MILLENNIUM CORPORATE PARK OFFICE LEASE AGREEMENT

EXHIBIT 10.12

 

MILLENNIUM CORPORATE PARK

 

OFFICE LEASE AGREEMENT

 

TABLE OF CONTENTS

 

 

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Exhibits :

 

A - Tenant Floor Plan

A-1 Parking Plan

B - Legal Description

C - Improvements and Work

C-1 – Work Schedule

D - Rules and Regulations

E – Intentionally deleted.

F - Estoppel Certificate

G – Subordination Agreement

H – Parking Agreement

 

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MILLENNIUM CORPORATE PARK

OFFICE LEASE AGREEMENT

 

THIS OFFICE LEASE AGREEMENT is made as of the      day of September, 2004, by and between BTC U.S. L.L.C., a Washington limited liability company (hereinafter referred to as “Landlord”), and CONCUR TECHNOLOGIES, INC., a Delaware corporation (hereinafter referred to as “Tenant”).

 

LEASE SUMMARY

 

In the event of any conflict between the terms of this Lease Summary and the terms of the Lease, the terms of the Lease shall prevail.

 

Section 1.1 The Building and Project

 

 

Section 2.1 Use of Premises and Tenant’s Trade Name

 

 

Section 3.1 Lease Term

 

(a) Ninety-Six (96) months

 

(b) Target Lease Commencement Date: June 1, 2005; provided, however, Tenant may commence installation of Tenant’s furniture, fixtures, and equipment on March 15, 2005 (without paying Basic Rent or Operating Expenses), and Landlord shall achieve substantial completion of the “Work” as described in Exhibit C by May 1, 2005 and Tenant may begin to move into and occupy the Premises commencing May 1, 2005 (without paying Basic Rent unless and until such time as Tenant occupies substantially all of the Premises and begins conducting its principal business activities from the Premises, but with paying Operating Expenses) (“Tenant’s Early Access Rights”).

 

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(c) Renewal Options: One (1) option of sixty (60) months at 95% of market with advance notice to be given at least nine (9) months but no more than twelve (12) months prior to the scheduled expiration date of the Term.

 

Section 4.1 Basic Rent (Triple Net)

 

 

 

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Section 7.4 Alterations

 

(a)

Subject to Landlord’s reasonable prior written approval.

 

(b)

At Tenant’s option, alteration work may be performed by Landlord.

 

Section 8.2 Liability Insurance Limits

 

(a)

$2,000,000 combined single limit and $3,000,000 aggregate.

 

Section 12: Assignment and Sublease

 

(a)

Subject to Landlord’s reasonable prior written consent except for Permitted Transferees as provided in Section 12.

 

(b)

Landlord to receive 50% of sublease profits without deduction of costs.

 

(c)

Landlord has right to recapture subject to the terms of Section 12.

 

Section 14.1 Holdover Rent

 

(a)

If without Landlord’s consent, but prior to Landlord commencing an unlawful detainer proceeding, 150% of last Basic Rent.

 

(b)

If without Landlord’s consent, but after Landlord has commenced an unlawful detainer proceeding, the greater of 150% of market or 200% of last Basic Rent.

 

(c)

If with Landlord’s consent, 125% of last Basic Rent.

 

Section 16.2 Estoppel Certificates

 

(a)

Tenant and Landlord to provide within ten (10) business days.

 

Section 19.1 Addresses for Notices

 

(a)

Landlord:

 

c/o Bentall Capital (U.S.), Inc.

1420 Fifth Avenue, Suite 400

Seattle, WA 98101

Attn: Lisa C. Rowe, Vice President/Leasing

 

With a copy to:

 

c/o Bentall Capital (U.S.), Inc.

1420 Fifth Avenue, Suite 400

Seattle, WA 98101

Attn: Gary Carpenter, Executive Vice President

 

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(b)

Tenant:

 

Prior to Tenant’s occupancy of the Premises:

 

Concur Technologies, Inc.

6222 185 ^th Avenue NE

Redmond, WA 98052

Attn: Kyle Sugamele, Vice President and General Counsel

 

With a copy to:

 

Concur Technologies, Inc.

6222 185 ^th Avenue NE

Redmond, WA 98052

Attn: Dan Merrill, Director of Operations

 

And

 

Perkins Coie LLP

10885 N.E. Fourth Street, Suite 700

Bellevue, Washington 98004

Attn: Craig H. Shrontz

 

After Tenant’s occupancy of the Premises, the notice to Concur Technologies shall be sent to the company and the above named individuals at Tenant’s address at the Premises.

 

Section 21.13 Broker’s Commission

 

(a)

Landlord’s Leasing

Representative

(Broker/Salesperson):    Lisa Rowe, Bentall Capital (U.S.), Inc.

 

(b)

Tenant’s Leasing

Representative

(Broker/Salesperson):    Puget Sound Properties (Eric Postle)

 

Section 21.14 Tenant’s Signage Rights

 

(a)

Exterior Building signage

 

Section 21.24 Parking

 

(a) Parking Spaces: 298 reserved parking spaces for Tenant and Tenant’s visitors, all located as and where shown on the parking plan attached hereto as Exhibit A-1. There shall be no additional charge for Tenant’s parking spaces during the Term. If parking spaces need to be removed or utilized for Tenant’s generator and/or loading dock, such spaces will be deducted from Tenant’s 298 reserved spaces. For example, if two parking spaces need to be used to accommodate Tenant’s generator, then Tenant will be entitled to 296 reserved spaces.

 

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Exhibit C Work Letter

 

(a)

Tenant Improvement Allowance: $3,200,000.00 with any savings to be split equally between Landlord and Tenant.

 

(b)

All Improvements Constructed By: Landlord, except as otherwise specifically noted in the Work Letter.

 

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MILLENNIUM CORPORATE PARK

OFFICE LEASE AGREEMENT

 

ARTICLE 1. PREMISES

 

Section 1.1 Premises Defined . Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, upon the terms and conditions hereinafter set forth, those certain premises and improvements consisting of the floor area and the location described in the Lease Summary and designated on the plans attached hereto as Exhibit A (hereinafter referred to as the “Premises”). The Premises comprise all of the interior space within the building known as Building C (the “Building”) which is part of that certain real estate development situated in the City of Redmond, County of King, State of Washington and located upon the real property described in Exhibit B (the “Project”).

 

As used herein, the terms “Rentable Square Feet” and “Useable Square Feet” shall be determined in accordance with the 1996 Building Owner’s and Manager’s Association Standard Method for Measuring Floor Area in Office Buildings, Publication ANSI/BOMA Z65.1-1996 (“1996 BOMA”). The Premises contains the number of Rentable Square Feet and Useable Square Feet specified in the Lease Summary and no economic terms based thereon shall be subject to revision. With respect to the Project, Landlord may re-measure the Rentable Square Feet in the Project using a licensed architect upon the addition or removal of square footage in the Project (including the addition of new buildings or the removal of existing buildings); provided, however, any change in the square footage of the Project shall not result in a material increase in Tenant’s Additional Rent obligations. Until any such re-measurement is made, the number of Project Rentable Square Feet and Useable Square Feet of space shown in the Lease Summary shall control. Landlord shall notify Tenant of any adjustment to the Rentable Square Feet in the Project (the “Adjustment Notice”) upon Landlord’s architect’s determination of the same. In the event such determination results in a change in the numbers shown in the Lease Summary, then all matters which are based on such numbers shall be adjusted based on Landlord’s architect’s determination and such adjustments shall be included in Landlord’s Adjustment Notice. If Tenant objects to any adjustment made by Landlord, Tenant shall notify Landlord in writing of such objection within thirty (30) days of Tenant’s receipt of the Adjustment Notice and failure by Tenant to provide such written objection shall be deemed to be an acceptance by Tenant of Landlord’s Adjustment Notice.

 

Section 1.2 Alterations . Tenant acknowledges that Exhibit A sets forth the floor plan for the floor(s) of the Building in which the Premises is located and the location of the Premises therein. Provided that such actions do not unreasonably interfere with Tenant’s use of the Premises, Landlord reserves the right from time to time to install, use, maintain, repair, relocate and replace pipes, ducts, conduits, wires, and appurtenant meters and equipment for service to the Premises or to other parts of the Building which are above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas of the Building which are located within the Premises or located elsewhere in the Building.

 

Section 1.3 Condition of Premises . Without limiting any of the representations, warranties and other provisions of this Lease, the Premises are leased by Landlord and will be accepted by Tenant in their existing condition upon completion of the improvements, alterations or modifications to be made by Landlord pursuant to Article 7 below, and the requirement of Landlord to complete the improvements specified therein. Notwithstanding any contrary provision in this Lease, Landlord shall deliver the Premises to Tenant on the Commencement Date in compliance in all material respects with all statutes, laws, ordinances, codes and regulations then in effect (including the Americans with Disabilities Act), with the exception of any items installed by Tenant or designed by Tenant which are not approved by

 

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Landlord. Landlord represents to Tenant that Landlord is not aware of any design, structural, mechanical or other defects in the Premises or the Common Areas or in any of the systems serving the Premises, and that the same are all currently and will be on the Commencement Date in good order, condition and repair.

 

Section 1.4 Common Areas . During the Lease Term, Tenant, its licensees, invitees, customers and employees shall have the non-exclusive right to use all of the public areas of the Project (the “Common Areas”) in common with Landlord, other Project tenants, and their respective licensees, invitees, customers and employees; provided, however, with respect to the Project’s parking areas, which include the Building parking garage (if any) as well as any other parking areas within the Project (collectively, the “Parking Areas”), Tenant shall have only the rights, if any, set forth in Section 21.24 of this Lease. The use of the Common Areas shall be subject to the terms and conditions of this Lease. Landlord has the right, in its sole discretion, from time to time, to: (a) make changes to the Common Areas and/or Project, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas (including the use of off-site parking areas as Common Areas for parking), ingress, egress, direction of driveways, entrances, hallways, corridors, lobby areas and walkways; (b) close temporarily any of the Common Areas for maintenance or construction purposes so long as reasonable access to the Premises remains available; (c) designate areas located outside of the Project for use as Common Areas, add additional buildings and improvements to the Project or remove existing buildings or improvements therefrom; (d) use the Common Areas while engaged in making additional improvements, repairs or alterations to the Project or any portion thereof, and (e) do and perform any other acts, alter or expand, or make any other changes in, to or with respect to the Common Areas and/or Project as Landlord may, in its sole discretion, deem to be appropriate. Notwithstanding the foregoing, Landlord represents and warrants to Tenant that at all times during the Lease Term Tenant shall have: (i) the right to use the parking spaces in the parking area and the loading dock described in Section 21.24; (ii) the right to have reasonable access to and from the Premises and Union Hill Road over and across the Common Areas and (iii) the right to use the Common Areas so as to permit Tenant to access the Premises 24 hours a day, 7 days a week..

 

ARTICLE 2. BUSINESS PURPOSE AND USE

 

Section 2.1 Permitted Uses . Tenant shall use the Premises solely for the uses specified in the Lease Summary, and for no other use without the prior written consent of the Landlord.

 

Section 2.2 Prohibited Uses . Tenant shall not do or permit anything to be done in or about the Premises, nor bring or keep anything therein, which will (a) in any way increase the existing rate of or affect any policy of fire or other insurance upon the Building or any of its contents, or cause a cancellation of any insurance policy covering any part thereof or any of its contents; provided, however, that for purposes of this Section 2.2 and Section 8.1 below, Landlord represents and warrants that, to the best of Landlord’s knowledge, Tenant’s use of the Premise for the permitted uses specified in the Lease Summary will not cause an increase the existing rate of or affect any policy of fire or other insurance upon the Building or any of its contents or cause a cancellation or invalidation of any insurance policy covering any part thereof or any of its contents or any other insurance coverage maintained by Landlord; or (b) use or allow the Premises to be used for any unlawful purposes. Tenant shall not use the Premises as a child care facility. Tenant shall not cause, maintain or permit any nuisance in, on or about the Premises, nor shall Tenant commit or suffer to be committed any waste in, on or about the Premises. Except as permitted herein, Tenant shall not place upon or install in windows or other openings any signs, symbols, drapes, or other material without written approval of Landlord, which shall not be unreasonably withheld. Tenant shall not place any object or barrier within, or otherwise obstruct, any of the Common Areas.

 

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Section 2.3 Compliance With Laws . Tenant shall at all times comply with all laws, ordinances and any regulations promulgated by any governmental authority having jurisdiction over the Building and/or the Premises to the extent such laws relate to Tenant’s use of the Premises or Common Areas or Tenant’s installation of improvements in the Premises (other than the Work). Except for Tenant’s obligations under the preceding sentence, Landlord shall at all times comply with all laws, ordinances and any regulations promulgated by any governmental authority having jurisdiction over the Building and Common Areas.

 

ARTICLE 3. TERM

 

Section 3.1 Term. . The term of this Lease shall commence on the first to occur of the following dates (such date shall be referred to as the “Lease Commencement Date”):

 

3.1.1 The date upon which (i) the “Work” as described in Exhibit C has been substantially completed, as defined in Section 3.2.1 below and Exhibit C; (ii) the “Fit Up Period” (as defined below) and the “Move-in Period” (as defined below) have expired; and (iii) the Landlord has tendered exclusive possession of the Premises to Tenant; or

 

3.1.2 The date that Tenant takes possession or beneficial occupancy of the Premises; provided, however, that, without limiting Tenant’s Basic Rent and Operating Expense obligations under Section 3.2.2 below, the utilization by Tenant of Tenant’s Early Access rights shall not trigger the Lease Commencement Date;

 

and provided further, that if the first to occur of Section 3.1.1 or Section 3.1.2 above falls on a day other than the first day of a calendar month, Tenant’s rent and other obligations pursuant to this Lease for the first month of the Lease Term (as defined below) shall be prorated based upon the number of days from and including the first to occur of Section 3.1.1 or Section 3.1.2 above to the end of such first month.

 

The term of this Lease shall expire the number of months specified in Section 3.1 of the Lease Summary after the last day of the month in which the Commencement Date occurs, the expiration of which shall be the Termination Date of this Lease, unless this Lease is sooner terminated as hereinafter provided. By way of example, if the Commencement Date was June 15, then (a) Rent for June would be pro rated based on the number of days in June, (b) the first full calendar month of the Term would be July and all Basic Rent increases would be effective on July 1, and (c) the Termination Date would be June 30 of the year in which the Term expires. The period between the Lease Commencement Date and the Termination Date shall be referred to as the “Lease Term” or “Term”. The Landlord and Tenant acknowledge that certain obligations under the provisions of this Lease may be binding upon them prior to the Lease Commencement Date, such as, but not limited to, the provisions of Exhibit C , and Landlord and Tenant shall be bound by such provisions prior to the Lease Commencement Date.

 

Section 3.2 Possession by Tenant.

 

3.2.1 Delivery of Possession. Landlord represents that the Premises is currently vacant and no other person has any right to possession of the Premises. Landlord shall deliver to Tenant, and Tenant shall accept from Landlord, exclusive possession of the Premises, upon the date of substantial completion of the “Work” as described in Exhibit C (which date is hereafter referred to as the “Substantial Completion Date”). A written Certification by Landlord’s architect (the “Project Architect”) that substantial completion of the Work has been achieved shall be provided to Landlord and Tenant. For the purposes of this Section 3, the term “Work” shall specifically exclude any items related to the installation of Tenant’s Generator (as defined in Section 21.25 below).

 

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3.2.2 Fit-Up Period and Move-In Period. Tenant (and Tenant’s contractors) shall have the right to: (a) install Tenant’s furniture, fixtures, equipment, and voice and data systems (“Tenant’s Fit Up Work”) from March 15, 2005, through the Substantial Completion Date (the “Fit Up Period”); provided, however, Tenant shall make reasonable efforts to cooperate with Landlord to minimize any material interference with Landlord’s Work; and (b) move in to and have occupancy of the Premises commencing May 1, 2005 (the “Move-in Period”) with the Work being substantially complete by May 1, 2005. During the Fit Up Period, Tenant shall not be obligated to pay Basic Rent or Operating Expenses. During the Move-in Period, Tenant shall commence paying Operating Expenses as such time as Tenant is provided with Tenant’s Early Access Rights and the Work is substantially complete and Tenant shall commence paying Basic Rent as soon as Tenant occupies substantially all of the Premises and begins to conduct its principal business activities from the Premises (the “Rent Payment Date”). Tenant agrees to provide at least five (5) days advance written notice to Landlord of the anticipated Rent Payment Date. To the extent Tenant is denied any of its Early Access Rights on May 1, 2005 then Tenant shall be entitled to offset from its Basic Rent and Operating Expense obligations the equivalent of one days’ Basic Rent and Operating Expense obligation for each day after May 1, 2005 that Tenant’s is denied the benefit of its Early Access Rights. Any such entry into and occupation of the Premises by Tenant shall be deemed to be under all of the terms, covenants, conditions and provisions of the Lease. Tenant shall be solely responsible for obtaining or causing its contractors to obtain all permits, if any, required for Tenant’s Fit Up Work and for complying will all applicable City codes and inspection requirements related to the Fit Up Work.

 

3.2.3 Delays.

 

(a) Definitions . For the purposes of this Section 3.2.3, the term (i) “Tenant Delay” shall have the meaning specified in Section 7(b) of the Work Letter; (ii) the term “Force Majeure Delay” shall mean a delay to the extent caused by the elements (such as earthquakes and major snow storms), war, riot, acts of terrorism, general labor strikes or any other cause that is beyond the reasonable control of Landlord; provided, however, (i) in each case the delay or cause of the delay must be of nature that would not have reasonably been anticipated by Landlord; and (iii) the term “Landlord Delay” shall mean a delay to the extent caused by the failure or inability of Landlord to perform its obligations so to achieve Substantial Completion of the Work by May 1, 2005, which failure or inability was not caused by a Tenant Delay or a Force Majeure Delay. Notwithstanding the foregoing, to the extent a failure by Landlord to achieve Substantial Completion of the Work by May 1, 2005 is caused by the inability of Landlord’s suppliers to timely deliver the Generator or any unique materials required for Tenant’s special server room, which unique materials cannot be obtained from normal trade or supplier channels (“Special Order Items”) it shall not be a Landlord Delay as long as the Generator or Special Order Items, if any, were ordered and paid for on a timely basis from reputable suppliers. Landlord shall have the right to substitute any Special Order Items with substantially equivalent materials if the substitute materials meet the requirements of the Lease and final Construction Documents or are otherwise approved by Tenant.

 

(b) Tenant Delay. If Substantial Completion of the Work is delayed due to a Tenant Delay, then the Substantial Completion Date shall be deemed to be the date on which Substantial Completion would have occurred but for the Tenant Delay.

 

(c) Force Majeure Delay. If Substantial Completion of the Work is delayed due to a Force Majeure Delay, then the Substantial Completion Date shall be extended to the earliest date that Substantial Completion of the Work is reasonably achievable by Landlord by the exercise of diligent and commercially reasonably efforts by Landlord; provided, however, if at any time

 

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Tenant reasonably determines that the Substantial Completion Date will be delayed by a Force Majeure Delay more than ninety (90) days beyond the Target Lease Commencement Date, then Tenant shall have the right, by giving written notice to Landlord, to terminate this Lease as long as notice is given prior to the actual date of Substantial Completion.

 

(d) Landlord Delay. If Substantial Completion of the Work is delayed beyond the Target Lease Commencement Date by less than thirty (30) days due to a Landlord Delay, then Tenant shall have the right to offset against Tenant’s Rent obligations first coming due under this Lease an amount equal to one half (50%) of the added hold over rent premium or other rent differential payable by Tenant under its current Lease for such period of delay (“Tenant’s Added Holdover Costs”). If Substantial Completion of the Work is delayed beyond the Target Lease Commencement Date for thirty (30) or more days, but less than sixty (60) days, due to a Landlord Delay then Tenant shall have the right to offset against its Rent obligations first coming due under this Lease an amount equal to seventy-five percent (75%) of Tenant’s Added Holdover Costs. If Substantial Completion of the Work is delayed for sixty (60) or more days beyond the Target Lease Commencement Date due to a Landlord Delay, then Tenant shall have the right to offset against its Rent obligations first coming due under this Lease an amount equal to all (100%) of Tenant’s Added Holdover Costs. For the purposes of this subsection (d), in no event shall “Tenant’s Added Holdover Costs” exceed $95,000 per month. Furthermore, if at any time Tenant reasonably determines that the Substantial Completion Date will be delayed by a Landlord Delay more than ninety (90) days beyond the Target Lease Commencement Date, then Tenant shall have the right, by giving written notice to Landlord, to terminate this Lease as long as notice is given prior to the actual date of Substantial Completion. Upon any such termination by Tenant, Landlord shall pay Tenant an amount equal to Tenant’s Added Holdover Costs that otherwise would have been an offset to Tenant’s Rent obligation.

 

(e) Termination. In the event of any termination of this Lease under this Section 3.2.3, Landlord shall return all funds received from Tenant together with all financial and other documents provided by Tenant.

 

Section 3.3 Option to Renew.

 

(i) Landlord hereby grants Tenant the right to renew the term of this Lease for one period of five (5) years (the “Renewal Term”) on the same general terms and conditions contained in the Lease, except that

 

a) The Basic Rent, parking charges (if any), security deposit amount (subject to the terms of subsection (iii)(d) below and which may be increased based on Landlord’s review of Tenant’s then current financial condition but shall in no event exceed the amount of any out of pocket expenses Landlord is obligated to pay for improvements to the Premises in connection with the Renewal Term), tenant improvement allowance and insurance limits (collectively, the “Market Terms”), shall be adjusted or included to reflect the then current “fair market terms” as determined hereinbelow (and as defined in subsection (iii)(c) below); provided, however, Basic Rent, parking charges and any tenant improvement allowance shall be based on ninety-five percent (95%) of such fair market terms.

 

b) Except to the extent expressly allowed hereunder with respect to the determination of the Market Terms, Tenant shall not be entitled to receive any additional concessions or financial incentives with respect to the Renewal Term including, without limitation, commissions or allowances, or free parking; and

 

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c) No additional options to renew shall apply following the expiration of the Renewal Term. Written notice (the “Tenant’s Election”) of Tenant’s exercise of its option to renew (“Option to Renew”) the Term of this Lease for the Renewal Term must be given to Landlord at least nine (9) months but no more than twelve (12) months prior to the date the Term of the Lease would otherwise expire. The Tenant’s Election shall be binding upon Tenant and Landlord.

 

(ii) Notwithstanding anything to the contrary set forth in this Section 3.3, Tenant shall not have the right to exercise an option to renew:

 

a) If Tenant has been in Default (as defined in Section 17) three (3) or more times in any twelve (12) month period (whether or not such defaults are cured); or

 

b) If Tenant is, at the time the Tenant Election notice is given, in Default under this Lease beyond any applicable notice and cure period; or

 

c) If Tenant does not, at the time the Renewal Term commences, occupy at least fifty percent (50%) of the Premises.

 

The period of time within which the option may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise the option because of the foregoing provisions and/or restrictions. All rights of Tenant under the provisions of this option shall, at Landlord’s election, terminate and be of no further force or effect even after Tenant’s due and timely exercise of the option, if after such exercise, but prior to the commencement date of the new term, Tenant Defaults under the terms of this Lease beyond any applicable notice and cure period.

 

(iii) In the event Tenant validly exercises its Option to Renew the term of this Lease as herein provided, the Market Terms shall be determined as of the commencement date of the Renewal Term as follows:

 

(a) Commencing within ten (10) days after Landlord’s receipt of Tenant’s Election, Landlord and Tenant shall attempt to agree upon the Market Terms for the Premises for the Renewal Term. The parties shall negotiate such terms in good faith. If the parties are unable to agree upon the Market Terms within thirty (30) days, then within thirty (30) days thereafter each party, at its own cost and by giving notice to the other party, shall appoint a real estate appraiser with at least five (5) years full-time commercial real estate appraisal experience in the area in which the Premises are located to appraise and set Market Terms for the Renewal Term. If a party does not appoint an appraiser within ten (10) days after the other party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set Market Terms for the Renewal Term. If each party shall have so appointed an appraiser, the two appraisers shall meet promptly and attempt to set the Market Terms for the Renewal Term. If the two appraisers are unable to agree within thirty (30) days after the second appraiser has been appointed, they shall attempt to select a third appraiser meeting the qualifications herein stated within ten (10) days after the last day the two appraisers are given to set the Market Terms. If the two appraisers are unable to agree on the third appraiser within such ten (10) day period, either of the parties to this Lease, by giving five (5) days notice to the other party, may apply to the then presiding judge of the Superior Court of King County for the selection of a third appraiser meeting the qualifications stated in this paragraph. Each of the parties shall bear one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser’s fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either party.

 

(b) Within thirty (30) days after the selection of the third appraiser, a majority of the appraisers shall set Market Terms for the Renewal Term.

 

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(c) For purposes of determining the Market Terms for the Renewal Term, including the determination of Basic Rent by the appraisers, the “fair market terms” shall be based on the actual lease terms which ready and willing landlord’s and renewal tenants are giving and receiving, as of the Renewal Term commencement date, for a primary renewal premises (as distinguished from the terms for a sublet premises or with respect to an assignment of an interest in an existing lease) for space comparable to the Premises (with improvements comparable to those existing in the Premises) in a building comparable to the Building and with respect to a tenant of a comparable financial condition to that of Tenant. In determining the Market Terms, the provisions of this Lease which are not subject to adjustment shall also be taken into consideration to the extent that such provisions impact the Market Terms. Terms quoted or used under sublease agreements shall be considered terms of special circumstances and shall be excluded from the definition of “fair market terms” under this Section 3.

 

(d) With respect to the Market Terms other than Basic Rent, (i) there shall be no requirement for any additional security deposit unless Tenant’s financial condition has materially declined since the date this Lease was entered into by Landlord and (ii) the insurance limits shall not exceed the coverage limits then being required by commercial landlords in office leases for similar commercial properties. The forgoing right to adjust the Market Terms shall not limit or revoke any right or privilege granted Tenant in this Lease provided Tenant complies with the new Market Terms.

 

(iv) The Option to Renew is granted for Tenant’s personal benefit and may not be assigned or transferred by Tenant, either voluntarily or by operation of law, in any manner whatsoever except to a Permitted Transferee. In the event that Landlord consents to a sublease or assignment of this Lease, the Option to Renew and Renewal Terms granted hereunder shall be void and of no further force and effect, whether or not Tenant shall have purported to exercise an Option to Renew prior to such assignment or sublease.

 

(v) In the event Tenant timely and properly exercises an Option to Renew, Landlord and Tenant shall within fifteen (15) days after the determination of Market Terms for the Renewal Term, execute an amendment to this Lease extending the Lease Term on the terms and conditions set forth in this Section 3.3.

 

ARTICLE 4. RENT

 

Section 4.1 Basic Rent . Tenant shall pay to Landlord as minimum rental for the use and occupancy of the Premises the “Basic Rent” as specified in the Lease Summary. Basic Rent shall be payable in Monthly Rent Installments of the amount specified in the Lease Summary, on or before the first day of each month of the Lease Term beginning on the Lease Commencement Date. If the Lease Commencement Date is a date other than the first day of a calendar month, then annual Basic Rent increases, if any, set forth in the Lease Summary shall take effect on the anniversary of the first day of the calendar month following the month in which the Lease Commencement Date occurs. Basic Rent for any partial year shall be prorated based upon the actual number of months left in such partial year. The Monthly Rent Installment for any partial month shall be prorated based upon the actual number of days in that partial month.

 

Section 4.2 Operating Expenses.

 

4.2.1 This is a net Lease. In addition to Basic Rent, Tenant shall pay, in monthly installments and as “Additional Rent”, an amount equal to the “Tenant’s Proportionate Share” (as hereinafter defined) of actual “Total Operating Expenses” (as hereinafter defined) for the Building and

 

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Project. Landlord agrees that in calculating Tenant’s Proportionate Share of Operating Expenses pursuant to this Section 4.2, that portion of Operating Expenses which are controllable by Landlord (specifically excluding, without limitation, insurance premiums, taxes [including real estate taxes], costs of utilities, costs imposed by governmental authorities, and costs which relate to special services requested by Tenant [above standard services which are provided by Landlord] or special equipment installed by Tenant) will not increase, with respect to the determination of Tenant’s Proportionate Share, by more than five percent (5%) over the actual controllable Total Operating Expenses for the prior year. For example, if the actual controllable Total Operating Expenses for 2005 are $7.00, the controllable Total Operating Expense upon which Tenant’s Proportionate Share is based for 2006 shall not exceed $7.35. However, if the actual controllable Total Operating Expenses for 2006 are $7.50, then the controllable Total Operating Expense upon which Tenant’s Proportionate Share is based for 2007 shall not exceed $7.86 (which is a 5% increase over the actual controllable Total Operating Expenses for 2006 of $7.50). Such cap is cumulative and the unused portion of a year’s cap may be carried forward to absorb any future Operating Expenses that would otherwise be in excess of the cap. Further, any Operating Expense amount which is in excess of the cap in one year may be carried forward by Landlord and recovered in later years if and to the extent the cap for such later years is not exceeded.

 

4.2.2 “Tenant’s Proportionate Share” of the Operating Expenses the benefit of which are only to Tenant as the sole occupant of the Building is 100% and “Tenant’s Proportionate Share” of the Operating Expenses the benefit of which are shared by the tenants in the Project shall be computed by dividing the Total Rentable Area of the Premises by the Total Rentable Area of the Project with respect to any particular Operating Expense. Tenant’s Proportionate Share of the Operating Expenses the benefit of which are shared by the tenants in the Project upon the Lease Commencement Date is as specified in the Lease Summary.

 

4.2.3 “Rentable Area of the Building,” “Rentable Area of the Project” and “Rentable Area of the Premises” are defined as those areas obtained by measuring the Building, Project and Premises using the 1996 BOMA Standard; provided, however, only the Rentable Area of the Project may be adjusted from time to time in accordance with Section 1.1. Tenant’s Proportionate Share of the Operating Expenses the benefit of which are shared by the tenants of the Project shall be based upon the relationship between the Total Rentable Area of the Building (which Landlord and Tenant agree to be 99,945) to the Total Rentable Area of the Project (which may be adjusted from time to time in accordance with Section 1.1).

 

4.2.4 Landlord shall provide Tenant with a written estimate of Total Operating Expenses for the succeeding year or partial year within thirty (30) days after the Commencement Date or the start of each calendar year, as applicable, during the Lease Term. Tenant shall then pay to Landlord, monthly in advance, one-twelfth (1/12) of Tenant’s Proportionate Share of the estimated Total Operating Expenses for the said calendar year. In the event any item of actual Operating Expenses, including without limitation those items identified in subparagraph 4.2.6 below, increases five percent (5%) or more in price or cost over any twelve (12) month period, Landlord shall have the option to increase the estimated payments of Tenant’s Proportionate Share of Operating Expenses upon thirty (30) days’ written notice from Landlord to Tenant.

 

4.2.5 Within one hundred twenty (120) days after the end of every calendar year during the Lease Term, Landlord shall provide the Tenant with a written statement of the actual Total Operating Expenses for that calendar year. If the actual Total Operating Expenses should exceed the estimated amount with respect to such calendar year, then Tenant shall pay Landlord the additional amount due to the Landlord within thirty (30) days and, if actual Total Operating Expenses should be less than the estimated Total Operating Expenses for that calendar year, then Landlord shall credit, against future Rent due under this Article, the amount of any overpayment by Tenant, unless the overpayment occurred with respect to the last year of the Term, in which case Landlord shall make a cash payment to Tenant.

 

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4.2.6 “Operating Expenses” the benefit of which are shared by tenants in the Project (“Project Operating Expenses”) shall mean all costs, expenses and other charges reasonably incurred by Landlord in connection with the ownership, operation, repair and maintenance of the Project and the Building (other than those Operating Expenses identified below as being Operating Expenses the benefit of which are only to Tenant as the sole occupant of the Building) as a first class office building complex in Redmond, Washington, including but not limited to:

 

4.2.6.1 Wages, salaries and fringe benefits of all employees and contractors engaged in the management, operation and maintenance of the Project and/or the Building; employer’s Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied against Landlord on those wages and salaries; and the cost to Landlord of disability and hospitalization insurance and pension or retirement benefits for these employees;

 

4.2.6.2 All supplies and materials used in the operation and maintenance of the Common Areas;

 

4.2.6.3 Cost of water and power, and cost of heating, lighting, air conditioning and ventilating, the Common Areas;

 

4.2.6.4 The electrical costs incurred in the operation of the mechanical equipment and systems for the Common Areas;

 

4.2.6.5 Cost of maintenance, depreciation and replacement of machinery, tools and equipment (if owned by Landlord) and for rental paid for such machinery, tools and equipment (if rented) used in connection with the operation or maintenance of the Building;

 

4.2.6.6 All premiums and commercially reasonable deductibles (not to exceed $50,000.00) on policies of compensation, public liability, property damage, automobile, garage keepers, rental loss and any other policies of insurance maintained by Landlord with respect to the Project, Building or any insurable interest therein;

 

4.2.6.7 Unless otherwise provided directly by Tenant as allowed under Section 7.3 below, the cost of janitorial services, repairs and general maintenance of the Common Areas;

 

4.2.6.8 Any capital improvements made or installed (a) to be in compliance with any applicable government statutes, ordinances, regulations or other requirements, and (b) for purposes of saving labor or otherwise reducing applicable operating costs amortized over the useful life of such improvements, as reasonably determined by Landlord in accordance with generally accepted accounting principles and practices in effect at the time of acquisition of the capital item;

 

4.2.6.9 Costs in connection with maintaining and operating any parking areas (including parking garages) or other common facilities owned by the Landlord for use by tenants of the Building and/or Project;

 

4.2.6.10 All taxes and assessments and governmental charges whether federal, state, county or municipal and any other taxes and assessments attributable to the Project and/or the Building or its operation, including without limitation real property taxes and assessments and

 

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any tax or other levy, however denominated, on or measured by the rental collected by the Landlord with respect to the Building, or on Landlord’s business of leasing the Building, but excluding federal and state taxes on income;

 

4.2.6.11 The cost of maintaining any transportation management program, public transit system, vanpool, or other public or semi-public transportation imposed upon Landlord’s ownership and operation of the Building;

 

4.2.6.12 Cost of all accounting and other professional fees incurred in connection with the operation of the Project and/or the Building;

 

4.2.6.13 A management fee, not to exceed current market rates, which may be payable to the Landlord;

 

4.2.6.14 Cost of replacing lamps, bulbs, starters and ballasts used in the Common Areas, other than specialty lighting or non-building standard lighting, which cost may be billed directly to a tenant;

 

4.2.6.15 The fair market rental value (having regard to rent being charged for similar space including Additional Rent as defined herein) of premises used by the Landlord or its property manager, acting reasonably, in respect of the operation, maintenance, administration or management of the Land, Premises and the Building.

 

“Operating Expenses” the benefit of which are only to Tenant as the sole occupant of the Building (“Building Operating Expenses”) shall mean all costs, expenses and other charges reasonably incurred by Landlord in connection with the ownership, operation, repair and maintenance of the Building (other than those Operating Expenses identified above as being Operating Expenses the benefit of which are shared by tenants in the Project as a first class office building in Redmond, Washington, including but not limited to: (i) all supplies and materials used in the operation and maintenance of the Building; (ii) the cost of water, sewer, electricity or other utilities used by Tenant at the Building, (iii) the cost of operating, maintaining and repairing the heating, air conditioning and ventilating systems for the Building, (iv) unless otherwise provided directly by Tenant as allowed under Section 7.3 below, the cost of janitorial services, repairs and general maintenance of the Building; (v) expenses for items described in Sections 4.2.6.6 (insurance), to the extent such insurance relates solely to the Building; 4.2.6.8 (capital improvements), to the extent such improvements are solely to the Building; and 4.2.6.14 (lamps, bulbs, etc.), to the extent such items are solely for the Building and are not otherwise provided by Tenant pursuant to Section 7.2.3 below. If an Operating Expense is charged to Tenant as a Building Operating Expense then, notwithstanding anything herein to the contrary, Landlord shall not also include the same types of expenses as Project Operating Expenses in determining Tenant’s share of Project Operating Expenses, and the converse shall also be true. By way of example, if Landlord charges Tenant with the cost of insurance coverage for the Building as a Building Operating Expense, then Landlord shall not include any costs associated with the same kind of coverages for other Buildings in the Project in the Project Operating Expenses.

 

Operating Expenses, whether for the benefit of all tenants in the Project (Project Operating Expenses) or only for Tenant (Building Operating Expenses), shall not include expenses for which the Landlord is reimbursed or indemnified (either by an insurer, condemnor, tenant or otherwise); expenses incurred in leasing or procuring tenants (including, without limitation, lease commissions, legal expenses, and expenses of renovating space for tenants); legal expenses arising out of disputes with tenants or the enforcement of the provisions of any lease of space in the Building; interest or amortization payments on any mortgage or mortgages, and rental under any ground or underlying lease or leases; costs of any work

 

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or service performed for or facilities furnished to a tenant at the tenant’s cost; the cost of correcting latent defects in the construction of the Building, except those conditions (not occasioned by construction defects) resulting from wear and tear shall not be deemed defects; and costs of capital improvements and depreciation and amortization (except as provided in Section 4.2.6.8 or otherwise above). Landlord and Tenant shall each from time to time upon request of the other sign a written memorandum confirming the amount of the Additional Rent as adjusted from time to time hereunder. In addition to the foregoing exclusions and limitations and notwithstanding anything herein to the contrary, Operating Expenses shall not include any of the following: (a) except for deductibles as described in subsection 4.2.6.6 above, repairs or other work occasioned by casualty (including damage and repairs necessitated by the negligence or willful misconduct of Landlord or Landlord’s employees, contractors or agents) or by the exercise of the right of eminent domain; (b) attorneys’ fees, the costs of tenant improvements, leasing commissions, advertising costs and other expenses related to the leasing of the Project; (c) except as expressly allowed above, depreciation and amortization; (d) costs of special services, goods or materials provided to other tenants; (e) interest on debt or principal payments to a lender; (f) executives’ salaries above the grade of general manager, costs of Landlord’s general overhead or salaries of service personnel for services which are performed in connection with properties other than the Property; (g) costs occasioned by the act, omission or violation of law, a contract or a lease by Landlord, any other occupant of the Project or their respective agents, employees or contractors; (h) insurance deductibles in excess of Fifty Thousand Dollars ($50,000); (i) costs incurred to remove or remediate any Hazardous Substances from the Premises or Project or to comply with any law pertaining to such Hazardous Substances and any judgments or other costs incurred in connection with any Hazardous Substances exposure or release; (j) costs and expenses for which Tenant reimburses Landlord directly or which Tenant pays directly to a third person; (k) charitable or political contributions; (l) attorney fees, accounting fees, and expenditures incurred in connection with negotiations, disputes and claims of other tenants or occupants of the Project or with other third parties; (m) except as expressly allowed above, costs of repairs, replacements, alterations, additions and improvements required to be capitalized in accordance with generally accepted accounting principles; (n) the cost of repairing, replacing, altering or otherwise correcting structural or latent defects in the Building or Project; (o) marketing fees, advertising fees and promotional expenditures in connection with leasing space in the Project; (p) legal fees in connection with the sale of all or any portion of the Building or Project, or an interest therein, or the refinancing of Landlord’s interest in all or any portion of the Building or Project; (q) costs of renovating or improving vacant space; (r) costs allocable to properties in which Landlord has an interest other than the Project; (s) damages incurred by Landlord for any default, breach, claim, judgment or settlement; (t) repairs, alterations, additions, improvements or replacements made to correct any defect in the original design, materials or workmanship for the Building or Project; (u) fees paid to Landlord or any affiliate of Landlord for goods or services in excess of the fees that would typically be charged by unrelated, independent persons or entities for similar goods or services; (v) amounts in excess of actual costs incurred or duplicative costs; (w) costs incurred in connection with the initial construction of the Building and Project; (x) any bad debt loss, rent loss, or reserves for bad debts or rent loss; (y) reserves for Operating Expenses; (z) electric power costs for which any tenant directly contracts with the local public service company; (aa) costs for sculpture, paintings or other objects of art; (bb) tax penalties incurred as a result of Landlord’s failure to make payments when due; (cc) costs and expenses of completing the work to be performed by Landlord prior to the Commencement Date; and (dd) as to the Building, costs and expenses paid by Tenant for the items described in Section 7.3 below.

 

4.2.7 Tenant shall have the right, upon fulfillment of the conditions set forth below, to conduct one (1) audit of the Landlord’s books and records covering the Operating Expenses for a particular calendar year to verify the accuracy of the Landlord’s determination of the Tenant’s Proportionate Share of such Operating Expenses. The conditions which must be met before Tenant shall have the right to audit the books and records of a particular calendar year are as follows:

 

4.2.7.1 Tenant must provide Landlord not less than thirty (30) days’ prior written notice of the Tenant’s election to audit (the “Tenant’s Notice of Audit”), together with the information concerning the auditor as outlined in subsection 4.2.7.4 below, which Tenant’s Notice of Audit and information must be delivered to Landlord within one hundred and eighty (180) days after Tenant’s receipt of the Landlord’s statement of actual Operating Expenses for a particular calendar year.

 

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4.2.7.2 Tenant’s audit must be undertaken and completed by Tenant or its agents or representatives at reasonable times during Landlord’s normal business hours at the place where the Landlord’s records are kept, which place shall be located in the greater Seattle/Bellevue area.. Provided Landlord’s records are promptly and made fully available to Tenant, said audit must be completed within one hundred and eight (180) days of Tenant’s receipt of the Landlord’s statement of Operating Expenses for a particular calendar year.

 

4.2.7.3 Tenant shall not be entitled to conduct an audit if Tenant is in Default under this Lease beyond any applicable cure period at the time Tenant gives its Tenant’s Notice of Audit or at the time the Tenant or its agent or representative undertakes the audit.

 

4.2.7.4 At the time the Tenant delivers its Tenant’s Notice of Audit to Landlord, the Tenant shall also provide evidence reasonably acceptable to the Landlord that the audit will be a “fair and true audit.” For the purposes hereof, the term “fair and true audit” shall mean that the review of the subject books and records shall be undertaken and completed by the Tenant, its officers or employees, representatives or by an independent accounting firm being paid on an hourly basis and that in no event will the party auditing the books (or that party’s employer or principal) directly or indirectly base the compensation or fees for such audit work upon a percentage of the savings found or the return due the Tenant by reason of that audit.

 

4.2.7.5 The Tenant’s rights to audit the Landlord’s books and records shall be strictly limited to the right set forth above and the Tenant shall have no right to audit any of the Landlord’s books or records for any calendar year before or after the Lease Term or for any calendar year other than the immediately preceding calendar year as set forth above. All costs and expenses of the audit shall be borne solely by the Tenant. unless an error in Tenant’s favor is found and the amount owing to Tenant by reason thereof is greater than five percent (5%) of the amount requested or collected by Landlord from Tenant for the obligation in question or $750, whichever is smaller.

 

4.2.7.6 A true and correct copy of the audit shall be delivered to the Landlord within fifteen (15) days of the completion of such audit if Tenant requests a credit for overpayment. Any overpayment shown by such audit shall be subject to the Landlord’s prompt verification (not to exceed 20 days) and, upon such verification, shall be given to the Tenant as a credit against Operating Expenses next falling due or, if after the expiration of the Term, shall be paid directly to Tenant.

 

Section 4.3 Rent . The terms “Rent” and “Rental” as used in this Lease shall mean all amounts to be paid hereunder by Tenant whether those sums are designated as Basic Rent or Additional Rent and as adjusted by the terms of this Lease. Failure by Tenant to pay any sum of Rent due under this Article 4 shall entitle Landlord to pursue any or all remedies specified in this Lease as well as remedies specified in RCW Chapter 59.12 or otherwise allowed by law.

 

Section 4.4 Place of Payment . All Rent shall be paid to the Landlord on or before the first day of each calendar month at the address to which notices to Landlord are to be given. All Rental payments to be made hereunder, whether Basic Rent, or Additional Rent or otherwise, are to be made, except as otherwise provided herein, without deduction, setoff, prior notice or demand by Landlord.

 

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ARTICLE 5. SECURITY DEPOSIT AND PREPAID RENT

 

Section 5.1 Security Deposit . Upon the mutual execution and delivery of this Lease, Tenant shall deliver to Landlord the sum set forth as the Security Deposit in the Lease Summary as security for the full and faithful performance of every provision of this Lease to be performed by Tenant. If Tenant is in Defaults after any applicable cure period with respect to any provision of this Lease, including but not limited to the provisions relating to the payment of Rent, the repair of damage to the Premises caused by Tenant and/or cleaning the Premises upon termination of this Lease, Landlord may use, apply or retain all or any part of this Security Deposit for the payment of any Rent or any other sum in Default, the repair of such damage to the Premises, the cost of cleaning or for the payment of any other amount which Landlord may spend or become obligated to spend by reason of Tenant’s Default. If any portion of said Security Deposit is so used or applied, Tenant shall, within ten (10) days after written 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. Provided that (a) Tenant is not in Default beyond any applicable cure period at the time of the refund, (b) Tenant has not been in Default more than three (3) times in any previous twelve month period (whether or not such Defaults are cured), and (c) Tenant has not been the subject of a bankruptcy proceeding (either voluntary or involuntary) prior to the time of the schedule refund, Landlord shall refund $324,821.25 of the Security Deposit to Tenant at the end of the forty-eighth (48 ^th ) month of the Lease Term. Landlord shall not be required to keep Tenant’s Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on the Security Deposit. Unless Tenant is then in Default beyond any applicable cure period 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 ten (10) days after the expiration of the Lease Term.

 

In the event of a sale or transfer of Landlord’s interest in the Building, Landlord shall transfer or cause to be transferred either the cash and all other sums collected hereunder by Landlord, together with any other sums then held by Landlord or its designee as such security, to the purchaser or transferee, and provided that such transferee assumes by a written instrument all of Landlord obligations under this Lease arising following the transfer (including the obligation to return the cash security deposit), Landlord shall be relieved and released of and from all liability with respect to the cash. Upon Tenant’s request, Landlord agrees to provide Tenant with a copy of the written assumption agreement referenced in the preceding sentence.

 

Section 5.2 Prepaid Rent . Contemporaneously with Tenant’s execution of this Lease, Tenant shall pay to Landlord the sum set forth as Prepaid Rent in the Lease Summary to be applied to Basic Rent for the month during the Term hereof as specified in the Lease Summary.

 

ARTICLE 6. TAXES

 

Section 6.1 Personal Property Taxes . Tenant shall pay before delinquency all license fees, public charges, property taxes and assessments on the furniture, trade fixtures, equipment and other property owned by Tenant at any time situated on the Premises.

 

Section 6.2 Business Taxes . Tenant shall pay before delinquency all taxes and assessments or license fees levied, assessed or imposed by law or ordinance, on Tenant related to Tenant’s activities in the Premises.

 

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ARTICLE 7. MAINTENANCE, REPAIRS AND ALTERATIONS

 

Section 7.1 Landlord’s and Tenant’s Improvements . Landlord shall complete and install in a good and workmanlike manner within the Premises those items specified as the “Work” on Exhibit C attached hereto and take all commercially reasonable actions necessary or appropriate to cause the Work to be sufficiently complete to allow Tenant to have the benefit of Tenant’s Move-in Period by the date set forth in Section 3.2.2 and for the Work to be substantially complete by the Target Lease Commencement Date.

 

Section 7.2 Services to Be Furnished by Landlord . Provided Tenant is not in Default under any of the provisions of this Lease beyond any applicable notice and cure period, and subject to reimbursement pursuant to Section 4.2 above, Landlord shall provide the following services, some of which shall only be provided during standard hours of operation of the Building as specifically noted below. The standard hours of operation are 6 a.m. to 6 p.m., Monday through Friday, and 8 a.m. to 1 p.m., on Saturdays. Subject to Landlord’s approval, which approval shall not be unreasonably withheld, the standard hours of operation with respect to the services provided to the Building only during the standard hours of operation may be expanded by Tenant provided that (a) Landlord shall not be obligated to operate the Building HVAC system 24 hours a day on a continuous basis; however there will be times that Tenant will rquire HVAC service to the Building during non-standard hours of operation and Landlord agrees to provide such service to Tenant during such non-standard hours of operation, and (b) Tenant shall pay Landlord directly for all increases in Operating Expenses attributable to Landlord’s provision of services during such expanded hours. Notwithstanding anything herein to the contrary, the parties agree that the cooling unit(s) serving Tenant’s server room(s) will operate on a 24 hour per day basis.

 

7.2.1 Public utilities, including but not limited to electricity, sewer, water and telecommunication connectivity shall be furnished to the Premises during all hours and not just during standard hours of operation;

 

7.2.2 Hot and cold water at those points of supply provided for the Building shall be furnished during all hours and not just during standard hours of operation, central heat, ventilation and air conditioning shall be provided at such times as Landlord normally furnishes these services to other tenants in the Project (but in no event less than during the standard hours of operation) and at temperatures and in amounts as are considered standard for first class office buildings in Redmond, but this service at times during the weekdays at other than standard hours of operation for the Project, on Saturday afternoons, Sundays and holidays shall be furnished only upon request of Tenant, who shall bear the entire costs thereof;

 

7.2.3 Unless otherwise provided by Tenant pursuant to Section 7.3 below, routine maintenance, painting and electric lighting service for all Common Areas and the Building, consistent with the operation and maintenance of the Building as a first-class office building in Redmond;

 

7.2.4 Unless otherwise provided by Tenant pursuant to Section 7.3 below, janitorial service on a five (5) day week basis, excluding Fridays, Saturdays, and legal holidays;

 

7.2.5 Electrical facilities at the Premises shall be capable of providing Tenant with (i) sufficient power for typewriters, personal computers and other small office machines of similar low electrical consumption, but not including electricity required for electronic data processing equipment, special lighting in excess of building standard, and any other item of electrical equipment which (itself) consumes more than .5 kilowatts per hour at rated capacity or requires a voltage other than 120 volts single phase per square foot; (ii) and shall otherwise be consistent with the specifications set

 

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forth in the bid documents for the Work as approved by Tenant. The existing air conditioning system serving the Premises will be supplemented with a separate system to provide HVAC service to the Server Rooms (described in the attached Work Letter); and

 

7.2.6 Tenant acknowledges and agrees that, while Landlord may in its sole and absolute discretion engage security personnel to patrol the exterior of the Building or the Project, Landlord is not providing any security services with respect to the Premises and that Landlord, except to the extent caused by Landlord’s gross negligence, shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises by any third party or any other breach of security with respect to the Premises, the Building or the Project. Tenant hereby agrees to the exercise by Landlord, within its reasonable discretion, of such security measures as, but not limited to, the evacuation of the Premises, the Building or the Project for cause, suspected cause or for drill purposes, the denial of any access to the Premises, the Building or the Project and other similarly related actions that it deems necessary to prevent any threat of property damage or bodily injury. Provided such actions are reasonably necessary and appropriate, the exercise of such security measures by Landlord, and the resulting interruption of service and cessation of Tenant’s business, if any, shall not be deemed an eviction or disturbance of Tenant’s use and possession of the Premises, or any part thereof, or render Landlord liable to Tenant for any resulting damages or relieve Tenant from Tenant’s obligations under this Lease.

 

7.2.7 Landlord shall, at Tenant’s expense, maintain and repair all of the HVAC systems serving the Premises.

 

In the event Tenant desires any of the aforementioned services in amounts in excess of those described above or generally considered “standard” in a single occupant first class office building and in the event Landlord elects to provide these additional services, Tenant shall pay Landlord as Additional Rent hereunder the reasonable cost of providing these additional services. Tenant will have the right to operate the Building HVAC system for periodic intervals after standard hours by utilizing an override switch. Failure by Landlord to any extent to furnish any of the above services, or any cessation thereof, resulting from causes beyond the control of Landlord, shall not render Landlord liable in any respect for damages to either person or property, nor shall that event be construed as an eviction of Tenant, nor result in an abatement of Rent, nor relieve Tenant from any of Tenant’s obligations hereunder (including, but not limited to, the payment of Rent). Should any of the equipment or machinery utilized in supplying the services listed herein for any cause cease to function properly, Landlord shall use reasonable diligence to repair that equipment or machinery promptly.

 

Section 7.3 Tenant’s Maintenance and Repairs .

 

7.3.1 Tenant shall be obligated to maintain and to make all repairs, replacements or additions of any kind whatsoever to all personal property of Tenant located within the Premises and to all trade fixtures, furnishings and carpet located within the Premises. Tenant shall also be responsible for the following: (i) quarterly cleaning and janitorial services to the Premises (provided that such janitorial services shall be of a quality consistent with the services provided to the other buildings in the Project); (ii) interior light bulb and fluorescent tube and ballast replacement (provided that all supplies shall be provided by Landlord and Tenant shall use qualified licensed technicians for such work), (iii) minor touch-up patching and painting; (iv) interior lock and key control and modifications (provided Landlord is given a master key); (v) maintaining and repairing door closers; (vi) carpet care including quarterly cleaning; (vii) installation of wall mounted items, such as whiteboards, pictures and tack boards; and (viii) temperature adjustments within the Premises (provided that such adjustments are within Landlord’s or the manufacturer’s guidelines for operating the Building HVAC system).

 

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Section 7.4 Tenant’s Alterations . Subject to Landlord’s prior written approval, which shall not be unreasonably withheld, Tenant may make, at its expense, additional improvements or alterations to the Premises which it may deem necessary or desirable (“Alterations”). Provided that Tenant provides Landlord with notice prior to commencing such alterations and, provided further, that Tenant provides Landlord with as-built plans following completion of such alterations and reimburses Landlord for Landlord’s architect’s costs to update Landlord’s Building plans, Tenant shall have the right to make non-structural alterations that cost less than $25,000.00 as to each such alteration without Landlord’s prior written approval. Landlord’s approval to any Alterations may be withheld in Landlord’s reasonable discretion if such Alterations require any other alteration, addition, or improvement to be performed or made to any structural portion of the Building, any of the Building systems, or any portion of the Building other than the Premises, or if such Alterations do not conform to Landlord’s Building Standard Specifications (which will be provided to Tenant upon request). Any Alterations by Tenant shall be done at Tenant’s sole cost and expense and in compliance with all applicable laws, rules, and regulations (including, without limitation, the Americans with Disabilities Act of 1990 (the “ADA”) and Landlord’s construction rules and regulations) and in conformity with plans and specifications approved by Landlord. If Tenant and Landlord agree to have Landlord contract directly for the installation of the Alterations, Tenant shall reimburse Landlord for the costs of installation, as Additional Rent, within ten (10) days of Tenant’s receipt of an invoice for such costs and/or, at Landlord’s election, Tenant shall deposit with Landlord prior to the commencement of installation of the Alterations up to 100% of the estimated costs of installation, which Landlord shall apply toward such costs upon completion of the Alterations, and (2) Tenant shall pay Landlord a reasonable construction management fee (not to exceed four percent (4%) of the total cost of designing and installing the Alterations, inclusive of taxes, permit fees, design fees, and construction fees). If Landlord does not elect to contract directly for the installation of the Alterations, such Alterations shall be performed by a licensed contractor reasonably acceptable to Landlord; provided, however, Landlord’s consent to any Alterations, or Landlord’s approval of plans and specifications for such Alterations shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules, and regulations (including, without limitation, the ADA). If requested by Landlord, Tenant shall post a bond or other security satisfactory to Landlord to protect Landlord against liens arising from work performed for Tenant. All work performed shall be done in a workmanlike manner and with materials of the quality and appearance as exist throughout the Building. Landlord may require Tenant to remove and restore any Alterations on the termination of this Lease in accordance with Section 13.2 below. Within thirty (30) calendar days following the completion of any Alterations, Tenant shall cause to be prepared and delivered to Landlord, at Tenant’s expense, updated “as-built” drawings showing the Premises with the new Alterations.

 

Section 7.5 Liens . Tenant shall keep the Premises and the Building free from any liens arising out of any work performed, material furnished, or obligations incurred by Tenant. If Tenant disputes the correctness or validity of any claim of lien, Tenant shall, within ten (10) days after written request by Landlord, post or provide security in a form and amount acceptable to Landlord to insure that title to the Project remains free from the lien claimed.

 

Section 7.6 Landlord Maintenance and Repair. Landlord shall maintain, repair and keep in good order, condition and repair the foundations and exterior walls and all other structural components of the Building, all utility systems outside the Building, the Building roof and all of the Common Areas. Notwithstanding anything herein to the contrary, if Landlord fails to maintain or repair a component or structure for which Landlord is responsible that relates to a life safety system or the failure results in a condition that materially impairs Tenant’s ability to continue to conduct its business in the Premises (a “Material Condition”), Landlord shall be in material Default if Landlord fails to take immediate action to cure the failure and thereafter pursue the cure with commercially reasonable diligence. A Default with respect Material Condition shall entitle Tenant to perform Landlord’s obligations and Landlord shall thereafter reimburse Tenant for the express incurred by Tenant to cure the failure by Landlord.

 

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ARTICLE 8. INSURANCE

 

Section 8.1 Use; Rate . Tenant shall not do anything in or about the Premises which will in any way tend to increase insurance rates paid by Landlord on policies of liability or casualty insurance maintained with respect to the Building and/or Project. In no event shall Tenant carry on any activities which would invalidate any insurance coverage maintained by Landlord.

 

Section 8.2 Liability Insurance . Tenant shall during the Lease Term, at its sole expense, maintain in full force a policy or policies of commercial general liability insurance issued by one or more insurance carriers, insuring against liability for injury to or death of persons and loss of or damage to property occurring in or on the Premises and any portion of the Common Area which is subject to Tenant’s exclusive control. Said liability insurance shall be in an amount not less than Two Million Dollars ($2,000,000.00) combined single limit for bodily and personal injury and property damage per occurrence and not less than Three Million Dollars ($3,000,000.00) in the aggregate.

 

Section 8.3 Worker’s Compensation Insurance . Tenant shall at all times maintain Worker’s Compensation Insurance in compliance with Washington law.

 

Section 8.4 Casualty Insurance . Tenant shall pay for and shall maintain in full force and effect during the Term of this Lease a standard form policy