Exhibit 10.6

TRINITY CAPITAL FUND III, L.P.

MASTER LEASE AGREEMENT

THIS MASTER LEASE AGREEMENT (this “Agreement”) is made as of September 25, 2018,
between TRINITY CAPITAL FUND III, L.P., a Delaware limited partnership
(“Lessor”) and ZOSANO PHARMA CORPORATION (“Lessee”).

Lessee desires to lease from Lessor the equipment and other property (the
“Equipment”) described in each Equipment Schedule executed pursuant to this
Lease (each, a “Schedule”) incorporating by reference the terms and conditions
of this Lease. Each Schedule identified as being part of this Agreement
incorporates the terms of this Agreement and constitutes a separate lease
agreement and is referred to herein as the “Lease.” Certain definitions and
construction of certain of the terms used in this Lease are provided in
Section 19 hereof.

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties to this Lease agree as follows:

 

  (a)

1. AGREEMENT TO LEASE; TERM. Subject to the terms of this Agreement, Lessor has
agreed to make available to Lessee lease financing in the aggregate amount of
$14,000,000 (the “Commitment Amount”) for the period from the date hereof
through the earliest to occur of (i) May 30, 2019, (ii) the date of any Default
or Event of Default, and (iii) the occurrence of an Event of Default that
continues (such date, the “Expiration Date”). Subject to the conditions
precedent set forth in Section 5 herein, (x) on the date hereof, the initial
agreement of Lessor to purchase and lease any Equipment under a Schedule shall
be for Equipment with a Total Cost of not less than $5,000,000; and (y) for the
period beginning on October 1, 2018 and ending on the Expiration Date any
agreement of Lessor to purchase and lease any Equipment under a Schedule shall
be, in each instance, for Equipment with a Total Cost of not less than $500,000.
Notwithstanding anything to the contrary contained herein, in any other Lease
Document, or in the Confidential Proposal by and between Lessor and Lessee dated
August 9, 2018, Lessor shall not be obligated to enter into any Schedule
(1) after the Expiration Date, (2) in excess of the Commitment Amount, or (3) at
any time that an Event of Default has occurred and is continuing hereunder or
under any other Lease Document. On the Expiration Date, Lessee shall pay Lessor
a fee equal to 3.0% of the difference between the Commitment Amount and the
aggregate Total Cost of the Equipment leased hereunder.

 

  (b)

This Agreement is effective as of the date specified above. By entering into a
Schedule, Lessor leases the Equipment described therein to Lessee, and Lessee
leases such Equipment from Lessor, in each case, subject to the terms and
conditions in this Lease, each Schedule, each Security Agreement and all of the
other documents and agreements executed in connection herewith (collectively,
the “Lease Documents”). Each Schedule, incorporating the terms and conditions of
this Lease, will constitute a separate instrument of lease. The term of lease
with respect to each item of Equipment leased under a Schedule shall commence on
the date of execution of such Schedule and accompanying Security Agreement and
continue for the term provided in that Schedule. The monthly rent factor with
respect to each Schedule will be fixed on the commencement date for such
Schedule, which will be determined by Lessor indexing the Prime Lending Rate as
reported in the Wall Street Journal on the first day of the month in which a
Schedule is executed against (5.0%) (which was the Prime Lending Rate at the
time the monthly rent factors described above were set). With respect to any new
Schedule executed by Lessee from or after the date of the increase in the Prime
Lending Rate, the monthly rent factors described above will be increased by the
increase in the implied interest rate underlying such monthly rent factor to the
extent of any increase in the Prime Lending Rate. By way of example only, if the
Prime Lending Rate is 6.0% on the date of execution of a Schedule, the implied
lending rate will be increased by one percentage point and the monthly rent
factors will be adjusted accordingly. Any drop in the Prime Lending Rate shall
not cause a corresponding drop in the monthly rent factors from those described
above. This Lease is not cancellable or terminable by Lessee for the term set
forth in each Schedule.

2. RENT. Lessee shall pay Lessor (a) the rental installments (“Basic Rent”) as
and when specified in each Schedule, without demand, and (b) all of the other
amounts payable in accordance with this Lease, such Schedule and/or any of the
other Lease Documents (“Other Payments”, and together with the Basic Rent,
collectively, the “Rent”). Upon Lessee’s

 

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execution thereof, the related Schedule shall constitute a non-cancelable net
lease, and Lessee’s obligation to pay Rent, and otherwise to perform its
obligations under or with respect to such Schedule and all of the other Lease
Documents, are and shall be absolute and unconditional and shall not be affected
by any circumstances whatsoever, including any right of setoff, counterclaim,
recoupment, deduction, defense or other right which Lessee may have against
Lessor, the manufacturer or vendor of the Equipment (the “Suppliers”), or anyone
else, for any reason whatsoever (each, an “Abatement”). Lessee agrees that all
Rent shall be paid in accordance with Lessor’s or Assignee’s written direction.
Time is of the essence. If any Rent is not paid within five (5) days of the due
date, Lessor may collect, and Lessee agrees to pay a late charge (accruing at
the “Late Charge Rate” specified in the related Schedule) with respect to the
amount in arrears for the period such amount remains unpaid (the “Late Charge”).
The assessment of a Late Charge shall be in addition to, and not in lieu of,
Lessor’s imposition of a default rate (accruing at the “Default Rate” specified
in the related Schedule) with respect to the unpaid and accelerated balance due
hereunder.

3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LESSEE. Lessee represents,
warrants and agrees that, as of the effective date of this Lease and of each
Schedule: (a) Lessee has the form of business organization indicated, and is and
will remain duly organized and existing in good standing under the laws of the
state specified, under Lessee’s signature and, except where failure to be so
qualified could not reasonably be expected to result in a Material Adverse
Effect, is duly qualified to do business wherever necessary to perform its
obligations under the Lease Documents, including each jurisdiction in which the
Equipment is or will be located. Lessee’s legal name is as shown in the preamble
of this Lease; and Lessee’s Federal Employer Identification Number and
organizational number are as set forth under Lessee’s signature. Within the
previous six (6) years, Lessee has not changed its name, done business under any
other name, or merged or been the surviving entity of any merger, except as
disclosed to Lessor in writing. (b) The Lease Documents have been duly
authorized by all necessary action consistent with Lessee’s form of
organization, do not require the approval of, or giving notice to, any
governmental authority, do not contravene or constitute a default under any
applicable law, Lessee’s organizational documents, or any material agreement,
indenture, or other instrument to which Lessee is a party or by which it may be
bound, and constitute legal, valid and binding obligations of Lessee enforceable
against Lessee, in accordance with the terms thereof. (c) There are no pending
actions or proceedings to which Lessee is a party, and there are no other
pending or threatened actions or proceedings of which Lessee has knowledge,
before any court, arbitrator or administrative agency, in each case which,
either individually or in the aggregate, would have a Material Adverse Effect.
As used herein, “Material Adverse Effect” shall mean (i) a materially adverse
effect on the business, financial condition, operations, performance or
properties of Lessee, or (ii) a material impairment of the ability of Lessee to
perform its obligations under or remain in compliance with such Schedule or any
of the other Lease Documents. Further, Lessee is not in default under any
financial or other material agreement that, either individually, or in the
aggregate, would have the same such effect. (d) All of the Equipment covered by
such Schedule is located solely in the jurisdiction(s) specified in such
Schedule. (e) Under the applicable laws of each such jurisdiction, such
Equipment consists (and shall continue to consist) solely of personal property
and not fixtures. Such Equipment is removable from and is not essential to the
premises at which it is located. (f) The financial statements of Lessee (copies
of which have been furnished to Lessor) have been prepared in accordance with
generally accepted accounting principles consistently applied (“GAAP”), and
fairly present Lessee’s financial condition and the results of its operations as
of the date of and for the period covered by such statements, and since the date
of such statements there has been no material adverse change in such conditions
or operations. (g) With respect to any Collateral, Lessee has good title to,
rights in, and/or power to transfer all of the same. (h) No Supplier is an
affiliate of Lessee. (i) The Supply Contract (as such term is hereinafter
defined) represents an arms’ length transaction and the purchase price for the
Equipment specified therein is the amount obtainable in an arms’ length
transaction between a willing and informed buyer and a willing and informed
seller under no compulsion to sell. Lessee further waives any and all rights and
remedies conferred by UCC 2A-508 through 2A-522, including, but not limited to,
Lessee’s right to (1) cancel or repudiate the Lease; (2) reject or revoke
acceptance of the Equipment; (3) deduct from rental payments all or any part of
any claimed damages resulting from Lessor’s default under the Lease; (4) recover
from Lessor any general, special, incidental, or consequential damages, for any
reason whatsoever. Lessee further waives any and all rights, now or hereafter
conferred by statute or otherwise, that may require Lessor to sell, re-lease, or
otherwise use or dispose of the Equipment in mitigation of Lessor’s damages or
that may otherwise limit or modify any of Lessor’s rights or remedies hereunder.

4. FURTHER ASSURANCES AND OTHER COVENANTS. Lessee agrees as follows: (a) Lessee
will furnish Lessor with (1) Lessee’s balance sheet, statement of income and
statement of retained earnings, prepared in accordance with GAAP, certified by a
recognized public accounting firm acceptable to Lessor, within one hundred
eighty (180) days of the close of each fiscal year of Lessee, (2) at Lessor’s
request, Lessee’s monthly financial report certified by the chief financial
officer of Lessee, within thirty (30) days of the close of each fiscal month of
Lessee, which will be in accordance with GAAP (except that the unaudited
financial statements may not contain all footnotes required by GAAP), (3) within

 

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forty-five (45) days after the end of each fiscal quarter, (x) a copy of
Borrower’s unaudited financial statements pertaining to the results of
operations for the fiscal quarter then ended and certified as true and correct
by Borrower’s chief operating officer or chief financial officer, consisting of
a consolidated balance sheet, income statement and cash flow statement, prepared
in accordance with GAAP and (y) forward looking financial projections, prepared
on a quarterly basis, and covering a time period of no less than four
(4) quarters; (4) all of Lessee’s Forms 10-K and 10-Q, if any, filed with the
Securities and Exchange Commission (“SEC”) as and when filed, (5) a complete and
accurate listing of all Equipment which includes its then current location
within thirty (30) days of request by Lessor, and (6) a list of Lessee’s fixed
assets within thirty (30) days of the end of each fiscal quarter of Lessee. Any
documents required to be delivered to Lessor hereunder may be deemed delivered
to Lessee electronically and if so furnished, shall be deemed to have been
furnished on the date on which Lessee posts such documents with the SEC, or
provides a link thereto, on Lessee’s website on the internet at Lessee’s website
address. (b) Lessee shall obtain and deliver to Lessor and/or promptly execute
or otherwise authenticate any documents, filings, waivers (including any
landlord and mortgagee waivers), releases and other records, and will take such
further action as Lessor may reasonably request in furtherance of Lessor’s
rights under any of the Lease Documents. Lessee irrevocably authorizes Lessor to
file UCC financing statements (“UCCs”), and other filings with respect to the
Equipment or any Collateral. Without Lessor’s prior written consent, Lessee
agrees not to file any corrective or termination statements or partial releases
with respect to any UCCs filed by Lessor pursuant to this Lease. (c) Lessee
shall provide written notice to Lessor within thirty (30) days prior to any
change in Lessee’s name or jurisdiction or form of organization, promptly upon
the occurrence of any Event of Default (as defined in Section 15) and/or
promptly upon Lessee becoming aware of any alleged violation of applicable law
relating to the Equipment or this Lease. (d) LESSEE acknowledges that LESSOR is
a SMALL BUSINESS INVESTMENT COMPANY as organized under the SMALL BUSINESS
INVESTMENT COMPANY ACT of 1958. LESSEE agrees to cooperate with LESSOR in
fulfilling the requirements for compliance under the SBIC program, which
includes providing SBA-specific information as requested from time to time by
the SBA via LESSOR.

5. CONDITIONS PRECEDENT. Lessor’s agreement to purchase and lease any Equipment
under a Schedule, is conditioned upon Lessor’s determination that all of the
following have been satisfied: (a) Lessor having received the following, in form
and substance reasonably satisfactory to Lessor: (1) evidence as to due
compliance with the insurance provisions of Section 11; (2) lien searches in the
jurisdiction of Lessee’s organization, and wherever else Lessor deems
appropriate; (3) UCCs, real property waivers and all other filings required by
Lessor; (4) a certificate of an appropriate Officer of Lessee certifying:
(A) resolutions duly authorizing the transactions contemplated in the applicable
Lease Documents, and (B) the incumbency and signature of the officers of Lessee
authorized to execute such documents; (5) [reserved]; (6) duly executed copies
of the applicable Schedule, and counterpart originals of all other Lease
Documents; (7) all purchase documents pertaining to the Equipment (collectively,
the “Supply Contract”); (8) good standing certificates from the jurisdiction of
Lessee’s organization and the location of the Equipment, and evidence of
Lessee’s organizational number; and (9) such other documents, agreements,
instruments, certificates, opinions, and assurances, as Lessor reasonably may
require. (b) All representations and warranties provided by Lessee in favor of
Lessor in any of the Lease Documents shall be true and correct on the effective
date of the related Schedule (Lessee’s execution and delivery of the Schedule
shall constitute Lessee’s acknowledgment of the same). (c) There shall be no
default or Event of Default under the Schedule or any other Lease Documents. The
Equipment shall have been delivered to and accepted by Lessee, as evidenced by
the Schedule, and shall be in the condition and repair required hereby; and on
the effective date of such Schedule Lessor shall have received good title to the
Equipment described therein, free and clear of any claims, liens, attachments,
rights of others and legal processes (“Liens”).

6. ACCEPTANCE UNDER LEASE. Lessor hereby appoints Lessee as Lessor’s agent for
the sole purpose of accepting delivery of the Equipment from the applicable
Supplier. Upon delivery, Lessee shall inspect and, if conforming to the
condition required by the applicable Supply Contract, accept the Equipment and
execute and deliver to Lessor a Schedule describing such Equipment. The Schedule
will evidence Lessee’s unconditional and irrevocable acceptance under the
Schedule of the Equipment described therein. However, if Lessee fails to accept
delivery of any item of the Equipment, or accepts such Equipment but fails to
satisfy any or all of the other conditions set forth in Section 5, Lessor shall
have no obligation to purchase or lease such Equipment. In such event, Lessor’s
rights shall include, among other things, the right to demand that Lessee
(a) fully assume all obligations as purchaser of the Equipment, with the effect
of causing Lessor to be released from any liability relating thereto,
(b) immediately remit to Lessor an amount sufficient to reimburse it for all
advance payments, costs, taxes or other charges paid or incurred with respect to
the Equipment (including any of such amounts paid by Lessor to any Supplier
under the Supply Contract or as a reimbursement to Lessee), together with
interest at the Late Charge Rate accruing from the date or dates such amounts
were paid by Lessor until indefeasibly repaid by Lessee in full, and (c) take
all other actions necessary to accomplish such assumption.

 

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7. USE AND MAINTENANCE. (a) Lessee shall (1) use the Equipment solely in the
continental United States and in the conduct of it business, for the purpose for
which the Equipment was designed, in a careful and proper manner, and shall not
permanently discontinue use of the Equipment; (2) operate, maintain, service and
repair the Equipment, and maintain all records and other materials relating
thereto, (A) in accordance and consistent with (i) the applicable Supplier’s
recommendations and all maintenance and operating manuals or service agreements,
whenever furnished or entered into, including any subsequent amendments or
replacements thereof, issued by any Supplier or service provider, (ii) the
requirements of all applicable insurance policies, (iii) the Supply Contract, so
as to preserve all of Lessee’s and Lessor’s rights thereunder, including all
rights to any warranties, indemnities or other rights or remedies, (iv) all
applicable laws, and (v) the prudent practice of other similar companies in the
same business as Lessee, but in any event, to no lesser standard than that
employed by Lessee for comparable equipment owned by or leased by it; and
(B) without limiting the foregoing, so as to cause the Equipment to be in good
repair and operating condition and in at least the same condition as when
delivered to Lessee hereunder, except for ordinary wear and tear resulting
despite Lessee’s full compliance with the terms hereof; (3) provide written
notice to Lessor not less than thirty (30) days after any change of the location
of any Equipment (or the location of the principal garage of any Equipment, to
the extent that such Equipment is mobile equipment) as specified in the
Schedule; and (4) not attach or incorporate the Equipment to or in any other
property in such a manner that the Equipment may be deemed to have become an
accession to or a part of such other property; (5) not allow any Hazardous
Material (as hereafter defined) to be used, generated, released, stored,
disposed of or transported in, on or around the Equipment. (b) Within a
reasonable time, Lessee will replace any parts of the Equipment which become
worn out, lost, destroyed, or damaged beyond repair or otherwise unfit for use,
by new or reconditioned replacement parts which are free and clear of all Liens
and have a value, utility and remaining useful life at least equal to the parts
replaced (assuming that they were in the condition required by this Lease). Any
modification or addition to the Equipment that is required by this Lease shall
be made by Lessee. Title to all such parts, modifications and additions to the
Equipment immediately shall vest in Lessor, without any further action by Lessor
or any other person, and they shall be deemed incorporated in the Equipment for
all purposes of the related Schedule. Unless replaced in accordance with this
Section, Lessee shall not remove any parts originally or from time to time
attached to the Equipment, if such parts are essential to the operation of the
Equipment, are required by any other provision of this Lease or cannot be
detached from the Equipment without materially interfering with the operation of
the Equipment or adversely affecting the value, utility and remaining useful
life which the Equipment would have had without the addition of such parts.
Except as permitted in this Section, Lessee shall not make any material
alterations to the Equipment. (c) Upon at least five (5) business days’ notice
(and no more than twice per year so long as no Event of Default has occurred and
is continuing), Lessee shall afford Lessor and/or its designated representatives
access to the premises where the Equipment is located for the purpose of
inspecting such Equipment and all applicable maintenance or other records
relating thereto at any reasonable time during normal business hours. If any
material discrepancies are found as they pertain to the general condition of the
Equipment, Lessor will communicate these discrepancies to Lessee in writing.
Lessee shall then have thirty (30) days (as may be extended by Lessor in its
reasonable discretion) to rectify these discrepancies at its sole expense.
Lessee shall pay all expenses of re-inspection by Lessor’s appointed
representative, if corrective measures were required.

8. DISCLAIMER; QUIET ENJOYMENT. THE EQUIPMENT IS LEASED HEREUNDER “AS IS, WHERE
IS”. LESSOR IS NOT A SUPPLIER, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE, AND
HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS
TO THE EQUIPMENT, INCLUDING ANY PART, OR ANY MATTER WHATSOEVER, INCLUDING, AS TO
EACH ITEM OF EQUIPMENT, ITS DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR ANY
PARTICULAR PURPOSE, TITLE, ABSENCE OF ANY PATENT, TRADEMARK OR COPYRIGHT
INFRINGEMENT OR LATENT DEFECT (WHETHER OR NOT DISCOVERABLE BY LESSEE),
COMPLIANCE OF SUCH ITEM WITH ANY APPLICABLE LAW, CONFORMITY OF SUCH ITEM TO THE
PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE DOCUMENT OR TO THE DESCRIPTION SET
FORTH IN THE RELATED SCHEDULE OR ANY OF THE OTHER LEASE DOCUMENTS, OR ANY
INTERFERENCE OR INFRINGEMENT (EXCEPT AS EXPRESSLY PROVIDED IN SECTION 8(b)), OR
ARISING FROM ANY COURSE OF DEALING OR USAGE OF TRADE, NOR SHALL LESSOR BE
LIABLE, FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR FOR
STRICT OR ABSOLUTE LIABILITY IN TORT; AND LESSEE HEREBY WAIVES ANY CLAIMS
ARISING OUT OF ANY OF THE FOREGOING. Lessee has selected the Equipment and
represents to Lessor that all of the Equipment is suitable for Lessee’s
purposes. If Lessee has any claims regarding the Equipment or any other matter
arising from Lessee’s relationship with any Supplier, Lessee must make them
against such Supplier. Without limiting the foregoing, Lessor will not be
responsible to Lessee or any other person with respect to, and Lessee agrees to
bear sole responsibility for, any risk or other matter that is the subject of
Lessor’s disclaimer; and Lessor’s agreement to enter into this Lease and any
Schedule is in reliance upon the freedom from and complete negation of liability
or responsibility for the matters so waived or disclaimed herein or covered by
the indemnity in this Lease. So long as no Event of Default has occurred, Lessee
may exercise Lessor’s rights, if any, under

 

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any warranty with respect to the Equipment. Lessee’s exercise of such rights
shall be at its sole risk, shall not result in any prejudice to Lessor, and may
be exercised only during the term of the related Schedule. Lessee shall not
attempt to enforce any such warranty by legal proceeding without Lessor’s prior
written approval. This provision survives termination and/or expiration of the
Lease.

9. FEES AND TAXES. Lessee agrees to: (a) (1) if permitted by law, file in
Lessee’s own name or on Lessor’s behalf, directly with all appropriate taxing
authorities all declarations, returns, inventories and other documentation with
respect to any personal property taxes (or any other taxes in the nature of or
imposed in lieu of property taxes) due or to become due with respect to the
Equipment, and if not so permitted by law, to promptly notify Lessor and provide
it with all information required in order for Lessor to timely file all such
declarations, returns, inventories, or other documentation, and (2) pay on or
before the date when due all such taxes assessed, billed or otherwise payable
with respect to the Equipment directly to the appropriate taxing authorities;
(b) (1) pay when due as requested by Lessor, and (2) defend and indemnify Lessor
on a net after-tax basis against liability for all license and/or registration
fees, assessments, and sales, use, property, excise, privilege, Federal Highway
Use, value added and other taxes or other charges or fees now or hereafter
imposed by any governmental body or agency upon the Equipment or with respect to
the manufacture, shipment, purchase, ownership, delivery, installation, leasing,
operation, possession, use, return, or other disposition thereof or the Rent
hereunder (other than taxes on or measured solely by the net income of Lessor);
and (c) indemnify Lessor against any penalties, charges, interest or costs
imposed with respect to any items referred to in clauses (a) and (b) above (the
items referred to as clauses (a), (b), and (c) above being referred to herein as
“Impositions”). Any Impositions which are not paid when due and which are paid
by Lessor shall, at Lessor’s option, become immediately due from Lessee to
Lessor.

10. TITLE; GRANTING CLAUSE. (a) Lessee and Lessor intend that: (1) each
Schedule, incorporating by reference the terms of this Lease, constitutes a true
“lease” and a “finance lease” as such terms are defined in Article 2A of the
Uniform Commercial Code and not a sale or retention of a security interest; and
(2) Lessor is and shall remain the owner of each item of Equipment (unless sold
by Lessor pursuant to any Lease Document), and Lessee shall not acquire any
right, title or interest in or to such Equipment except the right to use it in
accordance with the terms of the related Schedule. (b) In order to secure the
prompt payment of the Rent and all of the other amounts from time to time
outstanding with respect hereto and to each Schedule, and the performance and
observance by Lessee of all of the provisions hereof and thereof and of all of
the other Lease Documents (other than any warrant or other equity instrument),
Lessee hereby agrees to execute a security agreement in favor of Lessor in the
form of Exhibit A in conjunction with the execution of each Schedule
(individually and collectively, and as each may be amended, amended and
restated, supplemented or otherwise modified from time to time, the “Security
Agreement”) and collaterally assigns, grants, and conveys to Lessor, a security
interest in and lien on all of Lessee’s right, title and interest in and to all
of the following (whether now existing or hereafter created, and including any
other collateral described on any rider hereto; the “Collateral”): (1) the
Equipment described in such Schedule or otherwise covered thereby (including all
inventory, fixtures or other property comprising the Equipment), together with
all related software (embedded therein or otherwise) and related general
intangibles, all additions, attachments, accessories and accessions thereto
whether or not furnished by a Supplier; (2) all subleases, chattel paper,
accounts, security deposits, and general intangibles relating thereto, and any
and all substitutions, replacements or exchanges for any such item of Equipment
or other Collateral, in each such case in which Lessee shall from time to time
acquire an interest; (3) any and all insurance and/or other proceeds of the
property and other collateral in and against which a security interest is
granted under the Lease Documents; and (4) collectively, all “Collateral” as
defined in each Security Agreement. The collateral assignment, security interest
and lien granted in the Lease Documents shall survive the termination,
cancellation or expiration of each Schedule until such time as Lessee’s
obligations thereunder and under the other Lease Documents (other than any
warrant or other equity instrument) are paid in cash in full (other than
inchoate indemnity obligations). (c) If contrary to the parties’ intentions a
court determines that any Schedule is not a true “lease”, the parties agree that
in such event Lessee agrees that: (1) with respect to the Equipment, in addition
to all of the other rights and remedies available to Lessor hereunder upon the
occurrence of an Event of Default, Lessor shall have all of the rights and
remedies of a first priority secured party under the UCC; and (2) any obligation
to pay Basic Rent or any Other Payment, to the extent constituting the payment
of interest, shall be at an interest rate that is equal to the lesser of the
maximum lawful rate permitted by applicable law or the effective interest rate
used by Lessor in calculating such amounts. Lessee waives any and all written
notices for demand, presentment, notice of intent to accelerate and acceleration
otherwise applicable under any article of the UCC or other statutory provision.

11. INSURANCE. Upon acceptance under a Schedule, until the Equipment is returned
to Lessor in accordance with this Lease, Lessee shall maintain all-risk
insurance coverage with respect to the Equipment insuring against, among other
things: (a) any casualty to the Equipment (or any portion thereof), including
loss or damage due to fire and the risks

 

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normally included in extended coverage, malicious mischief and vandalism, for
not less than the full replacement value of the Equipment; and (b) any
commercial liability arising in connection with the Equipment, including both
bodily injury and property damage with a combined single limit per occurrence of
not less than One Million Dollars ($1,000,000); having a deductible reasonably
satisfactory to Lessor. The required insurance policies (including endorsements)
shall (i) be in form and amount reasonably satisfactory to Lessor, and written
by insurers of recognized reputation and responsibility satisfactory to Lessor,
(ii) be endorsed to name Lessor as an additional insured (but without
responsibility for premiums), (iii) provide that any amount payable under the
required casualty coverage shall be paid directly to Lessor as sole loss payee,
(iv) provide for thirty (30) days’ (ten (10) days’ for nonpayment of premium)
written notice by such insurer of cancellation or non-renewal, and (v) provide
that in respect of the interests of Lessor in such policies, the insurance shall
not be invalidated by any action or inaction of Lessee or any other person
operating or in possession of the Equipment regardless of any breach or
violation of any warranties, declarations or conditions contained in such
policies by or binding upon Lessee or any other person operating or in
possession of the Equipment. Lessee agrees that it shall obtain and maintain
such other coverages, or cause adjustments to be made to the scope, amount or
other aspects of the existing coverages, promptly upon Lessor’s request, as and
when Lessor deems such additional coverages or modifications to be appropriate
in light of any changes in applicable law, prudent industry practices, Lessee’s
anticipated use of the Equipment or other pertinent circumstances.

12. LOSS AND DAMAGE. (a) At all times until the Equipment is returned to Lessor
in accordance with this Lease, Lessee shall bear the risk of loss, theft,
confiscation, taking, unavailability, damage or partial destruction of the
Equipment and shall not be released from its obligations under any Schedule or
other Lease Document in any such event. (b) Lessee shall provide prompt written
notice to Lessor of any Total Loss or any material damage to the Equipment. Any
such notice must be provided together with any damage reports provided to any
governmental authority, the insurer or Supplier, and any documents pertaining to
the repair of such damage, including copies of work orders, and all invoices for
related charges. (c) Without limiting any other provision hereof, Lessee shall
repair all damage to any item of Equipment from any and all causes, other than a
Total Loss, so as to cause it to be in the condition and repair required by this
Lease. (d) A “Total Loss” shall be deemed to have occurred to an item of
Equipment upon the actual or constructive total loss of any item of the
Equipment, the loss, disappearance, theft or destruction of any item of the
Equipment, or damage to any item of the Equipment that is uneconomical to repair
or renders it unfit for normal use, or the condemnation, confiscation,
requisition, seizure, forfeiture or other taking of title to or use of any item
of the Equipment or the imposition of any Lien thereon by any governmental
authority. On the next rent payment date following a Total Loss (a “Loss Payment
Date”), Lessee shall pay to Lessor the Basic Rent due on that date plus the
Stipulated Loss Value of the item or items of the Equipment with respect to
which the Total Loss has occurred (the “Lost Equipment”), together with any
Other Payments due hereunder with respect to the Lost Equipment. Upon making
such payment, (i) Lessee’s obligation to pay future Basic Rent shall terminate
solely with respect to the items of Lost Equipment so paid for, but Lessee shall
remain liable for, and pay as and when due, all Other Payments, and (ii) Lessor
shall convey to Lessee all of Lessor’s right, title and interest in the Lost
Equipment “AS IS WHERE IS”, but subject to the requirements of any third party
insurance carrier in order to settle an insurance claim. As used in this Lease,
“Stipulated Loss Value” shall mean, with respect to any Equipment on a Schedule,
as of the Loss Payment Date, the product of (i) the sum of any accrued and
unpaid Rent, plus the present value as of such date of the total Basic Rent for
the then remaining term of such Schedule, plus Lessor’s reasonable estimate at
the time the Schedule was entered into of Lessor’s residual interest in the
Equipment, plus the present value of the Other Payments (other than Basic Rent)
to become due during the balance of the term of the applicable Schedule,
including amounts such as future taxes and (ii) the percentage of the Total
Invoice Cost of the Lost Equipment divided by the Total Invoice Cost applicable
to such Schedule. After the final rent payment date of the original term or any
renewal term of a Schedule, the Stipulated Loss Value shall be determined as of
the last rent payment date during the applicable term of such Schedule.
(e) Lessor shall be under no duty to Lessee to pursue any claim against any
person in connection with a Total Loss or other loss or damage. (f) If Lessor
receives a payment under an insurance policy required under this Lease in
connection with any Total Loss or other loss of or damage to an item of
Equipment, and such payment is both unconditional and indefeasible, then
provided Lessee shall have complied with the applicable provisions of this
Section, Lessor shall either (1) if received pursuant to a Total Loss, remit
such proceeds to Lessee up to an amount equal to the amount paid by Lessee to
Lessor as the Stipulated Loss Value, or credit such proceeds against any amounts
owed by Lessee pursuant to Section 12(d), or (2) if received with respect to
repairs to be made pursuant to Section 12(c), remit such proceeds to Lessee up
to an amount equal to the amount of the costs of repair.

13. REDELIVERY. In the event Lessee returns the Equipment to Lessor pursuant to
the terms of the applicable Schedule, Lessee shall provide, at its expense,
transit insurance for the redelivery period in an amount equal to the
replacement value of the Equipment and Lessor shall be named as the loss payee
on all such policies of insurance. Lessee shall cause: (1) the applicable
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“Designated Person”) to de-install the Equipment in accordance with the
applicable Supplier’s specifications (as applicable) and pack the Equipment
properly and in accordance with the applicable Supplier’s recommendations (as
applicable); and (2) the Equipment to be transported in a manner consistent with
the applicable Supplier’s recommendations and practices (as applicable). Upon
return, the Equipment shall be: (i) in the same condition as when delivered to
Lessee under the related Schedule, ordinary wear and tear excepted;
(ii) mechanically and structurally sound, capable of performing the functions
for which the Equipment was originally designed, in accordance with the
applicable Supplier’s published and recommended specifications (as applicable);
(iii) redelivered with all component parts in good operating condition (and all
components must meet or exceed the applicable Supplier’s minimum recommended
specifications, unless otherwise agreed by Lessor in writing); and (iv) cleaned
and cosmetically acceptable, with all Lessee-installed markings removed and all
rust, corrosion or other contamination having been removed or properly treated,
and in such condition so that it may be immediately installed and placed in
service by a third party. Upon delivery, the Equipment shall be in compliance
with all applicable Federal, state and local laws, and health and safety
guidelines. Lessee shall be responsible for the cost of all repairs,
alterations, inspections, appraisals, storage charges, insurance costs,
demonstration costs and other related costs necessary to cause the Equipment to
be in full compliance with the terms of this Lease. (c) If requested by Lessor,
Lessee shall also deliver all related records and other data to Lessor,
including all records of maintenance, modifications, additions and major
repairs, computerized maintenance history, and any maintenance and repair
manuals (collectively, the “Records”). All manuals or other documents delivered
to Lessor that are subject to periodic revision will be fully up-to-date and
current to the latest revision standard of any particular manual or document. In
the event any such Records are missing or incomplete, Lessor shall have the
right to cause the same to be reconstructed at Lessee’s expense. (d) In addition
to Lessor’s other rights and remedies hereunder, if the Equipment and the
related Records are not returned in a timely fashion, or if repairs are
necessary to place any item of Equipment in the condition required in this
Section, Lessee shall (i) continue to pay to Lessor per diem rent at the last
prevailing lease rate under the applicable Schedule with respect to such item of
Equipment, for the period of delay in redelivery, and/or for the period of time
reasonably necessary to accomplish such repairs, and (ii) pay to Lessor an
amount equal to the aggregate cost of any such repairs. Lessor’s acceptance of
such rent on account of such delay and/or repair does not constitute an
extension or renewal of the term of the related Schedule or a waiver of Lessor’s
right to prompt return of the Equipment in proper condition. Such amount shall
be payable upon the earlier of Lessor’s demand or the return of the Equipment in
accordance with this Lease. (e) Without limiting any other terms or conditions
of this Lease, the provisions of this Section are of the essence of each
Schedule, and upon application to any court of equity having jurisdiction,
Lessor shall be entitled to a decree against Lessee requiring Lessee’s specific
performance of its agreements and continued in this Section.

14. INDEMNITY. Lessee shall indemnify, defend and keep harmless Lessor and any
Assignee (as defined in Section 17), and their respective agents and employees
(each, an “Indemnitee”), from and against any and all Claims (other than such as
may directly and proximately result from the actual, but not imputed, gross
negligence or willful misconduct of such Indemnitee), by paying or otherwise
discharging same, when and as such Claims shall become due. Lessee agrees that
the indemnity provided for in this Section includes the agreement by Lessee to
indemnify each Indemnitee from the consequences of its own simple negligence,
whether that negligence is the sole or concurring cause of the Claims, and to
further indemnify each such Indemnitee with respect to Claims for which such
Indemnitee is strictly liable. Lessor shall give Lessee prompt notice of any
Claim hereby indemnified against and Lessee shall be entitled to control the
defense of and/or to settle any Claim, in each case, so long as (a) no Event of
Default has occurred and is then continuing, (b) Lessee confirms, in writing,
its unconditional and irrevocable commitment to indemnify each Indemnitee with
respect to such Claim, (c) Lessee is financially capable of satisfying its
obligations under this Section, and (d) Lessor approves the defense counsel
selected by Lessee. The term “Claims” shall mean all claims, allegations, harms,
judgments, settlements, suits, actions, debts, obligations, damages (whether
incidental, consequential or direct), demands (for compensation,
indemnification, reimbursement or otherwise), losses, penalties, fines,
liabilities (including strict liability), charges that Lessor has incurred or
for which it is responsible, in the nature of interest, Liens, and costs
(including attorneys’ fees and disbursements and any other legal or non-legal
expenses of investigation or defense of any Claim, whether or not such Claim is
ultimately defeated or enforcing the rights, remedies or indemnities provided
for hereunder, or otherwise available at law or equity to Lessor), of whatever
kind or nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, by or against any person, arising on account of (1) any Lease
Document, including the performance, breach (including any Event of Default) or
enforcement of any of the terms thereof, or (2) the Equipment, or any part or
other contents thereof, any substance at any time contained therein or emitted
therefrom, including any Hazardous Materials that may exist in violation hereof,
or the premises at which the Equipment may be located from time to time, or
(3) the ordering, acquisition, delivery, installation or rejection of the
Equipment, the possession of any property to which it may be attached from time
to time, maintenance, use, condition, ownership or operation of any item of
Equipment, and by whomsoever owned, used, possessed or operated, during the term
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Schedule with respect to that item of Equipment, the existence of latent and
other defects (whether or not discoverable by Lessor or Lessee) any claim in
tort for negligence or strict liability, and any claim for patent, trademark or
copyright infringement, or the loss, damage, destruction, theft, removal,
return, surrender, sale or other disposition of the Equipment, or any item
thereof, including, Claims involving or alleging environmental damage, or any
criminal or terrorist act, or for whatever other reason whatsoever. If any Claim
Is made against Lessee or an Indemnitee, the party receiving notice of such
Claim shall promptly notify the other, but the failure of the party receiving
notice to so notify the other shall not relieve Lessee of any obligation
hereunder.

15. DEFAULT. A default shall be deemed to have occurred hereunder and under a
Schedule upon the occurrence of any of the following (each, an “Event of
Default”):

(a) non-payment of Basic Rent on the applicable rent payment date;

(b) non-payment of any Other Payment within five (5) days after it is due;

(c) failure to maintain, use or operate the Equipment in compliance with
applicable law except where failure to be so qualified could not reasonably be
expected to result in a Material Adverse Effect;

(d) failure to obtain, maintain and comply with all of the insurance coverages
required under this Lease;

(e) other than Permitted Liens, the existence of any Lien that is prohibited by
this Lease;

(f) a payment or other default by Lessee under any loan, lease, guaranty or
other financial obligation to Lessor or its affiliates which default entitled
the other party to such obligation to accelerate such obligations in an amount
greater than $250,000;

(g) a default by Lessee under any material loan, lease, guaranty or other
material financial obligation to any third party which default has been declared
and results in the right to accelerate such obligations in an amount greater
than $250,000;

(h) an inaccuracy in any representation or breach of warranty by Lessee
(including any false or misleading representation or warranty) in any financial
statement or Lease Document, including any omission of any substantial
contingent or unliquidated liability or Claim against Lessee;

(i) (x) Lessee becomes insolvent, or makes an assignment for the benefit of its
creditors, files any petition or takes any action under any bankruptcy,
reorganization or insolvency laws or (y) the commencement of any bankruptcy,
insolvency, receivership or similar proceeding by or against Lessee or any of
its properties or business (unless, if involuntary, the proceeding is dismissed
within forty-five (45) days of the filing thereof) or the rejection of this
Lease or any other Lease Document in any such proceeding;

(j) the occurrence of a circumstance or circumstances that have a Material
Adverse Effect;

(k) Lessee:

(1) enters into any transaction of merger or consolidation, unless Lessee shall
be the surviving entity (such actions being referred to as an “Event”), unless
the surviving entity is organized and existing under the laws of the United
States or any state, and prior to such Event: (A) such person executes and
delivers to Lessor (x) an agreement satisfactory to Lessor, in its sole
discretion, containing such person’s effective assumption, and its agreement to
pay, perform, comply with and otherwise be liable for, in a due and punctual
manner, all of Lessee’s obligations having previously arisen, or then or
thereafter arising, under any and all of the Lease Documents, and (y) any and
all other documents, agreements, instruments, certificates, opinions and filings
requested by Lessor; and (B) Lessor is satisfied as to the creditworthiness of
such person, and as to such person’s conformance to the other standard criteria
then used by Lessor when approving transactions similar to the transactions
contemplated in this Lease; or

(2) ceases to do business, liquidates, or dissolves; or

 

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(3) sells, transfers, or otherwise disposes of all or substantially all of its
assets or property;

(l) if 50% of Lessee’s voting capital stock/membership interests/partnership
interests, issued and outstanding from time to time, is not retained by the
then-present holders (unless Lessee shall have provided seven (7 days’ prior
written notice to Lessor of the proposed disposition and Lessor shall have
consented thereto in writing);

(m) breach by Lessee of any other covenant, condition or agreement (other than
those in items (a)-(l)) under this Lease or any of the other Lease Documents
that continues for twenty (20) days after the occurrence of such default (but
such cure period will not be applicable unless such breach is curable by
practical means within such period).

(r) failure to promptly remit to Lessor an amount sufficient to reimburse Lessor
for all amounts paid to a Supplier under a Supply Contract in the event Lessee
fails to accept delivery of any item of Equipment.

16. REMEDIES. (a) if an Event of Default occurs and is continuing, Lessor may
(in its sole discretion) exercise any one or more of the following remedies with
respect to such Schedule and any or all other Schedules to which such Lessor is
then a party: (1) proceed at law or in equity, to enforce specifically Lessee’s
performance or to recover damages; (2) declare each such Schedule in default,
and cancel each such Schedule or otherwise terminate Lessee’s right to use the
Equipment and Lessee’s other rights, but not its obligations, thereunder and
Lessee shall immediately assemble, make available and, if Lessor requests,
return the Equipment to Lessor in accordance with the terms of this Lease;
(3) enter any premises where any item of Equipment is located and take immediate
possession of and remove (or disable in place) such item (and/or any unattached
parts) by self-help, summary proceedings or otherwise without liability; (4) use
Lessee’s premises for storage without liability; (5) sell, re-lease or otherwise
dispose of any or all of the Equipment, whether or not in Lessor’s possession,
at public or private sale, with or without notice to Lessee, and apply or retain
the net proceeds of such disposition, with Lessee remaining liable for any
deficiency and with any excess being retained by Lessor; (6) enforce any or all
of the preceding remedies with respect to any related Collateral, and apply any
deposit or other cash collateral, or any proceeds of any such Collateral, at any
time to reduce any amounts due to Lessor; (7) demand, accelerate and recover
from Lessee all Rent and all other damages whenever the same shall be due; and
(8) exercise any and all other remedies allowed by applicable law, including the
UCC.

(b) If an Event of Default occurs and is continuing hereunder or with respect to
any Schedule and:

(1) if Lessor recovers the Equipment and disposes of it by a lease or elects not
to dispose of the Equipment after recovery, upon demand, Lessee shall pay to
Lessor an amount equal to the sum of:

(A) any accrued and unpaid Rent as of the date Lessor recovers possession of the
Equipment, plus (B) the present value as of such date of the total Basic Rent
for the then remaining term of such Schedule, minus (C) either, as reasonably
determined by Lessor, (i) the present value, as of the commencement date of any
substantially similar re-lease of the Equipment, of the re-lease rent payable
for that period, commencing on such date, which is comparable to the then
remaining term of such Schedule or (ii) the present value, as of that certain
date which may be determined by taking into account Lessor’s having a reasonable
opportunity to remarket the Equipment, of the “market rent” for such Equipment
(as computed pursuant to Article 2A) in the continental United States on that
date, computed for that period, commencing on such date, which is comparable to
the then remaining term of such Schedule; provided, however, Lessee acknowledges
that if Lessor is unable after reasonable effort to dispose of the Equipment at
a reasonable price and pursuant to other reasonable terms, or the circumstances
reasonably indicate that such an effort will be unavailing, the “market rent” in
such event will be deemed to be $0.00, but in the event that Lessor does
eventually re-lease or otherwise dispose of the Equipment, it will apply the net
proceeds of such disposition, to the extent received in good and indefeasible
funds, as a credit or reimbursement, as applicable, in a manner consistent with
the applicable provisions of Article 2A. Any amounts discounted to present value
shall be discounted at a discount rate equal to the Wall Street Journal Prime
Rate, as of the date of default, compounded annually.

(2) if Lessee fails to return the Equipment in the manner and condition required
by this Lease, or if Lessor recovers and sells the Equipment, upon demand,
Lessee shall pay to Lessor an amount an amount equal to the sum of:

(A) the Stipulated Loss Value, plus (B) without duplication of any amounts paid
in the preceding clause (A), all Enforcement Costs (defined in Section 16(c),
minus (C) a credit for any disposition proceeds, if applicable, pursuant to the
application provisions in the next sentence. If Lessor recovers and sells the
Equipment, any proceeds received in good and indefeasible funds shall be applied
by Lessor, with respect to the related Schedule: first, to pay all

 

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Enforcement Costs, to the extent not previously paid; second, to pay to Lessor
an amount equal to any unpaid Rent due and payable to the extent not previously
paid; third, to pay to Lessor any interest accruing on the amounts covered by
the preceding clauses, at the Late Charge Rate, from and after the date the same
becomes due, through the date of payment; and fourth, (A) if the Lessor under
such Schedule is also the Lessor under any other Schedules (whether by retaining
the same, or as Assignee), to satisfy any remaining obligations under any or all
such other Schedules, or (B) if such Lessor is not the Lessor under any other
Schedule, or if Lessee’s obligations to such Lessor under such other Schedules
have been fully and indefeasibly satisfied, to reimburse Lessee for such amounts
to the extent previously paid by Lessee. Any amounts discounted to present value
shall be discounted at a discount rate equal to the Wall Street Journal Prime
Rate, as of the date of default, compounded annually.

(c) A cancellation of any Schedule shall occur only upon written notice by
Lessor to Lessee. Unless already specifically provided for in Section 16(b), if
an Event of Default occurs with respect to any Schedule, Lessee shall also be
liable for all of the following (“Enforcement Costs”): (1) all unpaid Rent due
before, during or after exercise of any of the foregoing remedies, and (2) all
reasonable legal fees (including consultation, drafting notices or other
documents, expert witness fees, sending notices or instituting, prosecuting or
defending litigation or arbitration) and other enforcement costs and expenses
incurred by reason of any default or Event of Default or the exercise of
Lessor’s rights or remedies, including all expenses incurred in connection with
the return or other recovery of any Equipment in accordance with the terms of
this Lease or in placing such Equipment in the condition required hereby, or the
sale, re-lease or other disposition (including but not limited to costs of
transportation, possession, storage, insurance, taxes, lien removal, repair,
refurbishing, advertising and brokers’ fees), and all other pre-judgment and
post-judgment enforcement related actions taken by Lessor or any actions taken
by Lessor in any bankruptcy case involving Lessee, the Equipment, or any other
person. Late Charges shall accrue with respect to any amounts payable under this
Section for as long as such amounts remain outstanding, and shall be paid by
Lessee upon demand. No right or remedy is exclusive and each may be used
successively and cumulatively. Any failure to exercise the rights granted
hereunder upon any default or Event of Default shall not constitute a waiver of
any such right. The execution of a Schedule shall not constitute a waiver by
Lessor of any pre-existing default or Event of Default. With respect to any
disposition of any Equipment or Collateral pursuant to this Section, (i) Lessor
shall have no obligation, subject to the requirements of commercial
reasonableness, to clean-up or otherwise prepare the same for disposition,
(ii) Lessor may comply with any applicable law in connection with any such
disposition, and any actions taken in connection therewith shall not be deemed
to have adversely affected the commercial reasonableness of any disposition
thereof, (iii) Lessor may disclaim any title or other warranties in connection
with any such disposition, and (iv) Lessee shall remain responsible for any
deficiency remaining after Lessor’s exercise of its remedies and application of
any funds or credits against Lessee’s obligations under any Schedule, and Lessor
shall retain any excess after such application.

17. ASSIGNMENT. (a) LESSEE SHALL NOT ASSIGN, DELEGATE, TRANSFER OR ENCUMBER ANY
OF ITS RIGHTS OR OBLIGATIONS HEREUNDER OR UNDER ANY SCHEDULE, OR ITS LEASEHOLD
INTEREST OR ANY COLLATERAL, SUBLET THE EQUIPMENT OR OTHERWISE PERMIT THE
EQUIPMENT TO BE OPERATED OR USED BY, OR TO COME INTO OR REMAIN IN THE POSSESSION
OF, ANYONE BUT LESSEE. Without limiting the foregoing, (1) Lessee may not
attempt to dispose of any of the Equipment, and (2) Lessee shall (A) maintain
the Equipment free from all Liens, other than Permitted Liens, (B) notify Lessor
immediately upon receipt of notice of any Lien (other than Permitted Liens)
affecting the Equipment, and (C) defend Lessor’s title to the Equipment. A
“Permitted Lien” shall mean (x) any Lien for Impositions, Liens of mechanics,
materialmen, or suppliers and similar Liens arising by operation of law,
provided that any such Lien is incurred by Lessee in the ordinary course of
business, for sums that are not yet delinquent or are being contested in good
faith and with due diligence, by negotiations or by appropriate proceedings
which suspend the collection thereof and, in Lessor’s sole discretion, (i) do
not involve any substantial danger of the sale, forfeiture or loss of the
Equipment or any interest therein, and (ii) for the payment of which adequate
assurances or security have been provided to Lessor an (y) licenses of Lessee’s
intellectual property in Lessee’s ordinary course of business. No disposition
referred to in this Section shall relieve Lessee of its obligations, and Lessee
shall remain primarily liable under each Schedule and all of the other Lease
Documents. (b) Lessor may at any time with or without notice to Lessee grant a
security interest in, sell, assign, delegate or otherwise transfer (an
“Assignment”) all or any part of its interest in the Equipment, this Lease or
any Schedule and any related Lease Documents or any Rent thereunder” or the
right to enter into any Schedule, and Lessee shall perform all of its
obligations thereunder, to the extent so transferred, for the benefit of the
beneficiary of such Assignment (such beneficiary, including any successors and
assigns, an “Assignee”). Lessee agrees not to assert against any Assignee any
Abatement (without limiting the provisions of Section 2) or Claim that Lessee
may have against Lessor, and Assignee shall not be bound by, or otherwise
required to perform any of Lessor’s obligations, unless expressly assumed by
such Assignee. Lessor shall be relieved of any such assumed obligations. If so
directed in writing, Lessee shall pay all Rent and all other sums that become
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under the assigned Schedule and other Lease Documents directly to the Assignee
or any other party designated in writing by Lessor or such Assignee. Lessee
acknowledges that Lessor’s right to enter into an Assignment is essential to
Lessor and, accordingly, waives any restrictions under applicable law with
respect to an Assignment and any related remedies. Upon the request of Lessor or
any Assignee, Lessee also agrees (i) to promptly execute and deliver to Lessor
or to such Assignee an acknowledgment of the Assignment in form and substance
satisfactory to the requesting party, an insurance certificate and such other
documents and assurances reasonably requested by Lessor or Assignee, and (ii) to
comply with all other reasonable requirements of any such Assignee in connection
with any such Assignment. Upon such Assignment and except as may otherwise be
provided herein, all references in this Lease to “Lessor” shall include such
Assignee. (c) Subject always to the foregoing, this Lease and each Schedule
shall inure to the benefit of, and are binding upon, Lessee’s and Lessor’s
respective successors and assigns. Notwithstanding the foregoing, any such
assignment(s) (i) shall be subject to Lessee’s right to quiet use and enjoyment
of the Equipment so long as there is no Event of Default has occurred and is
continuing and (ii) shall not release any of Lessor’s obligations hereunder, or
any claim, which Lessee has against Lessor.

18. MISCELLANEOUS. (a) This Lease, each Schedule hereto or thereto and any
commitment letter between the parties, constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof and shall not
be amended or modified in any manner except by a document in writing executed by
both parties. (b) In the event of any inconsistency between this Lease and any
Schedule, the terms of such Schedule shall control as to the Equipment listed on
such Schedule. (c) Any provision of this Lease that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The representations, warranties and agreements of Lessee
herein shall be deemed to be continuing and to survive the execution and
delivery of this Lease, each Schedule and any other Lease Documents. With
respect to each Schedule, the obligations of Lessee under this Lease which have
accrued but not been fully satisfied, performed or complied with prior to the
expiration or earlier cancellation or termination of such Schedule, shall
survive the expiration or earlier cancellation or termination thereof. (d) All
of Lessee’s obligations hereunder and under any Schedule shall be performed at
Lessee’s sole expense. Lessee shall reimburse Lessor promptly upon demand for
all expenses incurred by Lessor in connection with (1) any action taken by
Lessor at Lessee’s request, or in connection with any option, (2) the filing or
recording of real property waivers and UCCs, (3) any Enforcement Costs not
recovered pursuant to Section 16, (4) all inspections conducted pursuant to the
terms herein (not to exceed $3,000 per inspection), (5) all lien search reports
(and copies of filings) requested by Lessor and (6) all other reasonable costs
and expenses incurred in connection with this Lease. If Lessee fails to perform
any of its obligations with respect to a Schedule, Lessor shall have the right,
but shall not be obligated, to affect such performance, and Lessee shall
reimburse Lessor, upon demand, for all expenses incurred by Lessor in connection
with such performance. Lessor’s effecting such compliance shall not be a waiver
of Lessee’s default. All amounts payable under this Section, if not paid when
due, shall be paid to Lessor together with interest thereon at the Late Charge
Rate. (e) Lessee irrevocably appoints Lessor as Lessee’s attorney-in-fact (which
power shall be deemed coupled with an interest) to execute, endorse and deliver
any documents and checks or drafts relating to or received in payment for any
loss or damage under the policies of insurance required by this Lease, but only
to the extent that the same relates to the Equipment. (f) LESSOR AND LESSEE
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH LESSEE AND/OR
LESSOR MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS LEASE. IF
THIS JURY WAIVER IS NOT ENFORCEABLE, THEN LESSOR AND LESSEE SHALL RESOLVE ALL
DISPUTES BY JUDICIAL REFERENCE PURSUANT TO CODE OF CIVIL PROCEDURE BEFORE A
MUTUALLY ACCEPTABLE REFEREE OR, IF NONE IS MUTUALLY ACCEPTABLE, BY A REFEREE
APPOINTED BY THE PRESIDING JUDGE OF THE CALIFORNIA SUPERIOR COURT FOR SANTA
CLARA COUNTY, IN ALL CASES SITTING WITHOUT A JURY. (g) All notices (excluding
billings and communications in the ordinary course of business) hereunder shall
be in writing, personally delivered, delivered by overnight courier service,
sent by facsimile transmission (with confirmation of receipt), or sent by
certified mail, return receipt requested, addressed to the other party at its
respective address stated below the signature of such party or at such other
address as such party shall from time to time designate in writing to the other
party; and shall be effective from the date of receipt. (h) This Lease shall not
be effective unless and until accepted by execution by an officer of Lessor at
the address, in the State of California (the “State”), as set forth below the
signature of Lessor. THIS LEASE AND ALL OF THE OTHER LEASE DOCUMENTS, AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF THE STATE),
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF
THE LOCATION OF THE EQUIPMENT. The parties agree that any action or proceeding
arising out of or relating to this Lease may be commenced in any state or
Federal court in the State, and agree that a summons and

 

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complaint commencing an action or proceeding in any such court shall be properly
served and shall confer personal jurisdiction if served personally or by
certified mail to it at the mailing address below Lessee’s signature, or as it
may provide in writing from time to time, or as otherwise provided under the
laws of the State. (i) This Lease and all of the other Lease Documents may be
executed in counterparts. (j) If Lessor is required by the terms hereof to pay
to or for the benefit of Lessee any amount received as a refund of an Imposition
or as insurance proceeds, Lessor shall not be required to pay such amount, if
any Event of Default has occurred and not been cured. In addition, if Lessor is
required by the terms hereof to cooperate with Lessee in connection with certain
matters, such cooperation shall not be required if an Event of Default has then
occurred and is continuing. To the extent not otherwise set forth in the Lease
Documents, this Lease and the other Lease Documents are subject to the terms and
conditions set forth in that certain term sheet attached hereto as Exhibit B.

19. DEFINITIONS AND RULES OF CONSTRUCTION. (a) The following terms when used in
this Lease or in any of the Schedules have the following meanings: (1)
“affiliate”: with respect to any given person, shall mean (i) each person that
directly or indirectly owns or controls, whether beneficially or as a trustee,
guardian or other fiduciary, ten (10) percent or more of the voting stock,
membership interest or similar equity interest having ordinary voting power in
the election of directors or managers of such person, (ii) each person that
controls, is controlled by, or is under common control with, such person, or
(iii) each of such person’s officers, directors, members, joint venturers and
partners. For the purposes of this definition, “control” of a person means the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise; (2) “applicable law” or “law”: any law,
rule, regulation, ordinance, order, code, common law, interpretation, judgment,
directive, decree, treaty, injunction, writ, determination, award, permit or
similar norm or decision of any governmental authority; (3) “AS IS, WHERE IS”:
AS IS, WHERE IS, without warranty, express or implied, with respect to any
matter whatsoever; (4) “business day”: any day, other than a Saturday, Sunday,
or legal holiday for commercial banks under the laws of the state of the
Lessor’s notice address; (5) “governmental authority”: any federal, state,
county, municipal, regional or other governmental authority, agency, board,
body, instrumentality or court, in each case, whether domestic or foreign; (6)
“hazardous material”: means any chemical, compound, materials, substance or
other matter that: (i) is a flammable explosive, asbestos, radioactive
materials, nuclear medicine materials, drug, vaccine, bacteria, virus, hazardous
waste, toxic substance, petroleum product, or related injurious or potentially
injurious material, whether injurious or potentially injurious by itself or in
combination with other materials; (7) “person”: any individual, corporation,
limited liability entity, partnership, joint venture, or other legal entity or a
governmental authority, whether employed, hired, affiliated, owned, contracted
with, or otherwise related or unrelated to Lessee or Lessor; and (8) “UCC” or
“Uniform Commercial Code”: the Uniform Commercial Code as in effect in the State
or in any other applicable jurisdiction; and any reference to an article
(including Article 2A) or section thereof shall mean the corresponding article
or section (however termed) of any such applicable version of the Uniform
Commercial Code. (b) The following terms when used herein or in any of the
Schedules shall be construed as follows: (1) “herein,” “hereof,” “hereunder,”
etc. means in, of, under, etc. this Lease or such other Lease Document in which
such term appears (and not merely in, of, under, etc. the section or provision
where the reference occurs); (2) “including”: means including without limitation
unless such term is followed by the words “and limited to”, or similar words;
and (3) “or” means at least one, but not necessarily only one, of the
alternatives enumerated. Any defined term used in the singular preceded by “any”
indicates any number of the members of the relevant class. Any Lease Document or
other agreement or instrument referred to herein means such agreement or
instrument as supplemented and amended from time to time. Any reference to
Lessor or Lessee shall include their permitted successors and assigns. Any
reference to an applicable law shall also mean such law as amended, superseded
or replaced from time to time.

20. PUBLICITY: Lessor will have the right to disclose to others and to include
on or in its website, brochures and other marketing materials information
consisting of “tombstone-like” statements about this lease transaction which
mention Lessee and may use Lessee’s logo and the amount of the lease funding
provided by Lessor to Lessee. Such information shall not include any proprietary
or confidential information of Lessee. Lessee grants Lessor permission to make
reference to Lessee in its marketing materials referenced in this Section 20,
unless otherwise notified by Lessee in writing.

[SIGNATURE PAGE TO FOLLOW]

 

LEASE AGREEMENT

PAGE 12

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IN WITNESS WHEREOF, the parties hereto have caused this Master Lease Agreement
to be duly executed as of the day and year first above set forth.

 

Lessor     Lessee

TRINITY CAPITAL FUND III, L. P.,

a Delaware limited partnership

   

ZOSANO PHARMA CORPORATION,

a Delaware corporation

By: TRINITY SBIC PARTNERS III, LLC,

a Delaware limited liability company,

its general partner

   

By: TRINITY SBIC MANAGEMENT, LLC,

a Delaware limited liability company,

its Manager

    By:   /s/ Steven L. Brown     By:   /s/ John Walker Name: Steven L. Brown  
  Name: John Walker Title: Managing Member     Title: Chief Executive Officer

 

LEASE AGREEMENT

PAGE 13

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Exhibit A

SECURITY AGREEMENT

This SECURITY AGREEMENT (this “Agreement”) is made as of September 25, 2018 by
and between Zosano Pharma Corporation (the “Debtor”), and Trinity Capital Fund
III, L.P. (“Secured Party”).

RECITALS

Debtor and Secured Party are parties to certain Lease Documents, as defined in
the Master Lease Agreement of even date (as amended from time to time, the
“Lease Documents”). To secure Debtor’s performance under the Lease Documents,
Debtor wishes to grant Secured Party a security interest in certain of Debtor’s
personal property.

Now, Therefore, the parties agree as follows.

1. Grant of Security Interest. As security for payment and performance of all of
its obligations under the Lease Documents (other than any warrant or other
equity instrument) (the “Obligations”), Debtor grants Secured Party a security
interest in all of Debtor’s goods, equipment, inventory, general intangibles,
intellectual property, cash, deposit accounts, investment property, financial
assets, and commercial tort claims, now owned and hereafter acquired, and all
proceeds of any or all of the foregoing (the “Collateral”).

Notwithstanding the foregoing, the Collateral does not include (i) any property
that is nonassignable by its terms without the consent of the licensor thereof
or another party (but only to the extent such prohibition on transfer is
enforceable under applicable law, including, without limitation, Sections 9406
and 9408 of the UCC), (ii) any property that the granting of a security interest
therein is contrary to applicable law, provided that upon the cessation of any
such restriction or prohibition, such property shall automatically become part
of the Collateral, (iii) any property that constitutes the capital stock of a
subsidiary that is not an entity organized under the laws of the United States
or any state thereof, in excess of sixty five percent (65%) of the voting power
of all classes of capital stock of such subsidiary entitled to vote, or (iv) any
United States intent-to-use trademark or service mark application to the extent
that, and solely during the period in which, the grant of a security interest
therein would impair the validity or enforceability of such intent-to-use
trademark or service mark application under United States federal law. For the
avoidance of doubt, Debtor shall be permitted to license its intellectual
property in Debtor’s ordinary course of business.

2. Termination. As long as an Event of Default is not then continuing, this
Agreement and the security interest granted hereunder shall terminate upon
Debtor’s delivery to Secured Party of an executed Delivery and Acceptance
Certificate in the form attached hereto and Secured Party’s acceptance of that
Certificate.

3. Event of Default. Upon the occurrence of an Event of Default under the Lease
Documents, Secured Party may exercise all of the rights and remedies of a
secured party under the Uniform Commercial Code. Without limiting the foregoing,
Debtor shall reimburse Secured Party for all reasonable costs and expenses,
including reasonable attorneys fees, that Secured Party may incur in connection
with the exercise of any such remedies.

4. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.

5. Choice of Law. This Agreement shall be governed by the laws of the State of
California, without giving effect to conflicts of laws principles.

6. JURY WAIVER; Judicial Reference. Secured Party and Debtor waive any right to
a trial by jury of any matter arising out of this Agreement, or any transaction
or action related thereto. If this waiver is not enforceable, Debtor and Secured
Party shall resolve all disputes by judicial reference pursuant to Code

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of Civil Procedure Section 638 et seq before a mutually acceptable referee or,
if none is mutually acceptable, by a referee appointed by the Presiding Judge of
the California Superior Court for Santa Clara County, in all cases sitting
without a jury.

[Signature page follows]

 

2

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the date first written above.

 

DEBTOR: ZOSANO PHARMA CORPORATION By:   /s/John P. Walker

Title:   Chief Executive Officer

 

SECURED PARTY:

TRINITY CAPITAL FUND III, L. P.,

a Delaware limited partnership

By: TRINITY SBIC PARTNERS III, LLC,

a Delaware limited liability company,

its general partner

By: TRINITY SBIC MANAGEMENT, LLC,

a Delaware limited liability company,

its Manager

By:   /s/ Steven L. Brown

Name:   Steven L. Brown Title:   Managing Member

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DELIVERY AND ACCEPTANCE CERTIFICATE

Re: Master Lease Agreement dated as of September     , 2018 between Zosano
Pharma Corporation (“Lessee”) and Trinity Capital Fund III, L.P. (“Lessor”) and
Equipment Schedule No.      dated as of September     , 2018 (the “Lease
Documents”).

To Lessor:

All of the items referred to in the Lease Documents have been delivered to and
have been received by Lessee. All installation or other work necessary prior to
the use thereof has been completed. The equipment leased under the Lease
Documents (the “Equipment”) has been examined and/or tested and is in good
operating order and condition, and is in all respects satisfactory to Lessee and
is as represented. The Equipment has been accepted by Lessee and complies with
all terms of the Lease Documents.

In the future, even if the Equipment fails to perform as expected or
represented, Lessee will continue to comply with the Lease Documents by
continuing to make our periodic payments in the normal course of business, and
Lessee will look solely to the seller or manufacturer for the performance of all
covenants and warranties. In addition, Lessee shall indemnify and hold harmless
and defend Lessor from such nonperformance of the Equipment. Lessee has obtained
all insurance policies required by the Lease Documents. Those policies are in
full force and effect.

Lessee acknowledges that Lessor is not the manufacturer, distributor, or seller
of the Equipment and has no control, knowledge, or familiarity with the
conditioning, capacity, functioning, or other characteristics of the Equipment.

Lessee confirms that no Event of Default is continuing under the Lease
Documents.

[SIGNATURE PAGE TO FOLLOW]

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LESSEE:

 

ZOSANO PHARMA CORPORATION

By:                                                                    

Title:    

Date:    

 

Accepted:

 

TRINITY CAPITAL FUND III, L. P.,

a Delaware limited partnership

 

By: TRINITY SBIC PARTNERS III, LLC,

a Delaware limited liability company,

its general partner

 

By: TRINITY SBIC MANAGEMENT, LLC,

a Delaware limited liability company,

its Manager

By:                                                                    

Name:   Steven L. Brown Title:   Managing Member