On January 31, 2019, Gritstone Oncology, Inc. (the "Company") reported that it has entered into an Office/Laboratory Lease (the "New Lease"), effective as of January 28, 2019, with Emery Station West, LLC (the "Landlord") to lease approximately 34,469 square feet of office and laboratory space located at 5959 Horton Street, Emeryville, California 94608 (the "Premises") for the Company’s new principal executive offices (Press release, Gritstone Oncology, FEB 5, 2019, View Source [SID1234533086]).

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The term of the New Lease (the "Lease Term") commences on the earlier of (i) the date on which the Landlord delivers the newly constructed Premises, substantially completed, and tenders possession to the Company of, the Premises or (ii) the date upon which the Company, with the Landlord’s consent, takes possession of any portion of the Premises to commence construction of certain tenant improvements (the "Commencement Date"). Beginning on the earlier of (x) 270 days after the Commencement Date or (y) the date on which the Company opens for business in any portion of the Premises (the "Rent Commencement Date"), the New Lease provides for annual base rent of approximately $1.7 million, which increases on a yearly basis up to approximately $2.6 million for the final 12 months of the initial Lease Term (the "Initial Lease Term"). In addition, the Company deposited with the Landlord a security deposit of approximately $0.6 million, equal to three months base rent.

The Initial Lease Term terminates on the last day of the 120th calendar month following the Rent Commencement Date, unless terminated earlier in accordance with the New Lease. The Company has the option to extend the Lease Term for two consecutive additional five year terms (the "Renewal Terms"). The New Lease provides for the base rent during the applicable Renewal Term to be calculated based on the fair market rental value of the Premises at such time, as described in the New Lease. The Company will also be obligated to pay to the Landlord for certain costs, taxes and operating expenses related with the New Lease and the Premises, subject to certain exclusions.

Under the New Lease, the Landlord will provide the Company with an improvement allowance of up to approximately $4.0 million in the aggregate for costs relating to the design, permitting and construction of improvements that are permanently affixed to the Premises.

Lease Termination Agreement

On January 31, 2019, the Company also entered into a Lease Termination Agreement (the "Termination Agreement"), effective as of January 28, 2019, with Emery Station Joint Venture, LLC (the "Current Landlord"), pursuant to which the Company and the Current Landlord agreed to early terminate the Company’s lease, dated November 23, 2015, as subsequently amended (the "Current Lease"), of the premises located at 5858 Horton Street, Emeryville, California 94608 (the "Current Premises"). Pursuant to the Termination Agreement, the Current Lease will terminate effective no later than 60 days after the Rent Commencement Date under the New Lease. In the event that the Company is deemed to hold over in possession of the Current Premises, the Company will be liable for 150% of the monthly base rent under the Current Lease and 100% of any increases for rent adjustments, as reasonably determined by the Current Landlord.

The foregoing descriptions of the New Lease and the Termination Agreement do not purport to be complete and are subject to, and qualified in their entirety by reference to, the full terms of the New Lease and the Termination Agreement, copies of which are filed as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K, and are incorporated by reference herein.