LEASE

 

LEASE

THIS LEASE (this “ Lease ”) is entered into as of this 21 st  day of November, 2006 (the “ Execution Date ”), by and between BMR-217 TH  PLACE LLC, a Delaware limited liability company (“ Landlord ”), and SONUS PHARMACEUTICALS, INC., a Delaware corporation (“ Tenant ”).

RECITALS

A.            WHEREAS, Landlord has entered into a purchase agreement to acquire certain real property (the “ Property ”) and the improvements thereon located at 1522 217 th  Place SE in Bothell, Washington, including the building located thereon (the “ Building ”) in which the Premises (as defined below) are located; and

B.            WHEREAS, provided Landlord acquires the Property, Landlord wishes to lease to Tenant, and Tenant desires to lease from Landlord, certain premises located in the Building (the “ Premises ”), consisting of approximately 37,699 rentable square feet of office and laboratory space, pursuant to the terms and conditions of this Lease, as detailed below.

AGREEMENT

NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, agree as follows:

1.             Lease of Premises .  Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises, as generally shown on Exhibit A attached hereto.  Tenant and its agents, servants, employees and invitees shall have unobstructed access to the Premises (subject to reasonable security measures, emergencies, casualties and other provisions of this Lease) twenty-four (24) hours a day, 365 or 366 days a year.  The Property and all landscaping, parking facilities and other improvements and appurtenances related thereto, including, without limitation, the Building, are hereinafter collectively referred to as the “ Project .”  All portions of the Project that are for the non-exclusive use of tenants of the Building, including, without limitation, driveways, sidewalks, parking areas, landscaped areas, service corridors, stairways, elevators, public restrooms and public lobbies, are hereinafter referred to as “ Common Area .”  The Property is legally described on Exhibit F attached hereto.

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

2.1.          This Lease shall take effect upon the date of execution and delivery hereof by all parties hereto and, except as specifically otherwise provided within this Lease, each of the provisions hereof shall be binding upon and inure to the benefit of Landlord and Tenant from the date of execution and delivery hereof by all parties hereto.

 

2.2.          In the definitions below, each Rentable Area (as defined below) is expressed in rentable square footage.  Rentable Area and Tenant’s Pro Rata Share are all subject to adjustment as provided in this Lease. 

Definition or Provision		Means the Following (As of the Term Commencement Date)
Rentable Area of Premises		37,699 square feet
Rentable Area of Building		67,340 square feet
Tenant’s Pro Rata Share of Building		55.98%

 

2.3.          Initial monthly and annual installments of Basic Annual Rent for the Premises (“ Basic Annual Rent ”), subject to adjustment under this Lease:

Rentable S.F.		Per Rentable S.F.		Total Annual		Total Monthly
37,699		$35		$1,319,465		$109,955.42

 

2.4.          [Intentionally omitted]

2.5.          Estimated Term Commencement Date:  September 1, 2007

2.6.          Estimated Term Expiration Date:  September 30, 2017

2.7.          Security Deposit:  An amount equal to the first (1 st ) four (4) months of Basic Annual Rent payable by Tenant, subject to increase or decrease in accordance with the terms hereof

2.8.          Permitted Use:  General office, research, development, all uses reasonably related to the development of pharmaceutical and biological drug products (including, without limitation, laboratory and vivarium use), manufacturing, production and distribution use in conformity with Applicable Laws (as defined below)

	2.9.	Address for Rent Payment:		BMR-217 th  Place LLC
				17140 Bernardo Center Drive, Suite 222
				San Diego, California 92128
				Attn: Chief Accounting Officer
	2.10.	Address for Notices to Landlord:		BMR-217 th  Place LLC
				17140 Bernardo Center Drive, Suite 222
				San Diego, California 92128
				Attn: General Counsel/Real Estate

 

2

 

 

	2.11.	Address for Notices to Tenant:		Sonus Pharmaceuticals, Inc.
				22026 20th Avenue, SE
				Bothell, Washington  98021
				Attn:  Alan Fuhrman, SVP/CFO

2.12.        The following Exhibits are attached hereto and incorporated herein by reference:

Exhibit A                                                Premises

Exhibit B                                                  Acknowledgement of Term Commencement Date and Term Expiration Date

Exhibit C                                                  Tenant’s Personal Property

Exhibit D                                                 Rules and Regulations

Exhibit E                                                   Form of Estoppel Certificate

Exhibit F                                                   Legal Description of Property

Exhibit G                                                  Work Letter

Exhibit H                                                 Form of Letter of Credit

3.             Term .

3.1.          This Lease shall take effect upon the date of execution and delivery hereof by all parties hereto and, except as specifically otherwise provided within this Lease, each of the provisions hereof shall be binding upon and inure to the benefit of Landlord and Tenant from the date of execution and delivery hereof by all parties hereto.

3.2.          The actual term of this Lease (the “ Term ”) shall be that period from the actual Term Commencement Date (as defined in Section 4.2 below) through the last day of the one hundred twentieth (120 th ) calendar month following the month during which the actual Term Commencement Date occurs, which last day shall be the actual Term Expiration Date.

4.             Possession and Commencement Date .

4.1.          Landlord shall tender possession of the Premises to Tenant on the Estimated Term Commencement Date, with the work required of Landlord described in the Work Letter attached hereto as Exhibit G (the “ Work Letter ”) to be Substantially Complete (as defined below); provided that such work shall not be required to be Substantially Complete during the Installation Period (as defined below).  Tenant agrees that in the event such work is not Substantially Complete on or before the Estimated Term Commencement Date for any reason, then (a) this Lease shall not be void or voidable, (b) Landlord shall not be liable to Tenant for any loss or damage resulting therefrom, (c) the Term Expiration Date shall be extended accordingly and (d) Tenant shall not be responsible for the payment of any Rent (as defined below) until the actual Term Commencement Date as described in Section 4.2 occurs.  The work required of Landlord described in the Work Letter (both Landlord’s Work and the Shell and Core Work) shall be deemed Substantially Complete, as that term is used in this Article 4 and elsewhere in this Lease, if Landlord has (y) completed all of Landlord’s Work and the Shell and Core Work (subject only to a punchlist of items that do not materially and substantially interfere with Tenant’s use of the Premises) and provided to Tenant a certificate of Substantial Completion from the architect that

3

 

includes a certification to Tenant that the Tenant Improvements are substantially complete in accordance with the Approved Plans (as defined in the Work Letter), except for minor punch list items, and (z) received a temporary certificate of occupancy from the municipality(ies) in which the Property is located, or would have received the temporary occupancy certificate or certificate of Substantial Completion but for delays or failure of Tenant or Tenant’s architect to deliver items in accordance with the Work Letter.  The term “ Substantially Complete ” or “ Substantial Completion ” means that the Tenants Improvements satisfy the requirements of clauses (y) and (z) above.

4.2.          The “ Term Commencement Date ” shall be the day Landlord tenders possession of the Premises to Tenant, but no earlier than the later of (a) the date on which the Tenant Improvements are Substantially Complete and (b) the date Tenant has had access to the Premises for four (4) weeks (the “ Installation Period ”) solely to install furniture, fixtures and equipment in the Premises (during which period Tenant shall have no obligation to pay any Basic Annual Rent or Tenant’s Pro Rata Share of Operating Expenses), not to occupy the Premises.  Tenant shall execute and deliver to Landlord written acknowledgment of the actual Term Commencement Date and the Term Expiration Date, in the form attached as Exhibit B hereto, within forty (40) days after Tenant takes occupancy of the Premises.  Failure to execute and deliver such acknowledgment, however, shall not affect the Term Commencement Date or Landlord’s or Tenant’s liability hereunder.

4.3.          During the Installation Period and any other period prior to the Term Commencement Date that Landlord permits (such permission not to be unreasonably withheld, conditioned or delayed) Tenant to enter upon the Premises for the purpose of installing improvements or placing personal property, Tenant shall furnish to Landlord evidence reasonably satisfactory to Landlord that the insurance coverages required of Tenant under the provisions of Article 21 are in effect, and such entry shall be subject to all the terms and conditions of this Lease other than the payment of Basic Annual Rent or Additional Rent (as defined below), except as required under Section 4.2 .

4.4.          Possession of areas of the Premises reasonably necessary for utilities, services, safety and operation of the Building is reserved to Landlord.

5.             Rent and Tenant Improvement Allowance .

5.1.          Tenant shall pay to Landlord as Basic Annual Rent for the Premises, commencing on the Term Commencement Date, the sums set forth in Section 2.3 , subject to the rental adjustments provided in Article 6 hereof.  Basic Annual Rent and TI Rent (defined below) shall be paid in equal monthly installments (as set forth in Section 2.3 for Basic Annual Rent), subject to the rental adjustments provided in Article  6 hereof, each in advance on the first day of each and every calendar month during the Term.

5.2.          Landlord shall cause to be constructed the tenant improvements in the Premises (the “ Tenant Improvements ”) pursuant to the Work Letter at a cost to Landlord (the “ Tenant Improvement Allowance ”) not to exceed Six Million Five Hundred Ninety-Seven Thousand Three Hundred Twenty-Five Dollars ($6,597,325) (based upon One Hundred Seventy-Five

4

 

Dollars ($175) per rentable square foot, as adjusted based on the finally determined Rentable Area of the Premises), which amount shall include the costs of (a) construction, (b) project management by Landlord (which fee shall equal three percent (3%) of the Tenant Improvement Allowance actually paid by Landlord but not less than 3% of the product of the Rentable Area of the Premises times One Hundred Twenty-Five Dollars ($125) per rentable square foot), (c) space planning, architect, engineering and other related services and (d) building permits and other planning and inspection fees.  The Tenant Improvement Allowance shall consist of an allowance of (x) One Hundred Twenty-Five Dollars ($125) per rentable square foot, which shall be expended first, (y) an additional Twenty-Five Dollars ($25) per rentable square foot, which shall be expended second (“ Tranche 2 ”), and (z) an additional Twenty-Five Dollars ($25) per rentable square foot, which shall be expended third (“ Tranche 3 ”).  If the total cost of the Tenant Improvements exceeds the Tenant Improvement Allowance, then the overage shall be paid by Tenant to Landlord prior to the Term Commencement Date.  Tenant shall have until December 31, 2007, to expend the unused portion of the Tenant Improvement Allowance, after which date Landlord’s obligation to fund such costs shall expire.  Tenant shall pay to Landlord, as Additional Rent (the “ TI Rent ”), Tranche 2 or so much thereof as is actually paid by Landlord amortized over the final one hundred twenty (120) months of the initial Term at a rate of ten percent (10%) per annum, and Tranche 3 or so much thereof as is actually paid by Landlord amortized over the final one hundred twenty (120) months of the initial Term at a rate of twelve percent (12%) per annum.

5.3.          The Tenant Improvement Allowance shall be paid by Landlord as provided in the Work Letter.

5.4.          In addition to Basic Annual Rent, Tenant shall pay to Landlord as additional rent (“ Additional Rent ”) at times hereinafter specified in this Lease (a) Tenant’s pro rata share, as set forth in Section 2.2 (“ Tenant’s Pro Rata Share ”), of Operating Expenses as provided in Article 7 and (b) any other amounts that Tenant assumes or agrees to pay under the provisions of this Lease that are owed to Landlord, including, without limitation, any and all other sums that may become due by reason of any default of Tenant or failure on Tenant’s part to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant, after notice and the lapse of any applicable cure periods.

5.5.          Basic Annual Rent, TI Rent and Additional Rent shall together be denominated “ Rent .”  Rent shall be paid to Landlord, without abatement, deduction or offset, in lawful money of the United States of America at the office of Landlord as set forth in Section 2.10 or to such other person or at such other place as Landlord may from time designate in writing.  In the event the Term commences or ends on a day other than the first day of a calendar month, then the Rent for such fraction of a month shall be prorated for such period on the basis of a thirty (30) day month and shall be paid at the then-current rate for such fractional month.

6.             Rent Adjustments .  The Basic Annual Rent and TI Rent shall be subject to an annual upward adjustment of three percent (3%) of the then-current Basic Annual Rent and TI Rent, respectively.  The first such adjustment shall become effective commencing with that monthly rental installment that is due on the first (1 st ) day of the 13 th  calendar month following the month during which the actual Term Commencement Date occurs, and subsequent adjustments shall

5

 

become effective on every successive annual anniversary of the first adjustment for so long as this Lease continues in effect.

7.             Operating Expenses .

7.1.          As used herein, the term “ Operating Expenses ” shall include:

(a)           Government impositions including, without limitation, property tax costs consisting of real and personal property taxes and assessments, including amounts due under any improvement bond upon the Building or the Project, including the parcel or parcels of real property upon which the Building and areas serving such Building are located or assessments in lieu thereof imposed by any federal, state, regional, local or municipal governmental authority, agency or subdivision (each, a “ Governmental Authority ”) are levied; taxes on or measured by gross rentals received from the rental of space in the Building; taxes based on the square footage of the Premises, the Building or the Project, as well as any parking charges, utilities surcharges or any other costs levied, assessed or imposed by, or at the direction of, or resulting from Applicable Laws (as defined below) or interpretations thereof, promulgated by any Governmental Authority in connection with the use or occupancy of the Building or the parking facilities serving the Building; taxes on this transaction or any document to which Tenant is a party creating or transferring an interest in the Premises; any fee for a business license to operate an office building; and any expenses, including the reasonable cost of attorneys or experts, reasonably incurred by Landlord in seeking reduction by the taxing authority of the applicable taxes, less tax refunds obtained as a result of an application for review thereof.  Operating Expenses shall not include any net income, franchise, capital stock, estate or inheritance taxes, or taxes that are the personal obligation of Tenant or of another tenant of the Project; and

(b)           All other costs of any kind paid or incurred by Landlord in connection with the operation or maintenance of the Building and the Project including, by way of example and not of limitation, costs of repairs and replacements to improvements within the Project as appropriate to maintain the Project as required hereunder; costs of utilities furnished to the Common Areas; sewer fees; cable television; trash collection; cleaning, including windows; heating; ventilation; air-conditioning; maintenance of landscaping and grounds; maintenance of drives and parking areas; maintenance of the roof; security services and devices; building supplies; maintenance or replacement of equipment utilized for operation and maintenance of the Project; license, permit and inspection fees; sales, use and excise taxes on goods and services purchased by Landlord in connection with the operation, maintenance or repair of the Project or Building systems and equipment; telephone, postage, stationery supplies and other expenses incurred in connection with the operation, maintenance or repair of the Project; accounting, legal and other professional fees and expenses incurred in connection with the Project; costs of furniture, draperies, carpeting, landscaping and other customary and ordinary items of personal property provided by Landlord for use in Common Areas; capital expenditures, provided , however, that any capital expenditures in excess of One Hundred Thousand Dollars ($100,000) shall be amortized on a straight line basis over the useful life thereof in accordance with GAAP (but in no event longer than ten (10) years); costs of complying with all federal, state, municipal and local laws, codes, ordinances, rules and regulations of governmental authorities, committees, associations, or other regulatory committees, agencies or governing bodies having jurisdiction

6

 

over the Property, the Building, the Premises, Landlord or Tenant, including both statutory and common law and hazard waste rules and regulations (“ Applicable Laws ”); insurance premiums, including premiums for public liability, property casualty, earthquake and environmental coverages; portions of insured losses paid by Landlord as part of the deductible portion of a loss pursuant to the terms of insurance policies up to a maximum deductible amount of Two Hundred Fifty Thousand Dollars ($250,000) per occurrence for environmental insurance and Fifty Thousand Dollars ($50,000) per occurrence for all other policies; service contracts; costs of services of independent contractors retained to do work of a nature referenced above; and costs of compensation (including employment taxes and fringe benefits) of all persons who perform regular and recurring duties connected with the day-to-day operation and maintenance of the Project, its equipment, the adjacent walks, landscaped areas, drives and parking areas, including, without limitation, janitors, floor waxers, window washers, watchmen, gardeners, sweepers and handymen.

Notwithstanding the foregoing, Operating Expenses shall not include any leasing commissions , finder’s fees, attorneys’ fees, entertainment and travel expenses and other costs incurred by Landlord in leasing or attempting to lease space in the Building; expenses that relate to preparation, improvement, decoration, painting or redecorating of rental space for a tenant or other occupants of the Building; expenses of initial development and construction, including, but not limited to, grading, paving, landscaping and decorating (as distinguished from maintenance, repair and replacement of the foregoing); the cost of compliance with Applicable Laws in effect as of the Term Commencement Date to the extent the Building or Project was not in compliance as of the Term Commencement Date; the cost of compliance with Applicable Laws to the extent that such cost would not have been incurred but for the construction of additions to the Building involving the moving of perimeter walls of the Building, adding additional floors to the Building, or constructing additional buildings on the Property; expenses for the defense of Landlord’s title to the Property or Building; the cost of maintenance, repair and replacement of the foundation and structural walls; any repair, rebuilding or other work necessitated by condemnation, fire, windstorm, act of terrorism, or other casualty or hazard, the cost of which exceeds Ten Thousand Dollars ($10,000), except to the extent of any insurance deductible payable by Tenant under this Lease; the cost of insurance premiums for insurance coverage not typically carried on buildings comparable to the Building in the greater Seattle area ( provided that Landlord shall be allowed to include as Operating Expenses the costs of environmental and earthquake insurance); accounting, legal and other professional fees and expenses relating to other tenants or the refinance or sale of the Property; interest upon loans to Landlord or secured by a mortgage or deed of trust covering the Project or a portion thereof ( provided that interest upon a government assessment or improvement bond payable in installments shall constitute an Operating Expense under Section 7.1 ); costs arising from Landlord’s charitable or political contributions; salaries of executive officers of Landlord; Landlord’s general corporate overhead, except as it relates to the specific management of the Building; any ground lease rental; costs incurred by Landlord with respect to goods and services other than parking (including utilities sold and supplied to tenants and occupants of the Building) to the extent that Landlord is reimbursed for such costs other than through the Operating Expense pass-through provisions of such tenants’ leases; expenses in connection with services or other benefits that are not offered to Tenant or for which Tenant is charged directly and that are provided to another tenant or occupant of the Building; fines or

7

 

penalties incurred by Landlord due to the violation by Landlord of (i) any Applicable Laws ( provided that costs of complying with Applicable Laws may be included unless otherwise specifically excluded herein) or (ii) the terms and conditions of any lease of space in the Building; overhead and profit increments paid to subsidiaries or affiliates of Landlord for services provided to the Building to the extent the cost of such services exceeds the costs that would generally be charged for such services if rendered on a competitive basis (based upon a standard of similar office buildings in the general market area of the Premises) by unaffiliated third parties capable of providing such service; advertising and promotional expenditures; depreciation of the Building or the improvements therein; costs resulting from the negligence or willful misconduct of Landlord; and depreciation claimed by Landlord for tax purposes ( provided that this exclusion of depreciation is not intended to delete from Operating Expenses actual costs of repairs and replacements and reasonable reserves in regard thereto that are provided for in Section 7.1 ).

“ Applicable Laws ” means all laws, codes, ordinances, rules and regulations of governmental authorities having jurisdiction over the Property, the Building, the Premises, Landlord or Tenant.

7.2.          Tenant shall pay to Landlord on the first day of each calendar month of the Term, as Additional Rent, (a) the Property Management Fee (as defined below) and (b) Landlord’s estimate of Tenant’s Pro Rata Share of Operating Expenses with respect to the Building and the Project, as applicable, for such month.

(x)            The “ Property Management Fee ” shall equal two percent (2%) of the Basic Annual Rent due from Tenant.

(y)           Within ninety (90) days after the conclusion of each calendar year (or such longer period as may be reasonably required by Landlord), Landlord shall furnish to Tenant a statement showing in reasonable detail the actual Operating Expenses and Tenant’s Pro Rata Share of Operating Expenses for the previous calendar year.  Any additional sum due from Tenant to Landlord shall be due and payable within thirty (30) days after Tenant’s receipt of such statement.  If the amounts paid by Tenant pursuant to this Section 7.2 exceed Tenant’s Pro Rata Share of Operating Expenses for the previous calendar year, then Landlord shall credit the difference against the Rent next due and owing from Tenant; provided that, if the Lease term has expired, Landlord shall accompany said statement with payment for the amount of such difference.

(z)            Any amount due under this Section 7.2 for any period that is less than a full month shall be prorated (based on a thirty (30)-day month) for such fractional month.

7.3.          Landlord’s annual statement shall be final and binding upon Tenant unless Tenant, within sixty (60) days after Tenant’s receipt thereof, shall contest any item therein by giving written notice to Landlord, specifying each item contested and the reasons therefor.  If, during such sixty (60)-day period, Tenant reasonably and in good faith questions or contests the correctness of Landlord’s statement of Tenant’s Pro Rata Share of Operating Expenses, Landlord shall provide Tenant with reasonable access to Landlord’s books and records to the extent

8

 

relevant to determination of Operating Expenses, and such information as Landlord reasonably determines to be responsive to Tenant’s written inquiries.  In the event that, after Tenant’s review of such information, Landlord and Tenant cannot agree upon the amount of Tenant’s Pro Rata Share of Operating Expenses, then Tenant shall have the right to have an independent public accounting firm hired by Tenant on an hourly basis and not on a contingent-fee basis (at Tenant’s sole cost and expense) and approved by Landlord (which approval Landlord shall not unreasonably withhold , condition or delay) audit and review such of Landlord’s books and records for the year in question as directly relate to the determination of Operating Expenses for such year (the “ Independent Review ”).  Landlord shall make such books and records available at the location where Landlord maintains them in the ordinary course of its business.  Landlord need not provide copies of any books or records but Tenant may copy those portions of the books or records provided by Landlord to Tenant at Tenant’s expense.  Tenant shall commence the Independent Review within fifteen (15) days after the date Landlord has given Tenant access to Landlord’s books and records for the Independent Review.  Tenant shall complete the Independent Review and notify Landlord in writing of Tenant’s specific objections to Landlord’s calculation of Operating Expenses (including Tenant’s accounting firm’s written statement of the basis, nature and amount of each proposed adjustment) no later than six (6) months after Landlord has first given Tenant access to Landlord’s books and records for the Independent Review.  Landlord shall review the results of any such Independent Review.  The parties shall endeavor to agree promptly and reasonably upon Operating Expenses taking into account the results of such Independent Review.  If, as of  ninety (90) days after Tenant has submitted the Independent Review to Landlord, the parties have not agreed on the appropriate adjustments to Operating Expenses, then the parties shall engage a mutually agreeable independent third party accountant with at least ten (10) years’ experience in commercial real estate accounting in Western Washington (the “ Accountant ”).  If the parties cannot agree on the Accountant, each shall within ten (10) days after such impasse appoint an Accountant (different from the accountant and accounting firm that conducted the Independent Review) and, within ten (10) days after the appointment of both such Accountants, those two Accountants shall select a third (which cannot be the accountant and accounting firm that conducted the Independent Review).  If either party fails to timely appoint an Accountant, then the Accountant the other party appoints shall be the sole Accountant.  Within ten (10) days after appointment of the Accountant(s), Landlord and Tenant shall each simultaneously give the Accountants (with a copy to the other party) its determination of Operating Expenses, with such supporting data or information as each submitting party determines appropriate.  Within ten (10) days after such submissions, the Accountants shall by majority vote select either Landlord’s or Tenant’s determination of Operating Expenses.  The Accountants may not select or designate any other determination of Operating Expenses.  The determination of the Accountant(s) shall bind the parties.  If the parties agree or the Accountant(s) determine that Tenant’s Pro Rata Share of Operating Expenses actually paid for the calendar year in question exceeded Tenant’s obligations for such calendar year, then Landlord shall, at Tenant’s option, either (a) credit the excess to the next succeeding installments of estimated Additional Rent or (b) pay the excess to Tenant within thirty (30) days after delivery of such results.  If the parties agree or the Accountant(s) determine that Tenant’s payments of Tenant’s Pro Rata Share of Operating Expenses for such calendar year were less than Tenant’s obligation for the calendar year, then Tenant shall pay the deficiency to the Landlord within thirty (30) days after delivery of such results.  Tenant agrees to pay the cost of

9

 

such audit; provided that, if the audit reveals that Landlord’s determination of Tenant’s Pro Rata Share of Operating Expenses was at least five percent (5%) in error in Landlord’s favor, Landlord shall pay the reasonable costs of such audit.

7.4.          Tenant shall not be responsible for Operating Expenses attributable to the time period prior to the Term Commencement Date; provided , however , that if Landlord shall permit Tenant possession of the Premises prior to the Term Commencement Date (exclusive of the Installation Period ) , Tenant shall be responsible for Tenant’s Pro Rata Share of Operating Expenses from such earlier date of possession.  Tenant’s responsibility for Tenant’s Pro Rata Share of Operating Expenses shall continue to the latest of (a) the date of termination of the Lease or (b) the date Tenant has fully vacated the Premises.

7.5.          Operating Expenses for the calendar year in which Tenant’s obligation to share therein commences and for the calendar year in which such obligation ceases shall be prorated on a basis reasonably determined by Landlord.  Expenses such as taxes, assessments and insurance premiums that are incurred for an extended time period shall be prorated based upon the time periods to which they apply so that the amounts attributed to the Premises relate in a reasonable manner to the time period wherein Tenant has an obligation to share in Operating Expenses.

8.             Rentable Area .

8.1.          The Rentable Area of the Project is determined by making separate calculations of the Rentable Area of each floor of all buildings and totaling the Rentable Area of all floors within the buildings. The Rentable Area of a floor is calculated by measuring to the outside finished surface of each permanent outer building wall where it intersects the floor. The full area calculated as set forth above is included as Rentable Area of the Project without deduction for (a) columns or projections, (b) vertical penetrations (including stairs, elevator shafts, flues, pipe shafts, vertical ducts, and the like) and their enclosing walls, (c) corridors, equipment rooms, restrooms, entrance ways, elevator lobbies and the like, and each of their enclosing walls, and (d) any other unusable area of any nature.

8.2.          Promptly after Substantial Completion of the Tenant Improvements, Landlord’s architect shall certify to Tenant the Rentable Area of the Premises and the Rentable Area of the Building and shall provide to Tenant a copy of the drawings and calculations upon which such Rentable Areas are based.  If the Rentable Area of the Premises determined under this paragraph is different than the Rentable Area of the Premises set forth in Section 2.2 , then the Basic Annual Rent under Section 2.3 , the Security Deposit under Section 2.7 and the Tenant Improvement Allowance under Section 5 shall be adjusted to reflect the Rentable Area of the Premises determined under this paragraph.

8.3.          Tenant’s Pro Rata Share shall be recalculated in the event of any change in the Rentable Area of the Premises or the total Rentable Area in the Project.  It is anticipated that Landlord may construct another building on the Property, in which event Tenant’s Pro Rata Share shall be adjusted with respect to Operating Expenses benefiting the entire Property (e.g., real property taxes and insurance) such that all of the Rentable Area in the Project is taken into account.  If the recalculation of Tenant’s Pro Rata Share is certified by a licensed architect as

10

 

being correct, then Tenant shall be bound by such certification.  Landlord shall provide to Tenant a copy of the drawings and calculations upon which the recalculation of Tenant’s Pro Rata Share is based.

9.             Security Deposit .

9.1.          Tenant has deposited with Landlord the sum set forth in Section 2.7 (the “ Security Deposit ”), which sum shall be held by Landlord as security for the faithful performance by Tenant of all of the terms, covenants and conditions of this Lease to be kept and performed by Tenant during the Term.  If Tenant defaults with respect to any provision of this Lease, including, but not limited to, any provision relating to the payment of Rent, then Landlord may (but shall not be required to) use, apply or retain all or any part of the Security Deposit for the payment of any Rent or any other sum in default, or to compensate Landlord for any other loss or damage that Landlord may suffer by reason of Tenant’s default.  If any portion of the Security Deposit is so used or applied, then Tenant shall, within fifteen (15) days following demand therefor, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount, and Tenant’s failure to do so shall be a material breach of this Lease.

9.2.          In the event of bankruptcy or other debtor-creditor proceedings against Tenant, the Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due Landlord for all periods prior to the filing of such proceedings.

9.3.          Landlord may deliver to any purchaser of Landlord’s interest in the Premises the funds deposited hereunder by Tenant, and thereupon Landlord shall be discharged from any further liability with respect to such deposit.  This provision shall also apply to any subsequent transfers.

9.4.          If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, then the Security Deposit, or any balance thereof, shall be returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder) within thirty (30) days after the expiration or earlier termination of this Lease.

9.5.          [Intentionally omitted]

9.6.          If the Security Deposit shall be in cash, Landlord shall deposit the Security Deposit into an interest-bearing account at a banking organization selected by Landlord.  All interest and dividends, if any, accruing on the Security Deposit, less a one percent (1%) per annum charge on the Security Deposit for administrative expenses (but in no event greater than the amount of interest actually accrued on the Security Deposit during such annual period), shall be added to, held and included within the term Security Deposit and, provided that no Default shall have occurred and be continuing, shall accrue to the account of Tenant and be disbursed to Tenant annually.  Landlord shall not be required to credit Tenant with any interest for any period during which Landlord does not receive interest on the Security Deposit.

9.7.          The Security Deposit may be in the form of cash, a letter of credit or any other security instrument acceptable to Landlord in its sole discretion.  Tenant may at any time, except

11

 

during Default, deliver a letter of credit (the “ L/C Security ”) as the entire Security Deposit, as follows.

(a)           If Tenant elects to deliver L/C Security, then Tenant shall provide Landlord, and maintain in full force and effect throughout the Term, a letter of credit in the form of Exhibit H , or such other form as is reasonably acceptable to Landlord, issued by an issuer reasonably satisfactory to Landlord, in the amount of the Security Deposit, with an initial term of at least one (1) year.  If, at the Term Expiration Date, any Rent remains uncalculated or unpaid, then:  (a) Landlord shall with reasonable diligence complete any necessary calculations; (b) Tenant shall extend the expiry date of such L/C Security from time to time as Landlord reasonably requires; and (c) in such extended period, Landlord shall not unreasonably refuse to consent to an appropriate reduction of the L/C Security.  Tenant shall reimburse Landlord’s legal costs (as estimated by Landlord’s counsel), not to exceed One Thousand Five Hundred Dollars ($1,500), in handling Landlord’s acceptance of L/C Security or its replacement or extension.

(b)           If Tenant delivers to Landlord satisfactory L/C Security in place of the entire Security Deposit, Landlord shall remit to Tenant any cash Security Deposit Landlord previously held.

(c)           Landlord may draw upon the L/C Security, and hold and apply the proceeds in the same manner and for the same purposes as the Security Deposit, if:  (a) an uncured Default exists; (b) as of the date thirty (30) days before any L/C Security expires (even if such scheduled expiry date is after the Term Expiration Date) Tenant has not delivered to Landlord an amendment or replacement for such L/C Security, reasonably satisfactory to Landlord, extending the expiry date to the earlier of (i) one (1) month after the then-current Term Expiration Date or (ii) the date one year after the then-current expiry date of the L/C Security; (c) the L/C Security provides for automatic renewals, Landlord asks Tenant and the issuer to confirm the current L/C Security expiry date, and the issuer fails to do so within thirty (30) business days; (d) Tenant fails to pay (when and as Landlord reasonably requires) any bank charges for Landlord’s transfer of the L/C Security; or (e) the issuer of the L/C Security ceases, or announces that it will cease, to maintain an office in the city where Landlord may present drafts under the L/C Security.  This paragraph does not limit any other provisions of this Lease allowing Landlord to draw the L/C Security under specified circumstances.

(d)           Tenant shall not seek to enjoin, prevent, or otherwise interfere with Landlord’s draw under L/C Security, even if it violates this Lease.  Tenant acknowledges that the only effect of a wrongful draw would be to substitute a cash Security Deposit for L/C Security, causing Tenant no legally recognizable damage.  Landlord shall hold the proceeds of any draw in the same manner and for the same purposes as a cash Security Deposit.  In the event of a wrongful draw, the parties shall cooperate to allow Tenant to post replacement L/C Security simultaneously with the return to Tenant of the wrongfully drawn sums, and Landlord shall upon request confirm in writing to the issuer of the L/C Security that Landlord’s draw was erroneous.

(e)           If Landlord transfers its interest in the Premises, then Tenant shall at Tenant’s expense, within five Business Days after receiving a request from Landlord, deliver (and, if the issuer requires, Landlord shall consent to) an amendment to the L/C Security naming

12

 

Landlord’s grantee as substitute beneficiary.  If the required Security changes while L/C Security is in force, then Tenant shall deliver (and, if the issuer requires, Landlord shall consent to) a corresponding amendment to the L/C Security.

10.           Use .

10.1.        Tenant shall use the Premises for the purpose set forth in Section 2.8 (the “ Permitted Use ”), and shall not use the Premises, or permit or suffer the Premises to be used, for any other purpose without Landlord’s prior written consent, which consent Landlord may withhold in its sole and absolute discretion.

10.2.        Tenant shall not use or occupy the Premises in violation of Applicable Laws; zoning ordinances; or the certificate of occupancy issued for the Building, and shall, upon ten (10) days’ written notice from Landlord, discontinue any use of the Premises that is declared or claimed by any Governmental Authority having jurisdiction to be a violation of any of the above, or that in Landlord’s reasonable opinion violates any of the above.  Tenant shall comply with any direction of any Governmental Authority having jurisdiction that shall, by reason of the nature of Tenant’s use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupation thereof.

10.3.        Tenant shall not do or permit to be done anything that will invalidate or increase the cost of any fire, environmental, extended coverage or any other insurance policy covering the Building and the Project, and shall comply with all rules, orders, regulations and requirements of the insurers of the Building and the Project, and Tenant shall promptly, upon demand, reimburse Landlord for any additional premium charged for such policy by reason of Tenant’s failure to comply with the provisions of this Article; provided , however, that no action of Tenant that increases the cost of any insurance shall constitute a Default so long as Tenant pays such increased cost.

10.4.        Tenant shall keep all doors opening onto public corridors closed, except when in use for ingress and egress.

10.5.        No additional locks or bolts of any kind shall be placed upon any of the doors or windows by Tenant, nor shall any changes be made to existing locks or the mechanisms thereof without Landlord’s prior written consent , which consent shall not be unreasonably withheld, conditioned or delayed.  Tenant shall, upon termination of this Lease, return to Landlord all keys to offices and restrooms either furnished to or otherwise procured by Tenant.  In the event any key so furnished to Tenant is lost, Tenant shall pay to Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall reasonably deem it necessary to make such change.

10.6.        No awnings or other projections shall be attached to any outside wall of the Building.  No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises other than Landlord’s standard window coverings.  Neither the interior nor exterior of any windows shall be coated or otherwise sunscreened without Landlord’s prior written consent, nor shall any bottles, parcels or other

13

 

articles be placed on the windowsills.  No equipment, furniture or other items of personal property shall be placed on any exterior balcony without Landlord’s prior written consent.

10.7.        No sign, advertisement or notice (“ Signage ”) shall be exhibited, painted or affixed by Tenant on any part of the Premises or the Building without Landlord’s prior written consent, not to be unreasonably withheld, conditioned or delayed.  Interior signs on doors and the directory tablet shall be inscribed, painted or affixed for Tenant by Landlord at Tenant’s sole cost and expense, and shall be of a size, color and type and be located in a place reasonably acceptable to Landlord.  The directory tablet shall be provided exclusively for the display of the name and location of tenants only.  Tenant shall not place anything on the exterior of the corridor walls or corridor doors other than Landlord’s standard lettering.  Tenant shall be entitled to Tenant’s Pro Rata Share of the maximum Building façade Signage permitted by Applicable Laws, the cost of which shall be at Tenant’s sole expense (which expense shall be included in the Costs (as defined in the Work Letter)).  The design and placement of Tenant’s Building façade Signage shall be reviewed and approved by Landlord and Tenant as part of Landlord’s Work Plans and shall, if approved, be made part of the Approved Plans as defined in the Work Letter.  

10.8.        Tenant shall cause any office equipment or machinery to be installed in the Premises so as to reasonably prevent sounds or vibrations therefrom from extending into the Common Areas or other offices in the Building.  Further, Tenant shall not place any equipment weighing one hundred (100) pounds or greater per square foot of equipment footprint within the Premises, other than on the ground floor thereto, without Landlord’s prior written approval (which approval shall not be unreasonably withheld, conditioned or delayed), and such equipment shall be placed in a location designed to carry the weight of such equipment.

10.9.        Tenant shall not (a) do or permit anything to be done in or about the Premises that shall in any way obstruct or interfere with the rights of other tenants or occupants of the Building or the Project, or injure or annoy them, or (b) use or allow the Premises to be used for immoral, unlawful or objectionable purposes, nor shall Tenant knowingly cause, maintain or permit any nuisance or waste in, on or about the Premises, the Building or the Project.

10.10.      Notwithstanding any other provision herein to the contrary, Landlord shall correct, repair or replace any non-compliance of the Building exterior, the Tenant Improvements and the Common Area with all applicable building permits and codes in effect as of the Term Commencement Date, including, without limitation, the provisions of Title III of the Americans With Disabilities Act (“ ADA ”) in effect as of the Term Commencement Date.  Said costs of compliance shall be at Landlord’s sole cost and shall not be part of Operating Expenses, but shall constitute Costs (as defined in the Work Letter) to the extent that such costs are part of the Approved Budget (as defined in the Work Letter) for the Tenant Improvements, as the Approved Budget may be amended pursuant to the Work Letter.  Landlord shall correct, repair or replace any non-compliance of the Building exterior and the Common Area with any revisions or amendments to the ADA that become effective after the Term Commencement Date, provided that the cost of such repairs or replacements (amortized over the useful life thereof in accordance with GAAP, but in no event longer than ten (10) years) shall be included as Operating Expenses payable by Tenant.  Tenant shall be responsible, at its sole cost and expense, for all other ADA compliance for the Premises, including, without limitation, in connection with Tenant’s

14

 

construction of any alterations or other improvements in the Premises and the operation of Tenant’s business and employment practices in the Premises.  The repairs, corrections or replacements required of Landlord or of Tenant under the foregoing provisions of this Section 10.10 shall be made promptly following notice of non-compliance from any Governmental Authority.  The provisions of this Section 10.10 shall survive the expiration or earlier termination of this Lease with respect to any obligation accrued under this Section 10.10 before the date of expiration or earlier termination of this Lease.

11.           Brokers .

11.1.        Tenant represents and warrants that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Lease other than Flinn Ferguson (“ Tenant’s Broker ”), and that it knows of no other real estate broker or agent that is or might be entitled to a commission in connection with this Lease.  Landlord shall compensate Tenant’s Broker in relation to this Lease pursuant to a separate agreement between Landlord and Tenant’s Broker or Landlord’s Broker (as defined below).  Landlord represents and warrants that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Lease other than EDG Commercial Real Estate (“ Landlord’s Broker ”), and that it knows of no other real estate broker or agent that is or might be entitled to a commission in connection with this Lease.  Landlord shall compensate Landlord’s Broker in relation to this Lease pursuant to a separate agreement between Landlord and Landlord’s Broker.

11.2.        Tenant represents and warrants that no broker or agent has made any representation or warranty relied upon by Tenant in Tenant’s decision to enter into this Lease, other than as contained in this Lease.

11.3.        Tenant acknowledges and agrees that the employment of brokers by Landlord is for the purpose of solicitation of offers of leases from prospective tenants and that no authority is granted to any broker to furnish any representation (written or oral) or warranty from Landlord unless expressly contained within this Lease.  Landlord is executing this Lease in reliance upon Tenant’s representations, warranties and agreements contained within Sections 11.1 and 11.2 .

11.4.        Tenant agrees to indemnify, defend and hold Landlord harmless from any and all cost or liability for compensation claimed by any other broker or agent, other than Tenant’s Broker, employed or engaged by it or claiming to have been employed or engaged by it.

11.5.        Landlord agrees to indemnify, defend and hold Tenant harmless from any and all cost or liability for compensation claimed by any other broker or agent, other than Landlord’s Broker, employed or engaged by it or claiming to have been employed or engaged by it.

12.           Holding Over .

12.1.        If, with Landlord’s prior written consent, Tenant holds possession of all or any part of the Premises after the Term, Tenant shall become a tenant from month to month after the expiration or earlier termination of the Term, and in such case Tenant shall continue to pay (a) the Basic Annual Rent in accordance with Article 5 , as adjusted in accordance with Article 6 , and

15

 

(b) Tenant’s Pro Rata Share of Operating Expenses.  Any such month-to-month tenancy shall be subject to every other term, covenant and agreement contained herein.

12.2.        Notwithstanding the foregoing, if Tenant remains in possession of the Premises after the expiration or earlier termination of the Term without Landlord’s prior written consent, Tenant shall become a tenant at sufferance subject to the terms and conditions of this Lease, except that the monthly rent shall be equal to one hundred fifty percent (150%) of the Rent in effect during the last thirty (30) days of the Term.

12.3.        Acceptance by Landlord of Rent after the expiration or earlier termination of the Term shall not result in an extension, renewal or reinstatement of this Lease.

12.4.        The foregoing provisions of this Article 12 are in addition to and do not affect Landlord’s right of reentry or any other rights of Landlord hereunder or as otherwise provided by Applicable Laws.

13.           Taxes on Tenant’s Property .

13.1.        Tenant shall pay prior to delinquency any and all taxes levied against any personal property or trade fixtures placed by Tenant in or about the Premises.

13.2.        If any such taxes on Tenant’s personal property or trade fixtures are levied against Landlord or Landlord’s property or, if the assessed valuation of the Building or the Property is increased by inclusion therein of a value attributable to Tenant’s personal property or trade fixtures, and if Landlord, after ten (10) days’ written notice to Tenant, pays the taxes based upon any such increase in the assessed valued of the Building or the Project, then Tenant shall, within thirty (30) days after receipt of a written demand, repay to Landlord such increased portion of the taxes so paid by Landlord.

13.3.        If any improvements in or alterations to the Premises, whether owned by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which improvements conforming to Landlord’s building standards (the “ Building Standard ”) in other spaces in the Building are assessed, then the real property taxes and assessments levied against Landlord or the Building by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of Section 13.2 above.  Any such excess assessed valuation due to improvements in or alterations to space in the Building leased by other tenants of Landlord shall not be included in the Operating Expenses defined in Article 7 , but shall be treated, as to such other tenants, as provided in this Section 13.3 .  If the records of the County Assessor are available and sufficiently detailed to serve as a basis for determining whether said Tenant improvements or alterations are assessed at a higher valuation than the Building Standard, then such records shall be binding on both Landlord and Tenant.

14.           Condition of Premises .  Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of the Premises,

16

 

the Building or the Project, or with respect to the suitability of the Premises, the Building or the Project for the conduct of Tenant’s business.  Tenant’s taking of possession of the Premises shall, except as otherwise agreed to in writing by Landlord and Tenant and as provided by the Work Letter, conclusively establish that the Premises, the Building and the Project were at such time in good, sanitary and satisfactory condition and repair.  Notwithstanding the foregoing, Landlord shall use commercially reasonable efforts to enforce any warranties for the Core and Shell Work and Landlord’s Work, and, provided that Tenant shall notify Landlord of deficiencies in the Core and Shell Work within sixty (60) days after the Term Commencement Date, Landlord shall correct any such deficiencies that existed as of the Term Commencement Date at Landlord’s sole cost and expense.

15.           Common Areas and Parking Facilities .

15.1.        Tenant shall have the non-exclusive right, in common with others, to use the Common Areas, subject to the rules and regulations adopted by Landlord and attached hereto as Exhibit D , together with such other reasonable and nondiscriminatory rules and regulations as are hereafter promulgated by Landlord in its reasonable discretion (the “ Rules and Regulations ”) so long as such Rules and Regulations do not materially interfere with or prevent Tenant from operating the Premises for the Permitted Use.  Tenant shall faithfully observe and comply with the Rules and Regulations.  Landlord shall not be responsible to Tenant for the violation or non-performance by any other tenant or any agent, employee or invitee thereof of any of the Rules and Regulations.

15.2.        Tenant shall have a non-exclusive, revocable license, without charge, to use Tenant’s Pro Rata Share of parking facilities serving the Building in common on an unreserved basis with other tenants of the Building and the Project.  Landlord shall continuously provide Tenant with parking spaces located on the Property and sufficient in number to at least satisfy the minimum parking requirements of Applicable Laws.  Landlord shall designate visitor parking stalls near the entrance of the Building for use by visitors of all tenants of the Building or the Property.

15.3.        Tenant agrees not to unreasonably overburden the parking facilities and agrees to cooperate with Landlord and other tenants in the use of the parking facilities.  Landlord reserves the right to reasonably determine that parking facilities are becoming overcrowded and to limit Tenant’s use thereof.  Upon such determination, Landlord may reasonably allocate parking spaces among Tenant and other tenants of the Building or the Project.  Nothing in this Section, however, is intended to create an affirmative duty on Landlord’s part to monitor parking.

15.4.        Landlord reserves the right to modify the Common Areas, including the right to add or remove exterior and interior landscaping and to subdivide real property so long as such modifications do not materially interfere with or prevent Tenant from operating the Premises for the Permitted Use or materially increase Tenant’s Pro Rata Share of Operating Expenses.  Tenant acknowledges that Landlord specifically reserves the right to allow the exclusive use of corridors and restroom facilities located on specific floors to one or more tenants occupying such floors; provided , however , that Tenant shall not be deprived of the use of the corridors reasonably

17

 

required to serve the Premises or of restroom facilities serving the floor upon which the Premises are located.

16.           Utilities and Services .

16.1.        Tenant shall pay for all water (including the cost to service, repair and replace reverse osmosis, de-ionized and other treated water), gas, heat, light, power, telephone, internet service, cable television, other telecommunications and other utilities supplied to the Premises, together with any fees, surcharges and taxes thereon.  To the extent permitted by the local utilities, all utilities serving the Premises shall be separately metered.  All accounts for separately metered utilities shall be in Tenant’s name, and Tenant shall be responsible for paying for such utilities directly to the provider thereof.  If any such utility is not separately metered to Tenant, Tenant shall pay a reasonable proportion (to be determined by Landlord) of all charges of such utility jointly metered with other premises as part of Tenant’s Pro Rata Share of Operating Expenses or, in the alternative, Landlord may, at its option, monitor the usage of such utilities by Tenant and charge Tenant with the cost of purchasing, installing and monitoring such metering equipment, which cost shall be paid by Tenant as Additional Rent.

16.2.        Landlord shall not be liable for, nor shall any eviction of Tenant result from the failure to furnish any such utility or service, whether or not such failure is caused by accident; breakage; repair; strike, lockout or other labor disturbance or labor dispute of any character; act of terrorism; shortage of materials, which shortage is not unique to Landlord or Tenant, as the case may be; governmental regulation, moratorium or other governmental action; or Landlord’s inability, despite the exercise of reasonable diligence to furnish any such utility or service (collectively, “ Force Majeure ”).  In the event of such failure, Tenant shall not be entitled to any abatement or reduction of Rent, nor shall Tenant be relieved from the operation of any covenant or agreement of this Lease .

16.3.        Tenant shall pay for, prior to delinquency of payment therefor, any utilities and services that may be furnished to the Premises during or, if Tenant occupies the Premises after the expiration or earlier termination of the Term, after the Term.

16.4.        Tenant shall not, without Landlord’s prior written consent (not to be unreasonably withheld, conditioned or delayed), use any device in the Premises (including, without limitation, data processing machines) that will in any way (a) increase the amount of ventilation, air exchange, gas, steam, electricity or water beyond the existing capacity of the Building as proportionately allocated to the Premises based upon Tenant’s Pro Rata Share as usually furnished or supplied for the use set forth in Section 2.8 or (b) exceed Tenant’s Pro Rata Share of the Building’s capacity to provide such utilities or services.

16.5.        If Tenant shall require utilities or services in excess of those usually furnished or supplied for tenants in similar spaces in the Building by reason of Tenant’s equipment or extended hours of business operations, then Tenant shall first procure Landlord’s consent (not to be unreasonably withheld, conditioned or delayed) for the use thereof, which consent Landlord may condition upon the availability of such excess utilities or services, and Tenant shall pay as Additional Rent an amount equal to the cost of providing such excess utilities and services.

 

18

 

 

16.6.        Utilities and services provided by Landlord to the Premises that are separately metered shall be paid by Tenant directly to the supplier of such utility or service.

16.7.        Landlord shall provide water in Common Areas for drinking and lavatory purposes only; provided , however , that if Landlord reasonably determines that Tenant requires, uses or consumes water for any purpose other than ordinary drinking and lavatory purposes, Landlord may install a water meter and thereby measure Tenant’s water consumption for all purposes.  Tenant shall pay Landlord for the actual costs of such meter and the installation thereof and, throughout the duration of Tenant’s occupancy of the Premises, Tenant shall keep said meter and installation equipment in good working order and repair at Tenant’s sole cost and expense.  If Tenant fails to so maintain such meter and equipment, Landlord may repair or replace the same and shall collect the costs therefor from Tenant.  Tenant agrees to pay for water consumed, as shown on said meter (at cost and without any mark-up by Landlord), within fifteen (15) days after Tenant’s receipt of bills therefor.  If Tenant fails to timely make such payments, Landlord may pay such charges and collect the same from Tenant.  Any such costs or expenses incurred, or payments made by Landlord for any of the reasons or purposes hereinabove stated, shall be deemed to be Additional Rent payment by Tenant and collectible by Landlord as such.

16.8.        Landlord reserves the right to stop service of the elevator, plumbing, ventilation, air conditioning and electric systems, when Landlord deems reasonably necessary or desirable, due to accident, emergency or the need to make repairs, alterations or improvements, until such repairs, alterations or improvements shall have been completed, and Landlord shall further have no responsibility or liability for failure to supply elevator facilities, plumbing, ventilation, air conditioning or electric service when prevented from doing so by Force Majeure or a failure by a third party to deliver gas, oil or another suitable fuel supply, or Landlord’s inability by exercise of reasonable diligence to obtain gas, oil or another suitable fuel; provided , however, Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s use and operation of the Premises for the Permitted Use.  Without limiting the foregoing, it is expressly understood and agreed that any covenants on Landlord’s part to furnish any service pursuant to any of the terms, covenants, conditions, provisions or agreements of this Lease, or to perform any act or thing for the benefit of Tenant, shall not be deemed breached if Landlord is unable to furnish or perform the same by virtue of Force Majeure.

17.           Alterations .

17.1.        Tenant may make, at its expense and without Landlord’s prior consent, such cosmetic improvements or alterations to the Premises (such as carpeting, painting, non-load-bearing partitions, and installation or relocation of freestanding workstations, and installation of Tenant’s equipment) (“ Cosmetic Improvements ”) that do not exceed Fifty Thousand Dollars ($50,000) in any one instance or Two Hundred Fifty Thousand Dollars ($250,000) in any twelve (12) month period.  Except in accordance with the preceding sentence, Tenant shall make no alterations, additions or improvements in or to the Premises after the Term Commencement Date (“ Alterations ”) without Landlord’s prior written approval, which approval Landlord shall not unreasonably withhold, condition or delay; provided , however , that in the event any proposed Alteration affects (a) any structural portions of the Building, including exterior walls, roof, foundation or core of the Building, (b) the exterior of the Building or (c) any Building systems,

 

19

 

 

including elevator, plumbing, air conditioning, heating, electrical, security, life safety and power, then Landlord may withhold its approval with respect thereto in its sole and absolute discretion.  Tenant shall, in making any such Alterations, use only those architects, contractors, suppliers and mechanics of which Landlord has given prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed.  In seeking Landlord’s approval, Tenant shall provide Landlord, at least fourteen (14) days in advance of any proposed construction, with plans, specifications, bid proposals, work contracts, requests for laydown areas and such other information concerning the nature and cost of the Alterations as Landlord may reasonably request.

17.2.        Tenant shall not construct or permit to be constructed partitions or other obstructions that might interfere with free access to mechanical installation or service facilities of the Building, or interfere with the moving of Landlord’s equipment to or from the enclosures containing such installations or facilities.

17.3.        Tenant shall accomplish any work performed on the Premises or the Building in such a manner as to permit any fire sprinkler system and fire water supply lines to remain fully operable at all times.

17.4.        Any work performed on the Premises or the Building by Tenant or Tenant’s contractors shall be done at such times and in such manner as Landlord may from time to time reasonably designate.  Tenant covenants and agrees that all work done by Tenant or Tenant’s contractors shall be performed in full compliance with Applicable Laws.  Within thirty (30) days after completion of any Alterations, Tenant shall provide Landlord with complete “as-built” drawing print sets and electronic CADD files on disc (or files in such other current format in common use as Landlord reasonably approves or requires) showing any changes in the Premises.

17.5.        Before commencing any work, Tenant shall give Landlord at least fourteen (14) days’ prior written notice of the proposed commencement of such work and shall, if required by Landlord, secure, at Tenant’s own cost and expense, a completion and lien indemnity bond reasonably satisfactory to Landlord for said work.

17.6.        All Alterations, attached equipment, decorations, fixtures, trade fixtures, additions and improvements, subject to Section 17.8 , attached to or built into the Premises, made by either of the parties, including, without limitation, all floor and wall coverings, built-in cabinet work and paneling, sinks and related plumbing fixtures, laboratory benches, exterior venting fume hoods and walk-in freezers and refrigerators, ductwork, conduits, electrical panels and circuits, shall, unless, prior to such construction or installation, Landlord elects otherwise, become the property of Landlord upon the expiration or earlier termination of the Term, and shall remain upon and be surrendered with the Premises as a part thereof; provided , however, that all business and trade fixtures, machinery and equipment purchased at Tenant’s expense (exclusive of those purchased from the Tenant Improvement Allowance) shall be the property of Tenant and may be removed by Tenant at the end of the Term.  The Premises shall at all times remain the property of Landlord and shall be surrendered to Landlord upon the expiration or earlier termination of this Lease.  All trade fixtures, equipment, Tenant Improvements, Alterations and Signage installed by or under Tenant shall be the property of Landlord, except as provided above.

 

20

 

 

17.7.        Tenant shall repair any damage to the Premises caused by Tenant’s removal of any property from the Premises.  During any such restoration period, Tenant shall pay Rent to Landlord as provided herein as if said space were otherwise occupied by Tenant.  The provisions of this Section shall survive the expiration or earlier termination of this Lease.

17.8.        Except as to (a) those items listed on Exhibit C attached hereto, (b) other business and trade fixtures, machinery and equipment that are not affixed to the Building and that Tenant can prove were purchased at Tenant’s expense, and (c) other business and trade fixtures, machinery and equipment that are affixed to the Building and that Tenant can prove were purchased at Tenant’s expense and of which Tenant has delivered written notice to Landlord at the time the item is affixed to the Building, all business and trade fixtures, machinery and equipment, built-in furniture and cabinets, together with all additions and accessories thereto, installed in and upon the Premises shall be and remain the property of Landlord and shall not be moved by Tenant at any time during the Term.  Tenant shall complete and deliver Exhibit C to Landlord within thirty (30) days after the Term Commencement Date, which Exhibit C shall be subject to Landlord’s reasonable approval.   Exhibit C may include both items located in the Premises at the time of delivery of Exhibit C and items which Tenant anticipates it will acquire during the Term.  If Tenant acquires during the Term items listed (in the case of property affixed to a building, with particularity) in Exhibit C , then such items shall remain the property of Tenant and may be removed by Tenant from the Premises even if Tenant does not notify Landlord of the items at the time the items are affixed to the Building.  If Tenant shall fail to remove any of its effects from the Premises prior to termination of this Lease, then Landlord may, at its option, remove the same in any manner that Landlord shall choose and store said effects without liability to Tenant for loss thereof or damage thereto, and Tenant shall pay Landlord, within fifteen (15) days after Tenant’s receipt of a written demand, any costs and expenses incurred due to such removal and storage or Landlord may, at its sole option and without notice to Tenant, sell such property or any portion thereof at private sale and without legal process for such price as Landlord may obtain and apply the proceeds of such sale against any (a) amounts due by Tenant to Landlord under this Lease and (b) any expenses incident to the removal, storage and sale of said personal property.

17.9.        Notwithstanding any other provision of this Article 17 to the contrary, in no event shall Tenant remove any improvement from the Premises as to which Landlord contributed payment, including, without limitation, the Tenant Improvements made pursuant to the Work Letter without Landlord’s prior written consent, which consent Landlord may withhold in its sole and absolute discretion.

17.10.      Tenant shall pay to  Landlord an amount equal to three percent (3%) of the cost to Tenant of all Alterations made by Tenant that require Landlord’s approval to cover Landlord’s overhead and expenses for plan review, coordination, scheduling and supervision thereof.  For purposes of payment of such sum, Tenant shall submit to Landlord copies of all bills, invoices and statements covering the costs of such Alterations, accompanied by payment to Landlord of the fee set forth in this Section.  Tenant shall reimburse Landlord for any extra reasonable expenses incurred by Landlord by reason of faulty work done by Tenant or its contractors, or by reason of delays caused by such work, or by reason of inadequate clean-up.

 

21

 

 

17.11.      Within sixty (60) days after final completion of any Alterations performed by Tenant with respect to the Premises, Tenant shall submit to Landlord documentation showing the amounts expended by Tenant with respect to such Alterations performed by Tenant with respect to the Premises, together with supporting documentation reasonably acceptable to Landlord.

17.12.      Tenant shall require its contractors and subcontractors performing work on the Premises to name Landlord and its affiliates and lenders as additional insureds on their respective insurance policies.

18.           Repairs and Maintenance .

18.1.        Landlord shall repair and maintain in good operating condition the structural and exterior portions and Common Areas of the Building and the Project, including, without limitation, roofing and covering materials, foundations, exterior walls, plumbing and plumbing fixtures, fire sprinkler systems (if any), heating, ventilating, air conditioning, elevators, and electrical systems, unless installed by Tenant (Landlord’s Work, even if paid for by Tenant, shall not be deemed to be “installed by Tenant”).  Except as otherwise provided under Article 7, any costs related to the repair or maintenance activities specified in this Section 18.1 shall be included as a part of Operating Expenses, unless such repairs or maintenance is required in whole or in part because of any act, neglect, fault or omissions of Tenant, its agents, servants, employees or invitees, in which case Tenant shall pay to Landlord the cost of such repairs and maintenance.

18.2.        Except for services of Landlord, if any, required by Section 18.1 , Tenant shall at Tenant’s sole cost and expense maintain and keep the Premises and every part thereof in good condition and repair, damage thereto from ordinary wear and tear excepted.  Tenant shall, upon the expiration or sooner termination of the Term, surrender the Premises to Landlord in as good of a condition as when received, ordinary wear and tear and casualty damage excepted.  Landlord shall have no obligation to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof, other than pursuant to the terms and provisions of the Work Letter.

18.3.        Landlord shall not be liable for any failure to make any repairs or to perform any maintenance that is an obligation of Landlord unless such failure shall persist for thirty (30) days (or such shorter time as may be reasonable in case of emergency) after Tenant provides Landlord with written notice of the need of such repairs or maintenance; provided , however, that if the nature of Landlord’s obligation is such that more than thirty (30) days are required for its performance, then Landlord shall not be deemed to be in default if it commences performance within the thirty (30) day period and thereafter diligently pursues the cure to completion.

18.4.        Repairs under this Article 18 that are obligations of Landlord are subject to allocation among Tenant and other tenants as Operating Expenses, except as otherwise provided in this Article 18 .

18.5.        This Article 18 relates to repairs and maintenance arising in the ordinary course of operation of the Building and the Project and any related facilities.  In the event of fire,

 

22

 

 

earthquake, flood, vandalism, war, terrorism, natural disaster or similar cause of damage or destruction, Article 22 shall apply in lieu of this Article 18 .

19.           Liens .

19.1.        Subject to the immediately succeeding sentence, Tenant shall keep the Premises, the Building and the Project free from any liens arising out of work performed, materials furnished or obligations incurred by Tenant.  Tenant further covenants and agrees that any mechanic’s lien filed against the Premises, the Building or the Project for work claimed to have been done for, or materials claimed to have been furnished to, shall be discharged or bonded by Tenant within ten (10) days after Tenant’s receipt of written notice of the filing thereof, at Tenant’s sole cost and expense.

19.2.        Should Tenant fail to discharge or bond against any lien of the nature described in Section 19.1 in compliance with such Section, Landlord may, at Landlord’s election, pay such claim or post a bond or otherwise provide security to eliminate the lien as a claim against title, and Tenant shall reimburse Landlord for the costs thereof as Additional Rent within fifteen (15) days after Tenant’s receipt of written notice thereof.

19.3.        In the event that Tenant leases or finances the acquisition of office equipment, furnishings or other personal property of a removable nature utilized by Tenant in the operation of Tenant’s business, Tenant shall ensure that any Uniform Commercial Code financing statement executed by Tenant shall, upon its face or by exhibit thereto, indicate that such financing statement is applicable only to removable personal property of Tenant located within the Premises.  In no event shall the address of the Building be furnished on a financing statement without qualifying language as to applicability of the lien only to removable personal property located in an identified suite leased by Tenant.  Should any holder of a financing statement executed by Tenant record or place of record a financing statement that constitutes a lien against any interest of Landlord or against equipment that may be located other than within an identified suite leased by Tenant, Tenant shall, within fifteen (15) days after its receipt of written notice of the filing of such financing statement, cause (a) a copy of the lender security agreement or other documents to which the financing statement pertains to be furnished to Landlord to facilitate Landlord’s ability to demonstrate that the lien of such financing statement is not applicable to Landlord’s interest and (b) Tenant’s lender to amend such financing statement and any other documents of record to clarify that any liens imposed thereby are not applicable to any interest of Landlord in the Premises, the Building or the Project.

20.           Indemnification and Exculpation .

20.1.        Tenant agrees to indemnify, defend and save  Landlord harmless from and against any and all demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages or judgments, and all reasonable expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred in investigating or resisting the same (collectively, “ Claims ”) arising from injury or death to any person or injury to any property occurring within or about the Premises, the Building or the Property arising out of Tenant’s or Tenant’s employees’, agents’ or guests’ use or occupancy of the Premises or a breach or default

 

23

 

 

by Tenant in the performance of any of its obligations hereunder, except to the extent, if any, caused by the willful misconduct or negligence of Landlord, its agents, employees or contractors.

20.2.        Notwithstanding any provision of Section 20.1 to the contrary, Landlord shall not be liable to Tenant for, and Tenant assumes all risk of, damage to personal property or scientific research, including, without limitation, loss of records kept by Tenant within the Premises and damage or losses caused by fire, electrical malfunction, gas explosion or water damage of any type (including, without limitation, broken water lines, malfunctioning fire sprinkler systems, roof leaks or stoppages of lines), unless any such loss is due to the gross negligence or willful misconduct of Landlord, its agents or employees.  Tenant further waives any claim for injury to Tenant’s business or loss of income relating to any such damage or destruction of personal property as described in this Section 20.2 .

20.3.        Landlord shall not be liable for any damages arising from any act, omission or neglect of any other tenant in the Building or the Project, or of any other third party.

20.4.        Tenant acknowledges that security devices and services, if any, while intended to deter crime, may not in given instances prevent theft or other criminal acts.  Landlord shall not be liable for injuries or losses caused by criminal acts of third parties, and Tenant assumes the risk that any security device or service may malfunction or otherwise be circumvented by a criminal.  If Tenant desires protection against such criminal acts, then Tenant shall, at Tenant’s sole cost and expense, obtain appropriate insurance coverage.

20.5.        Notwithstanding anything in this Article 20 to the contrary, in the event of the concurrent negligence of Tenant, its agents, employees, subtenants, invitees, licensees, or contractors on the one hand, and that of Landlord, and Landlord’s officers, directors or partners, contractors, employees and agents (including any management company and its employees) on the other hand, which concurrent negligence results in injury or damage to persons or property and relates to the construction, alteration, repair, addition to, subtraction from, improvement to or maintenance of the Premises, Common Areas or Building, each party’s obligation to indemnify the other as set forth in this Article 20 shall be limited to the extent of the indemnifying party’s negligence and that of its agents, employees, subtenants, invitees, licensees or contractors, including its proportional share of costs, reasonable attorneys’ fees, and expenses incurred in connection with any claim, action or proceeding brought with respect to such injury or damage.

20.6.        The provisions of this Article 20 shall survive the expiration or earlier termination of this Lease.

21.           Insurance; Waiver of Subrogation .

21.1.        Landlord shall maintain insurance for the Building and the Project in amounts equal to full replacement cost (exclusive of the costs of excavation, foundations and footings, and without reference to depreciation taken by Landlord upon its books or tax returns) or such lesser coverage as Landlord may elect, provided that such coverage shall not be less than ninety percent (90%) of such full replacement cost or the amount of such insurance Landlord’s lender, mortgagee or beneficiary (each, a “ Lender ”), if any, requires Landlord to maintain, providing

 

24

 

 

protection against any peril generally included within the classification “Fire and Extended Coverage,” together with insurance against sprinkler damage (if applicable), vandalism and malicious mischief.  Landlord, subject to availability thereof, shall further insure, if Landlord deems it appropriate, coverage against flood, environmental hazard, earthquake, loss or failure of building equipment, rental loss during the period of repairs or rebuilding, workmen’s compensation insurance and fidelity bonds for employees employed to perform services for the Building or the Property.  Notwithstanding the foregoing, Landlord may, but shall not be deemed required to, provide insurance for any improvements installed by Tenant or that are in addition to the standard improvements customarily furnished by Landlord, without regard to whether or not such are made a part of or are affixed to the Building.  Any costs incurred by Landlord pursuant to this Section 21.1 shall constitute a portion of Operating Expenses, subject to the limitations of Article 7 .

21.2.        In addition, Landlord shall carry public liability insurance with a single limit of not less than Two Million Dollars ($2,000,000) for death or bodily injury, or property damage with respect to the Project.  Any costs incurred by Landlord pursuant to this Section 21.2 shall constitute a portion of Operating Expenses.

21.3.        Tenant shall, at its own cost and expense, procure and maintain in effect, beginning on the Term Commencement Date or the date of occupancy, whichever occurs first, and continuing throughout the Term (and occupancy by Tenant, if any, after termination of this Lease) comprehensive general liability insurance with limits of not less than Five Million Dollars ($5,000,000) per occurrence and Five Million Dollars ($5,000,000) in the aggregate for death or bodily injury and property damage with respect to the Premises.

21.4.        The insurance required to be purchased and maintained by Tenant pursuant to this Lease shall name Landlord, BioMed Realty, L.P., BioMed Realty Trust, Inc., and their respective officers, employees, agents, general partners, members and Lenders (“ Landlord Parties ”) as additional insureds.  Said insurance shall be with companies having a rating of not less than policyholder rating of A - and financial category rating of at least Class VII in “Best’s Insurance Guide.”  Tenant shall obtain for Landlord from the insurance companies or cause the insurance companies to furnish certificates of coverage to Landlord.  No such policy shall be cancelable or subject to reduction of coverage or other modification or cancellation except after thirty (30) days’ prior written notice to Landlord from the insurer.  All such policies shall be written as primary policies, not contributing with and not in excess of the coverage that Landlord may carry.  Tenant’s policy may be a “blanket policy” that specifically provides that the amount of insurance shall not be prejudiced by other losses covered by the policy.  Tenant shall, at least ten (10) days prior to the expiration of such policies, furnish Landlord with renewal certificates of insurance.  Tenant agrees that if Tenant does not take out and maintain such insurance, Landlord may (but shall not be required to) procure said insurance on Tenant’s behalf and at its cost to be paid by Tenant as Additional Rent.

21.5.        Tenant assumes the risk of damage to any fixtures, goods, inventory, merchandise, equipment and leasehold improvements, and Landlord shall not be liable for injury to Tenant’s business or any loss of income therefrom, relative to such damage, all as more particularly set forth within this Lease.  Tenant shall, at Tenant’s sole cost and expense, carry such insurance as

 

25

 

 

Tenant desires for Tenant’s protection with respect to personal property of Tenant or business interruption.

21.6.        In each instance where insurance is to name Landlord Parties as additional insureds, Tenant shall, upon Landlord’s written request, also designate and furnish certificates evidencing such Landlord Parties as additional insureds to (a) any Lender of Landlord holding a security interest in the Building or the Project, (b) the landlord under any lease whereunder Landlord is a tenant of the real property upon which the Building is located if the interest of Landlord is or shall become that of a tenant under a ground lease rather than that of a fee owner, and (c) any management company retained by Landlord to manage the Project.

21.7.        Landlord and Tenant each hereby waive any and all rights of recovery against the other or against the officers, directors, employees, agents and representatives of the other on account of loss or damage occasioned by such waiving party or its property or the property of others under such waiving party’s control, in each case to the extent that such loss or damage is insured against under any fire and extended coverage insurance policy that either Landlord or Tenant may have in force at the time of such loss or damage or that would have been insured against had the waiving party carried the insurance required under this Lease.  Such waivers shall continue so long as their respective insurers so permit.  Any termination of such a waiver shall be by