DEED OF TRUST AND SECURITY AGREEMENT

 

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                                                                    Exhibit 10.3

 

WHEN RECORDED RETURN TO:

 

The Northwestern Mutual Life Insurance Company

Robin Miller    Room N16WC

720 E. Wisconsin Avenue

Milwaukee, WI 53202

 

Loan No. 337153

 

Document Title:

 

                      DEED OF TRUST AND SECURITY AGREEMENT

                     (FIRST PRIORITY - MONTE VILLA PROJECT)

 

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WASHINGTON

LOAN NO. C-337153

RECORDING REQUESTED BY

 

_____________________

WHEN RECORDED MAIL TO

 

The Northwestern Mutual Life Ins. Co.

720 East Wisconsin Avenue - Rm N16WC

Milwaukee, WI 53202

Attn: Robin Miller

 

                    SPACE ABOVE THIS LINE FOR RECORDER'S USE

 

                      DEED OF TRUST AND SECURITY AGREEMENT

                     (FIRST PRIORITY - MONTE VILLA PROJECT)

 

      THIS DEED OF TRUST and SECURITY AGREEMENT is made as of the 28th day of

December, 2004 between BMR - 3450 MONTE VILLA PARKWAY LLC, a Delaware limited

liability company, whose mailing address is c/o BioMed Realty Trust, Inc., 17140

Bernardo Center Drive, Suite 222, San Diego, CA 92128, herein called "Grantor",

and CHICAGO TITLE INSURANCE COMPANY, a Missouri corporation, whose mailing

address is 303 Hoyt Avenue, Everett, WA 98201, herein called "Trustee", and THE

NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation, whose

mailing address is 720 E. Wisconsin Avenue, Milwaukee, WI 53202, herein called

"Beneficiary":

 

      WITNESSETH, that Grantor, in consideration of the indebtedness herein

mentioned, does hereby irrevocably bargain, sell, grant, transfer, assign and

convey unto Trustee, in trust, with power of sale and right of entry and

possession, the following property (herein referred to as the "Monte Villa

Project"):

 

       A.     The land in the City of Bothell, County of Snohomish, State of

            Washington, described in Exhibit "A" attached hereto and

            incorporated herein (the "Land");

 

      B.     All easements, appurtenances, tenements and hereditaments belonging

            to or benefiting the Land, including but not limited to all waters,

            water rights, water courses, all ways, trees, rights, liberties and

            privileges;

 

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      C.     All improvements to the Land, including, but not limited to, all

            buildings, structures and improvements now existing or hereafter

            erected on the Land; all fixtures and equipment of every description

            belonging to Grantor which are or may be placed or used upon the

            Land or attached to the buildings, structures or improvements,

            including, but not limited to, all engines, boilers, elevators and

            machinery, all heating apparatus, electrical equipment,

            air-conditioning and ventilating equipment, water and gas fixtures,

            and all furniture and easily removable equipment; all of which, to

            the extent permitted by applicable law, shall be deemed an accession

             to the freehold and a part of the realty as between the parties

            hereto; and

 

      D.     Grantor's interest in all articles of personal property of every

            kind and nature whatsoever, including, but not limited to all

             carpeting, draperies, ranges, ovens, microwave ovens, refrigerators,

            dishwashers, furniture, dehumidification equipment, laboratory

            equipment, etc., now or hereafter located upon the Land or in or on

            the buildings and improvements and now owned or leased or hereafter

            acquired or leased by Grantor.

 

      Grantor agrees not to sell, transfer, assign or remove any material item

described in B, C and D above now or hereafter located on the Land without prior

written consent from Beneficiary unless (i) such action does not constitute a

sale or removal of any buildings or structures or the sale or transfer of waters

or water rights and (ii) such action results in the substitution or replacement

with similar items of equal value.

 

Without limiting the foregoing grants, Grantor hereby pledges to Beneficiary,

and grants to Beneficiary a security interest in, all of Grantor's present and

hereafter acquired right, title and interest in and to the Monte Villa Project

and any and all

 

      E.     cash and other funds now or at any time hereafter deposited by or

            for Grantor on account of tax, special assessment, replacement or

            other reserves required to be maintained pursuant to the Loan

             Documents (as hereinafter defined) with Beneficiary or a third

            party, or otherwise deposited with, or in the possession of,

            Beneficiary pursuant to the Loan Documents; and

 

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       F.     surveys, soils reports, environmental reports, guaranties,

            warranties, architect's contracts, construction contracts, drawings

            and specifications, applications, permits, surety bonds and other

            contracts relating to the acquisition, design, development,

            construction and operation of the Monte Villa Project; and

 

      G.     accounts, chattel paper, deposit accounts, instruments, equipment,

            inventory, documents, general intangibles, letter-of-credit rights,

            investment property and all other personal property of Grantor;

 

      H.     present and future rights to condemnation awards, insurance proceeds

            or other proceeds at any time payable to or received by Grantor on

             account of the Monte Villa Project or any of the foregoing personal

            property; and

 

      I.     tenant security deposits (whether in the form of cash, letter of

            credit or other instrument) required by the terms of the lease with

            Nastech Pharmaceuticals, Inc. and by any other lease now or

            hereafter in effect at the Monte Villa Project.

 

All personal property hereinabove described is hereinafter referred to as the

"Personal Property".

 

      If any of the Monte Villa Project is of a nature that a security interest

therein can be perfected under the Uniform Commercial Code, this instrument

shall constitute a security agreement, financing statement and fixture filing if

permitted by applicable law and Grantor authorizes Beneficiary to file a

financing statement describing such Monte Villa Project and, at Beneficiary's

request, agrees to join with Beneficiary in the execution of any financing

statements and to execute any other instruments that may be necessary or

desirable, in Beneficiary's determination, for the perfection or renewal of such

security interest under the Uniform Commercial Code.

 

      To the extent any of the property described above is personal property,

Grantor, as debtor, grants to Beneficiary, as secured party, a security interest

therein together with a security interest in any products or proceeds of any

thereof, pursuant to the Uniform Commercial Code of the State of Washington (the

"UCC"), on the terms and conditions contained herein except that where any

provision hereof is in conflict with the UCC, the UCC shall control. Beneficiary

shall have the right, upon the occurrence or continuance of any Event of

Default, to realize upon the personal property subject to this Deed of Trust,

independent of any action of Trustee, pursuant to the UCC. Grantor agrees to

join with

 

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Beneficiary and/or Trustee in the execution of any financing statements and to

execute any other instruments that may be required for the perfection or renewal

of such security interest under the UCC.

 

      TO HAVE AND TO HOLD the same unto Trustee for the purpose of securing:

 

      (a) Payment to the order of Beneficiary of the indebtedness evidenced by a

promissory note of even date herewith (and any restatement, extension or renewal

thereof and any amendment thereto) executed by Grantor for the principal sum of

TEN MILLION SIX THOUSAND SIX HUNDRED FORTY DOLLARS, with final maturity no later

than January 1, 2010 and with interest as therein expressed (which promissory

note, as such instrument may be amended, restated, renewed and extended, is

hereinafter referred to as the "Note"), it being recognized that the funds may

not have been fully advanced as of the date hereof but may be advanced in the

future in accordance with the terms of a written contract; and

 

      (b) Payment of all sums that may become due Beneficiary under the

provisions of, and the performance of each agreement of Grantor contained in,

the Loan Documents; and

 

      (c) Payment of such additional sums, with interest thereon, as may

hereafter be loaned by Beneficiary to Grantor when evidenced by a promissory

note or notes of Grantor, such additional note or notes to be identified by

recital that it or they are secured by this deed of trust, and such note or

notes shall be included in the word "Note" wherever it appears in the context of

this deed of trust, and the indebtedness evidenced by such additional note or

notes shall have the same priority as the indebtedness secured hereby.

 

      "Loan Documents" has the meaning ascribed to it in that certain Master

Loan Agreement of even date herewith among Grantor (as Borrower), certain

Affiliates of Grantor and Beneficiary (as Lender) ("Master Loan Agreement"). Any

term capitalized herein and not expressly defined herein shall have the meaning

set forth in the Master Loan Agreement.

 

FIXTURE FILING. This Deed of Trust constitutes a financing statement, filed as a

fixture filing in the real estate records of the County of the State in which

the real estate described in Exhibit A is located, with respect to any and all

fixtures included within the term "Monte Villa Project" and "fixtures" under

this Deed of Trust and to any goods or other personal property that are now or

hereafter become a part of the Monte Villa Project as fixtures.

 

      TO PROTECT THE SECURITY OF THIS DEED OF TRUST, GRANTOR COVENANTS AND

AGREES:

 

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PAYMENT OF DEBT. Grantor agrees to pay the Indebtedness hereby secured promptly

and in full compliance with the terms of the Loan Documents.

 

OWNERSHIP. Grantor represents that it owns the Monte Villa Project and has good

and lawful right to convey the same and that the Monte Villa Project is free and

clear from any and all encumbrances whatsoever, except for Permitted Liens, as

hereinafter defined. "Permitted Liens" means (i) encumbrances which appear in

the title evidence accepted by Beneficiary, (ii) the Permitted Second Lien

defined in the provision below entitled "OTHER LIENS," and (iii) liens and

encumbrances on Personal Property incident to the ordinary course of business

that do not exceed $25,000 in the aggregate at any time.

 

Grantor does hereby forever warrant and shall forever defend the title and

possession thereof against the lawful claims of any and all persons whomsoever.

 

MAINTENANCE OF MONTE VILLA PROJECT AND COMPLIANCE WITH LAWS. Grantor agrees to

keep the buildings and other improvements now or hereafter erected on the Land

in good condition and repair, ordinary wear and tear excepted; not to commit or

suffer any waste; to comply with all laws, rules and regulations affecting the

Monte Villa Project; and to permit Beneficiary to enter at all reasonable times

for the purpose of inspection and of conducting, in a reasonable and proper

manner, such tests as Beneficiary determines to be necessary in order to monitor

Grantor's compliance with applicable laws and regulations regarding hazardous

materials affecting the Monte Villa Project.

 

TENANTS USING CHLORINATED SOLVENTS. Grantor agrees not to lease any of the Monte

Villa Project, without the prior written consent of Beneficiary, to (i) dry

cleaning operations that perform dry cleaning on site with chlorinated solvents

or (ii) any other tenants that use chlorinated solvents in the operation of

their businesses.

 

Notwithstanding the above, a tenant's use of a product which contains no more

than sixteen (16) ounces of chlorinated solvents, in solution or in pure form,

shall not violate this prohibition if, and only if, (i) tenant's use, storage,

and the ultimate disposal of, said solvents is at all times in compliance with

applicable law, and (ii) said solvents are acquired and kept in prepackaged

containers.

 

Notwithstanding the foregoing, Beneficiary acknowledges the use and storage of

dichloromethane, chloroform, and trichloroanisole by Nastech Pharmaceutical

Company, Inc. ("Nastech") at the Monte Villa Project. The use, storage, and

ultimate disposal of said solvents and any other chlorinated solvents used and

disposed of from time to time at the Monte Villa Project by Nastech shall be

limited to research and development use, vivarium use, warehouse use and

laboratory use, and shall be permitted by Beneficiary if, and only if,

 

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(i) use, storage, and the ultimate disposal of the solvents is at all times in

compliance with applicable law; (ii) all such solvents are acquired and kept in

containers specifically designed to safely hold said solvent; and (iii) once a

year an Environmental Engineer selected by Beneficiary shall inspect the Monte

Villa Project to verify Nastech's compliance with (i) and (ii). In the event the

annual inspection reveals any non-compliance with (i) or (ii), or any

unsatisfactory environmental condition related to chlorinated solvents, Grantor

shall cause Nastech to promptly remediate the condition and to comply with (i)

and (ii). All costs of the annual inspection shall be borne by Grantor. The

permitted use of the above listed solvents by Nastech does not constitute

approval of the use of chlorinated solvents at the Monte Villa Project by any

other tenant (except as permitted by the second grammatical paragraph of this

provision).

 

BUSINESS RESTRICTION REPRESENTATION AND WARRANTY. Grantor represents and

warrants that Grantor, all persons and entities owning (directly or indirectly)

an ownership interest in Grantor, all guarantors of all or any portion of the

Indebtedness, and all persons and entities executing any separate indemnity

agreement in favor of Beneficiary in connection with the Indebtedness: (i) are

not, and shall not become, a person or entity with whom Beneficiary is

restricted from doing business under regulations of the Office of Foreign Asset

Control ("OFAC") of the Department of the Treasury (including, but not limited

to, those named on OFAC's Specially Designated and Blocked Persons list) or

under any statute, executive order (including, but not limited to, the September

24, 2001 Executive Order Blocking Property and Prohibiting Transactions With

Persons Who Commit, Threaten to Commit, or Support Terrorism), or other

governmental action; (ii) are not knowingly engaged in, and shall not engage in,

any dealings or transaction or be otherwise associated with such persons or

entities described in (i) above; and (iii) are not, and shall not become, a

person or entity whose activities are regulated by the International Money

Laundering Abatement and Financial Anti-Terrorism Act of 2001 or the regulations

or orders thereunder.

 

INSURANCE. Grantor covenants to maintain all insurance and apply insurance

proceeds as required by Article IX (Insurance; Application of Insurance Loss

Proceeds) of the Master Loan Agreement.

 

CONDEMNATION. Grantor assigns Condemnation Proceeds to Beneficiary and agrees

that such proceeds shall be applied as set forth in the Master Loan Agreement.

 

TAXES AND SPECIAL ASSESSMENTS. Grantor agrees to pay before delinquency all

taxes and special assessments of any kind that have been or may be levied or

assessed against the Monte Villa Project, this instrument, the Note or the

Indebtedness, or upon the interest of

 

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Trustee or Beneficiary in the Monte Villa Project, this instrument, the Note or

the Indebtedness, and to procure and deliver to Beneficiary within thirty (30)

days after Beneficiary shall have given a written request to