDUCT OF BUSINESS    11
    5.1    Use of Premises    11     5.2    Appearance of Premises    11     5.3
   Unlawful Use    11     5.4    Liens and Encumbrances    11

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    5.5    Hazardous Substances    11     5.6    Signs    12 SECTION VI -
UTILITIES AND OTHER CHARGES    12     6.1    Utilities    12     6.2    Licenses
and Taxes    12     6.3    Electrical and Telecommunications Wires    12 SECTION
VII - DEPOSIT    12     7.1    Deposit    12 SECTION VIII - COMPLETION AND
ALTERATIONS    12     8.1    Delivery of Premises    12     8.2    Alterations
by Tenant    13 SECTION IX - MAINTENANCE OF PREMISES    13     9.1   
Maintenance and Repairs by Tenant    13     9.2    Failure to Maintain    13
    9.3    Maintenance and Repairs by Landlord    14     9.4    Surrender of
Premises    14 SECTION X - TRAFFIC    14     10.1    Trip Cap Agreement    14
    10.2    Adjustment of Tenant’s Trip Cap Allocation    15     10.3   
Monitoring and Compliance    15 SECTION XI - INSURANCE AND INDEMNITY    15
    11.1    Indemnification    15     11.2    Insurance    16     11.3   
Landlord’s Insurance    16     11.4    Waiver of Subrogation    16 SECTION XII -
ASSIGNMENT AND SUBLETTING    17     12.1    Assignment or Sublease    17
    12.2    Assignment by Landlord    17 SECTION XIII - DESTRUCTION OF PREMISES
   17     13.1    Partial Destruction    17     13.2    Total Destruction    17
    13.3    Limitation    17 SECTION XIV - EMINENT DOMAIN    18     14.1   
Total Taking    18     14.2    Partial Taking    18     14.3    Damages    18
SECTION XV - DEFAULT OF TENANT    18     15.1    Defaults    18

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    15.2    Legal Expenses    20     15.3    Remedies Cumulative; Waiver    20
SECTION XVI - ACCESS BY LANDLORD; DEFAULT OF LANDLORD    20     16.1    Right of
Entry    20     16.2    Default of Landlord    20 SECTION XVII - SURRENDER OF
PREMISES    20     17.1    Surrender of Possession    20     17.2    Holding
Over    20 SECTION XVIII - QUIET ENJOYMENT    21     18.1    Landlord’s Covenant
   21 SECTION XIX - MISCELLANEOUS    21     19.1    Notices    21     19.2   
Successors or Assigns    21     19.3    Brokerage Commissions    21     19.4   
Partial Invalidity    21     19.5    Recording    21     19.6    Subordination;
Notice to Lender; Estoppel    21     19.7    Liability of Landlord    22
    19.8    Force Majeure    22     19.9    Authority    22     19.10   
Headings    22     19.11    Gender    22     19.12    Counterparts    22 SECTION
XX - EXECUTION OF LEASE    22     20.1    Intentionally Omitted    22 SECTION
XXI - ENTIRE AGREEMENT - APPLICABLE LAW    22     21.1    Entire Agreement -
Applicable Law    22

EXHIBITS

 

A   Legal Description of Premises B   Site Plan C   Legal Description of Project
D-1   Boundary of Rainier CMR (first floor) D-2   Boundary of Rainier CMR
(second floor)

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LEASE

THIS LEASE is made as of the 31st day of May, 2006, by and between MICROSOFT
CORPORATION, a Washington corporation (“Landlord”), and GENERAL AMERICA
CORPORATION, a Washington corporation (“Tenant”).

For and in consideration of the mutual promises, covenants and conditions set
forth in this Lease, Landlord and Tenant agree as follows:

SECTION I - LEASE DATA AND EXHIBITS

1. Lease Data. The following definitions shall apply for purposes of this Lease,
except as otherwise specifically modified herein:

1.1 Premises. The real property that is legally described on Exhibit A attached
hereto (the “Real Property”), as depicted on the site plan attached hereto as
Exhibit B, inclusive of all buildings and other improvements depicted thereon
(the “Premises”).

The Premises includes three (3) office buildings (the “Office Buildings”), one
(1) warehouse building (the “Warehouse Building”), and one (1) parking
structure, except that with respect to the Rainier Building, the office portions
of the Rainier Building consisting of 152,935 net rentable square feet are not
included in the Premises, and only the cafeteria, meeting rooms, mail room,
training rooms, gift shop, copy center, salon, and “magic wardrobe” portions of
the Rainier Building, consisting of 34,624 net rentable square feet (the
“Rainier CMR”), are included in the Premises. The boundary between the office
portions of the Rainier Building and the Rainier CMR is shown on the partial
floor plans of the Rainier Building attached hereto as Exhibits D-1 (first
floor) and D-2 (second floor). Occupants of the office portions of the Rainier
Building and occupants of the Rainier CMR will not have access across that
boundary, subject to fire code and other legal requirements. However, Tenant
agrees to cooperate with Landlord to permit deliveries to the office portions of
the Rainier Building from the loading docks on the first level through the
Rainier CMR, subject to Tenant’s security requirements. The Office Buildings and
Warehouse Building are referred to collectively as the Premises Office and
Warehouse Buildings. The Office Buildings consist of 360,920 net rentable square
feet of office space and the Warehouse Building includes 35,325 square feet of
office space (for a total of 396,245 net rentable square feet of office space)
(the “Office Space”) and the warehouse building includes 70,649 net rentable
square feet of warehouse space (the “Warehouse Space”).

1.2 Commencement Date. The term of this Lease shall commence upon the date
Landlord acquires title to the Real Property from Tenant.

1.3 Term. With respect to the Pacific Building the Term shall terminate on
December 31, 2006. With respect to the Shasta Building and the Adams Building
and the Rainier CMR, (i) if Tenant has elected option 5C (i) under the Third
Amendment of Purchase and Sale Agreement dated May 23, 2006 between Landlord and
Tenant (the “Third Amendment”) the Term shall terminate on December 31, 2006,
provided that if Tenant reimburses the Purchase Price

 

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Increment (as defined in the Third Amendment) in accordance with the Third
Amendment Tenant may continue to occupy the Shasta and Adams Buildings until
May 31, 2007; and the term of the GAC Lease with respect to the Shasta and Adams
Buildings shall terminate on May 31, 2007 or (ii) if Tenant has elected option
5C (ii) under the Third Amendment, the Term shall terminate on May 31, 2007.

 

1.4 Minimum Rent. Tenant shall pay Minimum Rent in the following monthly
amounts:

(a) With respect to all Office Space in the Premises, except for Office Space in
the Shasta and Adams Buildings and the Rainier CMR:

$1.50 per rentable square foot per month; and

(b) With respect to all Warehouse Space in the Premises:

$1.00 per rentable square foot per month.

No Minimum Rent shall be payable with respect to Office Space in the Shasta and
Adams Buildings, or with respect to the Rainier CMR.

1.5 Use. Tenant shall use the Office Space only for general business office
purposes and other purposes permitted by applicable law, shall use the Warehouse
Space only for warehouse purposes and other purposes permitted by applicable
law, and shall use the balance of the Premises only for parking and other
purposes incidental to its use of the Office Space and the Warehouse Space.

1.6 Notice Addresses

 

Landlord:   

Microsoft Corporation

One Microsoft Way

Redmond, WA 98052

Attention: Chris Owen, General Manager,
Real Estate & Facilities

Fax No. (425) 936-7329

With copy to:   

Tim Osborn

Senior Attorney

Microsoft Corporation

One Microsoft Way, Building 8

Redmond, WA 98052-6399

Fax No. (425) 936-7329

Tenant:   

General America Corporation

4300 Brooklyn Avenue NE

Seattle, WA 98185

Attn: Corporate Real Estate

Fax No. (206) 545-5477

 

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With copy to:   

Alston, Courtnage & Bassetti LLP

Attn: Michael S. Courtnage

1000 Second Avenue

Suite 3900

Seattle, Washington 98104-1045

Fax No. (206) 623-1752

1.7 Project. The Project consists of the real property described in Exhibit C
hereto. The balance of the Project located outside of the Premises includes one
office building (the “Olympic Building”) and one parking structure (the “West
Parking Garage”).

1.8 Exhibits. The following exhibits are made a part of this Lease:

 

Exhibit A -    Legal Description of Real Property Exhibit B -    Site Plan
Exhibit C -    Legal Description of Project Exhibit D-1 -    Boundary of Rainier
CMR (first floor) Exhibit D-2 -    Boundary of Rainier CMR (second floor)

SECTION II - PREMISES

2.1 Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the Premises.

2.2 Landlord’s Reserved Parking Rights. Landlord (as owner of Lot 1, and not as
landlord under this Lease) initially reserves the right to use up to 648 parking
stalls in the West Parking Garage on Lot 1 (which is located on the Project
outside the Premises but is identified on the Site Plan), and shall issue 648
parking passes to its employees and others for that purpose.

2.3 Reductions in Office Space and Warehouse Space. Tenant may cause portions of
the Office Space and/or the Warehouse Space to be removed from the Premises (a
“Space Reduction”) on the following terms and conditions:

(a) Tenant shall give Landlord not less than thirty (30) days written notice of
the effective date of any Space Reduction affecting the Pacific Building;

(b) Space Reductions with respect to the Rainier CMR and the Pacific Building
(as so identified on the Site Plan) shall consist of the entire Rainier CMR or
the entire Pacific Building, as the case may be; no Space Reductions shall be
permitted as to portions of either the Rainier CMR or the Pacific Building;

(c) Space reductions in the Adams Building (as so identified on the Site Plan)
or the Shasta Building (as so identified on the Site Plan) shall consist of
either the entire Adams Building or Shasta Building, or one or more entire
floors in the Adams Building or the Shasta Building.

(d) The effective date of any such Space Reduction (a “Space Reduction Effective
Date”) shall be the date Tenant vacates the portion of the Premises involved in
the Space

 

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Reduction, including removal of all of Tenant’s trade fixtures, personal
property, and equipment, and returns the portion of the Premises so vacated to
Landlord in the condition required by section 9.4.

2.4 Consequences of Space Reductions. On the Space Reduction Effective Date,
with respect to any Space Reduction:

(a) the Office Space or Warehouse Space affected by the Space Reduction shall no
longer be considered part of the Premises, including, without limitation, for
purposes of calculating Minimum Rent and Tenant’s Share (as defined in
Section 4.3(b)(iii) below) of Project Operating Costs and Building Operating
Costs (as defined and allocated in Section 4.3(b)(i) below and Real Property
Taxes (as defined in Section 4.3(b)(ii) below);

(b) Tenant’s right to use parking spaces on the Premises shall be reduced at the
rate of 2.36 stalls for each 1,000 net rentable square feet of Office Space
affected by any Space Reduction (other than a Space Reduction affecting the
Pacific Building). A Space Reduction removing the Pacific Building from the
Premises shall reduce Tenant’s parking allocation by 154 stalls.

(c) Tenant’s Trip Cap Allocation shall be reduced as provided in Section 10.2.

(d) At such time, if any, as all of the Office Space and all of the Warehouse
Space has been removed from the Premises, this Lease shall terminate as to the
entire Premises.

2.5 Agreed Net Rentable Square Footage. For purposes of this section II, the
parties agree that the following are the net rentable square footages of the
buildings and floors identified below:

Rainier Building: 187,559 net rentable square feet of Office Space, of which
34,624 net rentable square feet consists of the Rainier CMR.

Pacific Building: 70,649 net rentable square feet of Warehouse Space

and 35,325 net rentable square feet of Office Space

Adams Building

 

Floor P1:   29,422 net rentable square feet of Office Space Floor P2:   4,115
net rentable square feet of Office Space Floor 1:   51,856 net rentable square
feet of Office Space Floor 2:   48,152 net rentable square feet of Office Space
Floor 3:   44,903 net rentable square feet of Office Space

Shasta Building

 

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Floor P1:   14,118 net rentable square feet of Office Space Floor P2:   816 net
rentable square feet of Office Space Floor 1:   46,476 net rentable square feet
of Office Space Floor 2:   44,640 net rentable square feet of Office Space
Floor 3:   41,798 net rentable square feet of Office Space

2.6 Parking. On the Commencement Date, Tenant shall have the right to use, and
shall be issued parking passes for, all parking stalls on the Premises and all
those parking stalls located in the West Parking Garage other than (i) those in
the West Parking Garage reserved by Landlord pursuant to Section 2.2, and
(ii) 361 stalls located in the North Parking Garage, which shall be reserved by
Landlord. The number of parking stalls Tenant is entitled to use, and the number
of parking passes allocated to Tenant, shall be reduced on each Space Reduction
Effective Date as provided in Section 2.4 (b).

2.7 Reserved to Landlord. Landlord reserves all air rights over the Premises
(except as otherwise expressly agreed in writing) and the right to install,
maintain, use, repair and replace pipes, ducts, conduits and wires leading
through the Premises outside that portion of the Premises Office and Warehouse
Buildings then constituting the Premises to serve other parts of the Project in
locations which will not materially interfere with Tenant’s use thereof or
access thereto or its parking rights under this Lease. Landlord shall provide
Tenant reasonable prior notice of any such work.

2.8 Changes to Project. Landlord reserves the right at any time to make
alterations or additions to the Project located outside that portion of the
Premises Office and Warehouse Buildings then constituting the Premises, to
expand the Project to include additional phases from time to time; to construct
other buildings or improvements in the Project located outside the Premises or
located on Lot 5 of the Real Property; and to relocate the various parking and
other common areas located outside the Premises; and to grant easements with
respect thereto, all to the extent that such will not materially interfere with
Tenant’s use of or access to the Premises or the buildings and other
improvements located thereon or its parking rights under this Lease.

SECTION III - TERM

3.1 Term. Subject to the provisions of Section 2.4 (c), this Lease shall be for
the term specified in Section 1.3 (the “Term”), commencing on the Commencement
Date.

SECTION IV - RENT

4.1 Minimum Rent. Tenant shall pay to Landlord at the address specified in
Section 1.6, or at such other entity or address as may be specified by Landlord
from time to time, without setoff or deduction whatsoever, except as permitted
hereunder, as fixed monthly minimum rent during the Term, the amounts set forth
in Section 1.4 (“Minimum Rent”). Minimum Rent and other sums due

 

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from Tenant under this Lease shall be paid to Landlord by electronic transfer
into a financial institutional account designated by Landlord from time to time.
Monthly installments of Minimum Rent are due in advance on or before the first
day of each month of the Term. Minimum Rent for partial months shall be
prorated. The Minimum Rent does not include the Additional Rent payable by
Tenant pursuant to this Lease.

4.2 Additional Rent. In addition to Minimum Rent, all other sums to be paid or
reimbursed by Tenant to Landlord, whether or not so designated, are “Additional
Rent” for the purposes of this Lease. Unless otherwise specifically provided in
this Lease, Tenant shall pay Landlord all Additional Rent within ten (10) days
after demand. As used herein the term “Rent” refers to both Minimum and
Additional Rent.

4.3 Tenant’s Contributions to Operating Expenses and Real Property Taxes. In
addition to Minimum Rent Tenant shall pay to Landlord as Additional Rent
Tenant’s Share of all “Project Operating Costs”, “Building Operating Costs” and
“Real Property Taxes” incurred in connection with the operation of the Project
as follows:

(a) Before Lease commencement and each calendar year commencing thereafter,
Landlord will notify Tenant in writing of Landlord’s estimate of Tenant’s Share
(as defined in Section 4.3(b)(iii) below) of the Project Operating Costs,
Building Operating Costs, and Real Property Taxes for the current year. Tenant
shall pay such estimated amount in advance, in equal monthly installments,
without deduction or offset, on or before the first (1st) day of each calendar
month, with the payment of Minimum Rent required pursuant to Section 4.1 above.
Following the end of each calendar year, Landlord will compute Project Operating
Costs, Building Operating Costs, and Real Property Taxes for such year based on
actual costs and, if Tenant’s Share of the amounts due for such year is greater
than the amounts already paid by Tenant pursuant to this Section 4.3, Tenant
shall pay Landlord the deficiency within thirty (30) days after receiving
written notice of such amount from Landlord. If the total amount paid for such
year exceeds Tenant’s Share, then if Tenant has cured any Tenant defaults then
existing under this Lease, Landlord shall credit such excess to the payment of
Additional Rent which may thereafter become due under this Lease; however, upon
the expiration or sooner termination of the Term, if Tenant has otherwise
complied with all other terms and conditions of this Lease, Landlord shall
refund such excess to Tenant. If at any time during a calendar year Landlord
obtains additional information regarding costs or expenses of the Real Property,
Landlord may at its election adjust the amount of the monthly installments due
under this section for the balance of the year to reflect such additional
information, by giving Tenant written notice thereof, which notice also shall
state the amount of the deficiency, if any, in the prior monthly payments for
the calendar year. Tenant shall pay any such deficiency within thirty (30) days
of its receipt of the notice and shall make the adjusted monthly payments for
the remainder of the calendar year.

(b) For purposes of this Lease:

(i) “Operating Costs” means all expenses actually paid or incurred by Landlord
for maintaining, managing, operating, cleaning, repairing, replacing and
administering the Project (but not the Premises Office and Warehouse Buildings
or the Olympic Building located thereon) or dealing with safety and security
related thereto, and the personal property used in conjunction therewith,
including without limitation, the costs of common refuse collection, water,

 

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sewer, electricity, gas, heat, air conditioning, fuel, light, fire protection,
and other utilities; services; supplies; window washing; snow, garbage, trash
and debris removal; traffic control costs, fire protection, life safety and
security services and systems; gardening and landscape maintenance; parking and
drive area resurfacing and restriping; services of independent contractors;
compensation (including employment taxes and fringe benefits) of all persons who
perform duties directly in connection with the operation, management,
maintenance, repair, replacement and administration of the Project; costs
incurred in connection with compliance with legal requirements; signage costs,
other than for signs belonging to individual tenants; insurance premiums and
charges for all insurance carried with respect to the Project and all
deductibles with respect thereto; bond premiums and charges; association fees
and dues; the Project’s share of expenses under easement, cross-easement or like
agreements benefiting the Project; license and permit costs and governmental
fees and charges, including inspection fees; subsidies, mitigation and other
payments required by public and quasi-governmental bodies, including those for
traffic management requirements; professional management fees (not to exceed one
and one-half percent (1 1/2%)) of gross Premises income easement and license
fees; reserves for roof repairs; legal and accounting expenses directly
attributable to the Project and other expenses or charges whether or not
hereinabove described which, in accordance with generally accepted accounting
and management practices, would be considered an expense of maintaining,
managing, operating, cleaning, repairing, replacing and administering the
Project.

“Building Operating Costs” shall mean the utility costs attributable to the
Premises Office and Warehouse Buildings, to the extent not paid directly by
Tenant under the terms of Section 6.1; maintenance and repair costs related
solely to the Premises Office and Warehouse Buildings; supplies related solely
to the Premises Office and Warehouse Buildings; refuse removal services
attributable solely to the Premises Office and Warehouse Buildings (if
separately billed); and life safety systems costs related solely to the Premises
Office and Warehouse Buildings. All other costs falling within the definition of
Operating Costs that are not part of Building Operating Costs are Project
Operating Costs:

Notwithstanding the foregoing, the following items shall be excluded or
deducted, as the case may be, from the calculation of Tenant’s share of
Operating Costs:

(1) Leasing commissions, fees and costs, advertising and promotional expenses
and other costs incurred in procuring tenants for or in selling any Building in
the Project or the Project;

(2) Legal fees except those incurred directly in connection with Landlord’s
operation and maintenance of the Project (other than the maintenance of the
Building thereon);

(3) Costs of renovating or otherwise improving or decorating space for any
tenant or other occupant of the Project, including Tenant, or relocating any
tenant;

(4) Financing costs including interest and principal amortization of debts and
the costs of providing the same;

 

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(5) Depreciation other than amortization of the cost of any alterations,
additions, changes, repairs, replacements or other items which, under generally
accepted accounting principles, are properly classified as capital items, except
that such costs as capitalized shall be amortized on a straight-line basis over
the useful life of the item in question with the annual amortization to be
included as part of Operating Costs.

(6) Rental on ground leases or other underlying leases and the costs of
providing the same;

(7) Wages, bonuses and other compensation of employees above the grade of
Building manager, and fringe benefits other than insurance plans and
tax-qualified benefit plans;

(8) Any liabilities, costs or expenses associated with or incurred in connection
with the removal, enclosure, encapsulation or other handling of asbestos or
other hazardous or toxic materials or substances and the cost of defending
against claims in regard to the existence or release of Hazardous Substances or
materials at the Project (except with respect to those costs for which Tenant is
otherwise responsible pursuant to the express terms of this Lease);

(9) Costs of any items for which Landlord is or is entitled to be paid or
reimbursed by insurance;

(10) Increases in insurance or Real Property Taxes specifically identifiable as
due to any tenant of the Olympic Building or other tenant of the Project;

(11) Charges for electricity, water, or other utilities, services or goods and
applicable taxes for which Tenant or any other tenant, occupant, person or other
party is obligated to pay directly to the utility or to reimburse Landlord and
which are not payable as part of the general reimbursement of Operating Costs;

(12) Cost of any HVAC, janitorial or other services provided to other tenants
after regular business hours;

(13) Cost of installing, operating and maintaining any specialty service, such
as an observatory, broadcasting facilities, child or daycare, luncheon club or
athletic or recreation club;

(14) Cost of any work or service performed on an extra cost basis for any tenant
in the Project;

(15) Cost of any work or services performed for any facility other than the
Buildings that form part of the Premises or Project;

(16) Any cost representing an amount paid to a person, firm, corporation or
other entity related to Landlord that is in excess of the amount which would
have been paid in the absence of such relationship;

 

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(17) Any cost of painting or decorating any interior parts of any Building in
the Project;

(18) Costs of relamping all light fixtures in non-public areas of the Project
including, without limitation, labor and materials for light tubes, bulbs,
starters, ballasts and their equivalents;

(19) Any cost associated with operating an off-site management office for any
Building in the Project or for the Project;

(20) Landlord’s general overhead and any other expense not directly attributable
to operation and management of the Project (e.g., the activities of Landlord’s
officers and executives or professional development expenditures);

(21) Cost of initial cleaning and rubbish removal from the Premises or Project
to be performed before delivery of the Premises to Tenant;

(22) Cost of initial landscaping of the Project;

(23) Costs of any mitigation fees, impact fees, subsidies, tap-in fees,
connection fees or similar one time charges or costs (however characterized),
imposed or incurred in connection with undertaking the initial Project or any
expansion of the Project;

(24) Any fees, costs or expenditures incurred in connection with negotiations,
disputes and claims of other tenants or occupants of the Project;

(25) Cost of any items that, under generally accepted accounting principles, are
properly classified as capital expenses, except to the extent Landlord is
expressly allowed to recover such costs under this Lease;

(26) Lease payments for rental equipment (other than equipment for which
depreciation is properly charged as an expense) that would constitute a capital
expenditure if the equipment were purchased;

(27) Cost of the initial stock of tools and equipment for operation, repair and
maintenance of the Project;

(28) Late fees or charges incurred by Landlord due to late payment of expenses;

(29) Cost of acquiring, securing, cleaning or maintaining sculptures, paintings
and other works of art;

(30) Real Property Taxes or taxes on Landlord’s business (such as income, excess
profits, franchise, capital stock, estate, inheritance, etc.);

(31) Costs and expenses incurred in connection with contesting or settlement of
any claimed violation of law or requirements of law;

 

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(32) Direct costs or allocable costs (such as Real Property Taxes) associated
with parking operations if there is a separate charge to Tenant, other tenants
or the public for parking;

(33) Costs incurred in connection with remedying violations of law with respect
to those parts of the Project that Landlord is responsible for maintaining and
repairing;

(34) Costs incurred in connection with compliance with the local implementation
of the National Energy Code, including but not limited to provisions requiring
the removal of cable and wires within the Project and Premises (except to the
extent such removal is required of Tenant hereunder);

(35) Cost of complying with the ADA, whether such costs are classified as
capital items or expenses under generally accepted accounting principles, to the
extent that such compliance was required on the date of this Lease;

(36) Charitable or political contributions;

(37) Costs related to public transportation, transit or van pools;

(38) All other items for which another party compensates or pays (other than as
part of Operating Costs) so that Landlord shall not recover any item of cost
more than once; and

(39) Flowers, balloons or gifts of any type.

(ii) “Real Property Taxes” means all taxes on the Project (including common
areas and facilities), and on personal property used in conjunction therewith,
and taxes on property of tenants of the Project which have not been paid by such
tenants directly to the taxing authority; surcharges; all local improvement and
other assessments of every kind and nature levied with respect to the Project
and/or the personal property used in connection with the operation of the
Project; any taxes levied or assessed in addition to or in lieu of, in whole or
in part, such taxes or assessments and any other tax or assessment upon leasing
of the Project or rents collected therefrom, other than any federal, state or
local net income tax or franchise tax; and all costs incurred by Landlord in
contesting taxes or assessments or attempting to reduce such or assessed values.

(iii) “Tenant’s Share” of Project Operating Costs and “Tenant’s Share” of Real
Property Taxes means the ratio, from time to time, of (i) the net rentable
square footage of space in the Premises Office and Warehouse Buildings then
constituting the Premises, to (ii) 838,325. Tenant’s Share of Building Operating
Costs means the ratio, from time to time, of (i) the net rentable square footage
of space in the Premises Office and Warehouse Buildings then constituting the
Premises, to (ii) 619,829.

(c) Not later than one hundred twenty (120) days after the expiration of each
calendar year included in the Term, Landlord shall submit to Tenant a detailed
written statement, certified by Landlord containing the amount of actual
Operating Costs for such calendar year

 

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broken down by component of expenses, the amount paid by Tenant towards the
Operating Costs, and the amount, if any, Tenant owes Landlord or the amount
Landlord owes Tenant as a refund for such year. Tenant or its audit
representatives shall have the right to inspect and audit Landlord’s books and
records with respect to this Lease no more than once each calendar year or not
more than one (1) year after the end of any calendar year during the Term to
verify actual Operating Costs for such calendar year. Tenant’s audit
representative shall be designated by Tenant. The Landlord’s books and records
shall be kept on an accrual basis according to generally accepted accounting
principles provided that prepaid items will be amortized to match the period in
which the service or benefit is received. If Tenant’s audit of the Operating
Costs by Tenant’s audit representative reveals an overcharge of more than five
percent (5%), Landlord promptly shall reimburse Tenant for the reasonable
out-of-pocket cost of the audit. Any overcharge or underpayment of Operating
Costs shall be due from one party to the other within thirty (30) days after the
amount of the overcharge or underpayment has been fixed.

4.4 Interest. Interest shall accrue on any payment due under this Lease which is
more than ten (10) days past due at the rate of twelve percent (12%) per annum.
If the foregoing rate exceeds the maximum rate permitted by applicable law,
interest shall accrue at the maximum rate so permitted by law, from the date due
until paid on any amount not paid when due.

SECTION V - CONDUCT OF BUSINESS

5.1 Use of Premises. Tenant shall use the Premises only for the purposes stated
in Section 1.5. Tenant shall not use or permit the use of the Premises for any
other purpose without Landlord’s express prior written consent. Tenant shall
promptly comply with such rules and regulations for the Project adopted from
time-to-time by Landlord, upon reasonable notice to Tenant so long as such rules
and regulations are not inconsistent with the terms of this Lease and are
uniformly enforced.

5.2 Appearance of Premises. Tenant shall maintain the Premises Office and
Warehouse Buildings (to the extent they remain part of the Premises) in a clean,
orderly and neat fashion and shall neither commit waste nor knowingly permit any
waste to be committed thereon. Tenant shall not permit any accumulation of trash
or refuse on or about the Premises Office and Warehouse Buildings except in
covered containers.

5.3 Unlawful Use. Tenant shall not use or knowingly permit the Premises or any
part thereof to be used for any purpose in violation of any municipal, county,
state or federal law, ordinance, rule or regulation (collectively “Applicable
Laws”).

5.4 Liens and Encumbrances. Tenant shall keep the Premises free and clear of all
liens and encumbrances arising or growing out of its use and occupancy of the
Premises. If any lien is filed against the Real Property as a result of the
action or inaction of Tenant or its employees, agents or contractors, Tenant
shall within fifteen (15) business days of Landlord’s demand therefor discharge
such lien by payment or post a bond sufficient in amount to cause the lien to be
removed of record.

5.5 Hazardous Substances. Tenant shall not, without Landlord’s prior written
consent, keep any substances designated as, or containing components designated
as, hazardous, dangerous,

 

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toxic, or harmful, and/or subject to regulation under any federal, state, or
local law, regulation, or ordinance (“Hazardous Substances”) on or about the
Premises, except supplies and products normally used in a general business
operations (which shall be stored, used, and disposed of in compliance with all
Applicable Laws). Tenant shall indemnify, defend and hold Landlord harmless with
respect to all claims, suits, causes of action, costs, losses, damages, fines
and penalties attributable to Tenant’s release of Hazardous Substances in, on,
under, about or from the Premises in violation of Applicable Laws during the
Term. Tenant’s obligations under this Section 5.5 shall survive expiration or
termination of this Lease.

5.6 Signs. Tenant shall be permitted to retain in place all existing signs on
the Premises and, subject to the provisions of Section 8.2, to modify them for
its use during the Term.

SECTION VI - UTILITIES AND OTHER CHARGES

6.1 Utilities. Tenant shall pay prior to delinquency for all electricity,
telephone, water, gas, sewer, garbage, fire protection and any other utilities
which are supplied to the Premises Office and Warehouse Buildings (to the extent
they remain a part of the Premises) which are separately metered or submetered
to the Premises, and, as part of Building Operating Costs, Tenant’s Share of all
other utilities provided to the Premises Office and Warehouse Buildings that are
not separately metered or submetered. Tenant shall cooperate with Landlord to
allow the electrical service provider access to electrical lines and equipment
within the Premises. The Premises are served by data, communications and power
cabling located within a subterranean bank/vault (the “Vault”) that serves the
entire Project. Landlord and Tenant shall jointly cooperate to develop
procedures so that such services can be maintained and access is available to
the Vault for work in conjunction therewith.

6.2 Licenses and Taxes. Tenant shall be liable for, and shall pay or cause to be
paid throughout the Term, all license and excise fees and occupation taxes
covering the business conducted on the Premises during the Term and all personal
property taxes levied with respect to all personal property located at the
Premises during the Term.

6.3 Electrical and Telecommunications Wires. Tenant shall comply with all
Applicable Laws with respect to all wires, cables and similar installations
(“Wires”) installed by Tenant within the Premises during the Term.

SECTION VII- DEPOSIT

7.1 Deposit. Intentionally omitted.

SECTION VIII - COMPLETION AND ALTERATIONS

8.1 Delivery of Premises. Landlord is leasing the Premises to Tenant in an AS IS
condition. Tenant acknowledges that Landlord has acquired the Premises on the
Commencement Date from Tenant, that Tenant has occupied the Premises prior to
the Commencement Date and is occupying the Premises on the Commencement Date,
and that, accordingly, (i) Landlord has no obligation to Tenant with respect to
delivery of possession of the Premises, and (ii) Landlord has no obligations to
Tenant with respect to the condition of the Premises Office and Warehouse
Buildings on the Commencement Date, including, without limitation, with respect
to any defects in the Buildings, latent or patent, or any deferred maintenance
of the Premises Office and Warehouse Buildings.

 

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8.2 Alterations by Tenant. Tenant shall not make any Material alterations,
additions or improvements in or to the Premises without first submitting to
Landlord professionally-prepared plans and specifications for such work and
obtaining Landlord’s prior written approval thereof, which approval shall not be
unreasonably withheld, delayed or conditioned. For the purposes of this
Section 8.2, a “Material” alteration, addition, or improvement shall be any such
alteration, addition, or improvement (i) the cost of which will exceed
$500,000), or (ii) which will change the exterior appearance or affect the
structure or building systems of any of the Premises Office and Warehouse
Buildings. Tenant agrees that in view of the relatively short term of this
Lease, and Tenant’s rights to effect Space Reductions, it shall not be
unreasonable for Landlord to condition Landlord’s approval of any Material
alteration, addition, or improvement on Tenant’s agreement to remove such
alteration, improvement or addition upon the earlier of (i) the expiration of
the term of this Lease, or (ii) the Space Reduction Effective Date with respect
to the space in which such alteration, improvement, or addition is located, and
to repair any damage to the Premises caused by any such removal. Tenant
covenants that it will cause all alterations, additions and improvements to the
Premises be performed at Tenant’s sole cost and in good and workmanlike manner
consistent with commercial standards for an office park comparable to the
Premises, and in the case of Material alterations, additions or improvements in
a manner which: (a) is consistent with the Landlord-approved plans and
specifications and any conditions reasonably imposed by Landlord in connection
therewith; and (b) does not invalidate or otherwise affect the warranties then
in effect with respect to the Premises. Tenant shall secure all governmental
permits and approvals for, as well as comply with all Applicable Laws in
connection with, all alterations, additions and improvements.

SECTION IX - MAINTENANCE OF PREMISES

9.1 Maintenance and Repairs by Tenant. Except for matters which are Landlord’s
responsibility under terms of Section 9.3, and except for maintenance
attributable to the negligence or wrongful acts of Landlord or its employees,
agents, contractors, guests or invitees or its or their breach of applicable law
or Landlord’s breach of its obligations under this Lease, Tenant shall at all
times keep the interior of the Premises Office and Warehouse Buildings (to the
extent they remain a part of the Premises) (including doors and entrances, all
windows and molding and trim of all doors and windows) and all partitions, door
surfaces and appurtenances thereof, all systems therein, in good order,
condition and repair. If Tenant’s maintenance obligations will require it to
make any expenditures which are capital in nature, then its share of the cost
therefor shall be limited to an amount equal to a portion of such expense that
is equal to the percentage that the then remaining Term bears to the Internal
Revenue Service determined useful life for the capital expenditure item. Tenant
shall not be obligated to perform such capital expenditure work until Landlord
provides to Tenant an amount equal to the difference between the cost thereof
and Tenant’s share of such cost. Tenant shall maintain and replace all light
bulbs, tubes and ballasts within the Premises Office and Warehouse Buildings and
provide janitorial service to the Premises Office and Warehouse Buildings (to
the extent such are still subject to the terms of this Lease).

9.2 Failure to Maintain. If Tenant fails to keep and maintain the Premises
Office and Warehouse Buildings in the condition set forth in Section 9.1,
Landlord may, at its option and,

 

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except in the case of emergency, following notice to Tenant and expiration of
the applicable cure period, put or cause the same to be put in the condition
required thereunder, and Tenant on demand shall pay Landlord the reasonable
out-of-pocket cost thereof within ten (10) business days after its receipt of an
invoice and supporting documentation therefor.

9.3 Maintenance and Repairs by Landlord. Except for maintenance attributable to
the negligence or wrongful acts of Tenant or its employees, agents, contractors,
guests or invitees or its or their breach of applicable law or Tenant’s breach
of its obligations under this Lease or to alterations, additions or improvements
made by Tenant, Landlord shall maintain and repair the roof structure, exterior
walls, foundation and building structure of all Premises Office and Warehouse
Buildings, all systems serving the Premises Office and Warehouse Buildings, and
all of the balance of the Premises located outside those Buildings in a good
order, repair and condition during the Term. In the event of an emergency caused
by an event posing an immediate danger or injury to persons or damage to
property involving any of those items which are Landlord’s obligation to repair
under the terms of this Section 9.3, Tenant shall exercise due diligence in
attempting to immediately contact Landlord telephonically or by other reasonable
means to inform Landlord of the emergency and of the need to take action. If
Landlord fails to commence taking action to deal with the emergency problem
within twenty four (24) hours after being advised by Tenant thereof, then Tenant
may make such repair as it deems necessary to resolve the immediate danger
giving rise to the emergency, but not any long term problem, for the account of
Landlord. Following Tenant’s completion of such emergency repair work, Landlord
shall reimburse Tenant for its reasonable out-of-pocket expenses incurred in
performing such repair work within fifteen (15) days following Landlord’s
receipt of invoice from Tenant. If Landlord fails to reimburse Tenant within
such fifteen (15) day period, then Tenant may offset such amount together with
interest at the interest rate set forth in Section 4.4 from the next
installment(s) of Rent due.

9.4 Surrender of Premises. At the expiration or sooner termination of this
Lease, or upon any Space Reduction Effective Date, Tenant shall return the
Premises Warehouse and Office Buildings (or the portion subject to the Space
Reduction) to Landlord in the same condition in which received (or, if altered
in compliance with the provisions of Section 8.2, then the Premises Warehouse
and Office Buildings shall be returned in such altered condition, except that if
Landlord conditioned its consent to any alteration, addition, or improvement
upon Tenant’s removal of such alteration, addition, or improvement, Tenant shall
remove such alteration, addition or improvements to the Premises Office and
Warehouse Building upon its surrender of the Premises and repair any damage
caused by any such removal) reasonable wear and tear and damage by casualty or
condemnation or attributable to Landlord’s breach of this Lease excepted. Prior
to such return, Tenant shall remove its trade fixtures, personal property and
equipment. Tenant’s obligation to perform this covenant shall survive the
expiration or termination of this Lease.

SECTION X – TRAFFIC

10.1 Trip Cap Agreement. Tenant shall cooperate with Landlord in meeting the
objectives and complying with the terms and conditions of any Transportation
Management Plan (the “Plan”) and the Safeco Trip Cap Agreement recorded under
Recording No. 9804290364, as amended by instrument under Recording
No. 20040811002098 (and as it may be affected by Section 4(c) of the Second
Amendment to Development Agreement recorded under Recording No. 20040811002099)
(the “Trip Cap Agreement”). Tenant acknowledges that its share of the PM Peak
Hours Trips under the Base Trip Cap of the Trip Cap Agreement is limited to 676
trips (“Tenant’s Trip Cap Allocation”).

 

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10.2 Adjustment of Tenant’s Trip Cap Allocation. Upon each Space Reduction with
respect to any building other than the Pacific Building, Tenant’s Trip Cap
Allocation shall be reduced at the rate of 1.19 trips for each 1,000 net
rentable square feet of Office Space affected by the Space Reduction. If the
Space Reduction removes the Pacific Building from the Premises Tenant’s Trip Cap
Allocation shall be reduced by 66 trips.

10.3 Monitoring and Compliance. Compliance with the Trip Cap Agreement shall be
monitored by an engineer or consultant (the “TCA Consultant”) selected by
Landlord (with Tenant’s approval which shall not be unreasonably withheld,
delayed or conditioned) under a contract with the City of Redmond (the “City”).
The cost of the TCA Consultant’s monitoring shall be shared by Landlord and
Tenant in the same ratio as they share the Base Trip Cap. If Tenant is
determined by the TCA Consultant to have used trips that exceed Tenant’s Trip
Cap Allocation by more than five percent (5%), and if such excess causes there
to be a violation of the Trip Cap Agreement, then Tenant shall satisfy the
City’s requirements related to such violation (including payment of any monetary
penalty, if then applicable) and shall be allocated any increase in the Base
Trip Cap to the Adjusted Trip Cap attributable thereto, so long as Tenant
complies with the City’s requirements related thereto.

SECTION XI - INSURANCE AND INDEMNITY

11.1 Indemnification.

(a) Except as provided in Section 1l.l(b) Landlord shall not be liable for
(a) any loss of or damage to any property (including property of Tenant)
occurring in or about the Premises from any cause whatsoever or (b) for
interference with light, air, or view. Except as covered by the waiver contained
in Section 11.4, Tenant shall indemnify, defend and hold Landlord, its lender(s)
(“Lender”), its and their officers, agents, and employees and contractors
harmless from all losses, damages, fines, penalties, liabilities and expenses
(including reasonable attorneys’ fees and other costs incurred in connection
with such claims, regardless of whether claims involve litigation) resulting
from any injury to any person or from any loss of or damage to any property
attributable to Tenant’s operation or occupation of the Premises or caused by or
resulting from any act or omission of Tenant or any subtenant, agent,
contractor, licensee, assignee, or concessionaire of Tenant, or of any officer,
agent, employee, guest or invitee of any such person in, on or about the
Premises.

(b) Except as provided in Section 11.1 (a) Tenant shall not be liable for any
loss of or damage to any property (including property of Landlord) occurring in
or about the Premises from any cause whatsoever. Except as covered by the waiver
contained in Section 11.4 Landlord shall indemnify, defend and hold Tenant, its
officers, agents, and employees and contractors harmless from all losses,
damages, fines, penalties, liabilities and expenses, (reasonable attorneys’ fees
and other costs incurred in connection with such claims, regardless of whether
claims involve litigation) resulting from any injury to any person or from any
loss of or damage to any property attributable to Landlord’s activities on the
Premises or caused by or resulting from any act or omissions of Landlord or any
agent, contractor, licensee, assignee, or concessionaire of Landlord, or of any
officer, agent, employee, guest or invitee of any such person in, on or about
the Premises.

 

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(c) Notwithstanding any of the foregoing, if losses, liabilities, damages,
liens, costs and expenses so arising are caused by the concurrent negligence of
both Landlord and Tenant, their employees, contractors, agents, invitees and
licensees, a party shall indemnify the other only to the extent of the
indemnifying party’s own negligence or that of its officers, agents, employees,
guests or invitees. The indemnifications provided for in this Section 11.1 with
respect to acts or omissions during the term of this Lease shall survive
termination or expiration of this Lease. Landlord and Tenant shall promptly
notify the other of casualties or accidents occurring in or about the Premises.
LANDLORD AND TENANT ACKNOWLEDGE THAT THE INDEMNIFICATION PROVISIONS OF THIS
SECTION 11.1 WERE SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.

11.2 Insurance. During the Term Tenant shall, at its own expense, maintain
commercial general liability insurance with minimum limits of Five Million
Dollars ($5,000,000) per occurrence and annual aggregate. Landlord and Lender
shall be named as additional insureds and shall be furnished with a certificate
of such policy or policies of insurance which shall bear an endorsement that the
same shall not be canceled nor materially reduced in coverage or limits without
thirty (30) days prior written notice to Landlord and Lender. During the Lease
term, Tenant shall also maintain at its own expense insurance covering its
furniture, fixtures, equipment and inventory on the Premises in an amount equal
to the full insurable value thereof, against fire and such other perils as are
covered by an all risk policy. All insurance required under this Lease shall
(a) be issued by insurance companies authorized to do business in the State of
Washington and having a financial rating of at least A, Class X status, as rated
in the most recent edition of Best’s Insurance Reports, or with companies
otherwise acceptable to Landlord; and (b) be issued as a primary policy, or
under the blanket policy, not contributing with and not in excess of coverage
which Landlord may carry.

11.3 Landlord’s Insurance. Landlord shall maintain such property and liability
insurance relating to the Real Property as it deems prudent, and, so long as
Microsoft Corporation is the Landlord, may self insure all such risks to the
extent it deems appropriate.

11.4 Waiver of Subrogation. Notwithstanding anything to the contrary contained
herein, neither Landlord nor Tenant shall be liable to the other party or to any
insurance company (by way of subrogation or otherwise) insuring the property of
the other party for any loss or damage to any building, structure or tangible
personal property of the other occurring in or about the Premises, even though
such loss or damage might have been occasioned by the negligence of such party,
its agents or employees, if such loss or damage is covered by property insurance
benefiting the party suffering such loss or damage or was required to be covered
by property insurance under terms of this Lease or if the party was
self-insuring as to such loss as permitted under this Lease. Each party shall
cause each insurance policy obtained by it insuring its property to contain such
a waiver of subrogation clause.

 

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SECTION XII - ASSIGNMENT AND SUBLETTING

12.1 Assignment or Sublease. Except for existing subtenants and for subleases to
Tenant’s affiliates, Tenant may not sublet the whole or any part of the Premises
or assign or encumber its interest hereunder without the prior written consent
of Landlord.

12.2 Assignment by Landlord. If Landlord sells or otherwise transfers the
Premises, or if Landlord assigns its interest under this Lease (other than for
security purposes) and such purchaser, transferee or assignee assumes Landlord’s
obligations hereunder arising thereafter, Landlord shall thereupon be relieved
of all liabilities hereunder which accrue as to periods thereafter, but this
Lease shall otherwise remain in full force and effect.

SECTION XIII - DESTRUCTION OF BUILDINGS

13.1 Partial Destruction. If any of the Premises Office or Warehouse Buildings,
or any parking structure on the Premises (a “Building” for purposes of Sections
XIII and XIV) is rendered partially untenantable by fire or other casualty, and
if the damage is repairable within one hundred twenty (120) days from the date
of the occurrence (with the repair work and preparations therefore to be done
during regular working hours on regular work days), Landlord shall repair the
Building so damaged with due diligence and Rent shall be abated in the
proportion that the untenantable portion of the Premises Office or Warehouse
Building, as the case may be, bears to the whole thereof for the period from the
date of the casualty to the completion of the repairs (or in the case of damage
to a parking structure, on an equitable basis in proportion to the effect that
the loss of use thereof has on Tenant’s operations on the Premises).

13.2 Total Destruction. If any of the Buildings is completely destroyed or
destroyed by fire or other casualty to such an extent that the damage cannot be
repaired within one hundred twenty (120) days of the occurrence, Landlord shall
have the option to restore the Building or to terminate this Lease with respect
to such Building by written notice given to Tenant within thirty (30) days after
the casualty, with any termination with respect to such Building to be effective
thirty (30) days after Landlord’s notice. Notwithstanding the foregoing, if
Landlord’s election not to restore a parking structure would render the Premises
in violation of parking requirements under applicable zoning codes, Landlord may
elect not to restore such structure only if alternate parking is provided on the
Real Property sufficient to bring the Premises into compliance with such
requirements. If Landlord elects to restore a Building, it shall commence and
prosecute the restoration work with diligence after obtaining required
governmental consents and permits. For the period from the date of the casualty
until completion of the repairs (or the date of termination of this Lease with
respect to the damaged Building, if Landlord elects not to restore the
Building), Rent shall be abated in the same proportion that the untenantable
portion of the Premises Office or Building, as the case may be, bears to the
whole thereof (or in the case of damage to a parking structure, on an equitable
basis in proportion to the effect that the loss of use thereof has on Tenant’s
operations on the Premises).

13.3 Limitation. Landlord shall not be liable to Tenant for destruction or
damage to any of Tenant’s property including fixtures, equipment and other
improvements, or for damages or compensation for inconvenience, loss of business
or disruption arising from damages to or repairs or restoration of any portion
of the Premises.

 

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SECTION XIV - EMINENT DOMAIN

14.1 Total Taking. If any Building is taken by eminent domain, this Lease shall
terminate as to such Building as of the date Tenant is required to vacate the
Building, and Rent shall be paid to that date. If the Premises or all of the
Buildings are taken by eminent domain, this Lease shall terminate as of the date
Tenant is required to vacate the Buildings or Premises, and rent shall be paid
to that date. The term “eminent domain” shall include the taking or damaging of
property by, through or under any governmental or statutory authority, and any
purchase or acquisition in lieu thereof, whether the damaging or taking is by
government or any other person.

14.2 Partial Taking. In the event of a taking of any part of any Building or
required parking therefor or access thereto by eminent domain, this Lease may,
at the option of either Landlord or Tenant, be terminated as to such Building by
written notice given to the other party not more than thirty (30) days after
Landlord receives notice (and provides Tenant written notice) of the taking, and
such termination shall be effective as of the date when Tenant is required to
vacate the portion of the Building so taken. If this Lease is so terminated as
to such Building, all Rent with respect to such Building shall be paid to the
date of termination. Whenever any portion of any Building is taken by eminent
domain and this Lease is not terminated, Landlord shall at its expense proceed
with all reasonable dispatch to restore the remainder of that Building to a
structurally sound condition. Rent payable hereunder with respect to a Premises
Office or Warehouse Building shall be equitably reduced from the date Tenant is
required to partially vacate such Premises Office or Warehouse Building.

14.3 Damages. Landlord reserves all right to the entire damage award or payment
for any taking by eminent domain or a transfer in lieu thereof, and Tenant
waives all claim whatsoever against Landlord for damages for termination of its
leasehold interest in the Premises or for interference with its business as a
result of such taking. Except as noted in the next sentence, Tenant hereby
grants and assigns to Landlord any right Tenant may now have or hereafter
acquire to such damages and agrees to execute and deliver such further
instruments of assignment as Landlord may from time to time request. However,
Tenant shall have the right to prosecute its own claim against the condemning
authority and to receive from the condemning authority damages attributable to
interference with Tenant’s operations on the Premises, for its moving and
relocation costs and for any taking of Tenant’s furniture, trade fixtures and
other personal property.

SECTION XV - DEFAULT OF TENANT

15.1 Defaults.

(a) Time is of the essence of this Lease. Tenant shall be in default under this
Lease if (i) Tenant violates or breaches or fails to keep or perform any
covenant, term or condition of this Lease, or (ii) Tenant files or is the
subject of a petition in bankruptcy, (iii) a trustee or receiver is appointed
for Tenant’s assets, (iv) Tenant makes an assignment for the benefit of
creditors. If the Tenant default is the nonpayment of Rent under this Lease,
Tenant shall have five (5) business days after written notice to cure the
default. If the Tenant default above is something other than nonpayment of Rent
due under this Lease, Tenant shall have thirty (30) days following receipt of
written notice from Landlord within which to cure any such default; provided, if
the nature of the default is such that the same cannot reasonably be cured
within such thirty (30) day

 

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period, the cure period shall be extended for so long as may be reasonably
necessary to cure the default so long as Tenant commences the cure within the
initial thirty (30) day period and thereafter diligently prosecutes the cure to
completion in good faith.

(b) If a default is not cured within the applicable cure period, if any,
Landlord shall have the following rights and remedies, at its option which shall
not be exclusive, but shall be cumulative and in addition and supplemental to
any and all other rights and/or remedies that Landlord may have at law or if
equity: (1) to declare the term hereof ended and to reenter the Premises and
take possession thereof and remove all persons therefrom, and Tenant shall have
no further claim thereon or hereunder; or (2) without declaring this Lease
terminated, to reenter the Premises and occupy the whole or any part thereof for
and on account of Tenant and to collect any unpaid Rent, which have become
payable, or which may thereafter become payable; or (3) even though it may have
reentered the Premises, to thereafter elect to terminate this Lease and all of
the rights of Tenant in or to the Premises. If Landlord reenters the Premises
under option (2) above, Landlord shall not be deemed to have terminated this
Lease or the liability of Tenant to pay any Rent thereafter accruing, or to have
terminated Tenant’s liability for damages under any of the provisions hereof, by
any such reentry or by any action, in unlawful detainer or otherwise, to obtain
possession of the Premises, unless Landlord shall have notified Tenant in
writing that it has so elected to terminate this Lease, and Tenant further
covenants that the service by Landlord of any notice pursuant to the unlawful
detainer statutes and the surrender of possession pursuant to such notice shall
not (unless Landlord elects to the contrary at the time of or at any time
subsequent to the serving of such notices and such election is evidenced by
written notice to Tenant) be deemed to be a termination of this Lease. In the
event of any entry or taking possession of the Premises, Landlord shall have the
right, but not the obligation, to remove therefrom all or any part of the
personal property located therein and may place the same in storage at a public
warehouse at the expense and risk of Tenant.

(c) If Landlord elects to terminate this Lease pursuant to the provisions of
options (1) or (3) in Section 15.l(b), Landlord may recover from Tenant as
damages, the following: (i) the worth at the time of award 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 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 could have
been reasonably avoided; plus (iv) any other amount necessary to compensate
Landlord for all the detriment that Landlord proves was proximately caused by
Tenant’s failure to perform its obligations under this Lease. As used in items
(i) and (ii) above, the “worth at the time of award” is computed by allowing
interest at the interest rate specified in Section 4.4 hereof. As used in item
(iii) above, the “worth at the time of award” is computed by using a discount
rate of five percent (5%).

(d) For all purposes of this Section 15.1 only, all such sums, other than
Minimum Rent, shall, for the purpose of calculating any amount due under the
provisions of item (iii) in Section 15.1(c), be computed on the basis of the
average monthly amount thereof accruing during the immediately preceding twelve
(12) month period, except that if it becomes necessary to compute such
Additional Rent before such a twelve (12) month period has occurred then such
Additional Rent shall be computed on the basis of the average monthly amount
hereof accruing during such shorter period.

 

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15.2 Legal Expenses. If any litigation arises in connection with the Lease, the
prevailing party shall be entitled to reimbursement from the non-prevailing
party for the prevailing party’s reasonable costs and attorneys’ fees incurred
in connection therewith or in preparation therefor, including those incurred in
bankruptcy court and on appeal.

15.3 Remedies Cumulative; Waiver. Landlord’s remedies hereunder are cumulative,
and Landlord’s exercise of any right or remedy due to a default or breach by
Tenant shall not be deemed a waiver of, or alter, affect or prejudice any other
right or remedy which Landlord may have under this Lease or by law. Neither the
acceptance of rent nor any other acts or omissions of Landlord at any time or
times after the happening of any event authorizing the cancellation or
forfeiture of this Lease shall operate as a waiver of any past or future
violation, breach or failure to keep or perform any covenant, agreement, term or
condition hereof or to deprive Landlord of its right to cancel or forfeit this
Lease, upon the written notice provided for herein, for any default, or be
construed so as at any future time to estop Landlord from promptly exercising
any other option, right or remedy that it may have under any term or provision
of this Lease.

SECTION XVI - ACCESS BY LANDLORD; DEFAULT OF LANDLORD

16.1 Right of Entry. Landlord and its agents shall have the right to enter the
Premises Office and Warehouse Buildings at any time following two (2) business
days prior notice to Tenant, to examine the same, to show them to prospective
purchasers or lenders or to perform Landlord’s obligations under this Lease;
provided, in an emergency, no advance notice shall be required. If requested by
Tenant, a Tenant representative shall accompany Landlord.

16.2 Default of Landlord. If Landlord defaults in the performance of any
covenant required to be performed by Landlord, Tenant may give Landlord a
written notice specifying the default. Subject to Tenant’s emergency rights
under terms of Section 9.3, if Landlord does not remedy the default within
thirty (30) days following receipt thereof or, in the case of a default which
reasonably requires more than thirty (30) days to cure, if Landlord has not
commenced to promptly remedy the same within thirty (30) days following receipt
thereof and be diligently and continuously prosecuting such cure, then Tenant
may pursue self-help or any other remedy available at law or in equity.

SECTION XVII - SURRENDER OF PREMISES

17.1 Surrender of Possession. Tenant shall promptly yield and deliver to
Landlord possession of the Premises upon the expiration or earlier termination
of this Lease in compliance with the provisions of Section 9.4.

17.2 Holding Over. If Tenant holds over after the end of the Term with
Landlord’s prior written consent, such shall be as a tenancy from month to month
on the terms and conditions set forth herein. Any holding over by Tenant after
the expiration of the term hereof without Landlord’s prior written consent shall
be deemed to be a tenancy at will, terminable at any time by Landlord at a
rental rate equal to one and one-half (1 1/2) times the rental rate in effect on
the date of expiration of the Term, prorated on a daily basis, and otherwise on
the terms, covenants and conditions of this Lease to the extent applicable.
Tenant shall be liable for all damages suffered by Landlord if Tenant holds over
without Landlord’s prior written consent.

 

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SECTION XVIII - QUIET ENJOYMENT

18.1 Landlord’s Covenant. Tenant, upon fully complying with and promptly
performing all of the terms, covenants, and conditions of this Lease on its part
to be performed, shall have and quietly enjoy the Premises free from claims
arising by, through or under Landlord, but not otherwise, for the Term, if
Tenant’s performance of such terms, covenants, and conditions continues for such
period, subject, however, to matters of record on the date hereof.

SECTION XIX - MISCELLANEOUS

19.1 Notices. Any notices required in accordance with any of the provisions
herein shall be in writing and delivered, sent by fax, overnight courier or
mailed by registered or certified mail to Landlord and Tenant at the addresses
set forth in Section 1.6, or to such other address as a party shall from time to
time advise the other party by a written notice given in accordance with this
Section 19.1. If mailed, a notice shall be deemed received three (3) business
days after the postmark affixed on the envelope by the United States Post
Office, unless sooner received or rejected.

19.2 Successors or Assigns. All of the terms, conditions, covenants and
agreements of this Lease shall extend to and be binding upon Landlord, Tenant
and, subject to the terms of Section 12.1 hereof, their respective heirs,
administrators, executors, successors and permitted assigns, and upon any person
or persons coming into ownership or possession of any interest in the Premises
by operation of law or otherwise, and shall be construed as covenants running
with the land.

19.3 Brokerage Commissions. Each party agrees to indemnify and hold the other
party harmless from all liabilities and claims for brokerage commissions or
finder’s fees growing out of agreements which the first party has made with
persons or entities relative to this Lease.

19.4 Partial Invalidity. If any term, covenant or condition of this Lease or the
application thereof to any person or circumstance is, to any extent, invalid or
unenforceable, the remainder of this Lease, or the application of such term,
covenant or condition to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.

19.5 Recording. Tenant shall not record this Lease without the prior written
consent of Landlord. However, upon either party’s request, both parties shall
execute a memorandum of this Lease, in a form customarily used for such purpose
of recordation. The memorandum shall describe the parties, the Premises and the
term of this Lease and shall incorporate the other terms of this Lease by
reference.

19.6 Subordination; Notice to Lender; Estoppel.

(a) Unless otherwise designated by Landlord, this Lease shall be subordinate to
all existing or future mortgages and deeds of trust on the Real Property, and to
any extensions, renewals or replacements thereof so long as the lender agrees
that so long as Tenant is not in default

 

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under this Lease beyond the applicable cure period, Tenant’s occupancy of the
Premises under this Lease and its rights hereunder will not be disturbed, and
Tenant will not be joined by the holder of any mortgage or deed of trust in any
action or proceeding to foreclose thereunder, except for joinder where such is
necessary for jurisdictional reasons. Tenant agrees to attorn to Landlord’s
successor following any foreclosure sale or transfer in lieu thereof.

(b) Within ten (10) business days of Landlord’s request therefor, Tenant shall
promptly execute and deliver to third parties designated by Landlord an estoppel
certificate or letter that correctly recites the facts with respect to the Lease
and its existence, terms and status.

19.7 Liability of Landlord. Tenant covenants that it shall look solely to
Landlord’s interests in the Premises (including without limitation the rents,
issues and profits and sale and insurance proceeds from the Premises) for the
satisfaction of any judgment or decree against Landlord based upon any default
under this Lease; agrees that no other property or assets of the Landlord (or
its members) shall be subject to levy, execution or other enforcement procedures
for satisfaction of any such judgment or decree; and agrees that no member in
Landlord shall be named in any such action or proceeding.

19.8 Force Majeure. Neither party shall be deemed in default hereof nor liable
for damages arising from its failure to perform its duties or obligations
hereunder if such is due to causes beyond its reasonable control, including, but
not limited to, acts of God, acts of civil or military authorities, acts of
terrorism, embargoes, fires, floods, windstorms, earthquakes, strikes, lockouts,
boycotts or other labor disturbances, civil disturbances or commotion or war;
provided that the foregoing shall not excuse a party from the performance of its
payment obligations under this Lease when stated herein.

19.9 Authority. Landlord and Tenant each represent and warrant to the other that
it has the power and authority to enter into this Lease and that the person(s)
signing this Lease on its behalf were duly authorized to do so.

19.10 Headings. The headings in this Lease are for convenience only and do not
in any way limit or affect the terms and provisions hereof.

19.11 Gender. Wherever appropriate in this Lease, the singular shall be deemed
to refer to the plural and the plural to the singular, and pronouns of certain
genders shall be deemed to include either or both of the other genders.

19.12 Counterparts. This Lease may be executed in counterparts, each of which
shall be deemed an original, but which when taken together shall constitute one
and the same instrument.

SECTION XX – INTENTIONALLY OMITTED

20.1 Intentionally Omitted.

SECTION XXI - ENTIRE AGREEMENT - APPLICABLE LAW

21.1 Entire Agreement - Applicable Law. This Lease and the Exhibits attached
hereto, and by this reference incorporated herein, set forth the entire
agreement of Landlord and Tenant

 

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concerning the Premises, and there are no other agreements or understanding,
oral or written, between Landlord and Tenant concerning the Premises. Any
subsequent modification or amendment of this Lease shall be binding upon
Landlord and Tenant only if reduced to writing and signed by them. This Lease
shall be governed by, and construed in accordance with the laws of the State of
Washington.

DATED as of the day and year first written above.

 

LANDLORD:

MICROSOFT CORPORATION,

a Washington corporation

By  

/s/ Chris R. Owens

  Its General Manager, Real Estate & Facilities

TENANT:

GENERAL AMERICA CORPORATION,

a Washington corporation

By

 

/s/ Michael LaRocco

 

Its President & Chairman

 

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STATE OF WASHINGTON   )   ) ss. COUNTY OF KING   )

On this 23rd day of May, 2006, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn personally appeared
Chris R. Owens, known to me to be the General Manager, Real Estate & Facilities
of Microsoft Corporation, the entity that executed the foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
entity, for the purposes therein mentioned, and on oath stated that he/she was
authorized to execute said instrument.

I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.

WITNESS my hand and official seal hereto affixed the day and year in the
certificate above written.

 

/s/ Allison C. Gubata

Signature

Allison C. Gubata

Print Name NOTARY PUBLIC in and for the State of Washington, residing at
Kirkland. My commission expires 9-29-08.

 

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STATE OF WASHINGTON   )   ) ss. COUNTY OF KING   )

On this 23rd day of May, 2006, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn personally appeared
Michael E. LaRocco, known to me to be the President & Chairman of GENERAL
AMERICA CORPORATION, the corporation that executed the foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
said corporation, for the purposes therein mentioned, and on oath stated that
he/she was authorized to execute said instrument.

I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.

WITNESS my hand and official seal hereto affixed the day and year in the
certificate above written.

 

/s/ Jill M. Brown

Signature

Jill M. Brown

Print Name

NOTARY PUBLIC in and for the State of

Washington, residing at Seattle.

My commission expires 3-7-10

 

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