exv10w1



 







Exhibit 10.1




COMMERCIAL LEASE



1.     BASIC LEASE TERMS




	 	 	 
	a.
	 	DATE OF LEASE: July 21, 2006
	 
	 	 
	b.
	 	TENANT: Blue Nile, Inc., a Delaware corporation

Address (Leased Premises): 5907 Fourth Ave. S., Seattle, WA 98108
	 
	 	 
	 
	 	Address (For Notices): 
At the Premises.

Attention: Dwight Gaston

Telephone: (206) 336-7977

Facsimile: (206) 336-7960
	 
	 	 
	 
	 	With copy to:
Blue Nile, Inc.

705 Fifth Avenue South, Suite 900, Seattle WA 98104

Attention: General Counsel

Telephone: (206) 336-6700

Facsimile: (206) 336-6809
	 
	 	 
	c.
	 	LANDLORD: Gull Industries Inc., a Washington corporation

Address (For Notices): P.O. Box 24687, Seattle, WA 98124

Attention: William T. Vivian

Telephone: (206) 624-5900

Facsimile: (206) 624-5412

or to such other place as Landlord may from time to time designate by
written notice to Tenant.






     d.      TENANT’S USE OF PREMISES: General office, shipping, receiving, warehousing, assembly and
light manufacturing.



     e.      PREMISES AREA: The initial premises area consists of approximately 13,543 Rentable Square
Feet of space which, as of the Commencement Date, Blue Nile occupies (the “Initial Premises”). The
parties anticipate that Tenant will also later lease, on the terms and conditions contained herein,
the remaining approximately 13,939 Rentable Square Feet of space within the building in which the
Initial Premises are located (the “Expansion Premises”). The Initial Premises and the Expansion
Premises are collectively referred to herein as the “Entire Premises”, which such Entire Premises
consists of approximately 27,482 Rentable Square Feet. The term “Premises” is occasionally used
herein to describe the Initial Premises or the Entire Premises as applicable based on the amount of
space Tenant is then leasing. The Project refers to the Entire Premises together with the Common
Areas.



     f.      PROJECT AREA: Approximately 27,482 Rentable Square Feet



     g.     TERM OF LEASE AND POSSESSION: The term (“Term“) of this
Lease shall commence on November 1, 2006 (“Commencement Date“) and shall terminate on October
31, 2011 (“Expiration Date”) unless otherwise terminated in accordance with the terms hereof. The
period between the Commencement Date and the Expiration Date is herein referred to as the “Lease
Term.” Tenant shall be in occupancy of the Initial Premises on the Commencement Date. On or
about April 1, 2007, Landlord shall deliver the Expansion Premises to Tenant (the “Expansion
Premises Delivery Date”). The Period between the



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Expansion Premises Delivery Date and the EARLIER
of (i) the date upon which Tenant’s Work is substantially completed ( as that term is used in the
construction industry), a temporary certificate of occupancy is issued, and Tenant takes possession
or commences beneficial occupancy of the Expansion Premises or (ii) that certain date which is One
Hundred and Twenty (120) days after the Expansion Premises Delivery Date, shall be deemed the
“Tenant Work Period”. The first day after the Tenant Work Period shall be deemed the “Expansion
Premises Acceptance Date”. Except as provided elsewhere in the Lease, if the Expansion Premises
Acceptance Date is later than the expected date of July 31, 2007, this Lease shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom.
Landlord shall confirm the Expansion Premises Acceptance Date by written notice to Tenant. This
Lease shall be for a term (“Lease Term”) beginning on the Commencement Date and ending on the
Expiration Date, unless extended or sooner terminated in accordance with the terms of this Lease.
All provisions of this Lease, other than those relating to payment of Base Monthly Rent and
Additional Rent, shall become effective on the date that Tenant or its officers, agents, employees
or contractors is first present on the Premises for inspection, construction or move in purposes.




     h.      BASE MONTHLY RENT:



	 	 	 
	Commencement Date to Expansion Premises Acceptance Date
	 	$10,400/month
	Acceptance Date to Expiration Date
	 	$16,490/month






     i.      PREPAID RENT (for months in addition to first month’s rent): $16,490 see 4(a).



     j.      SECURITY DEPOSIT: N/A




     k.     BROKER(S): Tenant’s Broker: Wilma Warshak, Colliers International; Landlord’s Broker:
David Azose, Morris Piha Real Estate Services



     l.      GUARANTOR(S): None.



     m.     EXHIBITS:




Exhibit A: The Premises

Exhibit B: The Project

Exhibit C: Tenant’s Work and Work Letter Agreement

Exhibit D: Rules and Regulations

Exhibit E: Tenant Sign Criteria

Exhibit F: Additional Utilities or Services [if applicable]

Exhibit G: Permitted Substances

Exhibit H: Location of Reserved Parking Stalls





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2.     PREMISES/COMMON AREAS/PROJECT.





	a.	 	Premises. Landlord leases to Tenant the Initial Premises and the Expansion Premises in two
stages described in Section 1 and depicted in Exhibit A, located in the project depicted on
Exhibit B (the “Project”). By entry on the Premises, Tenant acknowledges that it has examined the
Premises and accepts the Premises in their present condition, subject to any Landlord’s Work
required under this Lease. Landlord’s Work shall consist of such work, if any, as is specifically
identified as Landlord’s construction responsibility under Exhibit C. Unless otherwise identified
in the punchlist or otherwise in written notice from Tenant to Landlord prior to the dates
specified below, Landlord’s Work shall be deemed approved by Tenant in all respects on the date
Tenant begins to commence construction or move its personal property into the Premises. Prior to
the Expansion Premises Delivery Date, Landlord shall schedule with Tenant an inspection of the
Expansion Premises and of Landlord’s Work, if any. Following such inspection, Landlord’s architect
shall prepare a “punch list” (as such term is used in the construction industry) of such Landlord’s
Work. The existence of defects of a nature commonly found on a punchlist shall not postpone the
date of substantial completion of Landlord’s Work or result in a delay or abatement of Tenant’s
obligation to pay rent or give rise to a damage claim against Landlord. Landlord shall use
reasonable best efforts to complete all items on the punch list within thirty (30) days after
preparation thereof.






	b.	 	Common Areas. As used in this Lease, “Common Areas” shall mean all portions of
the Project not leased or demised for lease to specific tenants. During the Lease
Term, Tenant and its licensees, invitees, customers and employees shall have the
non-exclusive right to use the public portions of the Common Areas, including all
parking areas, landscaped areas, entrances, lobbies, elevators, stairs, corridors, and
public restrooms in common with Landlord, other Project tenants and their respective
licensees, invitees, customers and employees. Landlord shall at all times have
exclusive control and management of the Common Areas and no diminution thereof shall be
deemed a constructive or actual eviction or entitle Tenant to compensation or a
reduction or abatement of rent. Landlord in its discretion may increase, decrease or
change the number, locations and dimensions of any Common Areas and other improvements
shown on Exhibit A which are not within the Premises, so long as the same does not
materially interfere with Tenant’s use and enjoyment of, access to, or security with
regard to, the Premises and parking rights hereunder.






	c.	 	Project. Landlord reserves the right in its sole discretion to modify or alter
the configuration or number of buildings in the Project so long as the same does not
materially interfere with Tenant’s use and enjoyment of, access to, or security with
regard to, the Premises and parking rights hereunder, and provided further that upon
such modification or alteration, the Project Area as set forth in Section 1(f) shall be
adjusted to reflect such modification or alteration.






	d.	 	Rentable Square Footage. Within ninety (90) days after the Commencement Date
of this Lease, Landlord shall cause its architect to compute (with copy to Tenant) the
Rentable Square Footage of the Premises and the Project to be computed in accordance
with American National Standard Z65.1-1996 Method of Measuring Floor Space in Office
Buildings as published by the Building Owners and Managers Association, as amended from
time to time, and this Lease shall be deemed amended to incorporate such measurement.




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3.     DELIVERY OF EXPANSION PREMISES.



Landlord confirms that the Expansion Premises are presently leased to Allied Security pursuant to a
Lease terminating on March 31, 2007 and such lease does not contain any further right of renewal.
Landlord will act to enforce all of Landlord’s rights to obtain possession of the Expansion
Premises as soon as practicable. As described in Section 1 herein, the date of delivery of the
Expansion Premises shall be referred to as the “”Expansion Premises Delivery Date”.



Landlord shall deliver the Expansion Premises in broom clean condition and otherwise as-is;
provided, however, (1) Landlord shall complete any Landlord Work items described in Exhibit C and
(2) Landlord shall remain liable for any building code violations that are discovered as part of
Landlord or Tenant’s Work but which ARE NOT created or cured by Tenant or Tenant’s Work as
described in Tenant’s approved Tenant Work Plans as required by the Tenant Work Letter attached
hereto. Tenant shall be responsible for remedying Premises building code violations caused by
Tenant’s use or Tenant’s Work, or which such violations would otherwise be remedied by completion
of Tenant’s Work as described in Tenant’s Work plans.



In the event Landlord is unable to deliver lawful possession of the Expansion Premises by April 30,
2007, then Tenant shall be entitled to a rent credit at the rate of $5200 per month for May and
June, 2007 and $10,400 per month for July, August, and September, 2007, prorated between April 30,
2007 and the date the Expansion Premises are delivered to Tenant.



In the event Landlord is unable to deliver lawful possession of the Expansion Premises to Tenant by
September 30, 2007, Tenant has the right thereafter to terminate the Lease upon delivery of written
notice. After delivery of Tenant’s termination notice, Tenant shall have up to six (6) months to
vacate the Premises, during which time all of the monthly Base Rent, Additional Rent, and expense
reimbursement provisions for the Initial Premises

(13,543 RSF) shall apply, except Tenant shall be entitled to a credit , not to exceed the monthly
Base Rent, for the actual and reasonable costs of providing necessary auxiliary space for its
operations during the up to six month period during which Tenant is vacating the Premises.




4.     RENT





	a.	 	Base Monthly Rent. Tenant shall pay Landlord monthly base rent in the
applicable amount as described in Section 1 which shall be payable monthly in advance
on the first day of each and every calendar month (“Base Monthly Rent”) provided,
however, the last month’s Base Monthly Rent (in the estimated amount of $16,490) is due
and payable upon execution of this Lease.






	 	 	For purposes of Section 467 of the Internal Revenue Code, the parties to this Lease
hereby agree to allocate the stated Rents, provided herein, to the periods which
correspond to the actual Rent payments as provided under the terms and conditions of
this agreement.





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	b.	 	Expenses. The purpose of this Section 4(b) is to ensure that Tenant bears a
share of all Expenses related to the use, maintenance, ownership, repair or
replacement, and insurance of the Project. Accordingly, beginning on the date Tenant
takes possession of the Premises, Tenant
shall each month pay to Landlord one-twelfth (1/12) of Tenant’s Share of Expenses
related to the Project. As used in this Lease, “Tenant’s Share” shall mean the
Premises Area, as defined in Section 1(e), divided by the Project Area, as defined
in Section 1(f), and “Tenant’s Share of Expenses” shall mean the total Expenses for
the Project for the applicable calendar year multiplied by Tenant’s Share. Landlord
may specially allocate individual expenses where and in the manner necessary, in
Landlord’s reasonable discretion, to appropriately reflect the consumption of the
expense or service. Where multiple premises are served by a common meter, Landlord
shall allocate charges based on Landlord’s reasonable estimate of proportionate
usage.




1)     Expenses
Defined. The term “Expenses” shall mean all costs and expenses of the ownership, operation,
maintenance, repair or replacement, and insurance of the Project, including without
limitation, the following costs:



(a)      All
supplies, materials, labor, equipment, and utilities used in or related to the
operation and maintenance of the Project,



(b)      All
maintenance, janitorial, legal, accounting, insurance, service agreement and management
(including on-site management office) costs related to the Project;



(c)      All
maintenance, replacement and repair costs relating to the areas within or around
the Project, including, without limitation, air conditioning systems, sidewalks,
landscaping, service areas, driveways, parking Areas (including resurfacing
and restriping parking areas), walkways, building exteriors (including painting),
signs and directories, repairing and replacing roofs, walls, etc.
These costs may be included either based on actual expenditures or the
use of an accounting reserve based on past cost experience for the Project.



(d)      Amortization
over the reasonable useful life of the maintenance, repair or improvement
(along with financing charges at the Prime Rate) of (1) any major maintenance,
repair or other such expenses in excess of $10,000 per project required of
Landlord pursuant to the terms of the Lease, and/or (2) capital additions or
improvements exceeding $10,000 made to the Project which may be required
by any government authority or which will improve the operating efficiency of
the Project (provided, however, that the amount of such amortization for improvements not
mandated by government authority shall not exceed in any year the
amount of costs reasonably determined by Landlord in its sole
discretion to have been saved by the expenditure either through the
reduction or minimization of increases which would have otherwise occurred).




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(e)      Real Property Taxes including all taxes, assessments (general
and special) and other impositions or charges which may be taxed,
charged, levied, assessed or imposed upon all or any portion of or in
relation to the Project or any portion thereof, any leasehold estate
in the Premises or measured by Rent from the Premises, including any
increase caused by the transfer, sale or encumbrance of the Project
or any portion thereof. “Real Property Taxes” shall also
include any form of assessment, levy, penalty, charge or tax (other
than estate, inheritance, net income, or franchise taxes) imposed by
any authority having a direct or indirect power to tax or charge,
including, without limitation, any city, county, state federal or any improvement
or other district, whether such tax is (1) determined by the value of the
Project or the Rent or other sums payable under this Lease; (2) upon or with
respect to any legal or equitable interest of Landlord in the Project or any part
thereof; (3) upon this transaction or any document to which Tenant is a party creating a
transfer in any interest in the Project, (4) in lieu of or as a
direct substitute in whole or in part of or in addition to any real
property taxes on the Project, (5) based on any parking spaces or parking
facilities provided in the Project, 6) in consideration for
services, such as police protection, fire protection, street,
sidewalk and roadway maintenance, refuse removal or other services
that may be provided by any governmental or quasi-governmental agency
from time to time which were formerly provided without charge or with
less charge to property owners or occupants, or (7) otherwise
based on the operation of the Project (such as transit, carpooling or environmental facilities.




(f) Notwithstanding
any other provision of this Lease to the contrary, Landlord agrees
that Expenses as defined in Section 4(b) shall not include: leasing
commissions, attorneys’ fees, costs, disbursements, and other expenses incurred in
connection with leasing, renovating, or improving space for tenants or other
occupants or prospective tenants or other occupants of the Project;
the cost of any service sold to any tenant (including Tenant) or
other occupant for which Landlord receives reimbursement as an
additional charge or rental over and above the basic rent and
escalations payable under the lease with that tenant; any
depreciation on the Project; capital additions except as provided in
subsection (d) above; overhead profit increments paid to Landlord’s subsidiaries
or affiliates for management or other services on or to the building
or for supplies or other materials to the extent that the cost of the
services, supplies, or materials exceeds the cost that would have
been paid had the services, supplies, or materials been provided by unaffiliated
parties on a competitive basis; all interest, loan fees, and other carrying costs related to
any mortgage or deed of trust or related to any capital item not
chargeable as an Expense, and all rental and other payable due under
any ground or underlying lease, or any lease for any equipment
ordinarily considered to be of a capital nature unless the purchase
of such equipment would have been chargeable as an Expense (and
except janitorial equipment which is not affixed to the Project); any compensation
paid to clerks, attendants, or other persons in commercial
concessions operated by Landlord; advertising and promotional expenditures;
any costs, fines, or penalties incurred due to violations by Landlord
of any governmental rule or authority, this Lease or any other lease
in the Project, or due to Landlord’s gross negligence or willful
misconduct; the cost of correcting any building code or other
violations which were violations prior to the Commencement Date of
this Lease; the cost of containing, removing, or otherwise
remediating any contamination of the Project (including the
underlying land and ground water) by any toxic or hazardous materials
(including, without limitation, asbestos and ”PCBs“)
where such contamination was present as of the Commencement Date or
was brought onto the Project thereafter by Landlord, its employees or contractors;
management costs (whether provided by a third-party or through in-house Landlord employees)
to the extent they exceed standard, third-party management costs
charged for similar management services at similar single tenant
facilities in the area; Duplicative management costs for same services
rendered by both third-party and in-house managers; and costs for sculpture, paintings, or other objects
of art (and insurance thereon or extraordinary security in connection therewith).




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2)     Annual Estimate of Expenses. When Tenant takes
possession of the Premises, Landlord shall estimate Tenant’s
Share of Expenses for the remainder of the calendar year, and at the
commencement of each calendar year thereafter, Landlord shall
provide Tenant with an estimate of Tenant’s Share of Expenses
for the ensuing calendar year.



3)     Monthly
Payment of Expenses. Tenant shall pay to Landlord, monthly in
advance, as Additional Rent, one-twelfth (1/12) of the Annual
Estimate of Tenant’s Share of Expenses beginning on the date
Tenant takes possession of the Premises. As soon as practical
following each calendar year, Landlord shall prepare an accounting of actual
Expenses incurred during the prior calendar year and such accounting
shall reflect Tenant’s Share of Expenses. If the Additional Rent
paid by Tenant under this Section 4(b)(3) during the preceding
calendar year was less than the actual amount of Tenant’s Share
of Expenses, Landlord shall so notify Tenant and Tenant shall
pay such amount to Landlord within 30 days of receipt of such
notice. Such amount shall be deemed to have accrued during the prior
calendar year and shall be due and payable from Tenant even though
the term of this Lease has expired or this Lease has been terminated
prior to Tenant’s receipt of this notice. Tenant shall have
thirty (30) days from receipt of such notice to audit
Landlord’s books and records or contest the amount due, failure
to so notify Landlord shall represent final determination of
Tenant’s Share of Expenses. If Tenant’s payments were greater than the
actual amount, then such overpayment shall be credited by Landlord to Tenant’s Share of Expenses due under this Section 4(b)(3).





	c.	 	Rent Without Offset and Late Charge. As used herein, “Rent” shall mean all
monetary sums due from Tenant to Landlord. All Base Monthly Rent shall be paid by
Tenant to Landlord without prior notice or demand in advance on the first day of every
calendar month, at the address shown in Section 1, or such other place as landlord may
designate in writing from time to time. Whether or not so designated, all other sums
due from Tenant under this Lease shall constitute Additional Rent, payable without
prior notice or demand when specified in this Lease, but if not specified, then within
thirty (30) days of demand. All Rent shall be paid without any deduction or offset
whatsoever. All Rent shall be paid in lawful currency of the United States of America.
Proration of Rent due for any partial month shall be calculated by dividing the number
of days in the month for which Rent is due by the actual number of days in that month
and multiplying by the applicable monthly rate. Tenant acknowledges that late payment
by Tenant to Landlord of any Rent or other sums due under this Lease will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such cost
being extremely difficult and impracticable to ascertain. Such costs include, without
limitation, processing and accounting charges and late charges that
may be imposed on Landlord by the terms of any encumbrance or note secured by the
Premises. Therefore, if any Rent or other sum due from Tenant is not received when
due, Tenant shall pay to Landlord an additional sum equal to 10% of such overdue
payment. Landlord and Tenant hereby agree that such late charge represents a fair
and reasonable estimate of the costs that Landlord will incur by reason of any such
late payment and that the late charge is in addition to any and all remedies
available to the Landlord and that the assessment and/or collection of the late
charge shall not be deemed a waiver of any other default. Additionally, all such
delinquent Rent or other sums, plus this late charge, shall bear interest at the
rate of 18 percent per annum. If the interest rate specified in this Lease is
higher than the rate permitted by law, the interest rate is hereby decreased to the
maximum legal interest rate permitted by law. Any payments of any kind returned for
insufficient funds will be subject to an additional handling charge of $25.00, and
thereafter, Landlord may require Tenant to pay all future payments of Rent or other
sums due by money order or cashier’s check.





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5.     PREPAID RENT. [See Section 4(a) for last month’s rent]




6.     LETTER OF CREDIT. [intentionally omitted]



7.     USE OF PREMISES
AND PROJECT FACILITIES. Tenant shall use the Premises solely for the purposes
set forth in Section 1 and for no other purpose whatsoever without obtaining the prior written
consent of Landlord, which shall not be unreasonably withheld so long as Tenant’s proposed use
meets Landlord’s then-existing use criteria for the Project and complies with all applicable zoning
regulations. Except as provided in writing in this Lease, Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty with respect to the
Premises or with respect to the suitability of the Premises or the Project for the conduct of
Tenant’s business, nor has Landlord agreed to undertake any modification, alteration or improvement
to the Premises or the Project. Tenant acknowledges that Landlord may from time to time, at its
sole discretion, make such modifications, alterations, deletions or improvements to the Project as
Landlord may deem necessary or desirable, without compensation or notice to Tenant, so long as the
same does not materially interfere with Tenant’s use and enjoyment, or security of the Premises and
the Common Areas of the Project nor with Tenant’s parking rights hereunder. All work performed by
Landlord shall be done in a good and workmanlike manner in accordance with applicable laws and
codes. Tenant shall promptly comply with all laws, ordinances, orders and regulations affecting
the Premises and the Project, including, without limitation, the rules and regulations attached
hereto as Exhibit D and any reasonable modifications to these rules and regulations as Landlord may
adopt from time to time. Tenant acknowledges that, except for Landlord’s obligations pursuant to
Section 13, Landlord’s Work and the Tenant Improvements, Tenant is solely responsible for ensuring that the Project comply with any and all governmental regulations
applicable to Tenant’s conduct of business on the Project, and that Tenant is solely responsible
for any alterations or improvements that may be required by such regulations, now existing or
hereafter adopted. Tenant shall not do or permit anything to be done in or about the Project or
bring or keep anything in the Project that will in any way increase the premiums paid by Landlord
on its insurance related to the Project, unless Tenant agrees to reimburse Landlord for any
increase directly related to Tenant’s use, or which will in any way increase the premiums for fire
or casualty insurance carried by other tenants in the Project. Tenant will not perform any act or
carry on any practices that may injure the Premises or the Project; that may be a nuisance or
menace to other tenants in the Project; or that shall in any way materially interfere with the
quiet enjoyment of such other tenants. Tenant shall not use the Premises or the Project for
sleeping, cooking (except for preparation of employee meals) or the preparation, or manufacture or
mixing of anything that might emit any reasonably objectionable odor, noises, vibrations or lights
onto such other tenants. If sound insulation is required to muffle noise produced by Tenant on the
Premises, Tenant at its own cost shall provide all necessary insulation. Tenant shall not do
anything on the Project which will overload any existing parking or service for the Project. Pets
and/or animals of any type shall not be kept on the Project, except for guide dogs to assist the
physically disabled.


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8.     HAZARDOUS SUBSTANCES; DISRUPTIVE ACTIVITIES





	a.	 	Hazardous Substances.




(1)     Presence and
Use of Hazardous Substances. As used in this Lease, “Hazardous Substances” shall
mean anything which may be harmful to persons or property, including,
but not limited to, materials designated as a “Hazardous Substance” pursuant
to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as now or hereafter amended, 42 USC 9601, et seq., or as a
Hazardous Substance, Hazardous Household Substance, Moderate Risk
Waste or Hazardous Waste under RCW 70.105.010, or which is regulated by
any federal, state, or local law, statute, ordinance or regulation
pertaining to health, industrial hygiene or the environment. Tenant
shall not, without Landlord’s prior written consent, keep on or
around the Project, Premises, Common Areas or Building, for use,
disposal, treatment, generation, storage or sale, any Hazardous Substances
except such Hazardous Substances as are commonly used in general administrative office operations
and those which are listed on Exhibit G attached hereto and a made
a part hereof (“Permitted Substances“). Tenant shall have the right to
periodically update the list of Permitted Substances by provided written notice thereof
to Landlord for Landlord’s consent in Landlord’s
discretion. With respect to any Hazardous Substance, Tenant shall:



(i)      Comply promptly,
timely, and completely with all governmental requirements for reporting, keeping,
and submitting manifests, and obtaining and keeping current identification numbers;



(ii)      Submit to
Landlord true and correct copies of all reports, manifests, and
identification numbers at the same time as they are required to be
and/or are submitted to the appropriate governmental authorities;



(iii)      Within five
(5) days of Landlord’s request, submit written reports to Landlord regarding
Tenant’s use, storage, treatment, transportation, generation, disposal or sale of
Hazardous Substances and provide evidence satisfactory to Landlord of
Tenant’s compliance with the applicable government regulations;



(iv)      Allow
Landlord or Landlord’s agent or representative to come on the Premises in conformance with the entry
rights and notice requirements specified in Section 22 to check
Tenant’s compliance with all applicable governmental regulations
regarding Hazardous Substances, provided that Landlord shall use
reasonable means to minimize interference with the Tenant’s use of the Premises;



(v)      Comply with
minimum levels, standards or other performance standards or requirements which may be set forth
or established for certain Hazardous Substances (if minimum standards
or levels are applicable to Hazardous Substances present on the
Premises, such levels or standards shall be established by an on-site
inspection by the appropriate governmental authorities and shall be set forth in an addendum to this Lease); and




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(vi)      Comply with
all applicable governmental rules, regulations and requirements
regarding the proper and lawful use, sale, transportation, generation, treatment, and disposal of Hazardous Substances.



(2)      If
Landlord has reasonable cause to believe that Tenant is not in
compliance with this Section 8, then any and all costs incurred
by Landlord and associated with Landlord’s monitoring of
Tenant’s compliance with this Section 8, including Landlord’s reasonable
attorneys’ fees and costs, shall be Additional Rent and shall be due and payable to Landlord immediately upon demand by Landlord.





	b.	 	Cleanup Costs, Default and Indemnification.




(1)      Tenant
shall be fully and completely liable to Landlord for any and all cleanup costs, and any and all
other charges, fees, penalties (civil and criminal) imposed by any governmental authority
with respect to Tenant’s use, disposal, transportation,
generation and/or sale of Hazardous Substances, in or about the Project, Premises, Common Areas, or Building.



(2)      Tenant shall indemnify,
defend and save Landlord and Landlord’s lender, if any, harmless from any and all of the
costs, fees, penalties and charges assessed against or imposed upon Landlord (as well
as Landlord’s and Landlord’s lender’s attorneys’ fees and costs) as a result
of Tenant’s use, disposal, transportation, generation and/or sale of Hazardous Substances.



(3)      Upon
Tenant’s default under this Section 8, in addition to the
rights and remedies set forth elsewhere in this Lease, Landlord shall
be entitled in addition to all other rights and remedies under this
Lease to recover any and all damages associated with the default, including,
but not limited to cleanup costs and charges, civil and criminal
penalties and fees, loss of business and sales by Landlord and other tenants of the Building
arising from Tenant’s default under this Section 8, any and
all damages and claims asserted by third parties which arise from Tenant’s
default under this Section 8, and Landlord’s reasonable attorneys’ fees and costs.





	c.	 	Disposal of Waste.




(1)     Refuse
Disposal. Tenant shall not keep any trash, garbage, waste or other refuse on the Premises except
in sanitary containers and shall regularly and frequently remove same
from the Premises and the Project. Tenant shall keep all incinerators, containers or
other equipment used for storage or disposal of such materials in a clean and sanitary condition.




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(2)     Sewage Disposal. Tenant
shall properly dispose of all sanitary sewage and shall not use the
sewage disposal system (a) for the disposal of anything except sanitary sewage
or (b) in excess of the lesser amount (i) reasonably
contemplated by the uses permitted under this Lease or
(ii) permitted by any governmental entity. Tenant shall keep that portion of the
sewage disposal system located within the Premises free of all obstructions and in good operating condition.



(3)     Disposal of
Other Waste. Tenant shall properly dispose of all other waste or other matter delivered to, stored
upon, located upon or within, used on, or removed from, the Premises
in such a manner that it does not, and will not, adversely affect the (a) health or safety
of persons, wherever located, whether on the Premises or elsewhere
(b) condition, use or enjoyment of the Premises or Project, or
(c) Premises or any of the improvements thereto or thereon
including buildings, foundations, pipes, utility lines, landscaping or parking areas.





	d.	 	Disruptive Activities. Tenant shall not:









(1)      Produce,
or permit to be produced, any intense glare, light or heat except
within an enclosed or screened area and then only in such manner that
the glare, light or heat shall not, outside the Premises, be
materially different that the light or heat from other sources outside the Premises;



(2)      Create, or
permit to be created, any sound pressure level which will interfere with the quiet enjoyment of any
real property outside the Premises, or which will create a nuisance or violate any governmental law, rule, regulation or requirement;



(3)      Create,
or permit to be created, any ground vibration that is materially
discernible outside the Premises;



(4)      Transmit, receive
or permit to be transmitted or received, any electromagnetic, microwave or other radiation which is harmful or
hazardous to any person or property in, or about the Project; or



(5)      Create, or
permit to be created, any noxious odor that is disruptive to the business operations of any other tenant in the Project.



9.     SIGNAGE. All signage
installed by Tenant shall comply with Seattle codes and with rules and
regulations set forth by Landlord as may be modified from time to time. Current rules and
regulations relating to signs are described on Exhibit E. Tenant shall have the right to install
window blinds or screens within the Premises. Tenant shall place no stickers, signs, lettering,
banners or advertising or display material on or near exterior windows or doors if such materials
are visible from the exterior of the Premises, without Landlord’s prior written consent. Any
material violating this provision may be destroyed by Landlord without compensation to Tenant.



10.     PERSONAL
PROPERTY TAXES. Tenant shall pay before delinquency all taxes, assessments, license
fees and public charges levied, assessed or imposed upon its business operations as well as upon
all trade fixtures, leasehold improvements, merchandise and other personal property in or about the
Premises and the Project.



11.     PARKING. Landlord grants
to Tenant and Tenant’s customers, suppliers, employees and invitees,
a right to use 40 stalls in the designated parking areas in the Project for the use of full-sized
passenger automobiles during the term of this Lease. Of the total stalls which Tenant is entitled
to use, those stalls which are located within the first three (3) rows of parking adjacent to the
Premises and south of the demising wall of the Premises as identified on Exhibit H hereto
shall be made available to Tenant on a reserved, exclusive basis at no extra charge to Tenant.
Landlord reserves the right at any time to grant non-exclusive use to other tenants with respect to
the unreserved stalls within the parking area, to promulgate rules and regulations relating to the
use of such parking areas, including reasonable restrictions on parking by tenants and employees,
to designate specific spaces for the use of any tenant, and to make changes in the parking layout
from time to time, so long as the same does not reduce the number of parking stalls which Tenant is
entitled to use and the new location of such stalls is in reasonably close proximity to the
Premises and accomplishes the security purpose of the three row reservation. Employees of Tenant
shall have the right to park their vehicles on an overnight basis where necessitated by the work
schedules of such employees. Any vehicle violating any vehicle regulation adopted by Landlord and
posted in the parking area is subject to removal at the owner’s expense. Notwithstanding anything
to the contrary herein, on the Expansion Premises Delivery Date, Tenant shall have the exclusive
use of all parking and staging areas within the Project on a reserved basis and Landlord shall not
attempt to grant parking rights to any other person or entity during the term of the Lease;
provided, however, if Tenant requests consent to a sublease and Landlord recaptures the sublease
premises in accordance with the terms hereof, the parties shall, at such time, agree upon a
reasonable re-allocation of parking spaces which preserves Tenant’s three (3) row buffer but also
provides Landlord with a reasonable number of parking spaces for third party tenants of the
recaptured sublease space.



11









 






12.     UTILITIES; SERVICES. Subject to
the next paragraph, Landlord shall furnish the Initial
Premises with electricity for Tenant’s use as set forth in Section 1(d), including lighting and low
power usage for office machines and light manufacturing, and water for restroom facilities. From
7:00 a.m. to 6:00 p.m. on weekdays and 9:00 a.m. to 1:00 p.m. on Saturday, excluding legal holidays
(“Normal Business Hours”), Landlord shall furnish the Premises with heat and air conditioning
services as required, in Landlord’s reasonable judgment, for the comfortable use and occupancy of
the Premises. Landlord shall provide further services (such as janitorial services and trash
disposal) if Landlord and Tenant specifically agree to such additional services and identify such
services with specificity on Exhibit F hereto. If requested by Tenant, Landlord shall furnish heat
and air conditioning services at times other than Normal Business Hours, and supplements to Exhibit
F special services, and Tenant shall pay for such additional services as additional rent at such
reasonable rates as Landlord may establish from time to time. Subject to the next paragraph, from
and after the Expansion Premises Acceptance Date, Landlord shall furnish the Premises with water,
sewer, electricity and HVAC for Tenant’s use as set forth in Section 1(d), including lighting and
low power usage for office machines and light manufacturing, and water and sewer for restroom facilities twenty four hours a day, 365 days a
week. Landlord shall provide further services (such as janitorial services and trash disposal)
if Landlord and Tenant specifically agree to such additional services and identify such services
with specificity on Exhibit F hereto.




Tenant has
examined the existing electrical and mechanical systems and is
familiar with their capacities. If Tenant requires any additional
capacity, Tenant shall install such additional capacity as part of
the Tenant Improvements pursuant to Exhibit C (which cost
shall be paid pursuant to Section 7 of Exhibit C). If, in
Landlord’s reasonable estimation, Tenant’s usage of
electrical or mechanical systems exceeds the consumption of spaces
jointly metered or maintained with the Premises, Landlord may
specially allocate to Tenant the actual cost of such excess
consumption, and Tenant shall pay Landlord in advance, as additional rent,
on the first day of each month during the Term, the amount reasonably estimated by
Landlord as the cost of such excess consumption. Landlord shall be
entitled to install and operate, at Tenant’s cost, a
monitoring/metering system in the Premises to measure the added demands
on electricity and the HVAC systems resulting from such equipment and lights, and
from Tenant’s HVAC requirements during other than Normal
Business Hours. Tenant acknowledges that Landlord shall have sole
control over the determination of what utility providers serve the
Project, and Landlord shall have no obligation to give access or easement
rights or otherwise allow onto the Project any utility providers
except those approved by Landlord in its discretion. If, for any
reason, Landlord permits Tenant to purchase utility services from a
provider other than Landlord’s designated compan(ies), such provider
shall be considered a contractor of Tenant and Tenant shall indemnify
defend and hold Landlord harmless from such provider’s acts and
omissions while in, or in connection with their services to, the
Building or Project in accordance with the terms and conditions of
Article 15. In addition, Tenant shall allow Landlord to purchase
such utility service from Tenant’s provider at Tenant’s
rate or at such lower rate as can be negotiated by the aggregation of Landlord’s tenants’ requirements for such utility.






12









 





Except
for the costs of above-building standard and/or after-hours services,
which shall be paid directly by Tenant, the costs of all utilities
and services provided pursuant to this Section 12 shall be
Expenses allocated to Tenant as part of Tenant’s Share of Expenses
pursuant to Section 4(b) above. Tenant shall pay when due and
directly to the service provider any telephone or other services
metered, chargeable or provided to the Premises and not charged as part of Tenant’s Share of Expenses.



Landlord does not warrant
that any utilities or services will be free from interruption including by reason of accident,
repairs, alterations or improvements and including by reason of
computer programming weaknesses. No utility interruption shall be
deemed an eviction or disturbance of Tenant, or render Landlord
liable to Tenant for damages, or relieve Tenant from the full and complete
performance of all of Tenant’s obligations under this Lease.



Landlord may
provide such security for the Project as it deems appropriate.
Landlord understands that Tenant will independently be providing
security for the Premises. Landlord may not restrict access to the
Project in accordance with the Project’s security system without
Tenant’s prior consent. Except to the extent caused by the gross
negligence or willful misconduct of Landlord, its agents or
contractors, Landlord shall not be liable to Tenant for
injury to Tenant’s agents, employees, customers or invitees, or
for losses due to theft or burglary, or for damages done by unauthorized persons in the Project.



13.     MAINTENANCE. Landlord shall
maintain, in good condition and repair, the structural parts of
the building in which the Premises are located which shall include only the foundations, bearing
and exterior walls (excluding glass), subflooring and roof (including support and membrane but
excluding skylights) at Landlord’s sole cost and expense without pass-through to Tenant pursuant to
Section 4(b) Landlord shall maintain, replace as necessary, and repair the unexposed electrical,
plumbing and sewerage systems, including those portions of the systems lying outside the Premises,
gutters and downspouts on the Building the heating, ventilating and air conditioning system
servicing the Premises, and the common Areas; and shall pass-through the costs of same to Tenant
as an Expense pursuant to Section 4(b). Except as provided above, Tenant shall maintain and repair
the interior portions of the Premises in good condition and repair, including, without limitation,
maintaining and repairing all internal walls, storefronts, floors, ceilings, interior and exterior
doors, exterior and interior windows and fixtures and interior exposed plumbing, as well as damage
caused by Tenant, its agents, employees or invitees. Upon expiration or termination of this Lease,
Tenant shall surrender the Premises to Landlord in the same condition as existed upon the
Commencement Date if no Tenant Work is completed or as existed upon completion of the alterations
and improvements as set forth in the Tenant’s Work and Work Letter Agreement attached hereto as
Exhibit C if such Work is completed, except for reasonable wear and tear or damage caused by fire
or other casualty.


13









 






14.     ALTERATIONS. Other than Landlord’s Work and Tenant’s Work, which shall be governed by
Exhibit C, Tenant shall not make any alterations to the Premises, or to the Project, including any
changes to the existing landscaping, without Landlord’s prior written consent, which consent shall
not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, Tenant shall
have the right to make alterations and improvements to the Premises without Landlord’s consent (but
only after having provided not less than 15 days prior written notice to Landlord) where the same
(i) will not materially affect the structural components of the building in which the Premises
is located or the building systems, and (ii) will not exceed the cost of $10,000. If Landlord
gives its consent to alterations, Landlord may post notices of non-responsibility in accordance
with the laws of the state in which the premises are located. Tenant may, at the time of
requesting Landlord’s consent to alterations, further request in writing that Landlord elect, at
the time of granting consent, whether such alterations must be removed upon termination of the
Lease. If Tenant so requests, Landlord shall make such election at the time of granting consent to
the alteration (or if no consent is required, then within fifteen days of Tenant’s request).
Failure of Landlord to respond to Tenant’s request shall be deemed an election that the alteration
need not be removed on termination of this Lease. Any alterations made shall remain on and be
surrendered with the Premises upon expiration or termination of this Lease, except that Landlord
may, within 30 days before or 30 days after expiration of the term, elect to require Tenant to
remove any alterations which Tenant may have made to the Premises except such alterations as Tenant
has received consent to leave as provided above. If Landlord elects to require removal of an
alteration, at its own cost Tenant shall restore the Premises to the condition designated by
Landlord in its election, before the last day of the term or within 30 days after notice of its
election is given, whichever is later.



Should Landlord consent in
writing to Tenant’s alteration of the Premises, Tenant shall contract with a contractor
approved by Landlord for the construction of such alterations, which approval shall not be
unreasonably withheld, delayed or conditioned, shall secure all appropriate governmental approvals
and permits, and shall complete such alterations with due diligence in compliance with
plans and specifications reasonably approved by Landlord. All such construction shall be performed in
a manner which will not unreasonably interfere with the quiet enjoyment of other tenants of the Project. Tenant
shall pay all costs for such construction and shall keep the Premises
and the Project free and clear of all mechanics’ liens which may result from
construction by Tenant. Tenant shall not use any portion of the common areas in
connection with an alteration without the prior written consent of Landlord.




15.     RELEASE AND INDEMNITY.





	a.	 	Indemnity. Except to the extent caused by the gross negligence or willful
misconduct of Landlord, its agents, employees or contractors, Tenant shall indemnify,
defend (using legal counsel acceptable to Landlord) and save Landlord and its property
manager harmless from all claims, suits, losses, damages, fines, penalties, liabilities
and expenses (including Landlord’s personnel and overhead costs and reasonable
attorneys fees and other costs incurred in connection with claims, regardless of
whether such claims involve litigation but excluding consequential damages such as lost profits) resulting from any actual or
alleged injury (including death) of any person or from any actual or alleged loss of
or damage to, any property arising out of or in connection with (i) Tenant’s
occupation, use or improvement of the Premises, or that of its employees, agents or
contractors, or (ii) any act or omission of Tenant, its officers, agents or
employees in or about the Premises. Tenant agrees that the foregoing indemnity
specifically covers actions brought by its own employees. This indemnity with
respect to acts or omissions during the term of this Lease shall survive termination
or expiration of this Lease. The foregoing indemnity is specifically and expressly
intended to, constitute a waiver of Tenant’s immunity under Washington’s Industrial
Insurance Act, RCW Title 51, to the extent necessary to provide Landlord with a full
and complete indemnity from claims made by Tenant and its employees, to the extent
provided herein. Tenant shall promptly notify Landlord of casualties or accidents
occurring in or about the Premises.





14









 





Except
to the extent caused by the gross negligence or willful misconduct of Tenant, its
agents, employees or contractors, Landlord shall indemnify, defend
and save Tenant harmless from all claims, suits, losses, damages,
fines, penalties, liabilities and expenses (including reasonable
attorneys fees and other costs incurred in connection with claims,
regardless of whether such claims involve litigation but excluding
consequential damages such as lost profits) resulting from any
actual or alleged injury (including death) of any person or from any
actual or alleged loss of or damage to, any property to the extent
caused by (i) the activities of Landlord during improvement of
the Premises or Project, or the activities of its employees, agents
or contractors or (ii) any act or omission of Landlord, its
officers, agents or employees in the Common Areas. Landlord agrees that
the foregoing indemnity specifically covers actions brought by its
own employees. This indemnity with respect to acts or omissions
during the term of this Lease shall survive termination or expiration
of this Lease. The foregoing indemnity is specifically and expressly
intended to, constitute a waiver of Landlord’s immunity under
Washington’s Industrial Insurance Act, RCW Title 51, to
the extent necessary to provide Tenant with a full and complete
indemnity from claims made by Landlord and its employees, to the extent provided herein.



LANDLORD AND TENANT
ACKNOWLEDGE THAT THE INDEMNIFICATION PROVISIONS OF SECTION 8 AND THIS SECTION 15
WERE SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.





	b.	 	Release. Tenant hereby fully and completely waives and releases all claims
against Landlord for any losses or other damages sustained by Tenant or any person
claiming through Tenant resulting from any accident or occurrence in or upon the
Premises, including but not limited to: any defect in or failure of Project equipment;
any failure to make repairs; any defect, failure, surge in, or interruption of Project
facilities or services; any defect in or failure of Common Areas; broken glass; water
leakage; the collapse of any Building component; or any act, omission or negligence of
co-tenants, licensees or any other persons or occupants of the Building, provided only
that the release contained in this Section 15(b) shall not apply to claims for actual
damage to persons or property (excluding consequential damages such as lost profits)
resulting directly from Landlord’s breach of its express obligations under this Lease
which Landlord has not cured within a reasonable time after receipt of written notice
of such breach from Tenant.





15









 





Notwithstanding
any other provision of this Lease, and to the fullest extent
permitted by law, Tenant hereby agrees that Landlord shall not be liable for injury to
Tenant’s business or any loss of income therefrom, whether such
injury or loss results from conditions arising upon the Premises or
the Project, or from other sources or places including, without
limitation, any interruption of services and utilities or any
casualty, or from any cause whatsoever, including, Landlord’s negligence,
and regardless of whether the cause of such injury or loss or the
means of repairing the same is inaccessible to Landlord or Tenant.
Tenant may elect, at its sole cost and expense, to obtain business
interruption insurance with respect to such potential injury or loss.





	c.	 	Limitation on Indemnity. In compliance with RCW 4.24.115 as in effect on the date
of this Lease, all provisions of this Lease pursuant to which Landlord or Tenant (the
“Indemnitor”) agrees to indemnify the other (the “Indemnitee”) against liability for
damages arising out of bodily injury to Persons or damage to property relative to the
construction, alteration, repair, addition to, subtraction from, improvement to, or
maintenance of, any building, road, or other structure, project, development, or
improvement attached to real estate, including the Premises, (i) shall not apply to
damages caused by or resulting from the sole negligence of the Indemnitee, its agents
or employees, and (ii) to the extent caused by or resulting from the concurrent
negligence of (a) the Indemnitee or the Indemnitee’s agents or employees, and (b) the
Indemnitor or the Indemnitor’s agents or employees, shall apply only to the extent of
the Indemnitor’s negligence; PROVIDED, HOWEVER, the limitations on indemnity set forth
in this Section shall automatically and without further act by either
Landlord or Tenant be deemed amended so as to remove any of the restrictions
contained in this Section no longer required by then applicable law.






	d.	 	Definitions. As used in any Section establishing indemnity or release of
Landlord, “Landlord” shall include Landlord, its partners, officers, agents, employees
and contractors, and “Tenant” shall include Tenant and any person or entity claiming
through Tenant.




16.     INSURANCE. Landlord
shall maintain, or cause to be maintained, standard fire and extended
coverage insurance on the Project (excluding leasehold improvements by Tenant in excess of those
standard for the building and Tenant’s property) in amounts considered by Landlord to be reasonable
and customary. The insurance required to be obtained by Landlord may be obtained by Landlord
through blanket or master policies insuring other entities or properties owned or controlled by
Landlord.



Tenant shall, throughout
the term of this Lease and any renewal hereof, at its own expense, keep and maintain in full force and
effect, a policy of commercial general liability (occurrence form)
insurance, including contractual liability (including Tenant’s indemnification
obligations under this Lease) insuring Tenant’s activities upon,
in or about the Premises or the Project, against claims of bodily
injury or death or property damage or loss with a combined single
limit of not less than One Million Dollars ($1,000,000) per occurrence
and Three Million Dollars ($3,000,000) in the aggregate, with such
increases in limits as Landlord may from time to time require
consistent with insurance requirements of institutional landlords in
similar projects in the area. If Tenant manufactures on the Premises
consumer goods using any materials supplied by Landlord (including but not limited to
water supplied as part of utilities to the Premises), Tenant’s insurance shall include
products liability insurance in the amounts specified for the
commercial general liability insurance.



Tenant shall further, throughout the term of this Lease and any renewal thereof, at its own
expense, keep and maintain in full force and effect, what is commonly referred to as Special
Cause of Loss or a Special coverage insurance (excluding earthquake and flood) on tenant’s
leasehold improvements in an amount equal to one hundred percent (100%) of the replacement
value thereof with a coinsurance waiver. The proceeds from any such policy shall be used by
Tenant for the restoration of Tenant’s improvements or alterations. As used in this Lease,
tenant’s leasehold improvements shall mean any alterations, additions or improvements
installed in or about the Premises by or with Landlord’s permission or otherwise permitted
by this Lease, whether or not the cost thereof was paid for by Tenant.




16









 







All insurance required to be provided by Tenant under this Lease: (a) shall be issued by
Insurance companies authorized to do business in the state in which the premises are located
with a financial rating of at least an AVIII status as rated in the most recent edition of
Best’s Insurance Reports or equivalent rating organization; (b) shall be issued as a primary
policy; shall be on an occurrence basis; (c) name Landlord and Landlord’s property manager
as additional insured; and (d) shall contain an endorsement requiring at least 30 days prior
written notice of cancellation to Landlord and Landlord’s lender, before cancellation or
change in coverage, scope or amount of any policy. Tenant shall deliver a certificate or
copy of such policy together with evidence of payment of all current premiums to Landlord
within 30 days of execution of this Lease and at the time of all renewals thereof. If
Tenant fails at any time to maintain the insurance required by this Lease, and fails to cure
such default within five (5) business days of written notice from Landlord then, in addition
to all other remedies available under this Lease and applicable law, Landlord may purchase
such insurance on Tenant’s behalf and the cost of such insurance shall be Additional Rent
due within thirty (30) days of written invoice from Landlord to Tenant.



Each party hereto
waives all rights of recovery, claims, actions or causes of actions
arising in any manner in its (the Injured Party’s\) favor and against the other
party for loss or damage to the Injured Party’s property located within or constituting a
part or all of the Project, to the extent the loss or damage: (a) is covered by the Injured
Party’s insurance; or (b) would have been covered by the insurance the Injured Party is
required to carry under this Lease, whichever is greater, regardless of the cause or origin,
including the sole, contributory, partial, joint, comparative or concurrent negligence of
the other party. All insurance carried by either Landlord or Tenant covering the losses and
damages described in this section shall provide for such waiver of rights of subrogation by
the Injured Party’s insurance carrier to the maximum extent that the same is permitted under
the laws and regulations governing the writing of insurance within the state in which the
building is located. Both parties hereto are obligated to obtain such a waiver and provide
evidence to the other party of such waiver. The waiver set forth in this section shall be
in addition to, and not in substitution for, any other waivers, indemnities or exclusions of
liability set forth in this Lease.



17.     DESTRUCTION. If during the term, the Premises or Project are more than 30% destroyed from any
cause, or rendered inaccessible or unusable from any cause, Landlord may, in its sole discretion,
terminate this Lease by delivery of notice to Tenant within 30 days of such event without
compensation to Tenant. If in Landlord’s estimation, the Premises cannot be restored within 90
days following such destruction, the Landlord shall notify Tenant and Tenant may terminate this
Lease by delivery of notice to Landlord within 30 days of receipt of Landlord’s notice. If neither Landlord nor Tenant terminates this
Lease as provided above, then Landlord shall commence to restore the Premises in compliance with
then existing laws and shall complete such restoration with due diligence. In such event, this
Lease shall remain in full force and effect, but there shall be an abatement of Base Monthly Rent
and Tenant’s Share of Expenses between the date of destruction and the date of completion of
restoration, based on the extent to which destruction interferes with Tenant’s use of the Premises.


17









 






18.      CONDEMNATION.




	a.	 	Taking. If all of the Premises are taken by Eminent Domain, this Lease shall
terminate as of the date Tenant is required to vacate the Premises and all Base and
Additional 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. If, in the reasonable judgment of
Landlord, a taking of any part of the Premises by Eminent Domain renders the remainder
thereof unusable for the business of Tenant (or the cost of restoration of the Premises
is not commercially reasonable), the Lease may, at the option of either party, be
terminated by written notice given to the other party not more than thirty (30) days
after Landlord gives 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 Premises
so taken. If this Lease is so terminated, all Base and Additional Rent shall be paid
to the date of termination. Whenever any portion of the Premises is taken by Eminent
Domain and this Lease is not terminated, Landlord shall at its expense proceed with all
reasonable dispatch to restore, to the extent of available proceeds, the remainder of
the Premises to the condition they were in immediately prior to such taking, including
the Landlord’s Work and Tenant’s Work described in the Work Letter, and
Tenant shall at its expense proceed with all reasonable dispatch to restore its
personal property and all improvements and alterations other than the Tenant’s
Work made by it to the Premises to the same condition they were in immediately prior to
such taking. The Base and Additional Rent payable hereunder shall be reduced from the
date Tenant is required to partially vacate the Premises in the same proportion that
the Rentable Area taken bears to the total Rentable Area of the Premises prior to
taking.






	b.	 	Award. Landlord reserves all right to the entire damage award or payment for
any taking by Eminent Domain, 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. 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. Tenant shall, however, have the right to claim from the
condemning authority all compensation that may be recoverable by Tenant on account
of any loss incurred by Tenant in moving Tenant’s merchandise, furniture, trade
fixtures and equipment, provided, however, that Tenant may claim such damages only
if they are awarded separately in the eminent domain proceeding and not out of or as
part of Landlord’s damages.





19.     ASSIGNMENT OR
SUBLEASE. Tenant shall not assign or encumber its interest in this Lease
or the Premises or sublease all or any part of the Premises or allow any other person or entity
(except Tenant’s authorized representatives, employees, invitees, or guests) to occupy or use all
or any part of the Premises without first obtaining Landlord’s consent which shall not be
unreasonably withheld for tenants meeting Landlord’s then-existing standards for creditworthiness
and use. No assignment or sublease shall release Tenant from the obligation to perform all
obligations under this Lease. Any assignment, encumbrance or sublease without Landlord’s written
consent shall be voidable and at Landlord’s election, shall constitute a default. If Tenant is a
partnership, a withdrawal or change, voluntary, involuntary or by operation of law of any partner,
or the dissolution of the partnership, shall be deemed a voluntary assignment. If Tenant consists
of more than one person, a purported assignment, voluntary or involuntary or by operation of law
from one person to the other shall be deemed a voluntary assignment. If Tenant is a corporation,
any dissolution, merger, consolidation or other reorganization of Tenant, or sale or other transfer
of a controlling percentage of the capital stock of Tenant, or the sale of at least 25% of the
value of the assets of Tenant shall be deemed a voluntary assignment. The phrase “controlling
percentage” means ownership of and right to vote stock possessing at least 25% of the total
combined voting power of all classes of Tenant’s capital stock issued, outstanding and entitled to
vote for election of directors. This Section 19 shall not apply to corporations the stock of which
is traded through an exchange or over the counter. Seventy-five (75%) of all rent received by
Tenant from its subtenants in excess of the Rent payable by Tenant to Landlord under this Lease, or
any sums to be paid by an assignee to Tenant in consideration of the assignment of this Lease after
deducting therefrom brokers‘ commissions, reasonable attorneys‘ fees and costs for improving the
Premises for such subtenants or assignee (said costs to be amortized, without interest, over the
term of the sublease or remaining term of the Lease, as applicable), shall be paid to Landlord. If
Tenant requests Landlord to consent to a proposed assignment or subletting, Tenant shall pay to
Landlord, whether or not consent is ultimately given, $100 or Landlord’s reasonable attorney’s
fees, not to exceed $1,000, incurred in connection with such request, whichever is greater.




18









 







No interest of Tenant in this Lease shall be assignable by involuntary assignment through
operation of law (including without limitation the transfer of this Lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary assignment: (a) if
Tenant is or becomes bankrupt or insolvent, or institutes proceedings under the
Bankruptcy Act in which Tenant is the bankrupt; or if Tenant is a partnership or consists of
more than one person or entity, if any partner of the partnership or other person or entity
is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors; or
(b) if a writ of attachment or execution is levied on this Lease; or (c) if in any
proceeding or action to which Tenant is a party, a receiver is appointed with authority to
take possession of the Premises. An involuntary assignment shall constitute a default by
Tenant and Landlord shall have the right to elect to terminate this Lease, in which case
this Lease shall not be treated as an asset of Tenant.



Notwithstanding anything to the contrary contained in this Lease, provided that the net
worth of the succeeding entity is not less than 75% of the net worth of Tenant, Tenant may
assign this Lease or sublet the Premises, or any portion thereof, without Landlord’s
consent, to any entity which controls, is controlled by, or is under common control with
Tenant; to any entity which results from a merger of, reorganization of, or consolidation
with Tenant; to any entity engaged in a joint venture with Tenant; or to any entity which
acquires substantially all of the stock or assets of Tenant, as a going concern, with
respect to the business that is being conducted in the Premises (hereinafter each a
“Permitted Transfer”). In addition, a sale or transfer of the capital stock of Tenant shall
be deemed a Permitted Transfer if (1) such sale or transfer occurs in connection with any
bona fide financing or capitalization for the benefit of Tenant, or (2) Tenant is or becomes
a publicly traded corporation. Landlord shall have no right to terminate the Lease in
connection with, and shall have no right to any sums or other economic consideration
resulting from any Permitted Transfer.



Landlord reserves the right to
recapture the Premises should Tenant propose to assign or
sublease the Premises by any transfer other than a Permitted Transfer. Tenant shall first
notify Landlord, by written notice, of its intent to sublease or assign the Lease to a third
party and Landlord may recapture the Premises giving notice to Tenant in writing within five
(5) business days after delivery of Tenant’s notice. In the event Landlord exercises such
right Tenant promptly shall surrender the Premises to Landlord in accordance with the
provisions of the Lease, the parking reallocation obligations of Section 11 shall become
effective, Tenant’s share of Expenses shall be recomputed, and Landlord shall again have the
right to make reasonable allocations of utilities for non-separately-metered utilities. In the event
Landlord elects not to recapture the Premises, Tenant shall
thereafter have the right to sublease or assign to an outside entity subject to Section 19
of the Lease, subject to the Landlord’s right to recover 75% of rent paid in excess of the
Base Rent. In the event that Tenant enters into a Lease Assignment or Sublease that is not a
Permitted Transfer and for which consent of Landlord was required but was not obtained,
Landlord may recapture the entire Premises in the event of a wrongful assignment and the
portion of the Premises subleased in the event of a wrongful sublease. In the event that
Tenant enters into a Lease Assignment or Sublease and for which consent of Landlord was
required but was not obtained, Landlord may recapture the entire Premises in the event of a
wrongful assignment and the portion of the Premises subleased in the event of a wrongful
sublease.




19









 







20.     EVENT OF DEFAULT. The occurrence of any of the following shall constitute a default by
Tenant: (a) a failure to pay Rent or other charge when due, provided that Landlord shall not
exercise any of its rights under this Section 20(a) until Landlord has given Tenant notice of such
default and a cure period of three (3) days from receipt of such notice, and Tenant has failed to
pay such rent or other charge or establish the entry system within such cure period; (b) abandonment and
vacation of the Premises (failure to occupy and operate the Premises for ten
consecutive days while in monetary default under this Lease shall be conclusively deemed an
abandonment and vacation); or (c) failure to perform any other provision of this Lease, provided
that Landlord shall not exercise any of its rights under this Section 20(c) until Landlord has
given Tenant notice of such default and a cure period of thirty (30) days from receipt of such
notice, and Tenant has failed to cure such default within such cure period, provided further that
if more than thirty (30) days are required to complete such performance, the cure period shall not
be deemed to have run so long as Tenant commences to cure such default within the thirty (30) day
period and thereafter diligently pursues its completion. The notice required by this Section is
intended to satisfy any and all notice requirements imposed by law on Landlord and is not in
addition to any such requirement.



21.     LANDLORD’S REMEDIES. If an Event of Default by Tenant occurs, Landlord shall have the
following remedies. (These remedies are not exclusive; they are cumulative and in addition to any
remedies now or later allowed by law): Landlord may terminate Tenant’s right to possession of the
Premises at any time. No act by Landlord other than giving notice to Tenant shall terminate this
Lease. Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on
Landlord’s initiative to protect Landlord’s interest under this Lease shall not constitute a
termination of Tenant’s right to possession. Upon termination of Tenant’s right to possession,
Landlord has the right to recover from Tenant: (1) the worth of the unpaid Rent that had been
earned at the time of termination of Tenant’s right to possession; (2) the worth of the amount of the unpaid Rent that
would have been earned after the date of termination of Tenant’s right to possession less the
amount that Tenant proves Landlord should be able to earn during such period net of all releasing
costs; (3) any other amount, including but not limited to, expenses incurred to relet the Premises,
court, attorney and collection costs, necessary to compensate Landlord for all detriment caused by
Tenant’s default. “The Worth,” as used for Item (1) in this Paragraph 21 is to be computed by
allowing interest at the rate of 12 percent per annum. If the interest rate specified in this
Lease is higher than the rate permitted by law, the interest rate is hereby decreased to the
maximum legal interest rate permitted by law. “The Worth” as used for Item (2) in this Paragraph 21 is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of termination of Tenant’s right of possession.


20









 






22.     ENTRY ON PREMISES. Landlord and its authorized representatives shall have the right to
enter the Premises at all reasonable times on reasonable prior notice (provided that no notice
shall be required in an emergency) for any of the following purposes: (a) to determine whether the
Premises are in good condition and whether Tenant is complying with its obligations under this
Lease; (b) to do any necessary maintenance and to make any restoration to the Premises or the
Project that Landlord has the right or obligation to perform; (c) to post “for sale” signs at any
time during the term, to post “for rent” or “for lease” signs during the last 90 days of the Term,
or during any period while Tenant is in default; (d) to show the Premises to prospective brokers,
agents, buyers or persons interested in purchasing the Project, at any time during the Term, or to
prospective tenants interested in leasing the Premises during the last 90 days of the Term; or (e)
to repair, maintain or improve the Project and to erect scaffolding and protective barricades
around and about the Premises, and to do any other act or thing necessary for the safety or
preservation of the Premises or the Project; provided, however, with respect to each of subclauses
(a) through (e) above, Landlord agrees that any entry into the Premises will be limited to
accomplishment of tasks set forth in Landlord’s notice, and Landlord shall use commercially
reasonable best efforts not to prevent entry to the Premises or otherwise interfere with Tenant’s
use and enjoyment of the Premises and Project, Landlord shall not compromise or adversely affect
Tenant’s security measures, and Landlord shall diligently perform the relevant work or task to
completion. Tenant shall have the right to have a representative present during any entry within
the Premises by Landlord. Notwithstanding the foregoing, in the event that Landlord requires
access to the Premises during any time period when no Tenant representative is available and
Landlord reasonably believes that a condition exists within any portion of the Premises, which
condition poses an immediate threat of harm to any person or property (i.e., an “emergency”),
Tenant hereby instructs Landlord to use whatever force and means are reasonably necessary to gain
access to the Premises. Except to the extent caused by Landlord’s gross negligence or willful
misconduct (and in any event excluding consequential damages such as lost profits), Landlord shall not be liable in any manner for any
inconvenience, disturbance, loss of business, nuisance or other damage arising out of Landlord’s
entry onto the Premises as provided in this Section 22. Except as otherwise set forth in this
Lease, Tenant shall not be entitled to an abatement or reduction of Rent if Landlord exercises any
rights reserved in this Section 22. Without limiting any other requirement of Landlord herein,
Landlord shall conduct its activities on the Premises in a commercially reasonable manner so as to
limit inconvenience, annoyance or disturbance to Tenant to the maximum extent practicable.




23.     SUBORDINATION; ESTOPPEL CERTIFICATE.





	a.	 	Subordination. Without the necessity of any additional document being executed
by Tenant for the purpose of effecting a subordination, and at the election of Landlord
or any mortgagee or any beneficiary of a Deed of Trust with a lien on the Project or
any ground lessor with respect to the Project, this Lease shall be subject and
subordinate at all times to (a) all ground leases or underlying leases which may now
exist or hereafter be executed affecting the Project, and (b) the lien of any mortgage
or deed of trust which may now exist or hereafter be executed in any amount for which
the Project, ground leases or underlying leases, or Landlord’s interest or estate in
any of said items is specified as security. In the event that any ground lease or
underlying lease terminates for any reason or any mortgage or Deed of Trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the Tenant of the successor in
interest to Landlord, at the option of such successor in interest. Tenant covenants
and agrees to execute and deliver, upon demand by Landlord and in the form requested by
Landlord any additional documents evidencing the priority or subordination of this
Lease with respect to any such ground lease or underlying leases or the lien of any
such mortgage or Deed of Trust. Notwithstanding the foregoing, Tenant shall not be
required to subordinate its interest under this Lease unless (a) such subordination
does not materially increase Tenant’s obligations, or materially decrease its rights
under this Lease, and (b) Landlord first obtains from the holder of the mortgage, deed
of trust, or other instrument of security to which this Lease is to become subordinated
a written agreement that provides substantially the following: As long as Tenant
performs its obligations under this Lease, Tenant shall not be disturbed in its quiet
enjoyment under this Lease by any foreclosure of, deed given in lieu of foreclosure of,
or sale under the encumbrance, or steps or procedures taken under the encumbrance.





21









 






	b.	 	Estoppel Certificate. Tenant shall, within 10 days of demand, execute and deliver
to Landlord a written statement certifying: (i) the commencement and the expiration
date of the Term; (ii) the amount of Base Rent and the date to which it has been
paid; (iii) that this Lease is in full force and effect and has not been assigned or
amended in any way (or specifying the date and terms of each agreement so affecting
this Lease) and that no part of the Premises has been sublet (or to the extent such
is not the case, a copy of any sublease); (iv) that Landlord is not in default under
this Lease (or if such is not the case, the extent and nature of such default); (v)
on the date of such certification, there are no existing defenses or claims which
Tenant has against Landlord (or if such is not the case, the extent and nature of
such defenses or claims); (vi) the amount of the Security Deposit held by Landlord;
and (vii) any other fact or representation that a mortgagee or purchaser may
reasonably request. It is intended that any such statement shall be binding upon
Tenant and may be relied upon by a prospective purchaser or mortgagee. If Tenant
fails to respond within 10 days of receipt of a written request by Landlord
therefor, (a) Tenant shall be deemed to have given a certificate as above provided,
without modification, and shall be conclusively deemed to have admitted the accuracy
of any information supplied by Landlord to a prospective purchaser or mortgagee, and
(b) Landlord may impose a fee of $100 per day for each day of delay in providing the
statement by Tenant after the 10 day period.




24.     NOTICE. Any notice, demand or request required hereunder shall be given in writing to the
party’s facsimile number or address set forth in Section 1 hereof by any of the following means:
(a) personal service; (b) electronic communication, whether by telex, telegram or facsimile with
electronic confirmation; (c) overnight courier; or (d) registered or certified, first class mail,
return receipt requested. Such addresses may be changed by notice to the other parties given in
the same manner as above provided. Any notice, demand or request sent pursuant to either
subsection (a) or (b) hereof shall be deemed received upon such personal service or upon dispatch
by electronic means with electronic confirmation of receipt. Any notice, demand or request sent
pursuant to subsection (c) hereof shall be deemed received on the business day immediately
following deposit with the overnight courier and, if sent pursuant to subsection (d), shall be
deemed received forty-eight (48) hours following deposit in the U.S. mail. Tenant hereby appoints
as its agent to receive the service of all dispossessory or distraint proceedings and notices
thereunder the person in charge of or occupying the Premises at the time, and, if no person shall
be in charge of occupying the same, then such service may be made by attaching the same on the main
entrance of the Premises.




22









 







25.     WAIVER. No delay or omission in the exercise of any right or remedy by Landlord shall impair
such right or remedy or be construed as a waiver. No act or conduct of Landlord, including without
limitation, acceptance of the keys to the Premises, shall constitute an acceptance of the surrender
of the Premises by Tenant before the expiration of the term. Only written notice from Landlord to
Tenant shall constitute acceptance of the surrender of the Premises and accomplish termination of
the Lease. Landlord’s consent to or approval of any act by Tenant requiring Landlord’s consent or
approval shall not be deemed to waive or render unnecessary Landlord’s consent to or approval of
any subsequent act by Tenant. Any waiver by Landlord of any default must be in writing and shall
not be a waiver of any other default concerning the same or any other provision of the Lease.
TENANT SPECIFICALLY ACKNOWLEDGES AND AGREES THAT, WHERE TENANT HAS RECEIVED A NOTICE TO CURE
DEFAULT (WHETHER RENT OR NON-RENT), NO ACCEPTANCE BY LANDLORD OF RENT SHALL BE DEEMED A WAIVER OF
SUCH NOTICE, AND, INCLUDING BUT WITHOUT LIMITATION, NO ACCEPTANCE BY LANDLORD OF PARTIAL RENT SHALL
BE DEEMED TO WAIVE OR CURE ANY RENT DEFAULT. LANDLORD MAY, IN ITS DISCRETION, AFTER RECEIPT OF
PARTIAL PAYMENT OF RENT, REFUND SAME AND CONTINUE ANY PENDING ACTION TO COLLECT THE FULL AMOUNT
DUE, OR MAY MODIFY ITS DEMAND TO THE UNPAID PORTION. IN EITHER EVENT THE DEFAULT SHALL BE DEEMED
UNCURED UNTIL THE FULL AMOUNT IS PAID IN GOOD FUNDS.



26.     SURRENDER OF PREMISES; HOLDING OVER. Upon expiration of the term, Tenant shall surrender to
Landlord the Premises and all Tenant’s Work and Tenant Improvements and alterations in good
condition, except for ordinary wear and tear and alterations Tenant has the right or is obligated
to remove under the provisions of Section 14 herein. Tenant shall remove all personal property
including, without limitation, all data and phone wires, wallpaper, paneling and other decorative
improvements or fixtures which were not part of the Tenant Improvements and shall perform all
restoration made necessary by the removal of any alterations or Tenant’s personal property before
the expiration of the Term, including for example, restoring all wall surfaces to their condition
prior to the commencement of this Lease. Landlord can elect to retain or dispose of in any manner
Tenant’s personal property not removed from the Premises by Tenant prior to the expiration of the
Term. Tenant waives all claims against Landlord for any damage to Tenant resulting from Landlord’s
retention or disposition of Tenant’s personal property. Tenant shall be liable to Landlord for
Landlord’s cost for storage, removal or disposal of Tenant’s personal property.




23









 





If Tenant, with Landlord’s consent, remains in possession of the Premises after
expiration or termination of the term, or after the date in any notice given by Landlord to
Tenant terminating this Lease, such possession by Tenant shall be deemed to be a
month-to-month tenancy terminable as provided under Washington law, by either party. All
provisions of this Lease, except those pertaining to term and Rent, shall apply to the
month-to-month tenancy. During any holdover term, Tenant shall pay Base Monthly Rent in an
amount equal to 150% of Base Monthly Rent for the last full calendar month during the regular term plus 100% of
Tenant’s share of Expenses pursuant to Section 4(b)(3). If Tenant fails to surrender
possession of the Premises upon termination or expiration of this Lease and if Tenant does
not obtain Landlord’s written consent to Tenant’s continued occupancy, then Tenant
shall be deemed a trespasser and shall be liable to Landlord for all damages sustained by
Landlord as a result thereof, together with Base Rate at a rate double the Latest Rate.



27.     LIMITATION OF LANDLORD’S LIABILITY. In consideration of the benefits accruing hereunder,
Tenant agrees that, in the event of any actual or alleged failure, breach or default of this Lease
by Landlord, Landlord’s liability under this Lease shall be limited to, and Tenant shall look only
to Landlord interest in the Project and the rents and proceeds thereof.



28.     BUILDING PLANNING. Omitted.



29.     MISCELLANEOUS PROVISIONS.





	a.	 	Time of Essence. Time is of the essence of each provision of this Lease.






	b.	 	Successor. This Lease shall be binding on and inure to the benefit of the
parties and their successors, except as provided in Section 19 herein.






	c.	 	Landlord’s Consent. Unless otherwise specifically stated herein, any consent
required by Landlord under this Lease must be granted in writing and may be withheld
or conditioned by Landlord in its sole and absolute discretion.






	d.	 	Commissions. Each party represents that it has not had dealings with any real
estate broker, finder or other person with respect to this Lease in any manner,
except for the broker(s) identified in Section 1. Landlord shall pay a commission,
to be divided equally among the brokers, of Five Percent of Base Monthly Rent for
the first 60 months, to be paid one-half on lease execution and one-half on
occupancy. Each party shall be responsible for, and indemnify the other party
against, any additional sums claimed by its broker. Landlord and Tenant recognize
that it is possible that they may hereafter make additional agreements regarding
further extension or renewal of this Lease or a new lease or leases for all or one
or more parts of the Premises or other space in the Project for a term or terms
commencing after the Commencement Date of this Lease. Landlord and Tenant recognize
that it is also possible that they may hereafter modify this Lease to add additional
space or to substitute space as part of the Premises. If any such additional
agreements, new leases or modifications to this Lease are made, Landlord shall not
have any obligation to pay any compensation to any real estate broker or to any other third
person engaged by Tenant to render services to Tenant in connection with negotiating
such matters, regardless of whether under the circumstances such person is or is not
regarded by the law as an agent of Landlord.






	e.	 	Other Charges. If either party commences any litigation against the other
party or files an appeal of a decision arising out of or in connection with the
Lease, the prevailing party shall be entitled to recover from the other party
reasonable attorney’s fees and costs of suit. If Landlord employs a collection
agency to recover delinquent charges, Tenant agrees to pay all collection agency and
reasonable attorneys’ fees charged to Landlord in addition to Rent, late charges,
interest and other sums payable under this Lease. Tenant shall pay a charge of $75
to Landlord for preparation of a demand for delinquent Rent.






	f.	 	Force Majeure. Landlord shall not 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, fires, floods, windstorms,
earthquakes, strikes or labor disturbances, civil commotion, delays in
transportation, governmental delays or war.





24









 







	g.	 	Rules and Regulations. Tenant shall faithfully observe and comply with the
“Rules and Regulations”, a copy of which is attached hereto, and all reasonable and
nondiscriminatory modifications thereof and additions thereto from time to time put
into effect by Landlord. Landlord shall not be responsible to Tenant for the
violation or non-performance by any other tenant or occupant of the building or
Project of said tenant or occupant’s lease or of any of said Rules and Regulations.






	h.	 	Landlord’s Successors. In the event of a sale or conveyance by Landlord of the
Project, the same shall operate to release Landlord from any liability under this
Lease, and in such event Landlord’s successor in interest shall be solely
responsible for all obligations of Landlord under this Lease.






	i.	 	Interpretation. This Lease shall be construed and interpreted in accordance with
the laws of the state in which the premises are located. This Lease constitutes the
entire agreement between the parties with respect to the Premises and the Project,
except for such guarantees or modifications as may be executed in writing by the
parties from time to time. When required by the context of this Lease, the singular
shall include the plural, and the masculine shall include the feminine and/or neuter. “Party” shall mean Landlord
or Tenant. If more than one person or entity constitutes Landlord or Tenant, the
obligations imposed upon that party shall be joint and several. The enforceability,
invalidity or illegality of any provision shall not render the other provisions
unenforceable, invalid or illegal.






	j.	 	Prior Understandings. Tenant acknowledges that neither Landlord nor anyone
representing Landlord has made statements of any kind whatsoever on which Tenant has
relied in entering into this Lease. Tenant further acknowledges that Tenant has
relied solely on its independent investigation and its own business judgment in
entering into this Lease. Landlord and Tenant agree that: this Lease supersedes
all prior and contemporaneous understandings and agreement; the provisions of this
Lease are intended by them as the final expression of their agreement; this Lease
constitutes the complete and exclusive statement of its terms; and no extrinsic
evidence whatsoever may be introduced in any judicial proceeding involving this
Lease. No provision of this Lease may be amended except by an agreement in writing
signed by the parties hereto or their respective successors in interest, whether or
not such amendment is supported by new consideration.






	k.	 	Authority. If Tenant is a corporation, each individual executing this
Lease on behalf of said corporation represents and warrants that he/she is duly
authorized to execute and deliver this Lease on behalf of said corporation. If
Tenant is a partnership, each individual executing this Lease on behalf of said
partnership represents and warrants that he/she is duly authorized to execute and
deliver this Lease on behalf of said partnership and that this Lease is binding upon
said partnership in accordance with its terms, and concurrently with execution of
this Lease, Tenant shall deliver to Landlord such evidence of authorization as
Landlord may require. If Tenant is a marital community, or a member of a marital
community, both members of the marital community shall execute this Lease. Where
Tenant is comprised of more than one person or entity, all covenants, agreements and
obligations of Tenant hereunder shall be the joint and several covenants, agreements
and obligations of each person or entity comprising





25









 






	l.	 	Clean Air Act. Tenant acknowledges that Landlord has not made any portion of the
Premises or the Building accessible for smoking in compliance with WAC 296-62-12000.
If Tenant wishes to make any portion of the Premises accessible for smoking, Tenant
shall make all improvements necessary to comply with all applicable governmental
rules and regulations. Tenant acknowledges that the indemnity contained in Section
15 of the Lease includes, but is not limited to claims based on the presence of tobacco smoke as a
result of the activities of Tenant, its employees, agents, or guests.




30.     OPTION TO RENEW. Tenant is granted the right to extend the term of this Lease beyond the
expiration date of the initial term for two (2) consecutive periods of thirty-six (36) months each
(as exercised, the “Extended Term”). Tenant may not exercise its Extension Right if it is then in
default beyond any applicable cure period or if it has ever been in default beyond any applicable
cure period more than two (2) times in any twelve (12) month period. Tenant may exercise its
Extension Right (one extension period at a time) by delivering written notice thereof to Landlord
not later than one hundred eighty (180) days prior to the expiration of the then current term. In
the Extended Term, all terms and conditions of this Lease shall apply, except (i) the Work Letter
Agreement shall not apply, and (ii) the Base Monthly Rent for the Extended Term shall be 115% of
the Base Monthly Rent for the last month of the prior term.



Extension Rights shall
apply to all of the Premises then under lease to Tenant. Tenant’s
Extension Right is personal and may not be exercised by any assignee or sublessee other than
an affiliate of Tenant or a successor by merger or consolidation.



31.     AMERICANS WITH DISABILITIES ACT. Tenant shall be responsible for compliance with any
requirements of the Americans with Disabilities Act of 1990 (“ADA”) that may be imposed as a result
of the Tenant’s Work or Tenant Improvements constructed pursuant to the Work Letter Agreement.
Landlord shall be responsible, at Landlord’s expense, for the cost of remedying any violations of
the ADA existing as of the Commencement Date, except that the cost of constructing the Tenant
Improvements and Tenant’s Work shall be paid in compliance with the Work Letter. Landlord
hereby assumes responsibility for compliance with post-Commencement Date amendments or
reinterpretations of the ADA relating to the Common Areas, and the cost of such compliance shall be
an Expense. Tenant shall be responsible for ensuring that its Tenant’s Work and Tenant
Improvements do not cause violations of the ADA and for compliance with post-Commencement Date
amendments or reinterpretations of the ADA relating to the Premises.



32.     BUILDING CODES. Landlord shall be responsible, at Landlord’s expense, for the cost of
remedying any violations of the building codes existing as of the Commencement Date except such
violations as may be created by Tenant, or Tenant’s Work or which would otherwise be remedied by
completion of Tenant’s Work as described in the Tenant Work Plans required by the Tenant Work
Letter. So long as the Premises are not occupied by a single tenant, Landlord hereby assumes
responsibility for compliance with post-Commencement Date amendments or reinterpretations of the
applicable building codes relating to the Common Areas, and the cost of such compliance shall be
subject to Section 4(b). Tenant acknowledges that with respect to Landlord’s obligations pursuant to Sections 31 and 32, Landlord shall be entitled to
contest any notices of violation, and shall not be obligated to make any alterations or
improvements until so ordered by the applicable governmental entities, and any contested matters
have been finally resolved.




[Remainder of Page Left Blank]




26









 







This Lease was executed as of the day and date first set forth above.




	 	 	 	 	 
	Landlord:	 	 Gull Industries Inc., a Washington corporation

 	 
	 	 	
By  /s/ William T. Vivian
 	 
	 	 	Its Vice President 	 
	 
	 	 	By Its Tenant:        Blue Nile, Inc., a Delaware corporation


	 
	 	 	
By  /s/ Dwight B. Gaston
 	 
	 	 	Its Senior Vice President 	 
	 
	 	 	By
 	 
	 	 	Its 	 



27









 







	 	 	 
	STATE OF WASHINGTON
	 	)


	 
	 	) ss.
	COUNTY OF KING
	 	)







     I certify that I know or have satisfactory evidence that William T. Vivian is the person who
appeared before me, and said person acknowledged that he signed this instrument, on oath stated
that he was authorized to execute the instrument and acknowledged it as the Vice President of Gull
Industries Inc. to be the free and voluntary act of such party for the uses and purposes mentioned
in the instrument.



     Dated: July 21, 2006



	 	 	 	 	 
	 	 	 
	 	/s/ Janine Michele Wilson
 	 
	 	(Signature) 	 
	 
	 	/s/ Janine Michele Wilson
 	 
	 	(Print Name) 	 
	 
	 	Notary Public, in and for the
State

of Washington, residing at Kent

My Commission Expires September 1, 2009	 




	 	 	 
	STATE OF WASHINGTON
	 	)


	 
	 	) ss.
	COUNTY OF KING
	 	)







     I certify that I know or have satisfactory evidence that Dwight B. Gaston is the person who
appeared before me, and said person acknowledged that he signed this instrument, on oath stated
that he was authorized to execute the instrument and acknowledged it as the Senior Vice President
of Blue Nile, Inc. to be the free and voluntary act of such party for the uses and purposes
mentioned in the instrument.




     Dated: July 21, 2006



	 	 	 	 	 
	 	 	 
	 	/s/ Janine Michele Wilson
 	 
	 	(Signature) 	 
	 
	 	/s/ Janine Michele Wilson
 	 
	 	(Print Name) 	 
	 
	 	Notary Public, in and for the
State

of Washington, residing at Kent

My Commission Expires September 1, 2009	 




28









 






	 	 	 	 	 



EXHIBIT A




THE PREMISES




[KEY PLAN & EXIT PATH]





29









 








EXHIBIT B




THE PROJECT





30









 








EXHIBIT C

TENANT’S WORK AND

WORK LETTER AGREEMENT

[Tenant constructing Improvements]





     This Work Letter Agreement is part of that certain Lease (“Lease”) by and between Gull
Industries, Inc. (“Landlord”) and Blue Nile, Inc. (“Tenant”).



     This Work Letter Agreement shall govern the alteration and improvement to the Premises in
accordance with Section 14 of the Lease.



     Capitalized terms used but not defined herein shall have the meanings set forth in the Lease.


1.   TENANT ALTERATIONS AND IMPROVEMENTS.




     Reference herein to “Tenant Improvements” shall include all work to be done in the Premises
pursuant to the Tenant Improvement Plans described in Paragraph 2 below, including, but not limited
to, partitioning, doors, ceilings, floor coverings, wall finishes (including paint and wall
covering), electrical (including lighting, switching, telephones, outlets, etc.), plumbing,
heating, ventilating and air conditioning, fire protection, cabinets and other millwork. The
parties specifically contemplate that the Tenant Improvements will cost at least $850,000 and shall
include: demolition necessary to restore the Premises to a single-tenant building; construction of
office space; expansion of HVAC system into remaining warehouse space; stripping and sealing of
warehouse floor; installing dropped ceilings in remaining warehouse area; electrical system upgrade
and reconfiguration; data cabling; premises alarm; fire alarm; integrated access control system and
ancillary work related to same. “Tenant’s Work”, as referenced in the Lease, shall consist of the
Tenant Improvements constructed by Tenant pursuant to this Work Letter Agreement.


2.   TENANT IMPROVEMENT PLANS.




     Tenant shall deliver preliminary working drawings and specifications (“Preliminary Drawings”)
to Landlord within five (5) business days of the date of the Lease. Landlord shall have five (5)
days to provide its comments on the Preliminary Drawings. If no Landlord comments are received
within said period, the Preliminary Drawings will be deemed the approved Tenant Improvement Plans.
Within ninety (90) days of receipt of Landlord’s comments Tenant shall incorporate Landlord’s
comments (to the extent reasonably possible and practicable) and submit to Landlord final working
drawings and specifications. Such final working drawings and specifications shall be subject to
Landlord’s approval, not to be unreasonably withheld of delayed, which shall be given within ten
(10) business days, and once approved by Landlord they shall be known as the “Tenant Improvement
Plans.” The “Tenant Improvement Plans” must be consistent with Landlord’s’ standard specifications
(the “Standards”) for tenant improvements for the Building, as the same may be changed from time to time by Landlord.
Tenant and Landlord shall confirm the Standards prior to commencement of final working drawings and
specifications. Tenant, with Landlord’s cooperation, shall not cause changes to be made in the
Tenant Improvement Plans except only as necessary to obtain the building permit. Except as
otherwise specifically authorized herein, no further material changes to the Tenant Improvement
Plans may be made without the prior written approval from both Landlord and Tenant, which such
approvals shall not be unreasonably withheld. Upon termination of the Lease, Tenant shall deliver
to Landlord a full set of construction drawings.



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3.   NON-STANDARD TENANT IMPROVEMENTS.




     Landlord shall permit Tenant to deviate from the Standards for the Tenant Improvements or
approved Tenant Improvement Plans; provided that (a) the deviations shall not be of a lesser
quality than the Standards or original Tenant Improvement Plans; (b) the deviations conform to
applicable governmental regulations and necessary governmental permits and approvals have been
secured; and (c) the deviations do not require building service beyond the level normally provided
to other tenants in the Building and do not overload the floors; and Landlord has reasonably
determined that the deviations are of a nature and quality that are consistent with the overall
objectives for the Building.


4.   BUDGET.




     Tenant shall deliver an outline scope and preliminary budget to Landlord within five (5)
business days of the date of the Lease. Not later than Up to thirty (30) days prior to
commencement of construction, Tenant shall deliver an updated outline scope and budget to Landlord.


5.   COMPLETION SCHEDULE.




     Tenant shall deliver a preliminary time table for completion of the installation of the Tenant
Improvements to be constructed in the Premises to the Landlord within five (5) business days after
execution of the Lease. Not later than thirty (30) days prior to commencement of construction,
Tenant shall deliver to Landlord and updated timetable to complete the Tenant Improvements.
Landlord shall then have five (5) business days to provide its comments on the preliminary time
table. Within ninety (90) days of receipt of such comments Tenant shall incorporate (to the extent
reasonable and practicable) Landlord’s comments and submit to Landlord a final time table. The
final time table shall be subject to Landlord’s approval, in Landlord’s reasonable discretion.
Said approval shall be provided by Landlord to Tenant within ten (10) days of receipt of the final
timetable. Landlord recognizes that tenant may schedule to complete the Tenant Improvements in
stages.



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6.   CONSTRUCTION OF TENANT IMPROVEMENTS.




     Subject to Landlord’s approval, Tenant shall enter into a construction contract with its
contractor for the installation of the Tenant Improvements in accordance with the Tenant
Improvement Plans. Any contractor shall meet Landlord’s reasonable and industry standard insurance
requirements. Tenant is responsible for all of Tenant’s Work and all necessary permits and
approvals to complete such work. Tenant shall cause the Tenant Improvements to be constructed
lien-free, in a good and workmanlike manner in accordance with the Tenant Improvement Plans.
Tenant shall supervise the completion of such work and shall use its commercially reasonable best
efforts to secure substantial completion of the work as soon as is commercially practicable.
Tenant’s Work shall be completed in compliance with all laws, according to code, by licensed and
bonded contractors.


7.   PAYMENT OF COST OF THE TENANT IMPROVEMENTS.




     Tenant shall bear the entire cost of all Tenant Improvements; provided the Landlord shall
promptly contribute $100,000 for Tenant Improvements after Tenant has evidenced Tenant’s progress
and payment of $750,000 toward Tenant Improvements.


8.   INSPECTION AND LANDLORD’S WORK.




     “Landlord’s Work”, as referenced in the Lease, shall consist of any required repairs of
Operating Systems, any work required to bring the Expansion Premises to broom clean condition, and
the limited building code compliance obligations charged to Landlord pursuant to the terms of the
Lease, if any. The parties recognize that in addition, Landlord may construct (at its expense)
structural or other improvements , such as earthquake bracing, which work shall not be Tenant’s
Work and shall not be charged as a Tenant Improvement but which shall be coordinated with the
Tenant Improvements and be complete prior to the Expansion Premises Delivery Date to the extent
practicable.



     Tenant and Tenant’s prospective contractor completed a walk-through inspection with Landlord
of the Expansion Premises on June 12, 2006. The Expansion Premises were deemed acceptable and all
operating systems were deemed in good working condition. Landlord has received no Notices of
Building Code violations or ADA Non-compliance, and has no unresolved tenant complaints. Landlord
has acknowledged its obligation to enforce the terms of its Lease with the current tenant of the
Expansion Premises, particularly with regard to repair, maintenance and condition upon lease
termination. Prior to the Commencement Date, Tenant shall have the right to conduct an inspection
of the Project, and the condition of its “Operating Systems” which shall include, without
limitation, electrical systems, plumbing and water service, telecommunications, drainage and HVAC..
If the inspection identifies any imminent failures of Operating Systems, Landlord agrees to
repair, at its sole cost and expense, said imminent failures.



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EXHIBIT D




RULES AND REGULATIONS



To be developed subject to Tenant’s reasonable review and approval of rules and regulations similar
to those commonly found in projects of this type in the area





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EXHIBIT E




SIGN CRITERIA



To be developed subject to Tenant’s reasonable review and approval of sign criteria similar to
those commonly found in projects of this type in the area




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EXHIBIT F




ADDITIONAL UTILITIES OR SERVICES




[if applicable]




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EXHIBIT G




PERMITTED SUBSTANCES




     Rhodium sulfate plate bath, ultrasonic cleaning powder, denatured alcohol, boric acid powder,
propane, compressed oxygen, argon, acid activator, electrocleaner, sulfuric acid solution,
phosphoric acid solution, sulfuric acid powder, and flux.



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EXHIBIT H




LOCATION OF RESERVED PARKING STALLS





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