Exhibit 10.37 LEASE LAKE UNION STEAM PLANT BUILDING THIS LEASE is entered into and effective as of October 4, 2002 ("Effective Date"), between ARE-1201/1208 EASTLAKE AVENUE, LLC, a Delaware limited liability company ("Landlord") and ZYMOGENETICS, INC., a Washington corporation ("Tenant"). The parties agree as follows: 1. PREMISES/LEASE 1.1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord on the terms contained herein all property purchased by Landlord from Tenant and located at 1201 Eastlake Avenue East, Seattle, Washington ("Premises"), including (Section 27.2) the land described on Exhibit A, together with the easements, rights and appurtenances thereto and the buildings and other improvements located thereon ("Improvements"); including the Fixed Equipment (Section 8.8) and excluding the Removable Equipment (Section 8.8). 1.2 Operating Lease. Landlord and Tenant stipulate that this Lease is a true lease and does not represent a financing arrangement. Each party shall reflect the transactions represented by this Lease in a manner consistent with "true lease" treatment rather than "financing" treatment in all applicable books, records and reports (including income tax filings). Tenant intends to record this Lease as an operating lease for SEC reporting purposes in accordance with generally accepted accounting principles ("GAAP"), but failure to do so shall not be considered a default under this Lease. 1.3 Acceptance of Premises. As the prior owner of the Premises, Tenant designed and constructed substantial modifications to the Improvements on the Premises and has occupied the Improvements since completion of those modifications and is therefore completely familiar with the condition of the Improvements. By entering this Lease, Tenant is deemed to have accepted the Premises in its current condition, AS-IS and with all faults. To the extent necessary to comply with its obligations to maintain and repair the Premises, Tenant shall enforce the warranties and other obligations of contractors and suppliers for the original construction of the Premises and Landlord shall cooperate with Tenant in doing so, but Landlord shall have no other responsibility or liability for the design, construction or condition of Premises and makes no warranties with respect thereto and Tenant shall reimburse Landlord for all its reasonable out-of-pocket third party costs and expenses, including its attorneys' fees, incurred in connection with its cooperation. Landlord shall not be required to make any repairs or replacements of any kind whatsoever during the Term. Notwithstanding the sale of the Premises to Landlord, all warranties and guaranties regarding the development of the Premises remain with Tenant for the Term and any remaining warranties and guaranties will be deemed automatically transferred to Landlord upon termination of this Lease. 2. TERM 2.1 Initial Term. The "Initial Term" of this Lease shall be 15 years commencing on October 4, ("Commencement Date") and ending on October 3, 2017, unless sooner terminated pursuant to any provision hereof. Tenant and Landlord's affiliate are parties to the Earl Davie Building Lease (Section 15.2). If the Initial Term of the Earl Davie Building Lease is extended by operation of Section 24.11 of the Earl Davie Building Lease, then the Initial Term of this Lease will be extended to the same expiration date, and the parties shall enter into an amendment to this Lease in the form of Exhibit I evidencing such extension. As used herein, "Term" shall mean the Initial Term and any Renewal Term (Section 2.2) which becomes effective hereunder. 2.2 Extensions. Provided that Tenant is not in default on exercise of a right to extend or on the commencement of the Renewal Term (unless such default is cured within any applicable cure period), 1 Tenant shall have the right to extend this Lease for 4 consecutive renewal terms (each, a "Renewal Term") of 5 years each, with at least 16 months prior written notice to Landlord. If Landlord does not receive such notice 16 months prior to the end of a current Term, Tenant's renewal rights shall lapse. The rights to extend the Lease for the Renewal Terms are personal to Tenant and may not be assigned, pledged or transferred to any third party. Notwithstanding the foregoing, such rights may be assigned or transferred to Tenant's Affiliates (Section 13.2). 2.3 Rent For Renewal Terms. As of the commencement of each Renewal Term, the Base Rent (Section 3.1) shall be adjusted to the greater of (a) the fair market rental value of the Premises as of the commencement of the Renewal Term, or (b) 90% of the Base Rent applicable to the last year of the term prior to commencement of the applicable Renewal Term. Fair market rental value shall be the amount of rent which a well-informed tenant, willing, but not obliged to lease the Premises, would pay, and which a well-informed landlord, willing, but not obligated to lease, would accept, taking into consideration all uses to which the Premises is adapted and might in reason be applied, and the then market terms being offered in the Seattle metropolitan area (e.g. including Elliott Bay, the University District, Queen Anne/Interbay, Lake Union, Denny Triangle, etc.) for space reasonably comparable to the Premises. If, after bargaining in good faith for 30 days (the "Bargaining Period"), the parties have not reached agreement on the fair market rental value, it shall be established by binding arbitration in accordance with Section 2.4. Commencing at the start of the second year of each Renewal Term and continuing each year thereafter, the Renewal Term's Base Rent shall be increased by 3.5%. 2.4 Arbitration. The arbitration process outlined below must be commenced no more than 18 months before the first day of the ensuing Renewal Term and pursued in good faith. Each arbitrator shall be an MAI real estate appraiser with at least 7 years experience in appraising real property used for comparable "wet science" biological laboratory and research and development facilities or such similar uses to which the parties agree ("Arbitrator"). If the parties are able to reach agreement on a single Arbitrator within 10 days after the end of the Bargaining Period, that Arbitrator shall determine the fair market rental value. Otherwise, each party shall select its own Arbitrator and shall provide the name to the other party within 15 days following expiration of the Bargaining Period. The two Arbitrators shall meet within 20 days following their selection and attempt in good faith during such 20 days to reach agreement on the fair market rental value of the Premises. If the two Arbitrators are unable to agree, they shall jointly select a third Arbitrator. If they fail to either agree on the fair market rental value or appoint a third Arbitrator within 20 days following their appointments, the third Arbitrator shall be selected by the then Presiding Judge of King County Superior Court upon the request of either party. Within 10 days after the appointment of the third Arbitrator, the first two Arbitrators shall each submit in writing to the third Arbitrator the amount which they propose be established as the Renewal Term's Base Rent ("Submissions"). The Submissions shall not be disclosed by the third Arbitrator until the third Arbitrator has received both of the other Arbitrators' Submissions. Each Arbitrator may include in such Submissions any information which he/she deems relevant or helpful to the third Arbitrator in determining the fair market rental value of the Premises, and the third Arbitrator may not obtain, accept or consider any additional information in making its decision. The third Arbitrator's determination of the fair market rental value is strictly limited to selection, as the more reasonable approximation of the fair market rental value of the Premises, of the amount stated in one of the Submissions, and third Arbitrator may not select or declare any third number. The third Arbitrator's decision shall be made within 20 days after delivery of the Submissions, by a report in writing to each of the parties and in any event at least 12 1/2 months before the commencement of the Renewal Term. Each party shall pay the costs of its own Arbitrator and one-half of the single Arbitrator or the third Arbitrator's fee. If the Arbitrator's determination of fair market rental value is greater than 110% of the then Base Rent payable during the 12 months immediately preceding the applicable Renewal Term, Tenant may elect to rescind exercise of the option by written notice to Landlord given at least 12 months before the commencement of the Renewal Term. Notwithstanding the provisions of this Section 2.4, if during the arbitration period, Tenant and Landlord reach agreement on fair market rental value (independent of Arbitrator's findings), the arbitration shall be terminated and the determination of the parties shall govern. 2 3. RENT 3.1 Base Rent. Commencing on the Commencement Date, and continuing on the first of each month thereafter, Tenant shall pay to Landlord $284,220.54 per month ("Base Rent"). Base Rent shall be remitted to the Landlord at its address stated for notices in this Lease as the same may be amended from time to time or to such other address required by Landlord in a written notice to Tenant and shall be due and payable on the first day of each month during the Term and tendered in cash. Base Rent for any partial month shall be prorated based on the number of days in the applicable calendar month. 3.2 Increases in Base Rent. Commencing one year after the Commencement Date and continuing annually thereafter, the Base Rent shall be increased by 3.5%. 3.3 Intentionally Omitted 3.4 Additional Rent. All amounts other than Base Rent due by Tenant to Landlord under this Lease shall be deemed "Additional Rent" and Landlord shall have all of the same remedies for Tenant's failure to pay Additional Rent as for failure to pay Base Rent. The term "Rent" shall mean the combined Base Rent and Additional Rent. Tenant's obligations to pay Rent are in the nature of independent covenants and all Rent shall be paid without demand, notice, abatement, reduction or offset, except that Additional Rent may be subject to demand or notice where provided in this Lease. 3.5 Late Fee. If any installment of Base Rent is not received by Landlord by the 5/th/ of the month, Tenant shall pay to Landlord, on demand, a late charge equal to six percent (6%) on such overdue installment of Base Rent (the "Late Fee"). Notwithstanding the foregoing, Landlord agrees that pursuant to Section 15.2 below, Landlord will deliver notice to Tenant of any such delinquency and, not more than once each Lease Year, Landlord will waive the Late Fee if such delinquency is paid within three business days after Tenant's receipt of such notice. Tenant acknowledges that such late charge represents a reasonable estimate of the costs Landlord will incur as a result of such late payment. 3.6 Fines/Penalties. Subject to Section 22, Tenant shall pay and discharge when due all other amounts and obligations which Tenant assumes or agrees to pay pursuant to this Lease. 3.7 Abatement of Rent. Except as expressly agreed upon in Sections 10 and 12 below, Tenant's obligations to pay Rent shall not abate during any period that the Premises or any part thereof are untenantable regardless of the cause of such untenantability. 3.8 Asset Management Fee. In addition to the Base Rent, Tenant shall pay to Landlord each month with the Base Rent an asset management fee equal to one-half of one percent (0.5%) of the Base Rent. 4. USE 4.1 Use. Tenant may use the Premises only for office and laboratory, and research and development facilities and uses that are a reasonably necessary adjunct thereto. "Laboratory" as used herein refers to that portion of the Premises devoted to "wet" laboratory and related research and development use. Exhibit H shows the current allocation of Laboratory and office spaces. Changes resulting in more than 50% or less than 25% of the net rentable square feet of the Premises designated for office use will be considered a change in use. The methodology which will be used for calculating the percent of use will be calculated consistent with the methodology as was employed to calculate the current use percentage as described on Exhibit H (said uses and the permitted deviation in the ratio being hereinafter referred to as the "Use Requirements"). Any other uses or changes in uses shall require Landlord's approval, in accordance with the approval standards set forth in Section 8. The Premises shall not be used for any purpose which would constitute a public or private nuisance or waste, or violate the agreements listed on Exhibit B ("Title Encumbrances"). 3 4.2 Compliance with Laws. Tenant shall, at its cost, comply with all Laws (Section 27.2) and the requirements of any board of fire underwriters, including all modifications required thereby, relating to or affecting the condition, use or occupancy of the Premises. Upon request of Landlord, Tenant shall provide Landlord with copies of all documents evidencing Tenant's compliance with any particular Law specified by Landlord. Tenant shall notify Landlord in writing immediately of any threatened or actual notice or citation, regarding an alleged failure of the Premises to comply with any Law. 4.3 Mechanic's Liens. Except for claims for delinquent payments for which Landlord is contractually obligated, which shall be the sole responsibility of Landlord, Tenant agrees that during the Term hereof it shall not do or suffer any waste to the Premises, or cause, suffer or permit any liens for labor, services or materials to attach to the Premises by reason of any act or omission of Tenant or person claiming through Tenant. If any lien is filed arising out of work performed for Tenant, Tenant shall either discharge the lien or post a bond pursuant to RCW 60.04.161 to remove the lien from the Premises within 30 days after it receives notice of the lien. 4.4 Quiet Enjoyment. So long as no Event of Default (Section 15.2) exists hereunder, Landlord covenants that Tenant shall have quiet occupation and enjoyment of the Premises from any person claiming through Landlord. 4.5 Development Agreement. During the Term, Tenant shall be responsible for all of Tenant's obligations under that certain Real Estate Agreement, Development Conditions, and Physical Restrictions for Lake Union Steam Plant dated May 5, 1993 (the "Development Agreement"). Capitalized terms used in this Section 4.5 which are not defined in this Lease shall have the meanings set forth in the Development Agreement. Tenant's obligations under the Development Agreement shall not include the following: (a) without impairing Tenant's own obligations to cooperate, any failure of Landlord to cooperate with the City of Seattle (the "City") as required by Section 7.1.1 of the Development Agreement; (b) any exoneration of the City from liability under the Development Agreement as a result of Landlord's entering into a consent decree or consent order under Section 7.1.4 of the Development Agreement without the consent of Tenant; (c) the costs of any remediation of Hazardous Materials under any consent decree or consent order under Section 7.1.4 of the Development Agreement that was entered into without the consent of Tenant unless such remediation is otherwise an obligation of Tenant under this Lease and its failure to pursue the same is an Event of Default; (d) any costs, expenses, penalties, attorneys' or consultants' fees which become owed to the City under Section 7.1.5 of the Development Agreement as a result of the release of Historic Contamination by Landlord or Landlord Related Parties (Section 14); or (e) any costs, expenses, damages, fees or penalties relating to the remediation of Historic Contamination that become owed to the City under Section 7.5 of the Development Agreement as a result of the action of Landlord or Landlord Related Parties; provided, however, Tenant's use and occupancy of the Premises and the obligations of Tenant under the Lease to maintain, construct, alter, expand, repair, or restore any existing or future improvements on the Premises shall be deemed the sole acts of Tenant hereunder, whether the same are performed by (a) Tenant, or (b) Landlord on behalf of Tenant as a result of any Event of Default. 5. MAINTENANCE AND REPAIR 5.1 Tenant's Obligations. Tenant shall keep and maintain all portions of the Premises in good order and condition, in a manner typical of other properly maintained and operated facilities of a 4 similar nature and in accordance with all Laws and with the standards of maintenance and repair adhered to by Tenant prior to the Commencement Date. Tenant shall promptly make all repairs and replacements required in order to keep and maintain the Premises in such order and condition. Tenant shall also keep the Premises in compliance with all Laws and the requirements of the property and environmental insurance coverages. The provisions of this Section shall not conflict with Tenant's rights to obtain insurance and condemnation proceeds under Sections 10, 11 and 12. If Tenant fails to perform the required maintenance and repairs, Landlord shall have the cure rights described in Section 15.7. 5.2 Condition on Surrender. Upon termination of this Lease, Tenant shall remove its personal property, repair any damage caused by removal, comply with any removal and Restoration Requirements (Section 8), and leave the Premises in good repair and condition, subject to Section 10.3. In addition, prior to termination of the Lease, Tenant shall perform all decommissioning required by governmental agencies and shall provide copies of all decommissioning reports to Landlord. If Tenant has failed to complete the governmental decommissioning process by the expiration or earlier termination date of this Lease, and as a result, the Premises cannot be relet, the Tenant shall be required to continue to pay full Rent and perform its obligations hereunder until such decommissioning is complete. The foregoing shall also be considered holding over and be subject to the terms of Section 27.13 if, and for so long as, Tenant fails to pursue such decommissioning with due diligence. The Fixed Equipment then existing in the Premises shall be surrendered with the Premises in good and operating condition and free of any liens, financing leases or other encumbrances created by or imposed against Tenant, and belong solely to Landlord. 6. UTILITIES AND TAXES 6.1 Utilities. Subject to Section 22, Tenant shall pay when due all charges for utility services provided to the Premises including power, water and sewer, and gas. No interruption of utility service shall give Tenant the right to abate Rent or terminate this Lease. 6.2 Taxes. Subject to Section 22, Tenant shall pay when due all Real Property Taxes. "Real Property Taxes" shall mean: (i) the ad valorem property taxes and other similar taxes levied against the Premises which become due and payable during the Term, (ii) all installments of assessments imposed by governmental entities on the Premises which become due and payable during the Term, and (iii) governmental licensing or similar fees. Real Property Taxes shall include all taxes and assessments levied against the Premises other than conveyance taxes arising from Landlord's transfer of the Premises, Landlord's rental taxes (if any), Landlord's business and occupation taxes, franchise or net income taxes of Landlord, any estate, succession, gift, capital levy or similar taxes. If any assessment may be paid in installments, Tenant shall be responsible only for those installments due and payable during the Term and for those portions of installments to the extent they accrued during the Lease Term, even if they are payable thereafter. If Landlord enters into private agreements for off-site improvements for the benefit of the Premises which are in lieu of government imposed improvements, Tenant shall pay Landlord's installments thereunder to the extent they accrued during the Term. Notwithstanding the foregoing, if the amortization period used in calculating the amount of the installments is less than the amortization period that would have been used for the government assessment that would have otherwise been imposed, then Tenant shall pay a portion of the Landlord's installments due under such private agreements, to the extent they accrued during the Term, recalculated using the same amortization period as would have been used for the government assessment. Tenant shall pay all personal property taxes levied against the Premises as and when due to the extent the levy thereof is attributable to the Term and all such taxes are assessed against its own property. It is Landlord's and Tenant's express intent that all Fixed Equipment identified on Exhibit G and all substitutions, modifications or additions thereto, is part of the real property and not personal property. No personal property is being leased by Landlord to Tenant. Notwithstanding the foregoing, if the Department of Revenue assesses any personal property taxes relating to the Premises, the Fixed Equipment or this Lease, Tenant shall pay such taxes, subject to Section 22. 5 7. SECURITY DEPOSIT 7.1 General Requirements. Upon execution of this Lease, Tenant will provide to Landlord a security deposit ("Security Deposit") in the amount of $568,441.08 (i.e. two months Base Rent). Tenant shall increase the amount of the Security Deposit to correspond to increases in Base Rent at the time such adjustments become effective. Tenant can elect to provide the Security Deposit in the form of either a letter of credit ("LOC"), or pledged marketable securities from Tenant's corporate cash investment portfolio, or a combination thereof, variable over the Term. Landlord will hold the Security Deposit as security for the performance of Tenant's obligations under the Lease. The Security Deposit will not be considered an advance payment of Rent or a measure of Tenant's liability for damages. Landlord may, from time to time, without prejudice to any other remedy, upon the occurrence of an Event of Default, use all or a portion of the Security Deposit to cure any Event of Default. Following any such application of the Security Deposit, Tenant will replenish the Security Deposit to its required amount. Landlord shall transfer the Security Deposit to any subsequent owner of the Premises. Landlord and its successors and assigns will not be bound by any assignment or encumbrance of the Security Deposit by Tenant, provided, however, if Tenant's interest in the Lease has been assigned, Landlord will return the Security Deposit to such assignee in accordance with the terms and conditions hereof. Within 30 days following the expiration of this Lease and the performance by Tenant of all of its obligations hereunder, Landlord shall return the then existing balance of the Security Deposit to Tenant. Landlord shall have no obligation to pay interest on the Security Deposit. If Landlord returns the Security Deposit to Tenant's assignee as aforesaid, Landlord will have no further obligation to any party with respect thereto. Tenant shall not encumber the Security Deposit. 7.2 Letter of Credit. During any period that Tenant elects to satisfy all or any portion of the Security Deposit with an LOC, the LOC must be an irrevocable and unconditional standby letter of credit, issued by the Bank of America or its successors or another financial institution reasonably satisfactory to Landlord and with a term of at least one year substantially in the form of Exhibit D. Landlord may draw upon the LOC to cure any Event of Default, as described in Section 7.1. In addition, if at any time there are less than 30 days remaining before the expiration of the LOC, and if Tenant does not deliver an extension or replacement of the LOC within 5 business days after notice from Landlord, Landlord may draw upon the LOC; provided that if Tenant subsequently provides a replacement LOC, and to the extent Landlord has not applied the same to any default, Landlord will return the funds drawn to Tenant without interest. 7.3 Pledged Securities. So long as Tenant's reported Cash Position (defined below) is at least $50,000,000.00 (the "Cash Position Minimum"), Tenant may satisfy all or any portion of the Security Deposit with marketable securities satisfying the criteria stated in this Section 7.3. "Cash Position" is defined as the sum of unrestricted cash, cash equivalents and marketable securities as determined by reference to GAAP. If Tenant's reported Cash Position drops below the Cash Position Minimum at any time, then Tenant shall immediately convert all of its Security Deposit to an LOC. Tenant may subsequently satisfy its Security Deposit with marketable securities once Tenant has again exceeded the Cash Position Minimum for at least two consecutive quarters. During any period that Tenant elects to satisfy all or any portion of the Security Deposit with marketable securities, the pledge will be of short term (2 years or less) fixed income marketable securities from Tenant's corporate cash investment portfolio, including money market funds, rated not lower than Aa, AA, A1 or P1 or equivalent by a nationally recognized credit rating service. The pledged marketable securities will be held by Union Bank of California or another bank or financial institution mutually approved by Landlord and Tenant as custodian for Landlord, either in a separate custodian account or as specially designated securities within a larger custodian account. The pledge agreement must be substantially in the form of Exhibit E and provide Landlord with a perfected first lien security interest in the pledged securities. The custodial agreement must be substantially in the form of Exhibit F and provide direct access authorization which would permit Landlord in an Event of Default, without approval of Tenant, to authorize the sale of the securities and the withdrawal of the proceeds thereof (not to exceed the amount of the then required Security Deposit) for application by Landlord to cure any Event of Default, as described in Section 7.1. So long as the value of the pledged securities comply with the requirements of this Lease, Tenant will be entitled to retain all interest and other earnings generated by the pledged securities. If the market value 6 of the pledged securities drops below the required amount of the Security Deposit, Tenant will immediately add additional marketable securities to the pledge to increase the value of the pledged securities to equal or exceed the required level. Failure of Tenant to increase the pledged securities as required within 3 business days of notice from Landlord and/or the account custodian will constitute an Event of Default. Tenant will have the right to substitute marketable securities meeting the rating criteria and having all of the other characteristics specified above for the securities subject to the pledge. 8. ALTERATIONS 8.1 General. All alterations of Premises shall be made at Tenant's sole cost and expense. All alterations shall be made in a good and workmanlike manner and in compliance with all Laws and insurance requirements and Tenant shall enforce any warranties to the extent necessary to cause any defects in workmanship or materials to be corrected. Subject to Section 8.6, all alterations shall be fully consistent with the overall character of the Premises as a first class scientific research and development facility (the "Function Requirements") and the Use Requirements. Tenant shall indemnify, defend and hold Landlord harmless from all claims, costs (including attorneys' fees and costs) or damage occurring in connection with Tenant's alterations; notwithstanding the foregoing, Tenant shall not be liable to reimburse Landlord for Landlord's overhead and expenses in reviewing any plans, specifications and other documents or in otherwise confirming Tenant's conformance to the requirements of this Section 8 ("Review Costs") except that for Category D and E Alterations, Tenant shall pay Landlord a fee equal to the lesser of $10,000 or 5% of all costs incurred by Tenant or its contractors or agents in connection with any Category D or E Alteration, to defray Landlord's Review Costs. Prior to commencing any alterations, Tenant shall obtain all necessary permits from governmental authorities. Irrespective of Landlord's receipt, review and any approval of the plans and specifications for Tenant's alterations, Tenant, and not Landlord, shall have sole responsibility for the accuracy or sufficiency of the plans and specifications, their compliance with applicable Laws, codes, regulations or statutes, and their fitness for Tenant's purpose. If any alterations by Tenant trigger any legal requirements to make other modifications to the Premises, Tenant shall make such modifications at its sole cost and expense. Tenant shall provide to Landlord as-built drawings for all alterations by Tenant promptly after completion of the alteration. Except for Removable Equipment, all alterations shall become the property of Landlord immediately upon installation or completion and shall be subject to all of the terms of this Lease. Prior to commencing any Category "B-E" Alteration, Tenant must deliver to Landlord evidence of insurance from all contractors and subcontractors reasonably satisfactory to Landlord to protect Landlord against liability for personal injury or property damage during construction, naming Landlord as an additional insured. 8.2 Category "A" Alterations. An alteration is a "Category A Alteration" if the estimated cost of such alteration is less than $5,000 and the alteration does not fall within the definition of Category D or E Alterations. For Category A Alterations, in addition to the requirements of Section 8.1, Tenant will deliver notice to Landlord describing the alteration promptly after its completion, in the manner stated in Section 27.3. 8.3 Category "B" Alterations. An alteration is a "Category B Alteration" if the estimated cost of such alteration is between $5,000 and $25,000, and the alteration does not fall within the definition of Category D or E Alterations. For Category B Alterations, in addition to the requirements of Section 8.1, Tenant shall notify Landlord, in the manner stated in Section 27.3, of the planned alteration at least 5 business days prior to commencement of the work, providing a brief description of the work, the estimated cost, and any permit drawings, if applicable. 8.4 Category "C" Alterations. An alteration is a "Category C Alteration" if the estimated cost of such alteration exceeds $25,000 and the alteration does not fall within the definition of Category D or E Alterations. For Category C Alterations, in addition to the requirements of Section 8.1, Tenant shall notify Landlord, in the manner stated in Section 27.3, of the planned alteration at least 10 business days prior to the commencement of the work, providing a description of the work, the estimated cost and any permit drawings for Landlord's review and approval. Landlord will not withhold its approval of the alteration, however Landlord may impose reasonable conditions on the alteration to the extent necessary to protect its investment, provided that Landlord may not require Tenant to restore the Premises or 7 remove the Category C Alteration as a condition of its consent. For Category C Alterations, if Landlord does not respond to Tenant's notice of such alteration within the 10 business day period, Landlord shall be deemed to have approved such alteration without conditions. 8.5 Category "D" Alterations. An alteration is a "Category D Alteration," regardless of estimated cost, if such alteration does not fall within the definition of a Category E Alteration, and either (a) such alteration when aggregated with past alterations and concurrent alterations, fails to comply with the Use Requirements, or (b) such alteration results in a net change in rentable square footage for any Function which is outside of the "Function Tolerances" set forth in the Table of Uses contained in Exhibit H. "Function" is defined by reference to physical and functional distinctions evident in the floor plans attached as Exhibit H. For Category D Alterations, in addition to the requirements of Section 8.1, Tenant must obtain Landlord's prior written approval, which shall not be unreasonably withheld. To request Landlord's approval, Tenant shall provide to Landlord schematic drawings for Category D Alterations and Landlord shall respond with its comments on such proposed alteration within 10 business days after receipt thereof. Such approval is also subject to Landlord's subsequent 10 business day review and approval of the construction drawings for the proposed alteration. Landlord shall be required to approve the Category D Alteration and the construction drawings, if (i) Landlord had previously approved the schematic drawings, and (ii) the construction drawings reflect the same alterations as such schematic drawings. If Landlord disapproves of either the schematic drawings or the construction drawings, it shall provide Tenant with reasonably detailed reasons therefor. Failure to provide any such notice shall not be construed as an approval of or consent to any alteration. Landlord may condition its approval of Category D Alterations on a Restoration Requirement (Section 8.7). 8.6 Category "E" Alterations. An alteration is a "Category E Alteration," regardless of estimated cost, if such alteration (a) fails to comply with the Function Requirements, (b) incorporates materials or employs construction standards that are of a materially lesser quality than those used in the then existing Premises, (c) decreases the number of net rentable square feet in the Premises, (d) involves any alterations to the foundation, roof or structural components of the Improvements, (e) alters the exterior appearance of the Premises (but specifically excluding landscaping, Removable Equipment, antennas or mechanical systems on the roof, and signage when reasonably required for Tenant's business); (f) is designed for any use that is not expressly permitted under Section 4.1; (g) results in Laboratory space being improved for use as a "Process Lab" (defined by reference to Exhibit H) outside of the "Extreme Max" Function Tolerances set forth in Exhibit H; (h) results in more than 60% of the Premises being improved for office use; or (i) results in more than 80% of the Premises being improved for Laboratory use (Section 4.1). For Category E Alterations, in addition to the requirements of Section 8.1, Tenant must request Landlord's prior written approval, which is subject to Landlord's sole discretion. To request Landlord's approval, Tenant shall provide to Landlord schematic drawings for Category E alterations and Landlord shall respond with its comments on the proposal within 10 business days after receipt thereof, which is subject to Landlord's subsequent 10 business day review and approval of the construction drawings. Landlord shall approve the Category E Alteration and the construction drawings, if (i) Landlord had previously approved the schematic drawings, and (ii) the construction drawings reflect the same alterations as such schematic drawings. If Landlord disapproves of either the schematic drawings or the construction drawings, it shall provide Tenant with reasonably detailed reasons therefor. Failure to provide any such notice shall not be construed as an approval of or consent to any alteration. Landlord may condition its approval of Category E Alterations on a Restoration Requirement. 8.7 Restoration Requirement and Restoration Deposit. Landlord may condition its approval of Category D and E Alterations on a requirement that Tenant remove such alterations at the end of the Term and fully restore the Premises to the location, size, design, configuration, condition and state of improvement and fixturing that existed immediately prior to making such alterations and consistent with the degree of maintenance and repair required by this Lease (the "Restoration Requirement"). If Landlord conditions its approval of a Category D or E Alteration on a Restoration Requirement, Landlord may further require that Tenant post a deposit (the "Restoration Deposit") in an amount equal to Landlord's reasonable estimate of the removal and restoration costs in any circumstance 8 in which the same exceed $100,000 and which shall be subject to the same terms and conditions as those that are applicable to the Security Deposit; provided, however, the Restoration Deposit shall be returned to Tenant to the extent and at the earlier of such time as (a) Landlord waives its requirement in writing that such alterations be removed and the Premises restored, which election shall be at Landlord's sole and absolute discretion, or (b) Tenant completes the removals and restorations, Landlord accepts the same as having complied with Tenant's obligations under this section, and Tenant provides Landlord with final lien waivers and evidence of payment for all of the costs and expenses incurred to do so. Notwithstanding the foregoing, in no event shall Tenant be required to post a Restoration Deposit unless (a) Landlord has made a good faith determination that Restoration will likely be required and (b) Tenant's cash flow position drops below the Cash Position Minimum (Section 7.3). 8.8 Fixed and Removable Equipment. This Lease arises simultaneously with the sale of the Premises by Tenant to Landlord pursuant to that certain Agreement of Purchase and Sale dated August 29, 2002, as amended (the "Purchase Agreement"). In order to establish which elements and/or pieces of equipment within the Premises were included in the sale and which were not, the parties applied the criteria listed below to develop the listing contained on Exhibit G containing those items which were considered affixed and part of the Premises. All other items not listed on Exhibit G were considered personal property retained by Tenant. "Fixed Equipment" is defined as the equipment listed on Exhibit G, plus any new equipment brought onto the Premises which either replaces the items listed on Exhibit G, has the same the physical and functional distinctions as the equipment listed on Exhibit G, or satisfies the criteria stated below. FIXED EQUIPMENT CRITERIA: 1) Equipment that is built into the facility in such a manner that it will require the removal of walls, floors, ceilings or additions to or modifications of existing structural support, whether temporary or permanent, to install or relocate it; 2) Equipment that is connected to common building systems in such a way that the service must be modified outside the local area or room where the equipment is located when the equipment is disconnected; or 3) Equipment that provides service to other Fixed Equipment or without which such other Fixed Equipment would not be functional. As new equipment is brought into the Premises, the determination of whether such equipment is considered Fixed Equipment or Removable Equipment will be made by using the physical and functional distinctions evident in the listing attached as Exhibit G and where that does not provide sufficient guidance, applying the above Fixed Equipment criteria. If any alteration is intended to include attached equipment, Tenant shall give written notice to Landlord of its suggested classification as either Fixed or Removable when it gives the notices or requests the approvals as required above. New Fixed Equipment shall become Landlord's property immediately. No Fixed Equipment may be leased or subject to any lien or security interest by Tenant. 9. INSURANCE 9.1 Tenant's Insurance. Tenant shall maintain at its sole cost and expense the following insurance on the Premises, and in all cases such policies shall name as additional insureds (a) Landlord, (b) any lender of Landlord holding any security interest in the Premises, and (c) any management company retained by Landlord to manage the Premises: 9.1.1 Property. Insurance against loss or damage to the Premises on an all risk basis, including sprinkler damage and flood for an amount not less than the actual replacement cost of the Premises. The insurance shall include coverage from business interruption and extra expense for a period of not less than 18 months. Tenant shall also carry earthquake insurance and insurance against damage caused by terrorism and acts of war to the extent the same is or are available at commercially 9 reasonable rates and is required by Landlord. In determining whether such insurance is available at a commercially reasonably rate, the parties will take into consideration the cost and availability of similar policies for Landlord's (or its affiliates') other Seattle properties (or in similarly rated seismic areas if Landlord or its affiliates no longer own other Seattle properties). At Tenant's option, the Premises may be included in Landlord's (or its affiliates') blanket policy of insurance, if and for so long as the same is maintained by Landlord (or its affiliates), in which case the cost of insurance allocable to the Premises will be based on the insurer's cost calculations. In addition, Tenant shall maintain during the Term all risk insurance for Tenant's personal property (including business interruption and extra expense coverage) covering the full replacement cost of all property, improvements and equipment placed in or on the Premises by Tenant, with the understanding that the proceeds of such policies shall be paid to and belong to Tenant. 9.1.2 Liability. Commercial liability insurance with a combined single limit (including umbrella) of at least $10 million per occurrence and $10 million in the aggregate, naming Landlord as an additional insured and such insurance shall be primary to and not contributory with any insurance carried by Landlord regarding events that occur in the Premises. 9.1.3 Boiler. Insurance against loss or damage from explosion of any steam or pressure boilers or similar apparatus located in or about the Premises in an amount not less than the actual cost to repair or replace the insured equipment/machinery. At Tenant's option, the Premises may be included in Landlord's (or its affiliates') blanket policy of insurance, if and so long as the same is maintained by Landlord (or its affiliates), in which case the cost allocable to the Premises will be based on the insurer's cost calculations. 9.1.4 Builder's Risk. Whenever Tenant, whether as Landlord's construction agent or otherwise, is engaged in alterations costing in excess of $5 million, Tenant shall obtain completed value builder's risk insurance. 9.1.5 Environmental Insurance. To the extent available at a commercially reasonable rate, pollution legal liability insurance with a limit of not less than $10,000,000 covering the Premises and contamination therefrom. In determining whether such insurance is available at a commercially reasonable rate, the parties will take into consideration the cost and availability of similar policies for other of Landlord's (or its affiliates') similar properties. Such insurance shall be on a claims-made basis. At Tenant's option, the Premises may be included in Landlord's (or its affiliates') blanket policy of insurance, if and for so long as Landlord (or its affiliates) maintains such policies, in which case the cost of such insurance allocable to the Premises will be based on the insurer's cost calculations. 9.1.6 Workers' Compensation. Tenant shall maintain workers' compensation insurance with no less than the minimum limits required by law. 9.1.7 Other Tenant Insurance. In addition to the insurance coverage listed above in this Section 9.1, at Tenant's and Landlord's option, Tenant may be included in Landlord's (or its affiliates') blanket policy for other insurance (e.g. mold insurance), if and for so long as Landlord (or its affiliates) maintains such policies, in which case the cost of such insurance allocable to the Premises will be based on the insurer's cost calculations. 9.1.8 Landlord's Evidence of Insurance. In those instances where Tenant is included in Landlord's (or its affiliates') blanket policies of insurance, at Tenant's request, Landlord shall provide Tenant with insurance certificates, or such other reasonable evidence of coverage under such policies. 9.2 Rating. The insurance required by Section 9.1 shall be written by companies rated not less than A - and having a size rating of X or higher in the current edition of A. M. Best's Key Rating Guide, and all such companies shall be authorized to do insurance business in Washington, or otherwise agreed to by Landlord. The insurance policies shall be in amounts sufficient at all times to satisfy any coinsurance requirements thereof. If said insurance or any part thereof shall expire or be withdrawn, 10 Tenant shall immediately obtain new or additional insurance reasonably satisfactory to Landlord. As of the date of the Lease, Tenant's insurers are rated A++ (Chubb) and A+ (FM Global). 9.3 Mortgagee. Each insurance policy referred to in Sections 9.1.1, 9.1.3 and 9.1.4, shall contain standard non-contributory mortgagee clauses in favor of any mortgagee. Each such policy shall provide that the issuer will endeavor to notify the mortgagee if there are any material changes to the policy. 9.4 Renewal. Tenant shall pay when due all premiums for the insurance required by this Section 9 and shall deliver to Landlord copies of any insurance policy upon Landlord's request and a certificate or other evidence (reasonably satisfactory to Landlord) of the existing policies and of renewal or replacement policies prior to the policy expiration date (which may be by extension of the existing policy). If Tenant fails to comply with the requirements of this Section 9 within 5 business days after written notice by Landlord to Tenant, Landlord shall be entitled to procure such insurance pursuant to Section 15.7. 9.5 Landlord's Blanket Policies. As noted in Sections 9.1.1, 9.1.3, and 9.1.5, Tenant shall have the option of obtaining the insurance through Landlord's (or its affiliates') blanket insurance policies for its portfolio to obtain improved coverage or cost savings, if and for so long as Landlord (or its affiliates) maintains such policies. At Tenant's request, Landlord will provide Tenant with premium rating information, copies of insurance policies, and other information reasonably necessary to facilitate Tenant's evaluation of this option. 9.6 Landlord's Insurance. Landlord, at its expense, shall carry comprehensive general liability insurance with a combined single limit (including umbrella) of at least $5 million per occurrence and $5 million in the aggregate. 9.7 Waiver of Subrogation. Notwithstanding any other provisions of this Lease to the contrary, Landlord and Tenant waive their respective rights of recovery against the other and the officers, employees, agents and representatives of such other party for damage to the property of the other by fire or other casualty to the extent such damage is insured or required hereunder to be insured. The insurance policies carried by Landlord and Tenant shall include a waiver of the insurer's rights of subrogation. 10. CASUALTY; OBLIGATION TO RESTORE 10.1 Definitions. "Casualty" shall mean damage to or destruction of the Premises by storm, fire, lightning, earthquake, or from any other cause, other than such damage or destruction which is the subject of a Condemnation (Section 12). "Excess Insurance Proceeds" shall mean that portion of any Insurance Proceeds which are received by the Landlord or its mortgagee that are not used to pay the third party costs of restoring any damage to the Premises or any other third party out of pocket costs incurred, including attorneys' fees, in connection with the Casualty, including such costs to obtain the Insurance Proceeds, but in any event excluding Tenant's Proceeds. The determination of Excess Insurance Proceeds shall be made upon completion of the Casualty Restoration. "Excess Insurance Proceeds Rent Reduction" shall mean a dollar for dollar reduction to the Base Rent for the then remainder of the Term until exhausted, from and after the date Landlord receives any Excess Insurance Proceeds. "Fair Market Value of Premises" for purposes of this Section 10 is defined in Exhibit L. 11 "Insurance Proceeds" shall mean the proceeds of any insurance maintained by Tenant under Section 9, which is paid for a Casualty Restoration (Section 10.4), but excludes Tenant's Proceeds. "Substantial or Full Casualty" shall mean a Casualty which is certified, by an affidavit from Tenant's president, chief executive officer or chief financial officer, stating with a reasonable basis that such event has rendered the Premises (taken separately from any other properties owned or leased by Tenant) unavailable for Tenant's continued business operations in compliance with the Use Requirements and Function Requirements for more than 12 months and the cost of restoring the Premises is reasonably estimated to exceed $10,000,000. "Tenant's Proceeds" shall mean any proceeds of insurance policies payable for Tenant's business interruption or damage to Tenant's personal property. 10.2 Substantial or Full Casualty in Last 18 Months of Term. If and only if there is a Substantial or Full Casualty of the Premises during the last 18 months of the then current Term, then (i) Landlord will receive the Insurance Proceeds; and (ii) provided Tenant has maintained the insurance coverages required under this Lease, the Lease will terminate effective as of the date of the Casualty, and Tenant's obligations under the Lease will be replaced by an obligation for Tenant to pay any deductibles under applicable insurance policies, plus Rent for the balance of the then current Term. 10.3 Substantial or Full Casualty Prior to Last 18 Months of Term. If and only if there is a Substantial or a Full Casualty of the Premises prior to the last 18 months of the then current Term, then Tenant shall have the option to either (i) continue the Lease pursuant to Section 10.3.1 below; or (ii) make a rejectable offer to purchase pursuant to Section 10.3.2 below. If Tenant makes a rejectable offer to purchase, unless and until Tenant closes on the purchase, or the Lease terminates pursuant to 10.3.2, Tenant shall continue to pay Rent when due. 10.3.1 Lease Continuation. If there is a Substantial or Full Casualty of the Premises prior to the last 18 months of the then current Term, unless Tenant delivers a Termination Notice under Section 10.3.2 below, the Lease shall continue in full force and effect, and no Rent shall abate under this Lease as a result of such Substantial or Full Casualty; provided, however, the Base Rent under this Lease shall be subject to an Excess Insurance Proceeds Rent Reduction (as defined above). In such event, Tenant's restoration obligations set forth in Section 10.4 below shall apply. If Tenant elects to restore, and pursuant to Tenant's rights to sublet or assign under Section 13, Tenant may exercise up to 2 of its remaining 5 year Renewal Options. In such event Tenant waives its rescission right under Section 2.4 as it relates to such exercise only. 10.3.2 Lease Termination. If there is a Substantial or Full Casualty of the Premises prior to the last 18 months of the then current Term, and Tenant will not be re-occupying the Premises following such Substantial or Full Casualty Restoration, then Tenant may elect to terminate this Lease by delivering notice of such election to Landlord within 90 days after the Casualty ("Casualty Termination Notice"). The Casualty Termination Notice shall include an offer by Tenant to purchase the Premises from Landlord for the greater of (i) the original purchase price paid by Landlord for the Premises; or (ii) the Fair Market Value of the Premises. Within 60 days from Landlord's receipt of the Casualty Termination Notice, Landlord will notify Tenant whether it will accept or reject Tenant's offer to purchase the Premises, with Landlord's silence deemed rejection. If Landlord accepts Tenant's offer to purchase, then notwithstanding Section 10.5 below, Tenant shall be entitled to all Insurance Proceeds, and such purchase shall close on the later of (i) 10 business days after Tenant's receipt of all Insurance Proceeds; or (ii) 30 days after Tenant's receipt of Landlord's acceptance of such offer. If Landlord rejects, or is deemed to have rejected, Tenant's offer to purchase, then the Lease will be deemed terminated effective as of the date of Landlord's rejection, with Landlord retaining the Insurance Proceeds. In such event, Tenant shall also be liable to pay Landlord any applicable deductibles on insurance policies relating to the Casualty Restoration, and Tenant shall pay such 12 deductible amount to Landlord within 30 days of the date of Landlord's rejection and the Lease's termination date. 10.4 Obligation to Restore. If there is a Casualty and the Lease has not terminated by the application of Sections 10.2 or 10.3 above, then, irrespective of the extent of the Casualty or whether the cause is covered by insurance, Tenant shall repair, restore and rebuild the Premises in accordance with the Function Requirements and the Use Requirements and all applicable building and zoning codes at the time of rebuilding to substantially the same location, size, design, configuration and condition immediately prior to damage or destruction (with any departures from said characteristics in accordance with Section 8 for Alterations) and this Lease shall remain in full force and effect. Such repair, restoration and rebuilding, including the repair, restoration or replacement of Fixed Equipment (all of which are herein called a "Casualty Restoration") shall be commenced as soon as reasonably practical and taking into consideration a reasonable time for the insurance adjustment of the loss, the work to design the repairs/replacements, and permitting delays; and shall be diligently pursued to completion. 10.5. Insurance Proceeds. Insurance Proceeds shall be paid to Tenant for application to costs of Casualty Restoration; provided that if the proceeds exceed $3 million (unless Landlord's mortgagee should require a lesser amount, but in no event less than $1 million), they shall be held by an insurance trustee pursuant to Section 11. If the Insurance Proceeds are insufficient to cover the cost of repair, the deficit shall be paid by Tenant. Any Excess Insurance Proceeds shall be paid and belong to Landlord. For avoidance of doubt, this Section 10.5 shall not apply to Tenant's Proceeds; in every instance Tenant's Proceeds shall be paid to and be the sole property of Tenant. 10.6 No Casualty Termination. Notwithstanding any other provisions of this Lease to the contrary, unless Sections 10.2 or 10.3 above apply, this Lease may not be terminated by Tenant or Landlord as a result of a Casualty to the Premises, irrespective of the extent thereof, whether such loss is insured or when such Casualty occurs, or whether such damage is legally permitted to be restored, and Tenant and Landlord waive the provisions of any Law permitting termination of a lease due to destruction of the Premises. 10.7 No Abatement of Rent. Except to the extent stated in Sections 10.2 and 10.3 above, no Rent shall abate under this Lease as a result of any Casualty, whether or not or to the extent the same may be insured, and irrespective of whether or not such damage or destruction is prohibited from being repaired or restored; provided, however, the Base Rent shall be subject to an Excess Insurance Proceeds Rent Reduction. 11. INSURANCE TRUSTEE 11.1 Procedure. If the Insurance Proceeds exceed $3 million (unless Landlord's mortgagee should require a lesser amount, but in no event less than $1 million) and this Lease has not terminated by application of Sections 10.2 or 10.3, then such Insurance Proceeds shall be held by an insurance trustee which shall be a financial institution jointly selected by Landlord and Tenant and reasonably satisfactory to any mortgagee(s) (the "Trustee"). If Landlord's mortgagee is an institutional lender, such lender may elect to be the Trustee. Each insurer is authorized to make payment directly to the Trustee; and Tenant and Landlord each appoints such Trustee as its attorney-in-fact to endorse any check for Insurance Proceeds after approval by Tenant of the Trustee (if other than Landlord's mortgagee). The Insurance Proceeds, net of reasonable expenses incurred in obtaining them, shall be retained in a separate interest-bearing federally insured account by the Trustee for application to restoration, with the interest added to the proceeds. The Trustee shall make the net Insurance Proceeds available to Tenant for restoration, in accordance with the provisions of this Section 11. The net Insurance Proceeds held by the Trustee shall be disbursed in accordance with the following conditions: 11.1.1 Landlord's Approval. The plans and specifications for the restoration shall be subject to Landlord's reasonable approval, which approval shall be granted to the extent that the plans and specifications conform with the conditions specified in Section 10.4. 13 11.1.2 No Default. At the time of any disbursement, no Event of Default shall exist and no mechanics' or materialmen's liens shall have been filed and remain undischarged or unbonded except to the extent the disbursement would satisfy and discharge such liens. 11.2 Disbursements. After all of the uninsured costs to repair and restore the Premises have been paid by Tenant out of its own funds, disbursements shall be made monthly by the Trustee to reflect that percentage of the work that is being paid for with the Insurance Proceeds that has been completed since the prior disbursement upon receipt of (1) a Draw Certificate (Section 11.3), (2) completion and performance of the work to date in a good and workmanlike manner in accordance with the contracts, plans and specifications, (3) customary lien waivers for the work covered by the prior progress payments, and (4) other reasonable evidence of cost and payment so that Trustee can verify that the amounts disbursed from time to time constitute the same percentage of the total budgeted Casualty Restoration costs, as such budget may be adjusted from time to time. 11.3 Draw Certificates. Each request for disbursement shall be accompanied by a certificate using AIA Forms G702 and G703 ("Draw Certificates"), as the same may be amended or replaced by AIA or a similar entity describing the work, materials or other costs or expenses, for which payment is requested, stating the cost incurred in connection therewith and stating that Tenant has not previously received payment for such work or expense. For soft costs, where the referenced AIA Forms would not apply, Tenant's delivery of reasonable documentation of such costs shall satisfy the Draw Certificate requirement. The Draw Certificate to be delivered by Tenant upon completion of the work shall, in addition, state that the work covered by the request has been substantially completed. 12. CONDEMNATION 12.1 Definitions. "Condemnation" shall mean any taking of the Premises by condemnation or other eminent domain proceedings pursuant to any Law or any conveyance under threat thereof. "Excess Condemnation Award" shall mean that portion of any Condemnation Award which is paid to Landlord or its mortgagee and not used by Landlord, its mortgagee or Tenant to pay the third party out of pocket costs of restoring any damage to the Premises caused by the Condemnation or any third party out of pocket costs, including attorneys' fees, incurred by Landlord or its mortgagee in connection with the Condemnation. "Fair Market Value of Premises" for purposes of this Section 12 is defined in Exhibit L. "Substantial or Complete Condemnation" shall mean a Condemnation that is not a Temporary Taking, which is certified by an affidavit from Tenant's president, chief executive officer or chief financial officer, stating with a reasonable basis that such Condemnation has rendered the Premises (taken separately from any other properties owned or leased by Tenant) unavailable for Tenant's continued business operations in compliance with this Lease's Use Requirements and Function Requirements and results in a loss of 35% or more of the rentable square feet of the Premises. "Temporary Taking" shall mean a condemnation of all or part of the Premises for up to two (2) years. 12.2 Notice/Award. Either party, promptly upon obtaining knowledge of any Condemnation proceeding affecting the Premises, shall notify the other party and both parties shall be entitled to participate in any Condemnation proceeding. Subject to the provisions of this Section 12, Tenant hereby irrevocably assigns to Landlord any award or payment with respect to any Condemnation of Landlord's interest in the Premises (the "Condemnation Award"), except that nothing in this Lease shall be deemed to preclude Tenant from making a separate claim for an award on account of the Removable Equipment, 14 moving expenses, relocation costs, business interruption or out-of-pocket expenses incidental to the move so long as in doing so the amount of Landlord's award is not reduced. 12.3 Substantial or Complete Condemnation. If there is a Substantial or Complete Condemnation of the Premises Tenant will deliver notice thereof to Landlord within 120 days after receipt of demand for turnover from the condemning agency ("Condemnation Termination Notice")and this Lease shall terminate. The Condemnation Termination Notice shall verify the Substantial or Complete Condemnation and include an offer by Tenant to terminate the Lease by paying Landlord the greater of (i) the original purchase price paid by Landlord for the Premises; or (ii) the Fair Market Value of the Premises (the "Termination Fee"). Within 60 days from Landlord's receipt of the Termination Notice, Landlord will notify Tenant whether it will accept or reject Tenant's offer to terminate the Lease with Landlord's silence deemed rejection. If Landlord accepts Tenant's offer to terminate the Lease, then notwithstanding Section 12.2 above, Tenant shall be entitled to the entire Condemnation Award, and Tenant shall pay Landlord the Termination Fee by the later of (y) 10 business days after Tenant's receipt of the Condemnation Award; or (z) 30 days after Tenant's receipt of Landlord's acceptance of such offer. If there is less than a total condemnation, Landlord shall transfer to Tenant fee title to any remainder of the Premises, upon Landlord's receipt of the Termination Fee. If Landlord rejects, or is deemed to have rejected Tenant's offer to terminate the Lease, then the Lease will be deemed terminated effective as of the date the Premises are surrendered to the condemning authority, with Landlord retaining the Condemnation Award (subject to Section 12.2). Tenant shall continue to pay Rent until the latest of date on which (a) the Termination Fee is paid, (b) the Lease is deemed terminated, or (c) the Tenant vacates the Premises. 12.4 Partial Condemnation. If there is a partial Condemnation which is not a Substantial or Complete Condemnation, Section 12.3 shall not apply, this Lease will not terminate and the Condemnation Award shall be made available to Tenant to restore the Premises to a complete architectural unit with the character, function and commercial value as nearly as possible equal to the value of the Premises immediately prior to the taking. For such purposes, Landlord may require that the Condemnation Award be deposited with and disbursed by a trustee in the same manner that would have been applicable had the Premises been damaged by a casualty that invoked the provisions of Section 11. The Base Rent shall then be reduced to reflect the reduction in the Premises. If the reduction is to the interior, the Rent would be proportionately reduced to reflect the reduction in the rentable square feet; if the reduction affects the number of parking spaces available, the Rent reduction will reflect the excess cost to Tenant for comparable parking. There will be no Rent reduction for the Condemnation of unimproved or landscaped areas. Notwithstanding the foregoing, in no event shall the net present value of the Rent reduction exceed the Excess Condemnation Award. 12.5 Temporary Taking. If there is a Temporary Taking, then notwithstanding Section 12.2 above, the entire Condemnation Award shall be paid to Tenant to the extent it is attributable to the Term and Tenant shall continue to pay the Rent due hereunder without abatement or adjustment. 13. SUBLETTING AND ASSIGNMENT 13.1 General. Tenant shall have the right to assign or sublet the Premises, in whole or in part (any of which events being a "Transfer" and any assignee or sublessee being a "Transferee"), with the consent of Landlord, which shall not be unreasonably withheld as further detailed in this Section 13. Landlord will be deemed to have approved the Transfer unless within 10 business days after receipt of Tenant's request complying with this Section 13, Landlord gives written notice specifying its objections to the Transfer. Such request shall be accompanied by a complete and accurate copy of the proposed assignment or sublease, the name of the proposed assignee or sublessee, its address, telephone number and principal representative who may be contacted for information and inquiries, the uses it intends to make of the Premises, if and how it is affiliated with Tenant, and a then current credit report, an operating 15 statement for the immediately preceding 12 months and a then current financial statement reflecting its financial condition in accordance with GAAP (Section 1.2). 13.2 Affiliates/Cooperative Business Arrangements. Notwithstanding Section 13.1, Tenant shall have the right, upon not less than 30 days' advance written notice to Landlord but without Landlord's consent, to Transfer this Lease in whole or in part to Affiliates. "Affiliates" shall mean (a) entities which control, are controlled by or are under common control with Tenant; (b) Tenant's successor entities by merger or acquisition; and (c) entities in which Tenant is a 50% or more owner or joint venturer, and jointly pursuing business objectives consistent with Tenant's business operations, such as discovery or development of pharmaceutical products, so long as such entity has a Cash Position equal to or greater than Tenant's then Cash Position (Section 7.3). 13.3 Landlord's Consent. Landlord will not withhold its consent to a Transfer if: (a) The proposed uses of the Transferee comply with the provisions of Section 4.1. (b) In the case of a sublease, the demising configuration between the retained space and the subleased space does not unreasonably impair the marketability of the remaining space. 13.4 No Release. No Transfer shall release Tenant from any obligations hereunder and Tenant shall remain primarily liable for performance of its obligations under this Lease. Landlord may accept any Rent or performance of Tenant's obligations from any Transferee and such acceptance shall not constitute a waiver of Landlord's rights. If an Event of Default occurs, Landlord may proceed directly against Tenant, or any Transferee, without first exhausting Landlord's remedies against any other person or entity responsible therefor. 13.5 Assumption. Any assignee of this Lease shall execute an assumption agreement in form and substance reasonably satisfactory to Landlord in which such assignee becomes jointly and severally liable with Tenant for the performance of Tenant's obligations under the Lease to the extent claims arise after the effective date of the assumption. 13.6 Subleases. Each sublease shall provide that (a) it is subject and subordinate to this Lease; (ii) the term is not longer than the then Term of this Lease, plus any extensions which have been irrevocably exercised, and (iii) if this Lease is terminated for any reason, Landlord may, at its option, either (A) terminate the sublease, or (B) takeover all of the rights and interest of Tenant under the sublease, in which case the sublessee shall attorn to Landlord. If Landlord elects to takeover the rights and interest of Tenant, Landlord shall not (1) be liable for any previous act or omission of Tenant under the sublease, (2) be subject to any defense or offset in favor of the sublessee against Tenant, (3) be bound by any modification to the sublease made without Landlord's written consent or by any prepayment by sublessee of more than one month's rent, or (4) be liable for the application or return of any security deposit not actually received by Landlord. Landlord will agree to the same waiver of subrogation with sublessees as is set forth in Section 9.7. 13.7 Assignment and Sublease Profit. Landlord and Tenant shall each be entitled to 50% of the rent profit on assignment consideration (i.e. consideration for assignment of the Lease) and sublease rents. The assignment consideration shall be determined and paid as and when received by Tenant. For any nonmonetary consideration, Tenant will have option of assigning half of such non-monetary consideration to Landlord, or having the nonmonetary consideration fairly valued and half of such value paid to Landlord in immediately available funds within a reasonable time after receipt by Tenant of the consideration, to allow for liquidation/valuation. The rent profit on subleases will be determined and paid each month during the sublease term. The rent profit on subleases shall be calculated by taking the rent and other consideration and reimbursements payable by the sublessee to Tenant or to any third party pursuant to the sublease and subtracting (a) the Base Rent due from Tenant hereunder with respect to the subleased space over the same period to which the sublessee's rent applies (per square foot allocation), (b) the monthly amortization of the costs incurred in connection with the sublease for commissions, tenant improvement costs and legal fees (all amortized on a straight-line basis over the 16 sublease term), (c) any reasonable amounts specified in the sublease as rental payments for use of equipment owned by Tenant, (d) Tenant's reasonable estimate of those third party costs payable by Tenant under the Lease or under the sublease and other direct actual reimbursements of third party costs incurred at sublessee's request in connection with the Premises or sublessee's business operations at the Premises, (e) Tenant's reasonable estimate of the cost of providing additional services to the sublessee such as maintaining agreed temperature ranges with regard to the HVAC system and specified air pressures to fume hoods that are in addition to the costs Tenant would otherwise incur for such portion of the Premises. If the sublease is subsequently extended, the then outstanding balance of costs described in clause (b) above shall be reamortized over the remainder of the then sublease term and including the extension. Landlord shall have the right to require Tenant to provide subsequent reports for and confirmations and calculations of the amounts subtracted for (b) through (e) above and the parties agree that Landlord's share of the rent profit may be adjusted from time to time to more closely reflect the actual costs incurred by Tenant and reasonably allocated to sublessee pursuant to this Section. 14. TENANT'S INDEMNIFICATION Except to the extent caused by the gross negligence or willful misconduct of Landlord or any Landlord Related Parties, and subject to the waiver of subrogation in Section 9.7, Tenant shall indemnify, defend and hold Landlord, its employees, mortgagee(s) and agents ("Landlord Related Parties") harmless from and against all claims, liabilities, damages and costs (including attorneys fees and costs) arising out of (a) its use of or activities on the Premises, (b) any acts or omissions (including violations of Law) by Tenant or Tenant Related Parties (Section 19.1), and (c) any breach of this Lease by Tenant or Tenant Related Parties. 15. TENANT'S INSOLVENCY OR DEFAULT 15.1 Insolvency. Tenant shall be in default upon the occurrence of one or more of the following events (each, an "Event of Default"): (i) Tenant files a petition in bankruptcy or otherwise seeks any judicial protection, stay or relief against its creditors generally, (ii) an involuntary petition in bankruptcy against Tenant or any request for the appointment of a receiver or a custodian or other similar officer for any portion of the Tenant's property is filed or made and not dismissed within 90 days; or (iii) the assignment for the benefit of creditors of any portion of the Tenant's property is made; or (iv) Tenant's interests in this Lease shall be attached, levied upon or judicially seized, whereupon Landlord may, by notice to Tenant, terminate this Lease, and neither Tenant nor any person claiming through or under Tenant shall be entitled to be in possession of the Premises but shall forthwith surrender the same, and Landlord, in addition to the other rights Landlord may have, retains as security for its damages any Rent, Security Deposit or other monies received by Landlord on behalf of Tenant. If any such action, case or petition has been commenced by an unrelated third party against Tenant and is dismissed within a period of 90 days, then the Event of Default shall be deemed cured for purposes hereof. This Lease is upon the further condition that if a petition for relief under any chapter of the Bankruptcy Code is filed by an unrelated third party against Tenant and the trustee or debtor or debtor in possession has not cured all defaults hereunder and assigned or assumed this Lease under the Bankruptcy Code within 90 days after the entry of the Order for Relief, then this Lease shall, at Landlord's sole option, terminate. In case of termination pursuant to this Section 15.1, Tenant shall indemnify Landlord against all costs and expenses and loss of Rent, including amounts due under Section 15.3. 15.2 Defaults. Tenant shall be in default hereunder if: (i) Tenant fails to pay any installment of Base Rent or Additional Rent when due; or (ii) Tenant abandons the Premises, or (iii) Tenant fails to perform any other covenant, term, agreement or condition of this Lease not referred to in (i), (ii) or (iv) when required; or (iv) any insurance required to be maintained by Tenant is cancelled or reduced below its required limits or in its scope of coverage and Tenant does not replace the same at least 20 business days before the effective date of such cancellation or reduction (an "Insurance Default"). An "Event of Default" will exist if (a) Tenant is in default under subsection (i) and the default is not cured within 5 days after Landlord gives Tenant written notice of such default; (b) Tenant abandons the Premises, (c) Tenant is in default under subsection (iii) and the default is not cured within 30 days after Landlord gives Tenant written notice specifying the default (provided that if the default can not be cured within the 30 day period, 17 Tenant shall have such additional time to cure the default as is reasonably necessary so long as Tenant commences the cure within 10 days after such notice is given and diligently prosecutes the cure to completion within 90 days after Tenant is given the default notice, and such deadline may be further extended for Force Majeure (Section 27.11), provided that Tenant delivers notice to Landlord of such Force Majeure and monthly written status reports during any further extension arising therefrom), (d) an Insurance Default has occurred and Tenant has not cured such default by the sooner of 5 days after Landlord's notice of default or 10 days before the effective date of such cancellation or reduction, or (e) a default by Tenant occurs and is not cured within any applicable cure period, under (i) the Purchase Agreement, (ii) the Lease between Landlord's affiliate and Tenant dated concurrently herewith for the property located at 1208 Eastlake Avenue East, Seattle, WA ("Earl Davie Building Lease"), or (iii) the Line of Credit Loan (Section 26). When there is an Event of Default, Landlord may, at any time thereafter, exercise any of its legal, equitable or contractual remedies for a Tenant default, which may include an election to terminate this Lease by notice, lawful entry or otherwise, in which latter event Landlord shall be entitled to recover possession of the Premises from Tenant and those claiming through Tenant. Any termination of this Lease and any repossession of the Premises shall be without prejudice to any remedies which Landlord might otherwise have. In case of such termination, Tenant shall indemnify Landlord against all third party out of pocket costs and expenses including the amounts due under Section 15.3 and loss of Rent. All notice and cure periods provided for in this Lease shall run concurrently with any notice and cure periods provided for in any and all of the agreements referred to in part (e) of this Section. 15.3 Expense Recovery. Expenses for which Tenant shall indemnify Landlord shall include all third-party out of pocket collection costs, including attorneys' fees and all other third party out of pocket costs proximately caused by the Event of Default, with or without litigation, including any such costs incurred in connection with issues that are particular to a bankruptcy or any other type of proceeding and on appeal. These sums shall be due immediately upon notice from Landlord and shall bear interest at the Default Rate (Section 15.8) if not paid within 5 business days after written demand. If proceedings are brought under the Bankruptcy Code which relate to this Lease, Landlord shall be paid the costs incurred by Landlord in connection with the proceedings. 15.4 Damages. Notwithstanding termination of this Lease and reentry by Landlord pursuant to Section 15.1 or Section 15.2, Landlord shall be entitled to recover from Tenant: (i) The worth at the time of an award (including interest at the Default Rate) of any unpaid Rent which had been earned by Landlord at the time of termination; plus (ii) The worth at the time of an award (including interest at the Default Rate) of the amount by which the unpaid Rent which would have been earned after termination until the time of an award exceeds the amount of loss of Rent that Tenant proves could have been reasonably avoided; plus (iii) The worth at the time of an award of the amount by which the unpaid Rent and Additional Rent for the balance of the Term (as extended, if at all prior to termination) exceeds the amount of such loss of Rent that Tenant proves could have been reasonably avoided (including Default Interest from the date of the award until paid). Such worth at the time of award shall be computed at the discount rate of the Federal Reserve Bank of San Francisco, or successor Federal Reserve Bank, on the date of termination; plus (iv) Any other amount necessary to compensate Landlord for all the damage proximately caused by Tenant's failure to perform Tenant's obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including amounts due and payable pursuant to Section 15.3. 15.5 Non-Termination of Lease. If Landlord reenters the Premises pursuant to Section 15.1, Landlord may elect, by notice to Tenant, not to terminate this Lease, in which case Tenant shall indemnify Landlord for the loss of Rent by a payment at the end of each month during the remaining Term representing the difference between the Rent due in accordance with this Lease and the rental actually 18 derived from the Premises by Landlord for such month. Without any previous notice or demand, separate actions may be maintained by Landlord against Tenant from time to time to recover any damages which, at the commencement of any action, have then or theretofore become due and payable to Landlord under this Section 15 without waiting until the end of the Term. 15.6 Reletting. If this Lease is terminated as hereinabove provided or by summary proceedings or otherwise, Landlord may at any time and from time to time relet the Premises in whole or in part either in its own name or as agent of Tenant for any period equal to or greater or less than the remainder of the then-current Term. All rentals received by Landlord from such reletting shall be applied first to the payment of the costs of the reletting and alterations and repairs; second, to the payment of any amounts other than Base Rent due to Landlord; third, to Rent due and unpaid hereunder, and the residual, if any, shall be held by Landlord and applied in payment of future Rent when it becomes due. 15.7 Right of Landlord to Cure Defaults. If an Event of Default occurs, Landlord may, but shall not be required to, cure the Event of Default, for the account and at the expense of Tenant, if Tenant has not cured the default within 15 business days' after written notice from Landlord that Landlord intends to take action to cure Tenant's Event of Default; provided, however, such notice need not precede Landlord's payment or action in any circumstance that involves an immediate risk of foreclosure, loss or impairment of any insurance, property damage, personal injury, or enforcement by any governmental entity. Where an Event of Default concerns a release or imminent release of Hazardous Materials, Landlord will not have the ability to exercise self-help if Tenant (a) has previously delivered to Landlord a Hazardous Materials Response Plan (the "Response Plan") which outlines methods and persons reasonably acceptable to Landlord to address, treat, abate, forestall or prevent the release or imminent release of Hazardous Materials; and (b) promptly delivers written notice to Landlord of any release or imminent release of Hazardous Materials along with confirmation that Tenant is complying with the Response Plan. Tenant shall reimburse Landlord for any third party out of pocket expenses incurred in such cure, with interest accruing pursuant to Section 15.8, as Additional Rent, within 30 days after receipt of Landlord's invoice. 15.8 Default Interest. Any amounts owing from Tenant to Landlord under this Lease which are not paid when due shall bear interest at the greater of (a) 12% per annum or (b) 4% higher than and varying daily with the prime rate quoted by any of the three largest banks in the United States (as measured by assets) or such similar rate that is generally publicly announced by commercial lending institutions as an index for loans to its most credit-worthy customers (said prime rate or similar rate being hereinafter referred to as the "Prime Rate"), in either event calculated from the date due or expended until and including the date of payment (the "Default Rate"). 15.9 Other Available Remedies. At Landlord's election, upon an Event of Default, Landlord may pursue such other amounts or other remedies in addition to or in lieu of any one or more of the specific remedies listed in this Section and no articulation of any remedy shall be construed to be in lieu of any others that may be available to Landlord at law or in equity. 16. LANDLORD'S DEFAULT 16.1 Default. Landlord shall be in default hereunder if Landlord fails to perform any of its obligations hereunder within 30 business days after receipt of written notice from Tenant specifying such failure; provided that if the nature of the default is such that more than 30 business days are necessary for the cure, Landlord shall have such additional time as is reasonably necessary so long as Landlord commences the cure within the cure period and diligently pursues it to completion. Tenant shall not have the right to terminate the Lease due to a Landlord default. 16.2 Limitations on Landlord's Liability. The term "Landlord" as used herein shall mean only the owner or owners, at the time in question, of the fee title of the Premises. If Landlord transfers its interest in this Lease other than for security purposes, Landlord shall cause its assignee or transferee to assume the provisions of this Lease and Landlord shall deliver notice of such assignment or transfer and a copy of the effective instrument of transfer to Tenant within 15 business days after the date of transfer. 19 Tenant shall be entitled to continue to pay Rent and give all notices to Landlord until Tenant has received the foregoing from Landlord. Landlord shall deliver all funds in which Tenant has an interest except those which are then in the possession of an insurance or condemnation trustee, including but not limited to Tenant's Security Deposit to Landlord's purchaser or assignee. From and after such transfer, Landlord shall be released from all liability toward Tenant arising from this Lease due to any act, occurrence or omission of Landlord's successors occurring after the transfer of Landlord's interest in this Lease, provided Landlord's purchaser or assignee expressly assumes Landlord's duties and covenants under this Lease subject to the same limitations upon its personal liability as are applicable to Landlord in Section 16.3. Landlord's liability hereunder is limited to the extent agreed upon in Section 16.3 below, and except for Landlord's gross negligence or intentional misconduct, Landlord shall not be liable for any business interruption, property damage or personal injury (including death) sustained by Tenant or any person claiming through Tenant resulting from any accident, casualty, or other event or matter of any kind or nature occurring on or about the Premises and Tenant hereby waives and covenants not to bring any action based upon any claims or losses for which Landlord is not liable as stated above. 16.3 Further Limitations on Landlord's Liability. NOTWITHSTANDING ANYTHING SET FORTH HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY: (A) LANDLORD SHALL NOT BE LIABLE TO TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL TO: ANY TENANT'S PERSONAL PROPERTY OF EVERY KIND AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, REMOVABLE EQUIPMENT, INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS, PRODUCT, SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE PREMISES AND ANY AND ALL INCOME DERIVED OR DERIVABLE THEREFROM; (B) TENANT WAIVES ALL CLAIMS FOR CONSEQUENTIAL DAMAGES; (C) THERE SHALL BE NO PERSONAL RECOURSE TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING IN ANY WAY UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITY OF LANDLORD HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO LANDLORD'S INTEREST IN THE PREMISES AND ANY PROCEEDS FROM SALE, CONDEMNATION THEREOF OR ANY INSURANCE PROCEEDS PAYABLE IN RESPECT OF LANDLORD'S INTEREST IN THE PREMISES OR IN CONNECTION WITH ANY SUCH LOSS AND (D) IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTED AGAINST ANY OF LANDLORD'S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS. UNDER NO CIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD'S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS BE LIABLE FOR INJURY TO TENANT'S BUSINESS OR FOR ANY LOSS OF INCOME OR PROFIT THEREFROM. NOTWITHSTANDING THE CONTRARY, NOTHING IN THIS SECTION 16.3 WILL LIMIT THE LIABILITY OF THOSE LANDLORD'S CONTRACTORS OR AGENTS WHO EXECUTE A SEPARATE "ACCESS AND CONFIDENTIALITY AGREEMENT" (SECTION 21.2) DIRECTLY WITH TENANT, AND SUCH AGENTS AND CONTRACTORS' LIABILITY DIRECTLY TO TENANT SHALL BE AS AGREED UPON IN THOSE SEPARATE AGREEMENTS ALTHOUGH IN NO EVENT SHALL TENANT HAVE A CLAIM AGAINST LANDLORD UNDER SUCH SEPARATE AGREEMENT, AS LANDLORD'S LIABILITY FOR THE ACTIONS OF ITS CONTRACTORS AND AGENTS IS LIMITED TO THE EXTENT AGREED UPON IN THIS SECTION 16.3 AND IN SECTION 21.5. 17. LANDLORD'S FINANCING. So long as Tenant's rights of possession to the Premises will not be disturbed in the absence of a Tenant's Event of Default under this Lease, Tenant shall, upon request, enter into a Subordination, Non-Disturbance and Attornment Agreement ("SNDA") with any Landlord mortgagee in the form customarily required by such mortgagee, provided that such form does not require Tenant to adversely modify its rights or obligations under this Lease. Tenant agrees to provide Landlord's ,mortgagees with copies of notices sent to Landlord pursuant to Section15, upon Landlord's request and pursuant to the SNDA. 20 18. TENANT'S FINANCING. Tenant shall not pledge or encumber this Lease or enter into a financing lease and leaseback or comparable financing arrangement. Landlord shall cooperate with Tenant regarding any financing by Tenant which encumbers Removable Equipment or other personal property, including the execution of reasonable confirmations regarding the status of this Lease and the extent to which Tenant's lender may have access to the Premises to inspect or remove the Removable Equipment during the term hereof, and Tenant shall reimburse Landlord of all of its third party out of pocket costs and expenses, including its attorneys' fees in doing so. Tenant may enter into UCC fixture filings and/or financing statements for its Removable Equipment and other personal property. 19. HAZARDOUS SUBSTANCES 19.1 Prohibition. Tenant shall not cause or permit any Hazardous Materials (Section 19.8) to be brought upon, kept, used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises in violation of applicable Environmental Requirements (as hereinafter defined) by Tenant, its Affiliates and their respective assignees, sublessees, employees, agents or contractors (collectively "Tenant Related Party"). 19.2 Tenant's Indemnity. If Tenant breaches the obligation stated in Section 19.1, or if the presence of any Hazardous Materials in the Premises results in contamination of the Premises prior to or during the Term, any Renewal Term or any holding over by Hazardous Materials brought into, kept, used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises by anyone other than Landlord and Landlord's employees, agents and contractors (collectively the "Relevant Contamination"), Tenant hereby indemnifies and shall defend and hold Landlord, its officers, directors, employees, agents and contractors harmless from any and all actions (including, without limitation, remedial or enforcement actions of any kind, administrative or judicial proceedings, and orders or judgments arising out of or resulting therefrom), costs, claims, damages (including, without limitation, punitive damages and damages based upon diminution in value of the Premises or the loss of, or restriction on, use of the Premises), expenses (including, without limitation, attorneys', consultants' and experts' fees, court costs and amounts paid in settlement of any claims or actions), fines, forfeitures or other civil, administrative or criminal penalties, injunctive or other relief (whether or not based upon personal injury, property damage, or contamination of, or adverse effects upon, the environment, water tables or natural resources), liabilities or losses (collectively, "Environmental Claims") which arise prior to, during or after the Term as a result of Relevant Contamination. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, treatment, remediation, removal, or restoration work required by any federal, state or local governmental authority because of Hazardous Materials present in the air, soil or ground water above, on, or under the Premises. Without limiting the foregoing, if the presence of any Hazardous Materials on the Premises or any adjacent property caused or permitted by Tenant or any Tenant Related Party results in the Relevant Contamination of the Premises or any adjacent property, Tenant shall promptly take all actions at its sole expense and in accordance with applicable Environmental Requirements as are necessary to return the Premises or any adjacent property to the condition existing prior to the time of such contamination, provided that Landlord's approval of such action shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises. The foregoing obligations include all Historic Contamination present on the Premises, but subject to the limitations contained in Section 19.10(b) and(c) below. Notwithstanding anything to the contrary stated in this Section 19, (a) for claims relating to Relevant Contamination of property adjacent to the Premises, Tenant's obligations under this Section 19.2 are limited to any clean up requirement imposed by a governmental entity; and (b) in no event shall Tenant's obligations in this Section 19 include any Hazardous Materials releases to the extent they are caused by Landlord, its employees, agents or contractors. 19.3 Tenant's Business. Landlord acknowledges that it is not the intent of this Section to prohibit Tenant from using the Premises pursuant to the Use Requirements. Tenant may operate its business according to prudent industry practices so long as the use or presence of Hazardous Materials is strictly and properly monitored according to all applicable Environmental Requirements. Tenant shall deliver to Landlord prior to the Commencement Date copies of Tenant's current Hazardous Materials 21 reports, which list each type of Hazardous Materials currently present at the Premises and thereafter to annually provide Landlord with copies of updated reports to incorporate any additional Hazardous Materials which Tenant has brought upon, kept, used, stored, handled, treated, generated on or released or disposed of from the Premises during the past year, along with copies of citations, claims of noncompliance or liability, Remediation Plans relating to Hazardous Materials, if any and Hazardous Materials assessments provided by third parties, if any. Landlord agrees that Tenant's annual delivery of reports Tenant has prepared and delivered to governmental entities to comply with Environmental Requirements reporting requirements will satisfy this Section 19.3 and specifically, Landlord agrees that either the HMIS (Hazardous Material Inventory Statement) Report submitted to the Seattle Fire Department or the Dangerous Waste Annual Report filed with the Washington State Department of Ecology, satisfy this reporting requirement. To the extent not included in any other written report given by Tenant to Landlord, and reasonably requested by Landlord, Tenant shall provide Landlord with copies of permits and permit applications relating to Hazardous Materials at the Premises. To the extent reasonably requested by Landlord, Tenant will summarily explain requested matters regarding information provided to Landlord by Tenant under this Section 19.3. Tenant is not required, to include in the annual Hazardous Materials reports information of a proprietary nature. It is not the intent of this Section to provide Landlord with proprietary information which could be detrimental to Tenant's business should such information become possessed by Tenant's competitors. 19.4 Tenant's Representations and Warranties. Tenant hereby represents and warrants to Landlord that as of the Effective Date, except as related to 1150 Eastlake Ave. East in Seattle and as disclosed in Property Documents (as defined in the Purchase Agreement) and except for the Historic Contamination (i) Tenant has not been required by any prior landlord, lender or governmental authority at any time to take remedial action in connection with Hazardous Materials contaminating any property which contamination was permitted by Tenant or its predecessors or resulted from Tenant's or its predecessors' action or use of the Premises, and (ii) Tenant is not subject to any enforcement order for any property issued by any governmental authority in connection with the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting to any governmental authority). 19.5 Testing. Subject to the terms of Section 21.5, Landlord shall have the right to conduct annual tests and examinations of the Premises, at Landlord's sole expense, to determine whether any contamination of the Premises or on the Premises has occurred as a result of Tenant's use. Tenant shall be required to pay Landlord's third-party out of pocket expenses relating to such annual test or examination of the Premises only if such test or examination discloses unreported Relevant Contamination for which Tenant is liable pursuant to Section 19.2. If Tenant conducts its own tests of the Premises, at Tenant's expense, using third party contractors and test procedures reasonably acceptable to Landlord, and the tests are certified to Landlord, Landlord shall accept such tests in lieu of Landlord's annual tests. Landlord's right to conduct Hazardous Materials testing of the Premises at all other times to determine if contamination has occurred as a result of Tenant's use of the Premises shall be governed by Sections 15.7 and 21. In connection with Landlord's Hazardous Materials testing or examination, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant such non-proprietary information concerning the use of Hazardous Materials in or about the Premises by Tenant or any Tenant Related Party. Landlord shall provide Tenant with a copy of all third party, non-confidential reports and tests of the Premises made by or on behalf of Landlord during the Term without representation or warranty and subject to a confidentiality agreement. If necessary and pursuant to Section 15.7 and a Response Plan referenced therein, Tenant shall, at its sole cost and expense, promptly and satisfactorily remediate any environmental conditions identified by such testing in accordance with all Environmental Requirements. Landlord's receipt of or satisfaction with any environmental assessment in no way waives any rights which Landlord may have against Tenant. 19.6 Underground Tanks. Tenant will not install underground storage tanks storing Hazardous Materials on the Premises without first obtaining Landlord's advance written consent, which will be given or withheld at Landlord's sole discretion. If Tenant is permitted to install underground storage tanks, it shall install, use, monitor, operate, maintain, upgrade and manage such storage tanks, maintain appropriate records, obtain and maintain appropriate insurance, implement reporting 22 procedures, properly close any underground storage tanks, and take or cause to be taken all other actions necessary or required under applicable state and federal Environmental Requirements, as such now exists or may hereafter be adopted or amended in connection with the installation, use, maintenance, management, operation, upgrading and closure of such underground storage tanks. 19.7 Tenant's Obligations. Tenant's obligations under this Section 19 shall survive the expiration or earlier termination of the Lease. During any period of time after the expiration or earlier termination of this Lease required by Tenant or Landlord to complete the removal from the Premises of any Hazardous Materials (including, without limitation, the release and termination of any licenses or permits restricting the use of the Premises and the completion of a surrender plan reasonably approved by Landlord), Tenant shall continue to pay the pro-rata Rent as reasonably adjusted to reflect the differential rental values of different portions of the Premises, in accordance with this Lease for that portion of the Premises which cannot be relet by Landlord due to and during such clean up, provided such Rent shall be pro-rated daily and provided further that Tenant's obligation to pay the pro-rated Rent under this Section 19.7 is conditioned on Tenant having full access to such portion of the Premises. 19.8 Definitions. As used herein, the term "Environmental Requirements" means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, orders or other similar enactments of any governmental authority regulating or relating to health, safety, or environmental conditions on, under, or about the Premises, or the environment, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; and all state and local counterparts thereto, and any regulations or policies promulgated or issued thereunder. As used herein, the term "Hazardous Materials" means and includes any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, or regulated by reason of its impact or potential impact on humans, animals and/or the environment under any Environmental Requirements, asbestos and petroleum, including crude oil or any fraction thereof, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas) and Stacchybotris chartarum and other toxic molds. As defined in Environmental Requirements, Tenant is and shall be deemed to be the "operator" of Tenant's "facility" and the "owner" of all Hazardous Materials brought on the Premises by Tenant or any Tenant Related Party, and the wastes, by-products, or residues generated, resulting, or produced therefrom. 19.9 Notice to Landlord. To the extent that Tenant or Landlord has actual knowledge thereof, such party shall promptly provide notice to the other of any of the following matters: (i) any proceeding or investigation commenced or threatened by any governmental authority, against Tenant or Landlord, with respect to the presence, suspected presence, release or threatened release of Hazardous Materials on or from the Premises; (ii) all written notices of any pending or threatened claims or citations regarding Hazardous Materials on the Premises or released from the Premises; (iii) all written notices given to or received from the City of Seattle in connection with the Development Agreement or to or from the Landmarks Preservation Board in connection with the condition or use of the Premises; (iv) the discovery of any occurrence or condition on the Premises, or written notice received by Tenant of an occurrence or condition on any real property adjoining or in the vicinity of the Premises, which reasonably could be expected to lead to the Premises or any portion thereof being in violation of Environmental Requirements or which might subject Landlord to any claim alleging potential liability arising out of (A) the presence, or release into the environment, of any Hazardous Materials at the Premises, or (B) circumstances forming the basis of any violation, or alleged violation, of any Environmental Requirement; and (v) the commencement, nature, extent and completion of any remedial work. 23 19.10 Historical Contamination. (a) In connection with Tenant's acquisition of the Premises, Tenant and the City entered into the Development Agreement. Capitalized terms used in this Section 19.10 which are not defined in this Lease shall have the definitions set forth in the Development Agreement. This Section 19.10 expressly modifies Section 19.2 for those Hazardous Materials which are defined as Historic Contamination in the Development Agreement. In addition to the indemnities provided by Tenant pursuant to Section 19.2 above, until and unless Tenant obtains from the City consent to the assignment of the Development Agreement to Landlord in which the City acknowledges Landlord is a successor to Tenant's rights thereunder, confirms that Tenant is not in default under the Development Agreement, and does not contain any requirement for Landlord to assume any obligations thereunder ("City Confirmation"), Tenant shall indemnify, defend and hold Landlord, its agents and employees, harmless from and against any claims, costs (including attorneys' fees and other litigation costs) and damages arising from the failure of the City of Seattle to perform it's obligations relating to the remediation of Historic Contamination pursuant to the Development Agreement. (b) From and after the date Tenant obtains the City Confirmation in the form described herein, or such other confirmation of assignment from the City which Landlord accepts, Landlord agrees to first pursue its rights under the Development Agreement before seeking recovery against Tenant for matters related to Historic Contamination, except that Tenant may be named in or joined to any such action by Landlord to the extent such joinder is compulsory or is otherwise required for Landlord to preserve all of its rights against Tenant. It is the parties' intent that Tenant's obligations in Section 19.10(a) above shall only be obviated by this Section 19.10(b) to the extent of the City's performance. (c) Tenant's obligations and indemnities in Sections 19.10(a) and (b) above shall not apply to the extent that Landlord or Landlord's Related Parties actions or failures to act cause the City to be exonerated from liability or performance of its obligations under the Development Agreement. 20. FIRST OFFER. Tenant shall have a "Right of First Offer" if Landlord elects to market or sell the Premises to an unrelated third party. In such event, Landlord shall provide Tenant with a notice in writing of its intention to sell, setting forth the terms under which Landlord is prepared to sell the Premises. Tenant shall have 30 days to notify Landlord in writing whether it wishes to purchase the Premises on the proposed terms. If Landlord's notice states that its affiliate also intends to sell the Earl Davie Building property also leased by Tenant, Tenant will be required to purchase both unless Landlord and its affiliate specifically provides a single building alternative. If Tenant notifies Landlord that it wishes to purchase the applicable property (the "Sale Property") on the terms and conditions stated in Landlord's notice, the parties will negotiate in good faith for 30 days to reach agreement on a purchase and sale agreement. In the event that Tenant does not notify Landlord of its intent to purchase the Sale Property or the parties are unable to reach an agreement on a purchase and sale agreement within the prescribed time frames, Landlord shall be free to sell the Sale Property to any third party on such terms and conditions that Landlord finds acceptable. If Landlord does not transfer ownership of the Sale Property within 18 months of its original notice to Tenant, Tenant's Right of First Offer shall be reinstated. If Landlord does transfer ownership within 18 months of its original notice to Tenant to any unrelated third party, Tenant's Right of First Offer shall automatically terminate and be of no further force or effect for that or any subsequent sale of any property demised by this Lease or the Earl Davie Building Lease. All of Tenant's rights under this Section are personal to Tenant and may not be assigned, pledged or transferred to any third party. Notwithstanding the foregoing, such rights may be assigned or transferred to Tenant's Affiliate (Section 13.2). Tenant also agrees that its rights provided for in this Section shall not apply (a) so long as any Event of Default exists hereunder at the time Landlord's notice was otherwise required to be given to Tenant, in which event Landlord may proceed to negotiate and consummate a sale free of such right, (b) to any lease, mortgage or encumbrance of the Premises or other transfer of less than fee simple title thereto or any portion thereof, (c) to any transfer of any kind of any portion or all of the membership interests in Landlord, or (d) to any conveyance of the Premises or any portion thereof to (i) any entity that controls, is controlled by or under the common control with Landlord or any of their respective affiliates, or (ii) any entity in condemnation or in lieu of condemnation, or (iii) any judicial or nonjudicial foreclosure or deed in lieu of a judicial or nonjudicial foreclosure, and Tenant's right of first offer shall automatically 24 terminate with respect to the Premises or any portion thereof which are conveyed pursuant to part (ii) or (iii) of this Section. 21. ACCESS BY LANDLORD 21.1 Access. Subject to the terms and provisions of this Section 21, Tenant shall permit Landlord and its employees and authorized agents, consultants, contractors, and representatives (with Landlord, the "Landlord Representatives") to enter upon the Premises during normal business hours to inspect, examine, and show the Premises for lease (during the last 12 months of the Term), financing or sale, or to cure an Event of Default pursuant to Section 15.7 (generally, "Inspections"); provided, however, Landlord may enter the Premises during other hours when it is reasonably necessary to either address an emergency or an Event of Default. This right specifically excludes the right to obtain proprietary information relating to Tenant's business operations. Hazardous Materials tests and responses are specifically limited by Sections 15.7 and 19.5. 21.2 Conditions to Entry. At least 2 business days prior to entering the Premises or conducting any Inspections, Landlord shall (a) give Tenant oral or written notice of the times and dates it wishes to do so, (b) make arrangements with Tenant to have the Landlord Representatives to be accompanied by a representative of Tenant ("Tenant's Representative"), and (c) cause each Landlord Representative (other than the Landlord) accessing the Premises to sign an "Access and Confidentiality Agreement" in the form attached as Exhibit C or such other form reasonably acceptable to Tenant. The advance notice agreed upon shall apply in emergencies and following a default; provided that Tenant promptly delivers to Landlord reasonable assurances that such emergency or default is being adequately and diligently addressed (and for Hazardous Materials, so long as Tenant delivers and confirms compliance with its Response Plan). All Inspections shall be in accordance with all applicable Laws and regulations. Tenant agrees to make reasonable efforts to cause Tenant's Representatives to be available for such purposes during normal business hours. Tenant agrees that Landlord shall have no liability for any breach of an Access and Confidentiality Agreement by anyone other than Landlord except to the extent of Landlord's indemnity set forth in Section 21.5 below. 21.3 Inspection Costs. Except for any salary to be paid to Tenant's Representatives or as otherwise stated in this Lease or when necessitated by an Event of Default, Landlord shall bear the cost of all Inspections. 21.4 Inspection Obligations. (a) In conducting any Inspections, Landlord Representatives shall: (i) not materially interfere with the use of the Premises by any occupant; (ii) not materially interfere with the operation and maintenance of the Premises or any construction on the Premises; (iii) not damage any part of the Premises or personal property located at the Premises; (iv) not injure or otherwise cause bodily harm to any Tenant's Representative or any other person or entity or their respective employees, agents, contractors, representatives, guests, or invitees; (iv) at Tenant's request, provide Tenant with complete and accurate copies of all of the third-party reports and assessments of the Premises that are not proprietary to Landlord (collectively "Inspection Reports"); and (v) provide Tenant with copies of any Inspection Reports which provide information relating to Tenant's obligations under this Lease. No Landlord Representative will conduct any invasive Inspections which damage the Premises, unless such Inspections are (1) otherwise permitted by this Lease, (2) required by any governmental entity, (3) subject to Section 21.2, and except as restricted under Section 15.7, reasonably necessary in connection with a release or potential release of Hazardous Materials or there exists a reasonable belief that Environmental Requirements have been violated and such access and testing is conducted only by Landlord Representatives who are appropriately qualified as experts; or (4) are otherwise reasonably necessary and Landlord has first obtained Tenant's consent, which consent will not be unreasonably withheld. For Inspections relating to Hazardous Materials, the terms of Section 19.5 shall also apply. If the Premises are damaged during an Inspection, Landlord will immediately repair such damage and restore the Premises, pursuant to Section 21.5 below. Tenant acknowledges and agrees that Landlord shall have no responsibility for the accuracy or completeness of any such report or assessment or the suitability thereof for use by any person other than Landlord. 25 (b) Landlord and all Landlord Related Parties, including their respective partners, members, officers, directors, and attorneys will treat as confidential the information disclosed to them by Tenant or discovered on account of or pursuant to Landlord's Inspections (which information is disclosed orally, in writing or in visual or electronic form, and including any observations, knowledge, information, reports (written or oral), tests, or studies (together with the results of such studies and tests) obtained by or provided to Landlord or any Landlord Related Parties regarding the Premises, whether in connection with the Inspections, or otherwise, but shall not include information known by Landlord or Landlord Related Parties prior to any disclosures by Tenant or any Inspections or any other information that is generally known or available to the public) (the "Information"), giving it at least the same care as Landlord's own confidential information, and make no use of any such Information except in connection with (a) verifying Tenant's compliance with the terms of this Lease, (b) disclosing the condition of the Premises in connection with a sale, financing or lease of the Premises, or (c) to the extent required by court or legal requirements (which may include SEC regulations, NYSE and NASDAQ requirements). In addition, and except as required by applicable law, neither Landlord nor Tenant shall make or agree to any press releases in which the other party is identified without the prior written consent of the other party, and when such consent is given, the information disclosed and the persons to whom it is disclosed shall be limited to such releases. To the extent that the terms, provisions, and obligations of this Section 21, are inconsistent with the other provisions of this Lease, the terms of this Section 21 will control, but subject to limitations stated in Section 16.3. This Section 21.4(b) is not applicable to any Landlord Related Party who is also a Landlord Representative (Section 21.2) who executes a Access and Confidentiality Agreement pursuant to Section 21.2. 21.5 Indemnification and Repair. Landlord hereby agrees to indemnify, defend (with counsel reasonably acceptable to Tenant), and hold Tenant and its officers, directors, successors, and assigns harmless from and against any and all liens, claims, causes of action, liabilities, demands, suits, obligations, losses, penalties, costs, and expenses (including reasonable attorneys' fees) (generally, "Damages") including without limitation Damages for any actual physical damage to the Premises or any injury to persons, all to the extent caused by or in connection with the entry onto the Premises by a Landlord Representative or an act of a Landlord Representative in connection with the Inspections; provided, however, that Landlord's indemnity hereunder shall be limited to actual, direct damages only and shall not include (a) any consequential damages, or (b) any damages to the extent resulting from (i) the acts or omissions of any Tenant's Representative, or (ii) the discovery of any condition of the Premises that existed prior to Landlord's entry thereon (a "Pre-Existing Condition"), except that such indemnity shall apply to the extent, and only to the extent, such Pre-Existing Condition is directly exacerbated, aggravated, or worsened by the entry onto the Premises by an Landlord Representative or an act of an Landlord Representative in connection with the Inspections. In addition, Landlord shall promptly repair any physical damage to the Premises caused by any Landlord Representative (including without limitation damage relating to an Inspection) and shall promptly restore the Premises to the condition in which it existed prior to such entry; provided, however, that Landlord shall have no obligation to repair any damage caused by the acts or omissions of any Tenant's Representative or to remediate, remove, contain, abate, or control any Pre-Existing Condition, except to the extent, and only to the extent, necessary to restore the Pre-Existing Condition to the condition in which it existed prior to such entry. As an example only, if a Landlord Representative should cause a limited and confined release of asbestos while taking a sample of ceiling materials within the Premises, Landlord's sole obligation would be to remove, control and abate any released asbestos, indemnify and defend Tenant for any personal injury Damages claimed relating to the release, and to re-seal the ceiling materials where the sample was taken; Landlord would have no further obligation to remediate, remove, contain, abate, control, or take any further action whatsoever with respect to the asbestos contained in the sampled or any other ceiling materials. Landlord's obligations under this Section 21 shall survive termination of the Lease; provided that Tenant will only have two years from the expiration or termination of this Lease to commence an action against Landlord under this Section. 21.6 Building Signage. Landlord hereby agrees not to modify or require any changes to the current signage at the Premises, and further agrees that during the Term, Tenant shall have the sole right to designate the name of the Premises', but subject to Landlord's consent, which will not be unreasonably withheld (e.g., the Tenant's name on the Steam Stacks). Tenant's right under this Section 21.6 are 26 personal to Tenant and Tenant may not Transfer (Section 13.1) such rights, except to Tenant's Affiliates (Section 13.2). 22. CONTESTS 22.1 Notice. Notwithstanding the provisions of this Lease which require Tenant pay certain amounts to third parties ("Third Party Payments") on or before the date due (Sections 3.4, 4.3 and 6), Tenant shall not be required to (i) pay any Third Party Amounts, (ii) comply with any Law, or (iii) discharge or remove any lien arising out of Tenant, so long as Tenant contests, in good faith and at its expense, the existence, the amount or the applicability or validity thereof, and by appropriate proceedings so long as during the pendency thereof Tenant takes any necessary steps to prevent (A) the collection of, or other realization upon, the claim so contested, (B) the sale, forfeiture or loss of any of the Premises, or the Rent to satisfy the same, (C) any interference with the use or occupancy of any of the Premises, and (D) the cancellation of any insurance Tenant is required to carry pursuant to Section 9. 22.2 Conditions. In no event shall Tenant pursue any contest in such manner that exposes Landlord to (i) criminal liability, penalty or sanction, or (ii) defeasance of its interest in the Premises. 22.3 Hold Harmless. Tenant agrees that each contest shall be promptly and diligently prosecuted to a final conclusion, except that Tenant shall have the right to attempt to settle or compromise such contest through negotiations; provided that if such contest is not concluded and all amounts for which Tenant is liable are not paid prior to the expiration of this Lease, then Tenant agrees that its obligation to diligently pursue or settle such contest and its liability for such unpaid amounts shall survive the expiration of this Lease. Tenant shall pay and save Landlord harmless against any and all losses, judgments, decrees and costs (including all attorneys' fees and expenses) in connection with any such contest and shall, promptly after the final determination of such contest, fully pay and discharge the amounts which shall be levied, assessed, charged or imposed or be determined to be payable therein or in connection therewith, together with all penalties, fines, interest, costs and expenses thereof or in connection therewith, and perform all acts the performance of which shall be ordered or decreed as a result thereof. 23. ESTOPPEL CERTIFICATE. Each party shall at any time and from time to time upon not less than 20 days written notice from the other and without charge, execute and deliver to the other an estoppel certificate in the form of Exhibit J. 24. INTENTIONALLY OMITTED 25. PARKING FOR EARL DAVIE BUILDING. During the Term, Landlord grants to the tenant under the Earl Davie Building Lease (the "EDB Tenant") the right to utilize up to 49 parking stalls at the Premises which have been specifically covenanted and reserved for the EDB Tenant; provided that the EDB Tenant shall make commercially reasonable efforts to minimize or eliminate the need for the EDB Tenant to utilize such parking. 26. CROSS DEFAULTS. At Tenant's option, Landlord (or its affiliate) and Tenant may be parties to a $3,000,000 line of credit loan ("Line of Credit Loan") which will be documented by the forms attached to the fourth amendment to the Purchase Agreement, with such forms executed upon Tenant's election to draw on the Line of Credit Loan. Regardless of the actual date of execution of the Line of Credit Loan documents, the maturity date thereunder shall be five years from the Effective Date. As provided in Section 15.2, any Event of Default under the Line of Credit Loan or the Earl Davie Building Lease (Section 15.2) shall be an Event of Default hereunder and any default under this Lease shall be a default under the Earl Davie Building Lease and the Line of Credit Loan. 27 27. MISCELLANEOUS 27.1 Tenant's Obligations Unconditional. Tenant acknowledges and agrees that except as otherwise specifically stated in this Lease it shall be absolutely and unconditionally obligated to pay all Rent and all of the costs and expenses that relate to the ownership, occupancy, use, maintenance, insurance, repair, restoration, replacement, and remediation of the Premises and all utilities and other services provided thereto and taxes and installments of assessments levied thereon during the Initial Term and any Renewal Term and for those portions of installments of assessments to the extent they accrued during the Term of this Lease, even if they are payable thereafter and to take such other actions at its sole expense as are required to comply with all existing and future Laws with respect thereto and such obligations shall not be subject to abatement, offset or impairment for any cause or reason whatsoever. Except as otherwise stated in this Lease, nothing in this Section 27.1 is intended to require Tenant to pay or reimburse Landlord for (a) those taxes and assessments excluded from Tenant's obligations in Section 6.2, (b) Landlord's internal costs and expenses, (c) Landlord's third party out of pocket expenses, or (d) any Hazardous Materials remediation costs in excess of those agreed upon by the parties in Section 19 above. 27.2 Additional Definitions. "Landlord" as used in this Lease shall include the original Landlord hereunder, its successors, and if this Lease shall be validly assigned, shall also include Landlord's assignees. "Tenant" shall include the original Tenant hereunder, its successors, and if this Lease shall be validly assigned or sublet, shall include also Tenant's assignee or sublessee as to premises covered by such assignment or sublease. References to "Tenant's knowledge" shall refer to the actual personal knowledge of any one or more of the officers of Tenant, not the actual or constructive knowledge of any other employee, agent, officer, director or other representative of Tenant and shall in no case impose upon Tenant any duty or obligation to investigate or verify the information. References herein to "Law" shall mean any governmental statute, ordinance, rule or regulation now in force or which may hereafter be enacted, promulgated or modified and any easement, reservation, restriction or covenant now or hereafter recorded against the Premises or any portion thereof to the extent applicable to the particular matter at issue (collectively "CC&Rs"), excluding CC&Rs to the extent that they are created without Tenant's consent after the Effective Date and that they interfere with Tenant's use of the Premises or cause Tenant to incur additional cost. References to "including" or "includes" shall mean "includes, without limitation" and "including, but not limited to." References to "business days" shall mean Monday through Friday, excluding federal and national bank holidays. If any time period is to expire on a date which is not a business day, the time period shall be extended to the next business day. 27.3 Notices. Any notice or consent required to be given by or on behalf of either party to the other shall be in writing and given by mailing such notice or consent by either (i) one business day after sending by an overnight courier service when deposited with the courier in time for delivery the next business day or otherwise on the next business day thereafter, or (ii) 2 business days after deposit with the United States Post Office by registered or certified mail, return receipt requested, as evidenced by the date of the postmark thereon, or (iii) on the day transmitted via facsimile if completed in time for receipt by 12:00 p.m. recipient's time on a business day or otherwise on the next business day thereafter (provided that facsimile notice is only effective if notice is also delivered pursuant to Sections 27.3(i) or (ii) the next business day following the transmission of the facsimile notice); addressed to the other party as follows: If to Landlord: ARE-1201/1208 Eastlake Avenue, LLC 135 N. Los Robles Ave., Ste. 250 Pasadena, CA 91101 Attn: Corporate Secretary Telephone: (626) 578-0777 Fax: (626) 578-0770 28 With a copy to: Stoel Rives LLP Attn: David H. Rockwell 600 University Street, Suite 3600 Seattle, WA 98101-3197 Telephone: (206) 386-7694 Fax: (206) 386-7500 If to Tenant: ZymoGenetics, Inc. Attn: Chief Financial Officer 1201 Eastlake Avenue E. Seattle, WA 98102 Telephone: (206) 442-6600 Fax: (206) 442-6808 With a copy to: Real Property Law Group, PLLC Attn: Cynthia Thomas 1218 Third Avenue, Suite 1900 Seattle, WA 98101 Telephone: (206) 625-1717 Fax: (206) 374-2782 or to such other addresses as the parties may designate in writing by the means above described. In addition to the foregoing, any notice Tenant gives to Landlord which in any manner relates to any Alterations shall be given to: Alexandria Real Estate Equities, Inc. 9820 Willow Creek Road Suite 440 San Diego, CA 98131 Attn: Senior Vice President, Construction & Development Telephone: (858) 530-8190 Fax: (858) 530-8191 The time period in which to respond to any notice or consent shall commence to run on the date on which such notice is deemed effective as stated above. Any notices of the same matter that are required by or given in connection with this Lease, the Earl Davie Building Lease, the Purchase Agreement or the Line of Credit Loan need be given once to a party and not duplicated for each such contract. 27.4 Survival. The obligations of each party applicable to time periods prior to the termination or expiration of this Lease shall survive termination or expiration of this Lease, including each party's right to indemnification and defense from claims arising from matters occurring prior to termination even though the claim is asserted after termination. 27.5 No Oral Agreements. It is expressly agreed between Landlord and Tenant that there is no verbal understanding or agreement which in any way changes the terms, covenants and conditions herein set forth, and that no modification of this Lease shall be effective unless made in writing and duly executed by the authorized officers of the necessary parties or party and consented to by Landlord's mortgagee, if any. Landlord and Tenant hereby agree that all prior or contemporaneous oral understandings, agreements or negotiations relative to the leasing of the Premises are merged into this Lease. 27.6 No Waiver. The failure of Landlord or Tenant to insist, in one or more instances, upon the strict performance by Tenant or Landlord of any of the provisions of this Lease shall not be construed as a waiver of any right or remedy available for any future breach of such provisions. Receipt by Landlord of Rent with knowledge of the breach of any provisions hereof shall not be deemed a waiver of any right or remedy available for such breach. 29 27.7 Time of Essence. Time is of the essence of this Lease. 27.8 Waiver of Common Law. Tenant waives any of the following rights, to the extent they exist now or will exist in the future under Law(including common law): the right to terminate this Lease, any right to offset amounts due against Rent, and/or any right to make repairs at the expense of Landlord. Landlord waives any statutory landlord's lien against Tenant's personal property, including its Removable Equipment. 27.9 Legal Expense. If either party incurs any third party out of pocket costs or expenses, including those of a collection agency and any attorneys' fees, to collect any sum which is past due hereunder, the defaulting party shall reimburse the nondefaulting party therefor, with or without litigation. If any action, arbitration or proceeding (including any appeal thereof) is brought by either party to enforce its rights under this Lease or to collect a judgment against the other arising from this Lease ("Action"), the unsuccessful party therein shall pay all enforcement costs incurred by the prevailing party therein, including reasonable attorneys' fees and costs. 27.10 Governing Law/Venue/Waiver of Jury. This Lease shall be performed, construed and enforced in accordance with the laws of the State of Washington and the parties agree that venue shall lie in King County, Washington. Landlord and Tenant each unconditionally waives any right to trial by jury to resolve any claim, action or demand asserted in connection with any matter arising in connection with this Lease. 27.11 Force Majeure. Except as specifically provided otherwise herein, and except for the periods during which either party may cure a default hereunder the time periods for Landlord's or Tenant's performance hereunder (except for the payment of money) shall be extended for periods of time during which the non-performing party's performance is prevented due to circumstances beyond the party's control, including, without limitation, strikes, embargoes, newly imposed governmental regulations, inclement weather and other acts of God, war or other strife (collectively "Force Majeure"). Notwithstanding the foregoing, a Force Majeure may apply to certain Events of Default pursuant to Section 15.2. 27.12 Headings. The headings used in this Lease are for convenience only and shall not have any bearing or meaning with respect to the content or context of this instrument. 27.13 Holding Over. Tenant shall have no right to retain possession of the Premises beyond the expiration or earlier termination of the Lease. If Tenant holds over after the expiration of the Term, with the express consent of Landlord, such tenancy shall be from month-to-month only, and not a renewal hereof or an extension for any further Term, and such month-to-month tenancy shall be subject to each and every term, covenant and agreement contained herein; provided, however, that Tenant shall pay as rent during any holding over period, an amount equal to 150% of the Base Rent payable immediately preceding the expiration of the Term plus all Additional Rent. Nothing in this Section shall be construed as a consent by Landlord to any holding over by Tenant and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises upon the expiration of the Term or upon the earlier termination thereof and to assert any remedy in law or equity to evict Tenant and/or collect damages in connection with such holding over. 27.14 Rights Are Cumulative. All rights, powers and privileges conferred hereunder upon the parties shall be cumulative, but not restricted to those given by law. 27.15 Severability. If any term or provision of this Lease shall be held invalid or unenforceable to any extent, the remaining terms, conditions and covenants of this Lease shall not be affected thereby and each of said terms, covenants and conditions shall be valid and enforceable to the fullest extent permitted by law, unless an essential purpose of this Lease would be defeated by loss of the invalid or unenforceable provision. 30 27.16 Interpretation. This Lease has been fully negotiated and no provision shall be construed for or against either Tenant or Landlord, and this Lease shall be interpreted in accordance with its general tenor in an effort to reach an equitable result. Whenever words such as "herein," "hereunder," etc., are used in this Lease, they shall mean and refer to this Lease in its entirety and not to any specific section, paragraph or other part of this Lease. 27.17 Brokers. The Staubach Company represents Tenant and Insignia/Kidder Mathews represents Landlord. Each party shall be responsible for paying any commissions or fees due to its broker and shall hold the other party harmless from any claims for commissions or finders fees due from any other third parties claiming to have been engaged by that party. 27.18 Counterparts. This Lease may be executed in counterparts which, when taken together, will comprise a single original agreement. Facsimile signatures shall be binding upon transmission. IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed as of the day and year first written above. LANDLORD: ARE-1201/1208 Eastlake Avenue, LLC, a Delaware limited liability company By: ALEXANDRIA REAL ESTATE EQUITIES, L.P. a Delaware limited partnership, its managing member By: ARE-QRS CORP.,a Maryland corporation, general partner By: /s/ Peter J. Nelson ---------------------------- Peter J. Nelson, Chief Financial Officer TENANT: ZYMOGENETICS, INC. a Washington corporation By: /s/ James A. Johnson ---------------------------------------------- James A. Johnson Senior Vice President - Chief Financial Officer EXHIBITS: Exhibit A: Legal Description Exhibit B: Title Encumbrances Exhibit C: Access and Confidentiality Agreement Exhibit D: Letter of Credit Exhibit E: Pledge Agreement Exhibit F: Custodial Agreement Exhibit G: Fixed Equipment Exhibit H: Use and Function of Leased Space Exhibit I: Intentionally Deleted Exhibit J: Estoppel Exhibit K: Intentionally Deleted Exhibit L: Fair Market Value Determination Exhibit M: Amendment to Lease 31 STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) I certify that I know or have satisfactory evidence that PETER J. NELSON is the person who appeared before me, and said person acknowledged that he signed this instrument, on oath stated that he was authorized to execute the instrument and acknowledged it as the Chief Financial Officer of ARE-QRS, CORP., a Maryland corporation, which is the General Partner of ALEXANDRIA REAL ESTATE EQUITIES, L.P., a Delaware limited partnership, which is the Managing Member of ARE-1201/1208EASTLAKE AVENUE, LLC, to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument. DATED: October 15, 2002 /s/ Teresa A. Flores ------------------------------- (Signature of Notary Public) Teresa A. Flores ------------------------------- (Printed Name of Notary Public) My Appointment expires: 6-24-05 STATE OF WASHINGTON ) ) ss. COUNTY OF KING ) I certify that I know or have satisfactory evidence that James A. Johnson is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the Senior Vice President and Chief Financial Officer of ZYMOGENETICS, INC. to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument. DATED: October 16, 2002 /s/ Carol A. Alto ------------------------------- (Signature of Notary Public) Carol A. Alto ------------------------------- (Printed Name of Notary Public) My Appointment expires: 3-7-06 32 EXHIBIT A LEGAL DESCRIPTION PARCEL A (Lake Union Steam Plant): THAT PORTION OF LOTS 1 THROUGH 7, INCLUSIVE, BLOCK 4, R. C. GRAVES ADDITION TO THE CITY OF SEATTLE, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME 3 OF PLATS, PAGE(S) 120, IN KING COUNTY, WASHINGTON, LYING SOUTHEASTERLY OF FAIRVIEW AVENUE EAST AS CONDEMNED IN KING COUNTY SUPERIOR COURT CAUSE NUMBER 67239 UNDER CITY OF SEATTLE ORDINANCE NUMBER 20186; ALSO, LOTS 1 THROUGH 3 AND LOTS 6 THROUGH 10, BLOCK 4, FRANCE'S ADDITION TO THE CITY OF SEATTLE, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME 1 OF PLATS, PAGE(S) 195, IN KING COUNTY, WASHINGTON; EXCEPT THAT PORTION THEREOF CONDEMNED FOR EXTENSION OF LAKE AVENUE (NOW EASTLAKE AVENUE EAST) UNDER CITY OF SEATTLE ORDINANCE NUMBER 1284; ALSO, THAT PORTION OF GOVERNMENT LOT 1 OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 4 EAST, WILLAMETTE MERIDIAN, IN KING COUNTY, WASHINGTON, BOUNDED ON THE NORTH BY LOT 6, BLOCK 4, FRANCE'S ADDITION TO THE CITY OF SEATTLE, ACCORDING TO THE PLAT THEREOF, RECORDED IN VOLUME 1 OF PLATS, PAGE 195, IN KING COUNTY, WASHINGTON; ON THE SOUTH BY THE NORTH LINE OF LOT 9 AND THE SOUTHEASTERLY PRODUCTION THEREOF, BLOCK 11, EAST PARK ADDITION TO THE CITY OF SEATTLE, ACCORDING TO THE PLAT THEREOF, RECORDED IN VOLUME 8 OF PLATS, PAGE 83, IN KING COUNTY, WASHINGTON; ON THE EAST BY EASTLAKE AVENUE EAST; AND ON THE WEST BY LOT 12, BLOCK 68, LAKE UNION SHORELANDS, IN KING COUNTY, WASHINGTON, AS SHOWN ON THE OFFICIAL MAPS ON FILE IN THE OFFICE OF THE COMMISSIONER OF PUBLIC LANDS AT OLYMPIA, WASHINGTON, ON JULY 1, 1907; ALSO, LOTS 8 AND 9, BLOCK 11, EAST PARK ADDITION TO THE CITY OF SEATTLE, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME 8 OF PLATS, PAGE(S) 83, IN KING COUNTY, WASHINGTON; ALSO, LOTS 5 THROUGH 14, BLOCK 68, LAKE UNION SHORELANDS, IN KING COUNTY, WASHINGTON, AS SHOWN ON THE OFFICIAL MAPS ON FILE IN THE OFFICE OF THE COMMISSIONER OF PUBLIC LANDS AT OLYMPIA, WASHINGTON, ON JULY 1, 1907; EXCEPT THAT PORTION OF LOTS 5 THROUGH 8, LYING WITHIN FAIRVIEW AVENUE EAST AS CONDEMNED IN KING COUNTY SUPERIOR COURT CAUSE NUMBER 67239 UNDER CITY OF SEATTLE ORDINANCE NUMBER 20186; ALSO, THAT PORTION OF VACATED BELLEVUE AVENUE EAST, FORMERLY OREGON STREET, AS ESTABLISHED IN THE PLAT OF FRANCE'S ADDITION TO THE CITY OF SEATTLE, ACCORDING TO THE PLAT THEREOF, RECORDED IN VOLUME 1 OF PLATS, PAGE 195, IN KING COUNTY, WASHINGTON, LYING NORTHWESTERLY OF THE NORTHWESTERLY MARGIN OF LAKE AVENUE (NOW EASTLAKE AVENUE EAST), AS ESTABLISHED BY ORDINANCE NUMBER 1284; A-1 ALSO, THAT PORTION OF VACATED LAKE AVENUE (NOW EASTLAKE AVENUE EAST), AS ESTABLISHED IN THE PLAT OF EAST PARK ADDITION TO THE CITY OF SEATTLE, ACCORDING TO THE PLAT THEREOF, RECORDED IN VOLUME 8 OF PLATS, PAGE 83, IN KING COUNTY, WASHINGTON, LYING NORTHWESTERLY OF THE NORTHWESTERLY MARGIN OF SAID LAKE AVENUE (NOW EASTLAKE AVENUE EAST), AS ESTABLISHED BY ORDINANCE NUMBER 1284, AND ADJACENT TO LOT 9, BLOCK 11 OF SAID PLAT; ALSO, THAT PORTION OF VACATED EASTLAKE AVENUE EAST AT EAST NELSON PLACE DESCRIBED AS FOLLOWS: BEGINNING AT THE MOST EASTERLY CORNER OF BLOCK 11, EAST PARK ADDITION TO THE CITY OF SEATTLE, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME 8 OF PLATS, PAGE(S) 83, IN KING COUNTY, WASHINGTON; THENCE SOUTH 34(degree)41'22" WEST ALONG THE SOUTHEASTERLY LINE OF SAID BLOCK TO THE INTERSECTION WITH THE PRODUCTION SOUTHWESTERLY OF THE NORTHWESTERLY MARGIN OF EASTLAKE AVENUE NORTH AS ESTABLISHED BY ORDINANCE NUMBER 1284 AND THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTHWESTERLY ALONG SAID SOUTHEASTERLY LINE OF SAID BLOCK 11, A DISTANCE OF 17.96 FEET; THENCE NORTH 41(degree)17'56" EAST, A DISTANCE OF 91.02 FEET TO THE NORTHWESTERLY MARGIN OF EASTLAKE AVENUE NORTH AS ESTABLISHED BY ORDINANCE NUMBER 1284; THENCE SOUTH 42(degree)55'03" WEST ALONG SAID NORTHWESTERLY MARGIN OF EASTLAKE AVENUE NORTH AND ITS PROJECTION, A DISTANCE OF 73.21 FEET, TO THE TRUE POINT OF BEGINNING. (BEING KNOWN AS LOTS 1 AND 2 OF CITY OF SEATTLE LOT BOUNDARY ADJUSTMENT NUMBER 9604526, RECORDED UNDER RECORDING NUMBER 9611060361). A-2 EXHIBIT B CURRENT ENCUMBRANCES EASEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: CITY OF SEATTLE, A MUNICIPAL CORPORATION PURPOSE: WATER DRAIN PIPE AND APPURTENANCES, AND FOR THE INSTALLATION, OPERATION, MAINTENANCE, PROTECTION, REPAIR, ALTERATION OR RECONSTRUCTION THEREOF RECORDED: MAY 5, 1993 RECORDING NUMBER: 9305051203 EXCEPTIONS AND RESERVATIONS CONTAINED IN DEEDS FROM THE STATE OF WASHINGTON, WHEREBY THE GRANTOR EXCEPTS AND RESERVES ALL OIL, GASES, COAL, ORES, MINERALS, FOSSILS, ETC., AND THE RIGHT OF ENTRY FOR OPENING, DEVELOPING AND WORKING THE SAME AND PROVIDING THAT SUCH RIGHTS SHALL NOT BE EXERCISED UNTIL PROVISION HAS BEEN MADE FOR FULL PAYMENT OF ALL DAMAGES SUSTAINED BY REASON OF SUCH ENTRY; RECORDED UNDER RECORDING NUMBERS 2326072, 575452, 774699, 867187, 531949, 868275 AND 544487. RIGHT OF STATE OF WASHINGTON OR ITS SUCCESSORS, SUBJECT TO PAYMENT OF COMPENSATION THEREFOR, TO ACQUIRE RIGHTS OF WAY FOR PRIVATE RAILROADS, SKID ROADS, FLUMES, CANALS, WATER COURSES OR OTHER EASEMENTS FOR TRANSPORTING AND MOVING TIMBER, STONE, MINERALS AND OTHER PRODUCTS FROM THIS AND OTHER PROPERTY, AS RESERVED IN DEEDS REFERRED TO ABOVE. AGREEMENT AND THE TERMS AND CONDITIONS THEREOF: BETWEEN: ZYMOGENETICS, INC. AND: CITY OF SEATTLE RECORDED: MARCH 15, 1993 RECORDING NUMBER: 9303150948 REGARDING: TRANSPORTATION MANAGEMENT PLAN AGREEMENT AND THE TERMS AND CONDITIONS THEREOF: BETWEEN: ZYMOGENETICS, INC., A WASHINGTON CORPORATION AND: CITY OF SEATTLE, A MUNICIPAL CORPORATION RECORDED: MAY 5, 1993 RECORDING NUMBER: 9305051200 REGARDING: DEVELOPMENT AND USE OF SAID PREMISES AND RESTRICTIONS RELATED THERETO RELEASE OF DAMAGE AGREEMENT AND THE TERMS AND CONDITIONS THEREOF: BETWEEN: ZYMOGENETICS INC., A WASHINGTON CORPORATION AND: CITY OF SEATTLE RECORDED: MAY 10, 1993 RECORDING NUMBER: 9305100412 RELEASING CITY OF SEATTLE FROM ALL FUTURE CLAIMS FOR DAMAGES RESULTING FROM: PERMISSION TO OCCUPY PUBLIC RIGHT OF WAY ALONG EASTLAKE AVENUE EAST FROM 155 FEET NORTH OF EAST NELSON AND CONTINUING NORTH 110 FEET BY ERECTING AND MAINTAINING THEREIN A SHORING SYSTEM WITH EXTERIOR TIEBACKS. COVENANTS, CONDITIONS AND RESTRICTIONS CONTAINED IN CITY OF SEATTLE ORDINANCE NUMBER 117251 RELATING TO HISTORIC PRESERVATION: RECORDED: SEPTEMBER 6, 1994 RECORDING NUMBER: 9409060952 SAID INSTRUMENT IS A RE-RECORDING OF DOCUMENT RECORDED UNDER RECORDING NUMBER 9408150393. B-1 COVENANTS, CONDITIONS AND RESTRICTIONS RELATING TO LANDMARK PRESERVATION CONTAINED IN INSTRUMENT: RECORDED: JANUARY 26, 1995 RECORDING NUMBER: 9501260857 COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS, NOTES, DEDICATIONS AND SETBACKS, IF ANY, SET FORTH IN OR DELINEATED ON THE BOUNDARY/LOT LINE ADJUSTMENT RECORDED UNDER RECORDING NUMBER 9611060361. AGREEMENT AND THE TERMS AND CONDITIONS THEREOF: BETWEEN: ZYMOGENETICS, INC.AND: CITY OF SEATTLE RECORDED: MAY 1, 1997 RECORDING NUMBER: 9705011660 REGARDING: TRANSPORTATION MANAGEMENT PLAN RIGHT TO MAKE NECESSARY SLOPES FOR CUTS OR FILLS UPON PROPERTY HEREIN DESCRIBED AS RESERVED IN CITY OF SEATTLE ORDINANCE NUMBER 115487, RECORDED UNDER RECORDING NUMBER 9101221562. RIGHT TO MAKE NECESSARY SLOPES FOR CUTS OR FILLS UPON PROPERTY HEREIN DESCRIBED AS RESERVED IN CITY OF SEATTLE ORDINANCE NUMBER 116905, RECORDED UNDER RECORDING NUMBER 9311021657. MATTERS DISCLOSED BY UNRECORDED SURVEY BY BUSH, ROED & HITCHINGS, INC., DATED JUNE 2, 2002, JOB NO. 96189.09. NON-DELINQUENT TAXES AND ASSESSMENTS WHICH ARE NOT SHOWN AS EXISTING LIENS BY THE RECORDS OF ANY TAXING AUTHORITY THAT LEVIES TAXES OR ASSESSMENTS ON REAL PROPERTY OR BY THE PUBLIC RECORD. GENERAL TAXES AND RELATED CHARGES PAYABLE THEREWITH, IF ANY, FOR 2002, A LIEN NOW PAYABLE, BUT NOT YET DELINQUENT. B-2 EXHIBIT C ACCESS AND CONFIDENTIALITY AGREEMENT This ACCESS AND CONFIDENTIALITY AGREEMENT (this "Agreement") is executed effective as of the date indicated below, by undersigned ("Contractor") for the benefit of ZYMOGENETICS, INC., a Washington corporation ("ZGI"). A. ZGI owns certain real property and improvements commonly known as 1201 and 1208 Eastlake Avenue East in Seattle, Washington (the "Property"). B. ZGI is the tenant and _______________________________.("ARE") is the landlord under those certain Leases dated _______________________, 2002 for the Property (the "Leases"). Pursuant to Section 21 of each of the Leases, Landlord has various rights of access to the Property and a corresponding right to extend that right of access to its agents, consultants, contractors and representatives. C. ARE requested that ZGI allow Contractor to enter the______________ Property (the "Subject Property") for the following purpose: _____________________________________ (the "Access Purpose"). AGREEMENT NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Contractor agrees and acknowledges as follows: 1. Purpose. Subject to the terms and provisions of this Agreement and the Leases, Contractor, as ARE's agent, will be entering upon the Subject Property to perform the Access Purpose at ARE's request and direction. 2. Conditions to Entry. Contractor's access to the Property will be limited to regular business hours. At least 2 business days prior to entering onto or into the Subject Property, Contractor shall contact ZGI's representative, Scott Anderson at (206) 442-6747 or Cecil Weight at (206) 442-6689 who will make arrangements to have the Contractor accompanied by a ZGI representative ("ZGI Representative"). Contractor must be accompanied by a ZGI Representative at all times Contractor is on the Subject Property, and all of Contractor's activities shall be in accordance with all applicable Laws and regulations. 3. Costs. Contractor is engaged by ARE. ARE is not acting as ZGI's agent and ZGI is not liable to pay Contractor for any services provided by Contractor to ARE. 4. Inspection Obligations. While on the Subject Property and while performing the Access Purpose, Contractor shall: (a) not interfere with the use of the Subject Property by any occupant; (b) not interfere with the operation and maintenance of the Subject Property or any construction on the Subject Property; (c) not damage any part of the Subject Property or personal property located at the Subject Property owned or held by any person or entity; (d) not injure or otherwise cause bodily harm to any ZGI Representative or any other person or entity; (e) maintain comprehensive general liability (occurrence) insurance covering any accident arising in connection with the presence of the Contractor on the Subject Property in an amount not less than $2,000,000, evidence of such insurance shall name ZGI as an additional insured and be delivered to the ZGI Representative prior to accessing the Subject Property; (f) not permit any liens to attach to the Subject Property by reason of Contractor's work; and (g) not conduct any invasive activities, unless Contractor confirms in advance that ZGI has consented to each such invasive inspection. C-1 5. Confidentiality. Contractor and all of Contractor's partners, members, officers, directors, and attorneys (collectively the "Contractor Parties") will treat as confidential all the information disclosed to them by ZGI and/or ARE or discovered in connection with its access to the Subject Property (whether information is disclosed orally, in writing or in visual or electronic form, and including any observations, knowledge, information, reports (written or oral), tests, or studies (together with the results of such studies and tests) obtained by or provided to any of the Contractor Parties regarding the Subject Property, whether in connection with the Inspections, Contractor's review of the due diligence materials delivered or made available to Contractor, or otherwise, but not including information known by Contractor prior to any disclosures by ZGI and/or ARE or any information that is generally known or available to the public) (the "Information"), giving it no less care than Contractor's own confidential information, and make no use of any such Information except in connection with its engagement by ARE and subject to the limitations on ARE's use of the Information pursuant to Section 21.4 of the Leases, or to the extent required by court or legal requirements (which may include SEC regulations, NYSE and NASDAQ requirements). Contractor will not record any memorandum disclosing this Agreement. If Contractor receives any Information from ZGI, it will return originals and all copies of Information to ZGI immediately upon request (except for the copy delivered to ARE). In addition, and except as required by applicable law, Contractor shall not issue any release, make any statement to, or confirm or deny any statement made by the media without both ZGI and ARE's advance written consent, which may be withheld in their sole and absolute discretion. 6. Indemnification and Repair. Contractor hereby agrees to indemnify, defend (with counsel acceptable to ZGI), and hold ZGI and its officers, directors, successors, and assigns harmless from and against any and all liens, claims, causes of action, liabilities, demands, suits, obligations, losses, penalties, costs, and expenses (including reasonable attorneys' fees) (generally, "Damages"), including without limitation, Damages for any actual physical damage to the Subject Property or any injury to persons, all to the extent caused by or in connection with the entry onto the Subject Property by a Contractor Party or an act of a Contractor Party; provided, however, that Contractor's indemnity hereunder shall not include any Damages to the extent resulting from the acts or omissions of any ZGI Representative; and provided further, if there are any liens arising from or relating to Contractor's entry or any other activity of the Contractor Parties relating to the Subject Property, then Contractor will cause such liens to be removed from the Subject Property within 10 business days after notice thereof, and if Contractor fails to timely perform, then ZGI shall thereafter have the right but not the obligation to pay the amount claimed on the lien and collect from Contractor all costs incurred in removing the lien, including attorney's fees. In addition, Contractor shall promptly repair any physical damage to the Subject Property caused by any Contractor Party. ZGI will only have two years from the last date of Contractor's access to the Subject Property to commence an against Contractor under this Section. 7. No Right of Contribution from ARE. Contractor agrees that if it breaches its rights hereunder and such breach results in a payment to ZGI, then Contractor will not have any right to seek contribution or reimbursement from ARE. 8. Entire Agreement. This Agreement reflects the entire Agreement between Contractor and ZGI, and there are no other agreements, oral or written, between Contractor and ZGI regarding the Subject Property. This Agreement can be amended only by written agreement signed by both ZGI and Contractor. 9. Survival. This Agreement, and the terms, covenants, and conditions herein contained, shall inure to the benefit of and be binding upon the heirs, personal representatives, successors, and assigns of each of the Contractor and ZGI. Contractor agrees that all of the Contractor Parties' access to the Subject Property is subject to this Agreement. 10. Governing Law, Legal Expenses. This Agreement will be construed, performed, and enforced in accordance with the laws of the State of Washington. Supplementing ZGI's rights under Section 6 above, if any action, arbitration or proceeding (including any appeal thereof) is brought by ZGI to enforce its rights under this Agreement or to collect a judgment against Contractor arising from this C-2 Agreement, the unsuccessful party therein shall pay all enforcement costs incurred by the prevailing party therein, including reasonable attorneys' fees and costs. 11. Notice. For purposes of this Agreement only, any notice (including written notice) required by this Agreement may be provided either to: ZGI: ZYMOGENETICS, INC. Attn: Chief Financial Officer 1201 Eastlake Avenue East Seattle, WA 98121 Telephone: (206)442-6600 Facsimile: (206)442-6608 Contractor: see address below signature IN WITNESS WHEREOF, Contractor has executed this Agreement effective as of _______________, 2002. Contractor: _____________________________________________ a____________________________________________________ By:__________________________________________________ Name:________________________________________________ Title:_______________________________________________ Notice Address:______________________________________ _____________________________________________________ Fax:_________________________________________________ Telephone:___________________________________________ C-3 EXHIBIT D LETTER OF CREDIT IRREVOCABLE STANDBY LETTER OF CREDIT PLACE AND DATE OF ISSUE: CREDIT NUMBER: ___________ ____________________[PLACE] DATE AND PLACE OF EXPIRY: ____________________[DATE] ___________ [DATE] IN __________________[PLACE] BENEFICIARY: APPLICANT: [TENANT] __________________________________ ____________________________ __________________________________ ____________________________ __________________________________ ____________________________ Up to an aggregate amount of ____________________ US DOLLARS (US$____________). Dear Sirs: We hereby issue in your favor this Standby Letter of Credit which is available by your drafts at sight drawn on [ISSUER], at [OFFICE OF ISSUER] and accompanied by one of the following documents: 1. Your notarized signed written certification, stating substantially the following (all blank spaces shall be completed by Beneficiary): In reference to [ISSUER] Letter of Credit No. ____________, we hereby certify and affirm that an event has occurred which entitles [BENEFICIARY] to draw on this Letter of Credit pursuant to that certain lease dated [LEASE DATE] between [BENEFICIARY], "Landlord," and [TENANT] "Tenant." We hereby irrevocably instruct [ISSUER] to pay the sum of $ _______ Such sum shall be paid directly to [BENEFICIARY] at ___________________________________. IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of the ____ day of _______________, 200__. __________________________________, By: _______________________________ Name: Title: 2. Your notarized signed written certification, notarized, stating substantially the following (all blank spaces shall be completed by Beneficiary): In reference to [ISSUER] Letter of Credit No. ________ we hereby certify that this Letter of Credit is to expire within 30 business days and Tenant has not provided a renewal of this Letter of Credit or an acceptable security replacement after 5 business days notice as required by that certain Lease dated [LEASE DATE] between [BENEFICIARY], "Landlord," and [TENANT] "Tenant." We hereby irrevocably instruct [ISSUER] to pay the sum of $__________ directly to [BENEFICIARY] at _______________________________ ____________________. D-1 IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of the ____ day of _______________, 200___. ___________________________________, By: _______________________________ Name: Title: This Letter of Credit may be drawn in whole or in part from time to time to the aggregate of its face amount. This Letter of Credit is transferable. Transfer of this Letter of Credit is subject to our receipt of beneficiary's instructions in the form attached hereto as Exhibit A accompanied by the original Letter of Credit and amendment(s) if any, costs or expenses of such transfer shall be for the account of the beneficiary. We hereby agree with the beneficiary that documents presented to our office in compliance with the terms and conditions of this letter of credit will be duly honored as specified herein. This Letter of Credit is subject to the International Standby Practices 1998, ICC Publication No. 590. [or other convention selected by Issuer] All inquiries and/or correspondence pertaining to this Letter of Credit must be in writing and directed to the attention of _____________________, telephone number _____________________ at the above mentioned address and must specifically refer to this Letter of Credit No. ____________________. Very truly yours, [ISSUER] By: _______________________________ Authorized Signature Title: D-2 EXHIBIT A REQUEST FOR ENTIRE TRANSFER OF LETTER OF CREDIT WITHOUT SUBSTITUTION OF INVOICES {Issuer} ________________________ Letter of Credit No.________ ADDRESS ________________________ TO: [Issuer] We request you to transfer all of our rights as beneficiary under the Letter of Credit referenced above to a second beneficiary named below: ________________________________________________________________________________ NAME OF SECOND BENEFICIARY ________________________________________________________________________________ ADDRESS By this transfer, all our rights as the original beneficiary, including all rights to make drawings under the Letter of Credit, go to the second beneficiary. The second beneficiary shall have sole rights as beneficiary, whether existing now or in the future, including sole rights to agree to any amendments, including increases or extensions or other changes. All amendments will be sent directly to the second beneficiary without the necessity of consent by or notice to us. We enclose the original letter of credit and any amendments. Please indicate your acceptance of our request for the transfer by endorsing the letter of credit and send it to the second beneficiary with your customary notice of transfer. __ Enclose is our check for $_________________ __ You may debit my/our account No. _________ We also agree to pay you on demand any expenses which may be incurred by you in connection with this transfer. The signature and title below conform with those shown in our files as authorized to sign for the beneficiary. Policies governing signature authorization as required for withdrawals from customer accounts shall also be applied to the authorization of signatures on this form. _________________________________________ NAME OF BENEFICIARY _________________________________________ NAME OF AUTHORIZED SIGNER AND TITLE _________________________________________ AUTHORIZED SIGNATURE D-3 - ----------------------------------------- Date: __________________________ _________________________________________ NAME OF BANK _________________________________________ AUTHORIZED SIGNATURE AND TITLE - ----------------------------------------- D-4 EXHIBIT E PLEDGE AGREEMENT SECURITY DEPOSIT PLEDGE AGREEMENT THIS SECURITY DEPOSIT PLEDGE AGREEMENT (the "Agreement"), dated as of _______________, 20__, is between ZYMOGENETICS, INC, a Washington corporation ("Tenant"), and ____________________________, a _______________ ("Landlord"). The parties hereto agree as follows: 1. Definitions For purposes of this Agreement, the following terms have the meanings set forth below: "Collateral" has the meaning specified in Section 5. "Collateral Securities" means fixed income securities that meet the following requirements: (a) are rated AA or A1 or better by Standard & Poor's Rating Group; (b) are freely transferable without restriction of any kind (including any restrictions that may be imposed under federal or state securities laws); and (c) have remaining maturities of not more than 2 years. "Control Account" means the account established by Tenant in its name at _________________ or such other brokerage firm or bank as Landlord may reasonably approve, which account is subject to the terms and conditions of the Control Account Agreement. "Control Account Agreement" means the "Security, Custodian and Control Account Agreement" in substantially the form of EXHIBIT A hereto, which is entered into with respect to the Control Account. "Event of Default" has the meaning specified in Section 8. "Lease" means the "Lease" between Tenant and Landlord dated ______________, 2002, as now or hereafter amended, relating to_____________ [street address], Seattle, Washington. "Market Value" means, as of any date of determination, the market value of the Collateral Securities then held in the Control Account, as reflected, at Landlord's option, as of the end of a business day in the Wall Street Journal or other any nationally recognized business publication of similar stature containing the current bid and asked prices for securities traded on a major exchange in the United States or on the most recently monthly account statement delivered to Landlord and Tenant pursuant to the Control Account Agreement. 2. Purpose This Agreement is for the purpose of securing the prompt payment and performance in full when due, whether at stated maturity, by acceleration or otherwise, of Tenant's obligations (the "Obligations") with respect to the security deposit (the "Security Deposit") that are detailed in Section 7 of the Lease. The amount of the Security Deposit which is to be covered by the Collateral described in this Agreement is $______________ and is referred to herein as the "Required Balance." 3. Collateral Securities As collateral for the Obligations throughout the term of the Lease, Tenant will pledge to Landlord, and grant Landlord, a perfected, first priority security interest in, Collateral Securities held in the Control E-1 Account with a Market Value at all times equal to the Required Balance. A list of the initial Collateral Securities pledged by Tenant and held in the Control Account is attached to this Agreement as EXHIBIT B. 4. Control Account Subject to the terms of the Agreement and the Control Account Agreement, the Collateral Securities pledged by Tenant pursuant to this Agreement shall at all times be held in the Control Account. The maintenance, disposition and transfer of the Control Account and all Collateral Securities held therein shall at all times be subject to the terms of the Agreement and the Control Account Agreement. 5. Grant of Perfected First Lien Security Interest Throughout the term of the Lease, as security for the Obligations, Tenant hereby delivers, pledges, grants, transfers, assigns and sets over to Landlord, and hereby grants to Landlord a continuing perfected first lien security interest in, the following (the "Collateral"): (a) All Collateral Securities, cash and other assets held in the Control Account; (b) The Control Account; (c) All securities entitlements and financial assets relating to the foregoing; and (d) All proceeds and products of any of the foregoing held in the Control Account. 6. Consent Rights, Trading Rights and Payments in Respect of the Collateral (a) So long as no Event of Default has occurred and is continuing, Tenant shall be entitled (i) to exercise (but not in a manner inconsistent with this Agreement or the Control Account Agreement) all consent or other voting rights with respect to the Collateral Securities, (ii) to receive and retain all regularly scheduled payments of interest or dividends in respect of the Collateral Securities or (iii) to substitute at any time during the term of the Lease the Collateral Securities with other Collateral Securities, provided Landlord obtains a perfected first priority security interest in the substitute Collateral Securities prior to the release of the pledged Collateral Securities and provided that Market Value of all Collateral Securities after the substitution is equal to or greater than the Required Balance. Upon such substitution, release and withdrawal of such released assets from the Control Account, such released assets will no longer be subject to a security interest in favor of Landlord and, unless subsequently re-deposited into the Control Account, will no longer be "Collateral": within the meaning of this Agreement. (b) If an Event of Default (as defined in the Lease) has occurred and is continuing, Landlord shall be entitled (i) to exercise all consent or other voting rights with respect to the Collateral Securities, (ii) to any and all rights of sale, conversion, exchange, subscription, withdrawal and any other rights, privileges or options pertaining to the Collateral as if Landlord were the absolute owner thereof and (iii) to receive and retain, as additional Collateral hereunder, any and all interest, dividends or other payments at any time and from time to time paid on the Collateral; provided, however, that prior to any exercise by Landlord of any of the preceding rights with respect to the Collateral Securities, Landlord agrees to provide Tenant 3 business days' prior written notice of its intent to exercise its rights to the Collateral. (c) Any principal amount at any time paid in respect of the Collateral Securities (whether at the acceleration thereof, as a scheduled or mandatory sinking fund payment, in redemption or prepayment thereof or at the maturity thereof) shall constitute part of the Collateral and shall be held in the Control Account until reinvested as provided in the Collateral Account Agreement. If for any reason Tenant should receive any such payment of principal in respect of the Collateral Securities, Tenant shall receive and hold the same in trust, for the benefit of Landlord, and shall promptly deposit such payment (or, at Tenant's option, substitute Collateral Securities) in the Control Account. E-2 7. Representations, Warranties and Covenants by Tenant (a) Tenant represents that the execution, delivery and performance of this Agreement does not violate any agreement to which it is bound or any law or regulation applicable to Tenant, and that it has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. (b) Tenant represents that it is the sole beneficial owner of the Collateral Securities and the proceeds thereof free and clear of any security interest or other encumbrance other than the first priority security interest created favor of Landlord pursuant to and in accordance with this Agreement and Tenant will not create or permit to exist any other security interest or other encumbrance against the Collateral. Tenant further represents, except as permitted under this Agreement and the Control Account Agreement, that for the term of this Agreement it will not sell, convey, transfer or otherwise dispose of any of the Collateral Securities. (c) Tenant represents that this Agreement and delivery of the Collateral into the Collateral Account creates a valid, perfected, and first priority security interest in the Collateral in favor of Landlord, and all actions necessary to achieve such perfection have been duly taken. (d) Tenant represents that this Agreement and delivery of the substitute Collateral Securities into the Collateral Account pursuant to clause (iii) of Section 6(a) will create a valid, perfected, and first priority security interest in the substitute Collateral in favor of Landlord, and all actions necessary to achieve such perfection, upon delivery to the Custodian, will have been duly taken. (e) Tenant at all times will cause the Control Agreement to remain in full force and effect and will cause the Collateral Securities to be held in the Control Account. (f) Upon demand by Landlord, Tenant will permit inspection of the Collateral Securities by Landlord. (f) Tenant at all times will cause the Market Value of Collateral Securities held in the Control Account to equal or exceed the Required Balance. If, at any time, the Market Value of Collateral Securities held in the Control Account is less than the Required Balance, Tenant shall immediately cause to be deposited in the Control Account additional Collateral Securities with a Market Value sufficient to cause the aggregate Market Value of all Collateral Securities then held in the Collateral Account to equal or exceed the Required Balance. 8. Liability Tenant shall indemnify the financial institution party to the Control Account Agreement for any and all costs and expenses, and attorney's fees and court costs, which directly result from any sale of Collateral Securities and the withdrawal of the settlement proceeds thereof (not to exceed the amount of the Security Deposit Amount) authorized by Landlord to fulfill any of Tenant's Obligations; provided, however, that nothing in this indemnification provision shall operate or be construed to limit Tenant's rights against Landlord under the terms of the Lease or Landlord's rights against Tenant thereunder. Tenant shall indemnify and defend, with counsel reasonably acceptable to Landlord, Landlord's right, title and first priority security interest in the Collateral and Substitute Collateral. After Landlord delivers a Notice of Exclusive Control to the financial institution party to the Control Account Agreement, (a) Landlord may liquidate or sell all or any part of the Collateral in a commercially reasonable manner and whether or not the value of any of the Collateral is rising, falling or holding, and (b) Landlord is not required to exercise any right, option or privilege arising from or relating to the Collateral. The provisions of this section shall survive expiration or termination of this Agreement or any determination that this Agreement or any portion is void or voidable. E-3 9. Assignment and Amendment (a) This Agreement may not be amended without the prior written consent of both parties. (b) This Agreement may not be assigned by either party without the prior written consent of the other party; provided, however, that: (i) Landlord may, at any time, and without notice to or the necessity of obtaining Tenant's consent, assign to any financial institution providing a loan to Landlord in connection with the property subject of the Lease (together with any such financial institution's successors or assigns, the "Lender") all of its rights under, and interest in, this Agreement. Within one (1) business day after making any such assignment, Landlord shall deliver to Tenant written notice of the assignment and a copy of the instrument of assignment. Upon receipt by Tenant of the aforementioned notice, Lender shall thereafter succeed to all of the rights and privileges of Landlord and shall be subject to the same obligations, terms, conditions and restrictions applicable to Landlord under the terms of this Agreement, provided that after Lender sends Custodian a Lender Notice of Exclusive Control pursuant to Section 10(b) of the Control Account Agreement, Lender shall also be subject to the same obligations (including indemnification obligations arising from and after the date of the Lender Notice of Exclusive Control) as Landlord. Lender will not be liable for any act, omission or breach by Landlord of any obligation under this Agreement or the Control Account Agreement which occurs prior to the date of the Lender Notice of Exclusive Control and will, upon any sale or transfer by Lender of its interest in the property and the Lease, automatically be released and discharged from any and all liability thereafter accruing under this Agreement or the Control Account Agreement; and (ii) If Landlord assigns its interest in the Lease, whether voluntarily or through involuntary assignment or transfer such as bankruptcy or foreclosure, such assignment will automatically and without further action or notice to Tenant, cause an assignment of Landlord's rights in this Agreement and the Collateral to the assignee and upon the assignee's assumption of Landlord's obligations under the Lease (including Landlord's obligations with respect to this Agreement and the Collateral), Landlord will thereafter accrue no further liability for the return of the Collateral. Upon request of either party, Landlord and Tenant agree to execute such documents as may be necessary or desirable to reflect or better confirm such assignment, assumption and/or release. 10. Waivers A waiver by either party of a breach of any provision of this Agreement shall not constitute a waiver of any subsequent breach of such provision or of any other provision hereof. Failure of either party to enforce at any time or from time to time any provision of this Agreement shall not be construed as a waiver thereof. 11. Severability Each provision of this Agreement is intended to be severable from the others so that if any provision or term hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remaining provisions and terms hereof. 12. Governing Law: Successors Bound This Agreement shall be construed in accordance with the internal laws of the State of Washington, determined without regard to conflicts of law. Subject to all the terms and provisions hereof, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Each party hereto consents to submit to the jurisdiction of the courts of the State of Washington and of the United States of America located in King County, Washington for any action, suit or proceeding arising out of or relating to this Agreement. Each party further waives any objection to the laying of venue of any such action, suit or proceeding in such courts, and further agrees E-4 not to plead or claim in any such court that any such action, suit or proceeding has been brought in an inconvenient forum. 13. Notices All notices must be in writing and must be sent by personal delivery, United States registered or certified mail (postage prepaid) or by an independent overnight courier service, addressed to the addresses specified below or at such other place which is not a post office box as either party may designate to the other party by written notice given in accordance with this section. Notices given by mail are deemed effective within 3 business days after the party sending the notice deposits the notice with the United States Post Office. Notices delivered by courier are deemed effective on the next business day after the day the party delivering the notice timely deposits the notice with the courier for overnight (next day) delivery. If to Tenant: ZymoGenetics, Inc. Attn: Chief Financial Officer 1201 Eastlake Avenue E. Seattle, WA 98121 Telephone: (206) 442-6600 Fax: (206) 442-6608 With a copy to: Real Property Law Group, PLLC Attn: Cynthia Thomas 1218 Third Avenue, Suite 1900 Seattle, WA 98101 Telephone: (206) 625-1717 Fax: (206) 374-2782 If to Landlord: _________________________ Attn: ___________________ _________________________ _________________________ Telephone: ______________ Fax: ____________________ With a copy to: Stoel Rives LLP Attn: David H. Rockwell 600 University Street, Suite 3600 Seattle, WA 98101-3197 Telephone: (206) 386-7694 Fax: (206) 386-7500 14. Entire Agreement This Agreement, together with the Lease and the Control Account Agreement, embody the entire agreement and understanding between the parties pertaining to the subject matters hereof and thereof, and supersedes any prior agreements, understandings, negotiations, representations and discussions, whether oral or written, of the parties, pertaining to such subject matters. The parties acknowledge that they have all participated in the drafting of this Agreement, and that they all have been represented by legal counsel of their own choosing and the language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against any of the parties. 15. Further Assurances Tenant shall, upon the request of Landlord, execute and deliver such other instruments and take and cause to be taken such further actions as may be reasonably necessary or reasonably appropriate to E-5 carry out the provisions and purposes of this Agreement, and specifically to continue the creation, attachment and perfection of the security interest granted hereunder. IN WITNESS WHEREOF, Tenant and Landlord have caused this Agreement to be executed by their proper corporate officers as of the day and year first above written. TENANT ZymoGenetics, Inc. a Washington corporation By_______________________________ Name:_________________________ Title:________________________ LANDLORD: _________________________, a _____________________ By_______________________________ Name:_________________________ Title:________________________ E-6 EXHIBIT F CUSTODIAL AGREEMENT ACCOUNT CONTROL AGREEMENT THIS ACCOUNT CONTROL AGREEMENT (this "Agreement") is made and entered into as of the _____________day of _________________, 200_, by and among UNION BANK OF CALIFORNIA, N.A., a national banking association ("Securities Intermediary'), ___________________________________, a ___________________("Customer"), and ____________________________________, a _________________________________________("Secured Party"). RECITALS: A. Pursuant to a Personal Custody Agreement, dated _______________, 200_ (the "Account Agreement"), by and between Customer and Securities Intermediary, Customer has established a securities account, bearing Account No. _________ _______________________ (the "Account"), with Securities Intermediary. B. Pursuant to a ____________________________ , dated __________________, 200_ (the "Security Agreement"). Customer has granted to Secured Party a security interest in certain personal property of Customer, including without limitation (i) the Account, (ii) all securities entitlements, investment property and other financial assets now or hereafter credited to the Account, (iii) all of Customer's rights in respect of the Account, such securities entitlements, investment property and other financial assets, and (iv) all products, proceeds and revenues of and from any of the foregoing personal property (collectively, the "Collateral"). C. Securities Intermediary, Customer and Secured Party are entering into this Agreement in order to perfect Secured Party's security interest in the Account by means of control. AGREEMENT: In consideration of the foregoing recitals, Securities Intermediary, Customer and Secured Party hereby agree as follows: 1. All terms used in this Agreement which are defined in the Commercial Code of the state whose law governs this Agreement ("Commercial Code") but are not otherwise defined herein shall have the meanings assigned to such terms in the Commercial Code, as in effect on the date of this Agreement. 2. Upon receipt of a fully executed and acknowledged Notice of Exclusive Control, substantially in the form attached as Exhibit A, Securities Intermediary will comply with all entitlement orders originated by Secured Party with respect to the Collateral, or any portion of the Collateral, without further consent by Customer. 3. Securities Intermediary hereby represents and warrants (a) that the records of Securities Intermediary show that Customer is the sole owner of the Collateral, (b) that Securities Intermediary has not been served with any notice of levy or received any notice of any security interest in or other claim to the Collateral, or any portion of the Collateral, other than Secured Party's claim pursuant to this Agreement, and (c) that Securities Intermediary is not presently obligated to accept any entitlement order from any person with respect to the Collateral, except for entitlement orders that Securities Intermediary is obligated to accept from Secured Party under this Agreement and entitlement orders that Securities Intermediary, subject to the provisions of Section 5 below, is obligated to accept from Customer. F-1 4. Without the prior written consent of Secured Party, Securities Intermediary will not enter into any agreement by which Securities Intermediary agrees to comply with any entitlement order of any person other than Secured Party or, subject to the provisions of Section 5 below, Customer, with respect to any portion or all of the Collateral. Securities Intermediary shall promptly notify Secured Party and Customer if any person requests Securities Intermediary to enter into any such agreement or otherwise assert or seeks to assert a lien, encumbrance or adverse claim against any portion or all of the Collateral. 5. Except as otherwise provided in this Section 5, Securities Intermediary may allow Customer to effect sales, trades, transfers and exchanges of Collateral within the Account, but will not, without the prior written consent of Secured Party, allow Customer to withdraw any Collateral from the Account (other than withdrawals consisting solely of ordinary cash dividends or interest income). Securities Intermediary acknowledges that Secured Party reserves the right, by delivery of a fully executed and acknowledged Notice of Exclusive Control to Securities Intermediary, to prohibit Customer from effecting any further withdrawals (including withdrawals of ordinary cash dividends and interest income), sales, trades, transfers or exchanges of any Collateral held in the Account. Further, upon receipt of such fully executed and acknowledged Notice of Exclusive Control, Securities Intermediary hereby agrees from thereafter to comply with any and all written instructions delivered by Secured Party to Securities Intermediary and from thereafter has no obligation to and will not, investigate the reason for any action taken by Secured Party, the amount of any obligations of Customer to Secured Party, the validity of any of Secured Party's claims against or agreements with Customer, the existence of any defaults under such agreements, or any other matter. 6. Customer hereby irrevocably waives any rights Customer may have under the Account Agreement to the extent such rights are inconsistent with the provisions of this Agreement, and hereby irrevocably authorizes Securities Intermediary to comply with all instructions and entitlement orders delivered by Secured Party to Securities Intermediary. 7. Securities Intermediary will not attempt to assert control, and does not claim and will not accept any security or other interest in any part of the Collateral, and Securities Intermediary will not exercise, enforce or attempt to enforce any right of setoff against the Collateral, or otherwise charge or deduct from the Collateral any amount whatsoever, except for any right Securities Intermediary may have to collect account maintenance or similar fees under the Account Agreement. 8. Securities Intermediary and Customer shall not amend, supplement or otherwise modify the Account Agreement (including, without limitation the choice of law provision and provisions providing for treatment of property held in the Account as a financial asset) in any respect without Secured Party's prior written consent. 9. Securities Intermediary shall not terminate the Account, and shall not permit Customer to terminate the Account, without Secured Party's prior written consent. 10. This Agreement shall remain in full force and effect until Securities Intermediary receives written notice of its termination given by Secured Party. 11. Securities Intermediary and Customer hereby agree that any property held in the Account shall be treated as a financial asset under such section of the Commercial Code as corresponds with Section 8-102 of the Uniform Commercial Code, notwithstanding any contrary provision of any other agreement to which Securities Intermediary may be a party. 12. Securities Intermediary is hereby authorized and instructed, and hereby agrees, to send to Secured Party at its address set forth in Section 18 below, concurrently with the sending thereof to Customer, duplicate copies of any and all monthly Account statements or reports issued or F-2 sent to Customer with respect to the Account. In addition, Securities Intermediary shall (i) issue a confirmation or safekeeping receipt to both Customer and Secured Party for each transaction made on the Account; and (ii) upon request will provide Secured Party with information on the Account and the financial assets held therein, and will provide Customer with a copy of any information provided to Secured Party. 13. This Agreement does not create any obligation or duty on the part of Securities Intermediary other than those expressly set forth herein. Secured Party and Customer hereby acknowledge that Securities Intermediary has no obligation to monitor the value of the Collateral for Secured Party or Customer. 14. Secured Party and Customer hereby agree, jointly and severally, to indemnify and hold harmless Securities Intermediary from and against any and all losses, liabilities, demands, claims, expenses and attorneys' fees which Securities Intermediary may incur or suffer if all or any portion of the Collateral is found to be fraudulent in nature or otherwise worthless or invalid for any reason excepting only such losses, liabilities, demands, claims, expenses and attorneys' fees which result solely from the gross negligence or willful misconduct of Securities Intermediary. 15. Any forbearance or failure or delay by Secured Party in exercising any right hereunder shall not be deemed a waiver thereof and any single or partial exercise of any right shall not preclude the further exercise thereof. This Agreement may be amended only in writing signed by all parties hereto. 16. Notwithstanding the terms of any other agreement, the parties hereto agree that this Agreement shall be governed under and in accordance with the laws of the State of California and, for purposes of this Agreement, such state shall be deemed to be Securities Intermediary's jurisdiction. 17. This Agreement constitutes the entire agreement among Securities Intermediary, Customer and Secured Party with respect to the subject matter hereof, and all prior communications, whether verbal or written, between any of the parties hereto with respect to the subject matter hereof shall be of no further effect or evidentiary value. 18. Any notice or other communication provided for or allowed hereunder shall be effective only when given by one of the following methods and addressed to the respective party at its address provided below (or at such other address as the party changing its address shall notify the others as provided herein) and shall be considered to have been validly given (a) upon delivery, if delivered personally, (b) upon receipt, if mailed, first class postage prepaid with the United States Postal Service, (c) on the next business day, if sent by overnight courier service of recognized standing, and (d) upon telephoned confirmation of receipt, if telecopied: If to Securities Intermediary: Union Bank of California, N.A. _______________________________ _______________________________ _______________________________ If to Secured Party: _______________________________ _______________________________ _______________________________ If to Customer: _______________________________ _______________________________ _______________________________ F-3 19. To the extent that the terms or conditions of this Agreement are inconsistent with the Account Agreement or any other document, instrument or agreement between Securities Intermediary and Customer, the terms and conditions of this Agreement shall prevail. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. "Securities Intermediary" "Customer" "Secured Party" {Signature blocks to be inserted} F-4 EXHIBIT A TO ACCOUNT CONTROL AGREEMENT Form of Notice of Exclusive Control ____________, __ TO: [Name and address of Custodian] ___________________________________ ___________________________________ ___________________________________ Re: Notice of Exclusive Control--Account No. ___________ (the "Account") Dear Sir/Madam: Pursuant to the provisions of the Account Control Agreement dated as of ___________, among the undersigned as Secured Party, ZymoGenetics, Inc. as Customer and you as Securities Intermediary (the "Agreement"), the undersigned hereby gives notice of the exercise of exclusive control over the Account due to the occurrence and continuance of an Event of Default under the security agreement between Customer and the undersigned. Subject to the provisions of the Agreement, you are hereby notified that from this date forward you are instructed to comply only with entitlement orders for the Account issued by the undersigned. In accordance with the Agreement, you are hereby notified to cease complying with entitlement orders or other directions concerning the Account or the Financial Assets therein, or from making any withdrawals from the Account, if such directions, orders or requests are originated by Customer or its representatives. The undersigned hereby affirms and certifies under penalty of perjury that three (3) business days prior to the date hereof it has given notice to Customer that it is in default under the security agreement, that Customer has not cured such default, and such notice informed Customer that the undersigned intended to exercise its remedies under the Agreement. All capitalized terms used herein without definition have the same meanings as are ascribed to such terms in the Agreement. Very truly yours, ______________________________ By____________________________ Name:_______________________ Title:______________________ F-5 STATE OF _____________ ) ) ss. COUNTY OF ___________ ) I certify that I know or have satisfactory evidence that ____________________ is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the __________________ of ___________________, to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument. DATED: ____________________. ______________________________________ (Signature of Notary Public) ______________________________________ (Printed Name of Notary Public) My Appointment expires:_______________ F-6 EXHIBIT G FIXED EQUIPMENT Equipment No. Description ------------- ----------- AC-002 AIR, CONDITIONER, WALL MOUNT AC-1 BIG BOX, LAB AIR AC-1N BIG BOX, NORTH AC-1N-EF FAN, EXHAUST, BIG BOX, NORTH AC-1N-SF FAN, SUPPLY, BIG BOX, NORTH AC-1S BIG BOX, SOUTH AC-1S-EF FAN, EXHAUST, BIG BOX, SOUTH AC-1S-SF FAN, SUPPLY, BIG BOX, SOUTH AC-2 OFFICE AIR HANDLER BLDG-CONT-SYS BUILDING, CONTROL SYSTEM BLDG-SEC-SYS BUILDING SECURITY SYSTEM AXXESS 200 BOIL-H20-L001 BOILER, HOTWATER, FORCED DRAFT BOIL-H20-L002 BOILER, HOTWATER, FORCED DRAFT BOIL-STM-L001 BOILER, STEAM, NATURAL DRAFT, 125 PSI CC-003 COOLING COIL, IF-8, ROOF COMPACTOR-001 TRASH COMPACTOR, AUGER COMP-AIR-001 COMPRESSOR, AIR, LAB, 120 PSI COMP-AIR-002 COMPRESSOR, AIR, DRY FIRE SPRINKLER SYS COMP-REF-001 COMPRESSOR, REFRIG, AC-1S COMP-REF-002 COMPRESSOR, REFRIG, AC-1S COMP-REF-003 COMPRESSOR, REFRIG, AC-1S COMP-REF-004 COMPRESSOR, REFRIG, AC-1N COMP-REF-005 COMPRESSOR, REFRIG, AC-1N COMP-REF-006 COMPRESSOR, REFRIG, AC-1N COMP-REF-007 COMPRESSOR, REFRIG, AC-1N CP-L001 PUMP, HW PRODUCTION CP-L002 PUMP, HW PRODUCTION CP-L003 PUMP, HW DISTRIBUTION CP-L004 PUMP, HW DISTRIBUTION CP-L006 PUMP, CONDENSOR WATER, CP-L007 PUMP, CONDENSOR WATER, CP-L008 PUMP, HW DISTRIBUTION, IF-8 CP-L009 PUMP, HEAT RECOVERY, BIGBOX CT-1 COOLING TOWER W/4 MOTORS CU-DP-L001 CONDENSING UNIT, DXFC-DP-1, FREEZERS CU-L001 CONDENSING UNIT, DXFC-1, EXERCISE CU-L002 CONDENSING UNIT, DXFC-2, CAFETERIA CU-L004 CONDENSING UNIT, DXFC-4, COMPUTER RM CU-L005 CONDENSING UNIT, IF-8, VIVARIUM CU-L006 CONDENSING UNIT, DXFC-6, 1ST FL CMPTR RM CU-L007 CONDENSING UNIT, DXFC-7, 3RD FL COMTR RM CU-RU-L001 CONDENSING UNIT, COLD RM. 321 DH-1 DUCT HEATER DH-2 DUCT HEATER DOOR-FIRE-001 DOOR,FIRE,WON DOOR-ROLL-001 DOOR, ROLLUP,GARAGE, ENTRANCE G-1 DOOR-ROLL-002 DOOR, ROLLUP,GARAGE, EXIT DOOR-ROLL-003 DOOR, ROLLUP,GARAGE,ENTRANCE DOOR-ROLL-004 DOOR, ROLLUP,GARAGE,EXIT DOOR-ROLL-005 DOOR, ROLLUP, SHIPPING & RECEIVING DXFC-1 DIRECT EXCHANGE FAN COIL, EXERCISE DXFC-2 DIRECT EXCHANGE FAN COIL, CAFETERIA DXFC-4 DIRECT EXCHANGE FAN COIL, COMPUTER RM DXFC-6 DIRECT EXCHANGE FAN COIL, COMPUTER RM DXFC-7 DIRECT EXCHANGE FAN COIL, COMPUTER RM DXFC-DP-L001 DIRECT EXCHANGE FAN COIL, -80 FREEZERS ELEVATOR-001 ELEVATOR, PASSENGER,LUSP ELEVATOR-002 ELEVATOR, SERVICE, LUSP EUH-L1 HEATER, ELECTRICAL, RO/DI ROOM EUH-L2 HEATER, ELECTRICAL, ISOTOPE ROOM EUH-L3 HEATER, ELECTRICAL, PUMP/SPRINKLER ROOM EUH-L4 HEATER, ELECTRICAL, PUMP/SPRINKLER ROOM EUH-L5 HEATER, ELECTRICAL, ELEVATOR SOUTH MECH. EUH-L6 HEATER, ELECTRICAL, ELEVATOR NORTH MECH. EUH-L7 HEATER, ELECTRICAL, MAIN WATER ROOM FILTER-HEPA-001 FILTER, HEPA, IN-LINE, UEF-14 FILTER-HEPA-002 FILTER, HEPA, IN-LINE, UEF-15 FILTER-HEPA-003 FILTER, HEPA, IN-LINE, RAD-COMPACTOR FIRE-SYS-001 FIRE ALARM SYSTEM AT LUSP [SITE #01] GENERATOR-001 GENERATOR, 250 KW HC-L003 HEATING COIL, IF-8, VIVARIUM HOOD-BSC-016 BIO SAFETY CABINET, 6FT WIDE HOOD-BSC-046 BIO SAFETY CABINET, 4 FT WIDE, CLASS II HOOD-BSC-059 BIO SAFETY CABINET, CLASS II TYPE B2 HOOD-BSC-067 BIO SAFETY CABINET, CLASS II TYPE B2 HOOD-BSC-068 BIO SAFETY CABINET, CLASS II TYPE B2 HOOD-FUME-003 HOOD, FUME HOOD-FUME-004 HOOD, FUME HOOD-FUME-005 HOOD, FUME HOOD-FUME-006 HOOD, FUME HOOD-FUME-007 HOOD, FUME HOOD-FUME-008 HOOD, FUME HOOD-FUME-010 HOOD, FUME HOOD-FUME-011 HOOD, FUME HOOD-FUME-012 HOOD, FUME HOOD-FUME-014 HOOD, FUME HOOD-FUME-015 HOOD, FUME HOOD-FUME-016 HOOD, FUME HOOD-FUME-017 HOOD, FUME HOOD-FUME-018 HOOD, FUME HOOD-FUME-021 HOOD, FUME HOOD-FUME-024 HOOD, FUME HOOD-FUME-027 HOOD, FUME HOOD-FUME-028 HOOD, FUME HOOD-FUME-032 HOOD, FUME HOOD-FUME-034 HOOD, FUME G-2 HOOD-FUME-035 HOOD, FUME HOOD-FUME-036 HOOD, FUME HOOD-FUME-037 HOOD, FUME HOOD-FUME-038 HOOD, FUME HOOD-FUME-039 HOOD, FUME HOOD-FUME-040 HOOD, FUME HOOD-FUME-050 HOOD, FUME, 4 FT HRC-L005 HEAT RECLAIM COIL, UEF-1 HRC-L006 HEAT RECLAIM COIL, UEF-2 HRC-L007 HEAT RECLAIM COIL, UEF-3 HRC-L008 HEAT RECLAIM COIL, UEF-4 HRC-L009 HEAT RECLAIM COIL, UEF-6 HRC-L011 HEAT RECLAIM COIL, UEF-8 HRC-L012 HEAT RECLAIM COIL, UEF-9 HRC-L013 HEAT RECLAIM COIL, UEF-10 HRC-L014 HEAT RECLAIM COIL, UEF-11 HRC-L015 HEAT RECLAIM COIL, UEF-12 HRC-L017 HEAT RECLAIM COIL, UEF-14 HRC-L019 HEAT RECLAIM COIL,UEF-20 HRC-L020 HEAT RECLAIM COIL,UEF-21 HRC-L021 HEAT RECLAIM COIL, UEF-22 HUMIDIFIER-001 HUMIDIFIER, IF-8, VIVARIUM HWFC-1 FAN COIL, HOT WATER IF-1 FAN, IN-LINE, 37 DEG. WARM RM IF-2 FAN, IN-LINE, 30 DEG. WARM RM IF-3 FAN, IN-LINE, H.H. SHOWERS AND DELI R.R. IF-4 FAN, IN-LINE, FLAMMABLE STORAGE IF-5 FAN, IN-LINE, RADIOACTIVE RECEIVE IF-6 FAN, IN-LINE, GAS CYLINDER RM. IF-7 FAN, IN-LINE, BIOHAZARD STORAGE IF-8 FAN, IN-LINE, VIVARIUM SUPPLY AIR IF-9 FAN, IN-LINE, RADIOACTIVE COMPACTOR LOOP-DHW-001 DOMESTIC HOT WATER SYSTEM LOOP-HHW-001 LOOP, HEATING HOT WATER LOOP-HR-001 LOOP, HEAT RECOVERY PUMP-HSVAC-001 PUMP,VACUUM, HOUSE, LUSP REF-1 RESTROOM EXHAUST FAN RO-DI-001 WATER SYSTEM, RO-DI SPRINK-DRY-001 SPRINKLER, FIRE, DRY,LOWERPARKING SPRINK-DRY-002 SPRINKLER, FIRE, DRY,UPPERPARKING SPRINK-DRY-003 SPRINKLER, FIRE, DRY,FAN FARM SPRINK-WET-001 SPRINKLER, FIRE, WET TAF-1 FAN, EXHAUST, TUBE AXIAL, FREIGHT ELEV. TAF-2 FAN, EXHAUST, TUBE AXIAL, PASSENGR ELEV. UEF-001 FAN, EXHAUST, VIVARIUM UEF-002 FAN, EXHAUST, HUMAN FLUIDS, BL-3 UEF-003 FAN, EXHAUST, FUME HOOD, SW 4TH FLR UEF-004 FAN, EXHAUST, 5TH FLOOR FUME HOOD UEF-005 FAN, EXHAUST, ETHERIZING HOOD, RM 466 UEF-006 FAN, EXHAUST, FUME HOOD, SW 2ND FLR G-3 UEF-008 FAN, EXHAUST, FUME HOOD, NW 2ND FLR UEF-009 FAN, EXHAUST, FUME HOOD, VIVARIUM UEF-010 FAN, EXHAUST, FUME HOOD, SW 3RD FLR UEF-011 FAN, EXHAUST, FUME HOOD, SE 3RD FLR UEF-012 FAN, EXHAUST, FUME HOOD, NW 3RD FLR UEF-014 FAN, EXHAUST, FUME HOOD, RI 3RD SOUTH UEF-015 FAN, EXHAUST, FUME HOOD, RI 3RD NORTH UEF-018 FAN, EXHAUST, GLASS WASH UEF-019 FAN, EXHAUST, CAGE WASH UEF-020 FAN, EXHAUST, FUME HOOD, FERMENTATION UEF-021 FAN, EXHAUST, RESTROOM UEF-022 FAN, EXHAUST, RESTROOM UPS-001 UNINTERUPTABLE POWER SOURCE UPS-003 UNINTERUPTABLE POWER SOURCE UPS-004 UNINTERUPTABLE POWER SOURCE VAV-FAN-Z101 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z102 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z103 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z104 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z105 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z106 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z107 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z108 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z109 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z110 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z111 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z112 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z113 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z114 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z115 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z116 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z117 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z118 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z119 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z121 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z122 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z123 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z124 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z125 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z126 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z127 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z128 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z129 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z130 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z131 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z132 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z260 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z261 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z262 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z263 VAV, WITH ELECTRIC HEAT, FAN POWERED G-4 VAV-FAN-Z264 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z265 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z266 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z267 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z268 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z269 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z270 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z271 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z272 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z360 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z361 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z362 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z363 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z364 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z365 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z366 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z367 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z368 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z369 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z370 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z431 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z432 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z433 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z434 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z435 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z436 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z531 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z532 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z533 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z534 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z535 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-FAN-Z536 VAV, WITH ELECTRIC HEAT, FAN POWERED VAV-Z140 VAV, WITH HOT WATER REHEAT VAV-Z141 VAV, WITH HOT WATER REHEAT VAV-Z201 VAV, WITH HOT WATER REHEAT VAV-Z202 VAV, WITH HOT WATER REHEAT VAV-Z203 VAV, WITH HOT WATER REHEAT VAV-Z204 VAV, WITH HOT WATER REHEAT VAV-Z205 VAV, WITH HOT WATER REHEAT VAV-Z206 VAV, WITH HOT WATER REHEAT VAV-Z207 VAV, WITH HOT WATER REHEAT VAV-Z208 VAV, WITH HOT WATER REHEAT VAV-Z209 VAV, WITH HOT WATER REHEAT VAV-Z210 VAV, WITH HOT WATER REHEAT VAV-Z211 VAV, WITH HOT WATER REHEAT VAV-Z212 VAV, WITH HOT WATER REHEAT VAV-Z213 VAV, WITH HOT WATER REHEAT VAV-Z214 VAV, WITH HOT WATER REHEAT VAV-Z215 VAV, WITH HOT WATER REHEAT VAV-Z216 VAV, WITH HOT WATER REHEAT G-5 VAV-Z217 VAV, WITH HOT WATER REHEAT VAV-Z218 VAV, WITH HOT WATER REHEAT VAV-Z219 VAV, WITH HOT WATER REHEAT VAV-Z230 VAV, WITH HOT WATER REHEAT VAV-Z231 VAV, WITH HOT WATER REHEAT VAV-Z232 VAV, WITH HOT WATER REHEAT VAV-Z233 VAV, WITH HOT WATER REHEAT VAV-Z234 VAV, WITH HOT WATER REHEAT VAV-Z235 VAV, WITH HOT WATER REHEAT VAV-Z236 VAV, WITH HOT WATER REHEAT VAV-Z237 VAV, WITH HOT WATER REHEAT VAV-Z238 VAV, WITH HOT WATER REHEAT VAV-Z239 VAV, WITH HOT WATER REHEAT VAV-Z240 VAV, WITH HOT WATER REHEAT VAV-Z241 VAV, WITH HOT WATER REHEAT VAV-Z242 VAV, WITH HOT WATER REHEAT VAV-Z243 VAV, WITH HOT WATER REHEAT VAV-Z244 VAV, WITH HOT WATER REHEAT VAV-Z245 VAV, WITH HOT WATER REHEAT VAV-Z246 VAV, WITH HOT WATER REHEAT VAV-Z247 VAV, WITH HOT WATER REHEAT VAV-Z248 VAV, WITH HOT WATER REHEAT VAV-Z301 VAV, WITH HOT WATER REHEAT VAV-Z302 VAV, WITH HOT WATER REHEAT VAV-Z303 VAV, WITH HOT WATER REHEAT VAV-Z304 VAV, WITH HOT WATER REHEAT VAV-Z305 VAV, WITH HOT WATER REHEAT VAV-Z306 VAV, WITH HOT WATER REHEAT VAV-Z307 VAV, WITH HOT WATER REHEAT VAV-Z308 VAV, WITH HOT WATER REHEAT VAV-Z309 VAV, WITH HOT WATER REHEAT VAV-Z310 VAV, WITH HOT WATER REHEAT VAV-Z312 VAV, WITH HOT WATER REHEAT VAV-Z313 VAV, WITH HOT WATER REHEAT VAV-Z314 VAV, WITH HOT WATER REHEAT VAV-Z315 VAV, WITH HOT WATER REHEAT VAV-Z330 VAV, WITH HOT WATER REHEAT VAV-Z331 VAV, WITH HOT WATER REHEAT VAV-Z332 VAV, WITH HOT WATER REHEAT VAV-Z333 VAV, WITH HOT WATER REHEAT VAV-Z334 VAV, WITH HOT WATER REHEAT VAV-Z335 VAV, WITH HOT WATER REHEAT VAV-Z336 VAV, WITH HOT WATER REHEAT VAV-Z338 VAV, WITH HOT WATER REHEAT VAV-Z339 VAV, WITH HOT WATER REHEAT VAV-Z340 VAV, WITH HOT WATER REHEAT VAV-Z341 VAV, WITH HOT WATER REHEAT VAV-Z342 VAV, WITH HOT WATER REHEAT VAV-Z343 VAV, WITH HOT WATER REHEAT VAV-Z401 VAV, WITH HOT WATER REHEAT G-6 VAV-Z402 VAV, WITH HOT WATER REHEAT VAV-Z403 VAV, WITH HOT WATER REHEAT VAV-Z404 VAV, WITH HOT WATER REHEAT VAV-Z405 VAV, WITH HOT WATER REHEAT VAV-Z406 VAV, WITH HOT WATER REHEAT VAV-Z407 VAV, WITH HOT WATER REHEAT VAV-Z408 VAV, WITH HOT WATER REHEAT VAV-Z409 VAV, WITH HOT WATER REHEAT VAV-Z410 VAV, WITH HOT WATER REHEAT VAV-Z411 VAV, WITH HOT WATER REHEAT VAV-Z412 VAV, WITH HOT WATER REHEAT VAV-Z413 VAV, WITH HOT WATER REHEAT VAV-Z414 VAV, WITH HOT WATER REHEAT VAV-Z415 VAV, WITH HOT WATER REHEAT VAV-Z416 VAV, WITH HOT WATER REHEAT VAV-Z417 VAV, WITH HOT WATER REHEAT VAV-Z418 VAV, WITH HOT WATER REHEAT VAV-Z419 VAV, WITH HOT WATER REHEAT VAV-Z420 VAV, WITH HOT WATER REHEAT VAV-Z421 VAV, WITH HOT WATER REHEAT VAV-Z422 VAV, WITH HOT WATER REHEAT VAV-Z423 VAV, WITH HOT WATER REHEAT VAV-Z538 VAV, WITH HOT WATER REHEAT VAV-Z539 VAV, WITH HOT WATER REHEAT VAV-Z540 VAV, WITH HOT WATER REHEAT VAV-Z541 VAV, WITH HOT WATER REHEAT VAV-Z542 VAV, WITH HOT WATER REHEAT VAV-Z543 VAV, WITH HOT WATER REHEAT VID-CON-002 VIDEO CONFRENCING SYSTEM WARM-RM-001 WARM ROOM, WALK IN, 30 DEG WARM-RM-002 WARM ROOM, WALK IN, 37 DEG WATER-PUR-007 PURIFIER, WATER WEF-001 FAN, EXHAUST, GARAGE WEF-002 FAN, EXHAUST, GARAGE WEF-003 FAN, EXHAUST, TRANSFORMER VAULT WEF-004 FAN, EXHAUST, PASSENGER ELEVATOR WEF-005 FAN, EXHAUST, FREIGHT ELEVATOR G-7 EXHIBIT H - Floor Plans and Functions H-1 EXHIBIT I - INTENTIONALLY DELETED I-1 EXHIBIT J-1 Landlord Estoppel Certificate THIS LANDLORD ESTOPPEL CERTIFICATE ("Certificate"), dated as of ________ __, 2001, is executed by ____________________, a _____________ ("Landlord") in favor of_____________________________, ( "Subtenant"[or other appropriate identifier, such as "Assignee"]). RECITALS A. Tenant and Landlord have entered into that certain Lease Agreement dated as of ________ ___, 20___ (together with all amendments, modifications, supplements, guarantees and restatements thereof, the "Lease"), for a portion of the improved real property located in the City of Seattle, County of King, State of Washington, more particularly described on Exhibit A attached hereto ( the "Property"). B. Pursuant to the Lease, Landlord has agreed that upon the request of Tenant, Landlord would execute and deliver an estoppel certificate certifying the status of the Lease. C. Tenant has requested that Landlord execute this Certificate with an understanding that Subtenant will rely on the representations and agreements below in [subleasing space in the Premises from Tenantinsert appropriate description of transaction] (the "Transaction"). NOW, THEREFORE, Landlord certifies and represents to Subtenant as follows: 1. Lease. Attached hereto as Exhibit B is a true, correct and complete copy of the Lease, including the following amendments, modifications, supplements, guarantees and restatements thereof, which together represent all of the amendments, modifications, supplements, guarantees and restatements thereof: __ ________________________________________________________________________________ (If none, please state "None.") 2. Premises. Pursuant to the Lease, Tenant leases those certain premises (the "Premises") consisting of approximately ___________ rentable square feet within the Property, as more particularly described in the Lease. In addition, pursuant to the terms of the Lease, Tenant has the right to use [_______ parking spaces/the parking area] located on the Property during the term of the Lease. 3. Full Force of Lease. The Lease has been duly authorized, executed and delivered by Landlord, is in full force and effect has not been terminated and constitutes a legally valid instrument, binding and enforceable against Landlord in accordance with its terms, subject only to applicable limitations imposed by laws relating to bankruptcy and creditor's rights. 4. Complete Agreement. The Lease constitutes the complete agreement between Landlord and Tenant for the Premises and the Property, except as modified by the Lease amendments noted above (if any), has not been modified, altered or amended. 5. Lease Term. The term of the Lease commenced on ________ ___, 20___ and ends on ________ ___, 20___, subject to the following options to extend: _______________________________________________________________________________. (If none, please state "None.") 6. Purchase Rights. Tenant has no option, right of first refusal, right of first offer, or other right to acquire or purchase all or any portion of the Premises or all or any portion of, or interest in, the J-1-1 Property, except as follows: ___________________________________________________ _______________________________________________________________________________. (If none, please state "None.") 7. Rights of Tenant. Except as expressly stated in this Certificate, Tenant: (a) has no right to renew or extend the term of the Lease, except as follows: _____________________________________________________; (b) has no right, title, or interest in the Premises, other than as Tenant under the Lease or as the owner of all Removable Equipment and personal property not identified as Fixed Equipment under the Lease. 8. Rent. (a) The obligation to pay Rent under the Lease commenced on ________ ___, 20___. The Rent under the Lease is curRent, and to the best of Landlord's actual knowledge, Tenant is not in default in the performance of any of its obligations under the Lease. (b) Tenant is currently paying Base Rent under the Lease in the amount of $________ per month. Tenant has not received and is not, presently, entitled to any abatement, refunds, rebates, concessions or forgiveness of Rent or other charges, free Rent, partial Rent, or credits, offsets or reductions in Rent, except as follows: ____________________________________________________________ _______________________________________________________________________________. (If none, please state "None.") (c) There are no existing defenses or offsets against Rent due or to become due under the terms of the Lease, and there presently is no default or other wrongful act or omission by Landlord under the Lease or otherwise in connection with Tenant's occupancy of the Premises, nor to the best of Landlord's actual knowledge is there a state of facts which with the passage of time or the giving of notice or both could ripen into a default on the part of Tenant, , except as follows: _______________________ _______________________________________________________________________________. (If none, please state "None.") 9. Security Deposit. Tenant's compliance with the Security Deposit provision of the Lease (Section 7) is through a Letter of Credit in the amount of $______ and pledged marketable securities of $________. 10. Prepaid Rent. The amount of prepaid Rent, separate from the security deposit, is $___________, covering the period from ________ ___, 20___ to ________ ___, 20___. 11. Insurance. To the best of Landlord's actual knowledge, all insurance, if any, required to be maintained by Tenant under the Lease is presently in effect. 12. Pending Actions. There is not pending or, to the best of Landlord's actual knowledge, threatened against or contemplated by the Landlord, any petition in bankruptcy, whether voluntary or otherwise, any assignment for the benefit of creditors, or any petition seeking reorganization or arrangement under the federal bankruptcy laws or those of any state. 13. Tenant Improvements. As of the date of this Certificate, to the best of Landlord's actual knowledge: Tenant has performed all obligations required of Tenant pursuant to the Lease; no offsets, counterclaims, or defenses of Landlord under the Lease exist against Tenant; and no events have occurred that, with the passage of time or the giving of notice, would constitute a basis for offsets, counterclaims, or defenses against Tenant, except as follows: __________________ _________________. (If none, please state "None.") J-1-2 14. Assignments by Tenant. To the best of Landlord's actual knowledge, Tenant has not sublet or assigned the Premises or the Lease or any portion thereof to any sublessee or assignee. No one except Tenant and its employees will occupy the Premises. The address for notices to be sent to Tenant is as set forth in the Lease or is: 15. Reliance. Landlord makes this Certificate with the knowledge that it will only be relied upon by Subtenant in agreeing to complete the Transaction. Landlord has executed this Certificate as of the date first written above by the person named below, who is duly authorized to do so. LANDLORD: ______________________________________________ a ____________________________________________ By:___________________________________________ Name: _______________________________ Its:_________________________________ J-1-3 Exhibit J-2 Tenant Estoppel Certificate THIS TENANT ESTOPPEL CERTIFICATE ("Certificate"), dated as of ________ __, 2001, is executed by ____________________, a _____________ ("Tenant") in favor of_____________________________, ( "Buyer"[or other appropriate identifier, such as "Lender"]). RECITALS A. Tenant and Landlord have entered into that certain Lease Agreement dated as of ________ ___, 20___ (together with all amendments, modifications, supplements, guarantees and restatements thereof, the "Lease"), for a portion of the improved real property located in the City of Seattle, County of King, State of Washington, more particularly described on Exhibit A attached hereto ( the "Property"). B. Pursuant to the Lease, Tenant has agreed that upon the request of Landlord, Tenant would execute and deliver an estoppel certificate certifying the status of the Lease. C. Landlord has requested that Tenant execute this Certificate with an understanding that Buyer [Lender} will rely on the representations and agreements below in [acquiring the Property and Landlord's interest under the Lease] [connection with a loaninsert appropriate description of transaction] (the "Transaction"). NOW, THEREFORE, Tenant certifies and represents to Buyer as follows: 16. Lease. Attached hereto as Exhibit B is a true, correct and complete copy of the Lease, including the following amendments, modifications, supplements, guarantees and restatements thereof, which together represent all of the amendments, modifications, supplements, guarantees and restatements thereof:___ _______________________________________________________________________________. (If none, please state "None.") 17. Leased Premises. Pursuant to the Lease, Tenant leases those certain premises (the "Premises") consisting of approximately ___________ rentable square feet within the Property, as more particularly described in the Lease. In addition, pursuant to the terms of the Lease, Tenant has the right to use [_______ parking spaces/the parking area] located on the Property during the term of the Lease. 18. Full Force of Lease. The Lease has been duly authorized, executed and delivered by Tenant, is in full force and effect has not been terminated and constitutes a legally valid instrument, binding and enforceable against Tenant in accordance with its terms, subject only to applicable limitations imposed by laws relating to bankruptcy and creditor's rights. 19. Complete Agreement. The Lease constitutes the complete agreement between Landlord and Tenant for the Premises and the Property, except as modified by the Lease amendments noted above (if any), has not been modified, altered or amended. 20. Acceptance of Premises. Tenant has accepted possession and is currently occupying the Premises. 21. Lease Term. The term of the Lease commenced on ________ ___, 20___ and ends on ________ ___, 20___, subject to the following options to extend:________ (If none, please state "None.") J-2-1 22. Purchase Rights. Tenant has no option, right of first refusal, right of first offer, or other right to acquire or purchase all or any portion of the Premises or all or any portion of, or interest in, the Property, except as follows: _______________________________________________________________________ _______________________________________________________________________________. (If none, please state "None.") 23. Rights of Tenant. Except as expressly stated in this Certificate, Tenant: (a) has no right to renew or extend the term of the Lease except as follows: ___________________________________________________________; (b) has no right, title, or interest in the Premises, other than as Tenant under the Lease or as the owner of all Removable Equipment and personal property not identified as Fixed Equipment under the Lease. 24. Rent. (a) The obligation to pay rent under the Lease commenced on ________ ___, 20___. The Rent under the Lease is current, and Tenant is not in default in the performance of any of its obligations under the Lease. (b) Tenant is currently paying Base Rent under the Lease in the amount of $________ per month. Tenant has not received and is not, presently, entitled to any abatement, refunds, rebates, concessions or forgiveness of Rent or other charges, free rent, partial Rent, or credits, offsets or reductions in rent, except as follows: _____________________________________________________________ _______________________________________________________________________________. (If none, please state "None.") (c) There are no existing defenses or offsets against Rent due or to become due under the terms of the Lease, and there presently is no default or other wrongful act or omission by Landlord under the Lease or otherwise in connection with Tenant's occupancy of the Premises, nor is there a state of facts which with the passage of time or the giving of notice or both could ripen into a default on the part of Tenant, or to the best of Tenant's actual knowledge, or could ripen into a default on the part of Landlord under the Lease, except as follows: ______________________________________________________ _______________________________________________________________________________. (If none, please state "None.") 25. Security Deposit. Tenant's compliance with the Security Deposit provision of the Lease (Section 7) is through a Letter of Credit in the amount of $______ and pledged marketable securities of $________. 26. Prepaid Rent. The amount of prepaid Rent, separate from the Security Deposit, is $___________, covering the period from ________ ___, 20___ to ________ ___, 20___. 27. Insurance. All insurance, required to be maintained by Tenant under the Lease is presently in effect. 28. Pending Actions. There is not pending or, to the best of Tenant's actual knowledge, threatened against or contemplated by the Tenant, any petition in bankruptcy, whether voluntary or otherwise, any assignment for the benefit of creditors, or any petition seeking reorganization or arrangement under the federal bankruptcy laws or those of any state. 29. Tenant Improvements. As of the date of this Certificate, to the best of Tenant's actual knowledge: Landlord has performed all obligations required of Landlord pursuant to the Lease; no offsets, counterclaims, or defenses of Tenant under the Lease exist against Landlord; and no events have J-2-2 occurred that, with the passage of time or the giving of notice, would constitute a basis for offsets, counterclaims, or defenses against Landlord, except as follows: _____________________________________________________________ _______________________________________________________________________________. (If none, please state "None.") 30. Assignments by Landlord. Tenant has received no notice of any assignment, hypothecation or pledge of the Lease or rentals under the Lease by Landlord. Tenant hereby consents to an assignment of leases and rents to be executed by Landlord to Buyer in connection with the Transaction and acknowledges that said assignment does not violate the provisions of the Lease. The address for notices to be sent to Landlord is as set forth in the Lease or is: _________________________________________________. 31. Assignments by Tenant. Tenant has not sublet or assigned the Premises or the Lease or any portion thereof to any sublessee or assignee. No one except Tenant and its employees will occupy the Premises. The address for notices to be sent to Tenant is as set forth in the Lease or is: ____________________________. 32. Environmental Matters. Tenant is in compliance with the Lease and Environmental Requirements in connection with its generation, treatment, storage, disposal or release into the environment of any Hazardous Materials at the Premises. Environmental Requirements and Hazardous Materials are defined by reference to Lease Section 19.8. Concerning Lease Section 19 specifically, there presently is no default or other wrongful act or omission by Tenant under the Lease or otherwise in connection with Tenant's occupancy of the Premises, nor is there a state of facts which with the passage of time or the giving of notice or both could ripen into a default under Lease Section 19 on the part of Tenant; except as follows: _____________________________ (If none, please state "None.") 33. Succession of Interest. Tenant agrees that, in the event Buyer succeeds to interest of Landlord under the Lease: (a) Buyer shall not be bound by any amendments or modifications of the Lease, subsequent to the date of this Certificate, made without prior consent of Buyer which will not be unreasonably withheld, delayed or conditioned; with the understanding that this Section 17(a) shall not longer apply if the Transaction terminates; 34. Reliance. Tenant makes this Certificate with the knowledge that it will only be relied upon by Buyer in agreeing to complete the Transaction. Tenant has executed this Certificate as of the date first written above by the person named below, who is duly authorized to do so. TENANT: _________________________________________ a________________________________________ By:______________________________________ Name:____________________________ Its:_____________________________ J-2-3 EXHIBIT K INTENTIONALLY DELETED K-1 EXHIBIT L Fair Market Value Determination For Premises (Lease Sections 10 and 12) Determination of "Fair Market Value" of the Premises under paragraphs 10 and 12 of this Lease shall be made in accordance with the following procedures, which shall be valued assuming the Premises are encumbered by the Lease and Renewal Options, with the sum of such determinations being the Fair Market Value of the Premises as a whole: (a) Fair Market Value of the Premises shall be determined by the agreement of two (2) appraisers (each, an "Initial Appraiser"), one of which shall be selected by Landlord and the other of which shall be selected by Tenant as set forth in this Exhibit L. Each of the parties shall concurrently identify in writing, an Initial Appraiser selected and retained by such party and specifically identify such Initial Appraiser's name, address, phone number and qualifications as an appraiser. Within five (5) days after the parties have designated their Initial Appraisers, each of Landlord and Tenant shall direct, in writing with a copy to the other party, its Initial Appraiser to work with the other party's Initial Appraiser to endeavor to determine and reach agreement upon the Fair Market Value of the Premises (including the land and the improvements), considered as encumbered by this Lease and its extensions, and considered as not having been the subject of a casualty or condemnation, as applicable, and thereafter to deliver in writing to Landlord and Tenant within thirty (30) days (such 30-day period, the "Valuation Period") the agreed-upon Fair Market Value (the "Valuation Notice"). The costs and expenses of each Initial Appraiser shall be paid by the party selecting such Initial Appraiser. If Tenant fails to identify in writing an Initial Appraiser as required by this Exhibit, Landlord shall identify an Initial Appraiser on behalf of Tenant; provided, however, Tenant shall be liable for the costs and expenses of such Initial Appraiser identified on Tenant's behalf by Landlord as if Tenant had selected such Initial Appraiser. (b) If the Initial Appraisers are not able to reach agreement upon the Fair Market Value within the Valuation Period, within ten (10) days after the end of the Valuation Period each Initial Appraiser shall deliver a written notice to Landlord, Tenant, and the other Initial Appraiser setting forth (i) such Initial Appraiser's valuation of the Fair Market Value (each, an "Initial Valuation") and (ii) the name, address and qualifications of a third appraiser selected jointly by the Initial Appraisers (the "Third Appraiser"). The Initial Appraisers shall, in writing with a copy to Landlord and Tenant, direct the Third Appraiser (or substitute Third Appraiser) to determine a valuation of the Fair Market Value of the Premises (including the land and the improvements), considered as encumbered by this Lease and its extensions, and considered as not having been the subject of a casualty or condemnation, as applicable, and to deliver in writing to Landlord, Tenant and the Initial Appraisers such valuation (the "Third Valuation") within twenty (20) days of the date of the written direction retaining such Third Appraiser. The Fair Market Value shall be the arithmetic mean of (A) the Third Valuation and (B) the Initial Valuation closer to the Third Valuation. If the Third Valuation is exactly between the two Initial Valuations, then the Fair Market Value shall be the Third Valuation. If the Initial Appraisers are unable to agree upon the designation of a Third Appraiser within the requisite time period or if the Third Appraiser selected does not make a valuation of the Fair Market Value within twenty (20) days after being directed by the Initial Appraisers, then such Third Appraiser or a substitute Third Appraiser, as applicable, shall, at the request of Landlord or Tenant, be appointed by the President or Chairman of the American Arbitration Association in the area in which the Premises exist which is the subject of the fair market valuation determination determined hereunder. The costs and expenses of the Third Appraiser (and substitute Third Appraiser and the American Arbitration Association, if applicable) shall be divided evenly between, and paid for by, Landlord and Tenant. (c) All appraisers selected or appointed pursuant to this Exhibit shall be independent qualified appraisers and shall be, at a minimum, MAI real estate appraisers with at least 7 years experience in appraising real property used for comparable "wet science" biological laboratory L-1 and research and development facilities or such similar uses to which the parties agree. Such appraisers shall have no right, power or authority to alter or modify the provisions of this Lease, and such appraisers shall determine the Fair Market Value of the Premises, as applicable, considered as encumbered by this Lease including assuming all Extension Terms have been exercised by Tenant and considered as not having been the subject of a casualty or condemnation, as applicable. (d) Notwithstanding the foregoing, if Landlord and Tenant are able to agree upon a Fair Market Value of the Premises, Landlord and Tenant shall execute an agreement setting forth such agreed-upon Fair Market Value of the Premises, as applicable, and waiving each party's right to have the Fair Market Value of the Premises, as applicable, determined in accordance with the procedures set forth in paragraphs (a) and (b) of this Exhibit. (e) If Tenant elects not to make an offer to purchase the Premises under Sections 10 or 12 after this valuation process has been conducted, Tenant shall reimburse Landlord its out of pocket third party costs (including attorney's fees and the costs of Landlord's Initial Appraiser). and pay all charges assessed by the Third Appraiser. L-2 EXHIBIT M Lease Amendment Form AMENDMENT NO. __ TO LEASE This AMENDMENT NO. ____ TO LEASE (this "Amendment") is entered into as of the below date between ARE-1201/1208 EASTLAKE AVENUE, LLC, a Delaware limited liability company("Landlord") and ZYMOGENETICS, INC., a Washington corporation ("Tenant"). Landlord and Tenant are parties to that certain Lease dated October ___, 2002 {, as amended by Amendment No. to Lease ___ dated ____________ - to be included if there are any prior amendments at that time} (as amended, the "Lease"). Capitalized terms not defined herein shall have the meanings set forth in the Lease. Pursuant to Section 2.1 of the Lease, the initial term has been extended and the purpose of this Amendment is to reflect the extension. Now, therefore, Landlord and Tenant agree as follows: 1. EXTENSION OF INITIAL TERM. Effective on _________________, expiration date of the Initial Term of the Lease is extended to ____________________. 2. NO OTHER AMENDMENTS. Except as modified by this Amendment {and by Amendment No. ____ dated ______________}, the Lease remains in full force and effect and has not been modified or amended. DATED: _______________________. LANDLORD: ARE-1201/1208 Eastlake Avenue, LLC, a Delaware limited liability company By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., a Delaware limited partnership, managing member By: ARE-QRS CORP., a Maryland corporation, general partner By: ___________________________ Peter J. Nelson, CFO M-1 TENANT: ZYMOGENETICS, INC., a Washington corporation By _______________________________________ Name:__________________________________________________ Title:_________________________________________________ STATE OF WASHINGTON ) ) ss. COUNTY OF KING ) I certify that I know or have satisfactory evidence that ______________________ signed this instrument, on oath stated that he was authorized to execute the instrument and acknowledged it as the _____________________________ of ZymoGenetics, Inc. to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. Dated: ______________. ____________________________________ (Signature) ____________________________________ Title My appointment expires _____________ STATE OF __________ ) ) ss. COUNTY OF _________ ) I certify that I know or have satisfactory evidence that Peter J. Nelson is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the Chief Financial Officer of ARE-QRS Corp., general partner of Alexandria Real Estate Equities, L.P., the Managing Member of ARE-1201/1208 Eastlake Avenue, LLC, to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument. DATED:________________. ______________________________ (Signature of Notary Public) ______________________________ (Printed Name of Notary Public) My Appointment expires:_______ M-2