EXHIBIT 10.1
[***] Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.
SUBLEASE AGREEMENT
     This Sublease Agreement (the “Sublease”) is entered into as of this 13 th
day of June, 2011, by and between 1000 Master Tenant LLC, a Washington limited
liability company (“Sublandlord”) and Jones Soda Co., a Washington corporation
(“Subtenant”).
     This Sublease is subject and subordinate to that certain Master Lease
Agreement by and between Sublandlord, as tenant, and 1000 1st Avenue South
Limited Partnership, a Washington limited partnership, as landlord (the “Master
Landlord”), dated October 24, 2008 (“Master Lease”), and any recorded deed of
trust. Subtenant shall comply with all applicable provisions of the Master
Lease. This Sublease and Subtenant’s use and enjoyment of the Premises shall at
all times be subject to and in compliance with applicable laws, codes,
ordinances and regulations related to the Building’s status as a historic
building and promulgated by the National Park Service, the State of Washington,
the Pioneer Square Preservation Board and the City of Seattle (“HTC
Regulations”). To the extent that any provisions of this Sublease are
inconsistent with applicable HTC Regulations, the HTC Regulations shall control
and shall be applicable to Sublandlord and Subtenant.
     Sublandlord represents and warrants to Subtenant that the Master Lease is,
as of the date hereof, in full force and effect, and no uncured event of default
by either party thereto has occurred thereunder and, to Sublandlord’s knowledge,
no event has occurred and is continuing which would constitute an event of
default by any party thereto but for the requirement of the giving of notice
and/or the expiration of the period of time to cure. Sublandlord shall not agree
to terminate the Master Lease nor agree to any amendment to the Master Lease
which might have a material adverse effect on Subtenant’s occupancy of the
Premises or its use of the Premises for its intended purpose. Sublandlord shall
not exercise any right it may have under the Master Lease or applicable law to
elect to terminate the Master Lease (e.g., due to events of damage, destruction,
or condemnation, or in the event of Master Landlord’s bankruptcy and rejection
of the Master Lease) without the prior consent of Subtenant. Sublandlord shall
neither do nor permit anything to be done which would constitute a default or
breach under the Master Lease or which would cause the Master Lease to be
terminated or forfeited by reason of any right of termination or forfeiture
reserved or vested in the Master Landlord, and Sublandlord agrees to comply with
all terms, conditions, and covenants of the Master Lease. Sublandlord represents
and warrants that no consent to this Sublease is required from the Master
Landlord.
     1. SUBLEASE SUMMARY AND EXHIBITS.
          1.1. Subleased Premises. The Subleased premises (“Premises”) consists
of an agreed area of 9,500 rentable square feet of retail/office space as
outlined on the floor plan attached hereto and incorporated herein as Exhibit A
(“Floor Plan”) and incorporated herein by this reference, located on the real
property legally described

 

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on the attached Exhibit B and incorporated herein by this reference, and
commonly known as Palmer Court, first floor located at 1000 First Avenue South,
Seattle, Washington. Adjacent and along the easterly façade of the Building is a
Common Area exterior deck that provides, among other things, access to and from
the Building (the “Deck”). The Premises shall also include, at no additional
charge to Subtenant, an approximately three hundred forty-nine (349) square foot
portion of the Deck as set forth on Exhibit J attached hereto and incorporated
herein (the “Patio”). Before Subtenant holds any events or otherwise uses the
Patio, it shall install at Subtenant’s sole expense a fence or other method of
demarcation made of material(s) mutually acceptable to Subtenant and
Sublandlord, consistent with the architecture of the Building and reasonably
approved in advance by Sublandlord to separate the Patio from the remainder of
the Deck and the ingress/egress routes it provides to the Building. The Premises
does not include the real property beneath the Premises or structural elements
of the building in which the Premises is located (“Building”). The Building, the
real property upon which it is situated, all other improvements located on such
land, and all common areas appurtenant to the Building are referred to herein as
the “Property.”
     Subtenant understands and acknowledges that the Premises is located in an
industrial area subject to potential nuisances, primarily emanating from other
properties in the vicinity of the Building, such as, by way of illustration
only, excessive noise, dust and pungent odors. Subtenant represents and warrants
that its intended use is consistent with the location of the Premises and such
potential nuisances.
          1.2. Sublease Commencement Date. The Sublease shall commence on the
date on which Sublandlord delivers possession of the Premises to Subtenant with
the Sublandlord’s Work described in Section 3.1 below substantially completed
(the “Commencement Date”). The “Projected Commencement Date” is the date that is
up to forty-five (45) days from the date of mutual execution hereof.
          1.3. Sublease Expiration Date. The Sublease shall expire at midnight
on the last day of the calendar month in which the fifth (5th) anniversary of
the Commencement Date occurs (the “Expiration Date”).
          1.4. Monthly Base Rent. The base monthly rent (“Monthly Base Rent”),
based on an agreed Premises area of 9,500 rentable square feet, shall be as
follows:

                                            Building   Month   $/YR/SF    
Annual Base Rent     Monthly Base Rent  
01 - 05
  $Abated*   Abated*   $             Abated *
06-12
  $ 21.00     $ 199,500.00     $ 16,625.00  
13-24
  $ 21.50     $ 204,250.00     $ 17,020.83  
25-36
  $ 22.00     $ 209,000.00     $ 17,416.67  
37-48
  $ 22.50     $ 213,750.00     $ 17,812.50  
49-60
  $ 23.00     $ 218,500.00     $ 18,208.33  
61-65
  $ 23.50     $ 223,250.00     $ 18,604.17  

 

*   All Monthly Base Rent shall abate during this period.

     
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Rent shall be payable at Sublandlord’s address shown in Section 1.8 below, or
such other place designated in writing by Sublandlord.
          1.5. Prepaid Rent. Upon occupancy of this Sublease, Subtenant shall
deliver to Sublandlord the first payment of Monthly Base Rent.
          1.6. Security Deposit & Letter of Credit. Upon execution of this
Sublease, Subtenant shall deliver to Sublandlord a security deposit in the
amount of Eighteen Thousand Six Hundred Four Dollars and Seventeen Cents
($18,604.17) (“Security Deposit”).
          In addition to the Security Deposit, within five (5) business days
following execution of this Sublease, Subtenant shall provide Sublandlord with a
Letter of Credit (“LOC”) in the amount equivalent to fifty percent (50%) of the
total Subtenant Improvement Allowance. Such LOC must be issued by a reputable
bank to guarantee Subtenant’s ability to pay the Sublease and costly/nonstandard
improvements as the improvements are amortized over the term of the lease.
Sublandlord agrees to release the LOC requirement after year three of the Term
in the event Subtenant has not been in late in the payment of Rent more than
five times during this period. The LOC is hereby attached to this Sublease as
Exhibit F.
          1.7. Permitted Uses. The Premises shall be used only for
retail/merchandising, light manufacturing relating to Subtenant’s business,
office support, and preparation and sale of food and beverages including liquor
(subject to receipt of and in compliance with an appropriate liquor license),
and for no other purpose without the prior written consent of Sublandlord, not
to be unreasonably withheld. At all times, Subtenant shall keep the Patio clean
and neat, avoid blocking pedestrian traffic, and cause all trash and garbage to
be picked up and removed at its expense. Subtenant may offer low level music on
the Patio and may install and use tables, chairs, umbrellas, and the like,
provided that the same kept in a clean, useable and orderly condition, so as to
present a tidy, attractive and consistent appearance to customers and passersby.

     
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          1.8. Notice and Payment Addresses.

         
Sublandlord:
  1000 Master Tenant LLC
270 S Hanford St, Ste 100
Seattle, WA 98134  
 
     
Subtenant:
  Jones Soda Co.  
 
     
Before Month 6:
  234 9th Ave. N.
Seattle, WA 98109-5120  
 
     
On and After Month 6:
  The Premises

          1.9. Subtenant’s Pro Rata Share. Sublandlord and Subtenant agree that
Subtenant’s pro rata share is Thirteen and One-Half Percent (13.50%)
(“Subtenant’s Pro Rata Share”)(based on 70,350 total rentable square feet in the
Building).
          1.10. Subtenant Improvement Allowance. The design and construction of
Subtenant’s desired initial leasehold improvements to the Premises (the
“Subtenant Improvements”) will be constructed in accordance with Sublandlord’s
tenant improvement procedures set forth in Exhibit G attached hereto and
incorporated herein. Sublandlord hereby agrees to provide Subtenant with a
Subtenant Improvement Allowance (“TI Allowance”) of Thirty Eight Dollars and
Fifty Cents ($38.50) per rentable square foot. Such TI Allowance shall be usable
for space planning, construction drawings, project/construction management, hard
and soft construction costs, and permits. Sublandlord and its contractor will
allow the Subtenant and its subcontractors to work in parallel with the
Sublandlord’s contractors only with approval from the Sublandlord’s contractor
whose consent will not unreasonably be withheld as provided in Exhibit G
attached hereto and incorporated herein.
          1.11. Exhibits.

         
Exhibit A
  Site Plan and Premises Floor Plan  
Exhibit A-1
  Expansion Space Floor Plan  
Exhibit B
  Legal Description  
Exhibit C
  Guaranty  
Exhibit D
  Affidavit  
Exhibit E
  Sublandlord’s Work  
Exhibit F
  Letter of Credit  
Exhibit G
  Subtenant Improvements  
Exhibit H
  Subtenant’s Approved Signage  
Exhibit I
  Prohibited Uses  
Exhibit J
  Depiction of the Deck and Patio Area  
Exhibit K
  Form of Wall Sublease

         
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     2. AGREEMENT TO SUBLEASE PREMISES. Sublandlord hereby agrees to lease to
Subtenant, and Subtenant hereby agrees to lease from Sublandlord the Premises
“as is” and upon the terms and conditions set forth herein. Subtenant
acknowledges that Sublandlord will construct tenant improvements for other
Subtenant’s in the Building during the Term. Subtenant and its employees, agents
and customers will be subject to noise and construction debris commonly
encountered in connection with the construction of tenant improvements for other
tenants that Sublandlord will use commercially reasonable efforts to mitigate
and which shall not be subject to the provisions in Section 31 below.
Sublandlord also grants to Subtenant a license and nonexclusive right to the use
of all Common Areas (defined below) located from time to time in the Building
and at the Property and the benefit of all other easements, rights, and
provisions of any covenants and restrictions pertaining to the Property or
Building and intended for the common use and enjoyment of other occupants and
subtenants thereof.
     3. TERM AND CONDITION OF PREMISES.
          3.1. Term. The Sublease shall commence on the Commencement Date set
forth in Section 1.2 and shall expire on the Expiration Date set forth in
Section 1.3, unless the Sublease is sooner terminated as provided herein
(“Term”). Sublandlord will deliver the Premises to Subtenant with the work
Sublandlord has agreed to perform set forth on Exhibit E, attached hereto and
incorporated herein (“Sublandlord’s Work”). In the event Sublandlord is unable
to deliver possession of the Premises on the Projected Commencement Date,
Subtenant shall receive one (1) day’s worth of Base Rent abatement for each one
(1) day after the Projected Commencement Date on which the Premises are
delivered, with the benefit of such abatement to be applied to the sixth month’s
Monthly Base Rent. Monthly Base Rent shall not abate, however, if delivery of
possession of the Premises is delayed by acts or omissions of Subtenant (or, up
to a total of thirty (30) days, force majeure events), or acts or omissions of
the City of Seattle or the Pioneer Square Preservation Board. If the
Commencement Date is delayed beyond the first (1st) anniversary of the Projected
Commencement Date, Subtenant may terminate this Sublease, and receive a full
refund of any advance rent or other deposits or sums or charges paid to
Sublandlord. If Subtenant does not elect to terminate as aforesaid, the
foregoing Monthly Base Rent abatement shall continue to accrue.
          The Sublease Term may be extended as set forth in Section 3.3.
References herein to “Term” shall also include the Option Term(s) if the Option
set forth below is exercised.
          3.2. Condition of Premises. Except to the extent otherwise set forth
herein, Sublandlord makes no representations or warranties to Subtenant
regarding the condition of the Premises, including the structural condition of
the Premises or the condition of mechanical, electrical, and other systems on or
serving the Premises or the Building. By signing this Sublease, Subtenant
acknowledges that it has had adequate opportunity to investigate the Premises
and the Building, acknowledges responsibility for making any corrections,
alterations and repairs to the Premises other than Sublandlord’s

     
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Work, and acknowledges that the time needed to complete any such items, other
than Sublandlord’s Work, shall not delay the Commencement Date.
     Notwithstanding anything to the contrary elsewhere herein, Sublandlord
represents to Subtenant that (i) Sublandlord has the authority to enter into
this Sublease and its execution and delivery by Sublandlord has been duly
authorized; (ii) to the best of Sublandlord’s knowledge as of the Commencement
Date, the Premises, all Common Areas at the Building, all electrical, HVAC,
mechanical, plumbing, and fire/life safety systems in the Building (the
“Buildings Systems”) will comply with applicable laws, codes, and ordinances;
(iii) to the best of Sublandlord’s knowledge all Building Systems are, or will
be on the Commencement Date, in reasonably good working order and condition.
          3.3. Options to Renew. Provided Subtenant is not, at the time of its
notice of exercise described below, in uncured default under the terms and
conditions of this Sublease, Subtenant may extend this Sublease for up to three
(3) additional Five (5) year terms (each an “Option Term”) on the same terms and
conditions set forth herein, except that the Monthly Base Rent for the first
year of each Option Term shall be adjusted to the Fair Market Value, as defined
in Section 3.4(c), for similar properties in the area but not less than the
Monthly Base Rent for the last year of the Sublease Term. Subtenant must give
Sublandlord not less than one hundred and twenty (120) days’ written notice of
its intent to exercise the Option Term.
          3.4. Option to Expand and [***]. Sublandlord hereby agrees that during
the Term of this Sublease, Subtenant shall have a right of expansion (“Expansion
Right”) and [***] with respect to all of the 4,757 rentable square foot area set
forth as Office 201 on Exhibit A-1 hereto (“Expansion Space”).
               (a) Subject to Section 3.4(b), Subtenant may exercise its
Expansion Right with respect to the Expansion Space at any time during the Term
of the Sublease. If Subtenant exercises its Expansion Right within the first
twelve (12) months following the Commencement Date, the Monthly Base Rent for
the Expansion Space shall be $21.00 per rentable square foot. If Subtenant
exercises the Expansion Right after the first twelve (12) months following the
Commencement Date, the Monthly Base Rent for the Expansion Space shall be
determined based on the Fair Market Value, as defined in Section 3.4(c), for the
Expansion Space.
               (b) [***].
               (c) “Fair Market Value” means the prevailing market rate for
comparable buildings in the vicinity of the Building for gross rent (i.e.,
inclusive of operating expenses and taxes, but excluding electricity) for office
space (like that existing in the Premises on the date on which the Fair Market
Value is being calculated) taking into account the size of the space and the
length of the term of the Sublease with respect to such space. Sublandlord shall
notify Subtenant of its determination of the Fair Market Value within ten
(10) days. If Subtenant disagrees with Sublandlord’s determination of

     
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the Fair Market Value, Sublandlord and Subtenant shall confer for a period of
thirty (30) days in an attempt to agree on the Fair Market Value. In the event
Sublandlord and Subtenant fail to reach an agreement on such rental rate within
such thirty (30) day period, then the Fair Market Value that will be used in
computing Monthly Base Rent shall be determined as follows: Within five (5) days
after the expiration of the thirty (30) day period described above, Sublandlord
and Subtenant shall each select an appraiser with at least ten (10) years
experience in the market in which the Building is located. If the two appraisers
are unable to agree within ten (10) days after their selection, they shall
select a similarly qualified third appraiser (the “Neutral Appraiser”). Within
twenty (20) days after selection of the Neutral Appraiser, the three appraisers
shall simultaneously exchange determinations of the Fair Market Value. If the
lowest appraisal is not less than ninety percent (90%) of the highest appraisal,
then the three appraisals shall be averaged and the result shall be the Fair
Market Value. If the lowest appraisal is less than ninety percent (90%) of the
highest appraisal, then the Fair Market Value shall be deemed the rate set forth
in the appraisal submitted by an appraiser appointed by a party that is closest
in dollar amount to the appraisal submitted by the Neutral Appraiser. If the
Fair Market Value has not been determined on or before the Commencement Date for
the relevant space, Subtenant shall begin paying Base Monthly Rent at the rate
Subtenant is paying for the Premises, and Subtenant and Sublandlord shall make
any necessary adjusting payments when the Fair Market Value is determined. Each
party shall pay the cost of its own appraiser and the parties shall share the
cost of the Neutral Appraiser equally. Subtenant may rescind the exercise of its
expansion right with respect to any portion of the Expansion Space within ten
(10) days following the determination of Fair Market Value for such space.
     4. RENT. All Rent (as defined in Section 4.4, below) payments shall be made
without any prior demand and therefore without deduction or offset to the
Sublandlord at the address set forth in Section 1.8.
          4.1. Payment of Monthly Base Rent. Subtenant agrees to pay the Monthly
Base Rent for the Premises on or before the first day of each calendar month.
Subtenant shall pay Sublandlord Monthly Base Rent due for the sixth (6th) month
of the Term plus the Security Deposit when Subtenant executes the Sublease. The
Monthly Base Rent shall be paid to the Sublandlord at such place as Sublandlord
may from time to time designate in writing.
          4.2. Additional Rent.
               (a) Real Property Taxes. Subtenant shall pay Sublandlord as
Additional Rent (as defined in Section 4.2(d), below), in the manner described
below, an amount equal to Subtenant’s Pro Rata Share of Real Property Taxes,
defined below, payable by Sublandlord for the Property in any full or partial
calendar year. “Real Property Taxes” shall mean real and personal property
taxes, assessments, including omit tax (but excluding any such omit tax properly
allocable to periods prior to the Commencement Date of this Sublease), and other
governmental impositions and charges

     
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of every kind and nature, now or hereafter imposed, including surcharges with
respect thereto and interest thereon with respect to assessments amortized over
a period exceeding one year, which may during the Term of this Sublease be
levied, assessed, imposed, or otherwise become due and payable with respect to
the Property, including the Subtenant improvements, and the Property and all
improvements, fixtures, and equipment thereon, or the use, occupancy or
possession thereof; taxes on Property of Subtenant which have not been paid by
Subtenant directly to the taxing authority; any taxes levied or assessed upon or
measured by the Premises, the Building, or the Property, or any amounts received
by Sublandlord in connection therewith or hereunder, but not including any
federal or state net income, estate, inheritance, succession, transfer, gift,
franchise, or capital stock tax, or any income taxes arising out of or related
to ownership and operation of income-producing real estate, any Real Property
Taxes allocable to any time prior to the Commencement Date hereof or after the
expiration or earlier termination hereof. All Real Property Taxes due hereunder
shall be determined with respect to the period for which such taxes are (or
would have been if timely levied) due and payable; and any taxes levied or
assessed in lieu of, or as a substitute for, the foregoing in whole or part.
Notwithstanding the foregoing, in the event rental income becomes subject to
Washington business and occupation tax, such business and occupation tax shall
be subject to this Section 4.2(a).
               (b) Operating Expenses. Subtenant shall pay Sublandlord as
Additional Rent, in the manner described below, an amount equal to Subtenant’s
Pro Rata Share of the Property’s Operating Expenses, defined below, payable by
Sublandlord in any full or partial calendar year. “Operating Expenses” shall
mean all expenses paid or incurred by Sublandlord for maintaining, operating and
repairing the Property and the personal property used in conjunction therewith,
including, without limitation, the costs of utility and other services not paid
separately by Subtenant, services of independent contractors, compensation,
including employment taxes and fringe benefits, of all persons who perform
duties in connection with the operation, maintenance and repair of the Property
and its equipment, insurance premiums, licenses, permits and inspection fees,
commercially reasonable management fees of four percent (4%) of the gross base
rents for the Building, commercially reasonable legal and accounting expenses,
amortization of capital improvements that Sublandlord reasonably anticipates
will improve the operating efficiency of the Property, but the amortization
expense shall not exceed reasonably expected savings in operating costs
resulting from such capital improvements, and any other expense or charge, which
in accordance with generally accepted accounting and management practices would
be considered an expense of maintaining, operating or repairing the Property,
but excluding costs of any special services rendered to individual Subtenants,
including Subtenant, for which a special charge is made.
               (c) Common Area Maintenance Expenses. Subtenant shall pay
Sublandlord as Additional Rent, in the manner described below, an amount equal
to Subtenant’s Pro Rata Share of the Common Area Maintenance Expenses, defined
below, for the Property incurred or payable by Sublandlord with respect to the
Common Areas

     
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(defined below) of the Property in any partial or full calendar year. The terms
“Common Area Maintenance Expenses” shall mean all expenses paid or incurred by
Sublandlord for maintaining, operating and repairing the common areas of the
Property, including, without limitation, that portion of the Deck that does not
include the Patio, stairways, elevators, hallways, lobby, rooftop, parking
areas, landscaping, and restrooms open to use by more than one Subtenant
(“Common Areas”), including costs of obtaining services and products for
maintaining, operating and repairing such Common Areas and the personal property
used in conjunction therewith, services of independent contractors compensation,
including employment taxes and fringe benefits, of all persons who perform
duties in connection with the operation, maintenance, repair of the Common
Areas, insurance premiums, personal property taxes, licenses, seasonal
decorations, activities and events, permits and inspection fees, amortization of
capital improvements that Sublandlord reasonably anticipates will improve the
operating efficiency of the Common Areas, but such amortization expenses shall
not exceed reasonably expected savings in operating costs resulting from such
capital improvements, and any other expense or charge described, which in
accordance with generally accepted accounting and management practices would be
considered an expense of maintaining, operating or repairing the Common Areas of
the Property. In no event shall any such charges, modifications or alterations
to the Common Areas increase Subtenant’s Pro Rata Share as specified in
Section 1.9. Sublandlord acknowledges that Subtenant’s acceptance of the
Sublease is based on the condition and location of the parking, loading, and
Common Areas of the Property and Premises as of the Commencement Date herein.
Sublandlord shall, at all times, act in good faith and with due diligence to
minimize interruption, reduction or discontinuation as to not unreasonably
interfere with the ordinary conduct of Subtenant’s business operations in the
Premises.
     In no event shall Operating Expenses or Common Area Maintenance Expenses
include, and Subtenant shall not be required by this Sublease to pay for, the
following: (i) costs of any special services rendered to individual Subtenants,
including Subtenant, for which a special charge is made; (ii) any capital costs
except as expressly permitted above; (iii) interest, charges and fees incurred
on debt, payment on mortgages and rent under ground leases; and all costs
expended in connection with any sale, hypothecation, financing, refinancing, or
ground lease of the Building or Property or of the Sublandlord’s interest
therein; (iv) costs occasioned by casualties that would be covered by an
all-risk property insurance policy (including earthquake and flood) or by other
insurance actually carried by Sublandlord, insurance deductibles greater than
$20,000 per calendar year, or self-insured retentions or co-insurance of any
type; (v) administrative fees if property management fees are already included
in Operating Expenses or Common Area Maintenance Expenses; (vi) reserves for any
purposes; (vii) depreciation for any of the real or personal property associated
with the Building or Property, including depreciation of any leasehold
improvements; (viii) any duplicative charges (i.e., costs includable in
Operating Expense shall not be includable in Common Area Maintenance Expenses);
(ix) leasing expenses such as commissions, attorneys’ fees, auditing fees, and
other costs incurred in connection with negotiations or disputes with subtenants
or negotiating or enforcing

     
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leases and lease-related documents; and (x) costs incurred to remove or
remediate any hazardous materials or substances from the Property existing in,
on or under the Property as of the Commencement Date and any judgments, fines,
penalties, or other costs incurred in connection with any hazardous material or
substance exposure or release.
               (d) Manner of Payment. Subtenant’s Pro Rata Share of Real
Property Taxes, Operating Expenses, and Common Area Maintenance Expenses, is
sometimes collectively referred to herein as “Additional Rent”.
                    (1) Sublandlord may reasonably estimate in advance the
amounts Subtenant shall owe for Additional Rent for any full or partial calendar
year of the Term. Subtenant shall pay such estimated amounts of Additional Rent,
on a monthly basis, on or before the first day of each such calendar month. Such
estimate may be reasonably adjusted from time to time by Sublandlord. The
estimate for the first year of the Term is approximately $0.58 per rentable
square foot per month.
                    (2) Within ninety (90) days after the end of each calendar
year, or as soon thereafter as practicable, Sublandlord shall provide a
statement (the “Statement”) to Subtenant showing: (a) the amount of actual
Additional Rent for such calendar year, with a listing of amounts for major
categories of Operating Expenses, Real Property Taxes, and Common Area
Maintenance Expenses, (b) any amount paid by Subtenant toward such Additional
Rent during such calendar year on an estimated basis and (c) any revised
estimate of Subtenant’s obligations for Additional Rent for the current calendar
year.
                    (3) If the Statement shows that Subtenant’s estimated
payments were less than Subtenant’s actual obligations for Additional Rent for
such year, Subtenant shall pay the difference. If the Statement shows an
increase in Subtenant’s estimated payments for the current calendar year,
Subtenant shall pay the difference between the new and former estimates, for the
period from January 1 of the current calendar year through the month in which
the Statement is sent. Subtenant shall make such payments within thirty
(30) days after Sublandlord sends the Statement.
                    (4) If the Statement shows that Subtenant’s estimated
payments exceeded Subtenant’s actual obligations for Additional Rent, Subtenant
shall receive a credit for the difference against payments of Rent next due. If
the Term shall have expired and no further Rent shall be due, Subtenant shall
receive a refund of such difference, within thirty (30) days after Sublandlord
sends the Statement.
                    (5) So long as Subtenant’s obligations hereunder are not
materially adversely affected thereby, Sublandlord reserves the right to
reasonably change, from time to time, the manner or timing of the foregoing
payments. In lieu of providing one (1) Statement covering Real Property Taxes,
Operating Expenses, and Common Area Maintenance Expenses, Sublandlord may
provide separate statements, at the same or different times. No delay by
Sublandlord in providing the Statement, or

     
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separate statements, shall be deemed in default by Sublandlord or a waiver of
Sublandlord’s right to require payment of Subtenant’s obligations for actual or
estimated Real Property Taxes, Operating Expenses, or Common Area Maintenance
Expenses.
               (e) Proration. If the Term commences other than on January 1, or
ends other than on December 31, Subtenant’s obligations to pay estimated and
actual amounts towards Additional Rent for such first or final calendar year
shall be prorated to reflect the portion of such years included in the Term.
Such proration shall be made by multiplying the total estimated or actual, as
the case may be, Additional Rent, for such calendar years by a fraction, the
numerator of which shall be the number of days of the Term during such calendar
year, and the denominator of which shall be 365. Other amounts payable or to be
expended pursuant to this Sublease on an annual or quarterly basis shall be
similarly prorated.
               (f) Sublandlord’s Records. The initial determination of
Additional Rent shall be made by Sublandlord. Sublandlord or its agents shall
keep records in reasonable detail showing all expenditures made or items
enumerated above, which records shall be available for inspection and auditing
by Subtenant at its cost at any reasonable time on reasonable notice. Subtenant
reserves the right to object to any statement provided by Sublandlord, provided
that nothing shall relieve Subtenant of making payments of Additional Rent as
determined by Sublandlord as and when required hereunder.
          4.3. Late Charges and Default Interest. If Subtenant fails to pay when
due Rent or other amounts or charges which Subtenant is obligated to pay under
the terms of this Sublease, the unpaid amounts shall bear interest at the
maximum rate then allowed by law. Subtenant acknowledges that the late payment
of any installment of Monthly Base Rent will cause Sublandlord to lose the use
of that money and incur costs and expenses not contemplated under this Sublease,
including without limitation, administrative and collection costs and processing
and accounting expenses, the exact amount of which is extremely difficult to
ascertain. Therefore, in addition to interest, if any such installment is not
received by Sublandlord within ten (10) days from the date it is due, Subtenant
shall pay Sublandlord a late charge equal to ten percent (10%) of such
installment. Sublandlord and Subtenant agree that this late charge represents a
reasonable estimate of such costs and expenses and is fair compensation to
Sublandlord for the loss suffered from such nonpayment by Subtenant. Acceptance
of any interest or late charge shall not constitute a waiver of Subtenant’s
default with respect to such nonpayment by Subtenant nor prevent Sublandlord
from exercising any other rights or remedies available to Sublandlord under this
Sublease.
          4.4. Rent and Other Charges. Monthly Base Rent, Additional Rent, and
any other amounts which Subtenant is or becomes obligated to pay Sublandlord
under this Sublease or other agreement entered into in connection herewith, are
sometimes herein referred to collectively as “Rent” and all remedies applicable
to the nonpayment of Rent shall be applicable thereto

     
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     5. SECURITY DEPOSIT. Subtenant agrees to deposit with Sublandlord the
Security Deposit set forth at Section 1.6 upon execution of this Sublease, as
security for Subtenant’s faithful performance of its obligations under this
Sublease. Sublandlord and Subtenant agree that the Security Deposit may be
commingled with funds of Sublandlord and Sublandlord shall have no obligation or
liability for payment of interest on such deposit. Subtenant shall not mortgage,
assign, transfer or encumber the Security Deposit without the prior written
consent of Sublandlord and any attempt by Subtenant to do so shall be void,
without force or effect and shall not be binding upon Sublandlord. If Subtenant
fails to pay any Rent or other amount when due and payable under this Sublease,
or fails to perform any of the terms hereof, Sublandlord may appropriate and
apply or use all or any portion of the Security Deposit for Rent payments or any
other amount then due and unpaid, for payment of any amount for which
Sublandlord has become obligated as a result of Subtenant’s default or breach,
and for any loss or damage sustained by Sublandlord as a result of Subtenant’s
default or breach, and Sublandlord may so apply or use this deposit without
prejudice to any other remedy Sublandlord may have by reason of Subtenant’s
default or breach. If Sublandlord so uses any of the Security Deposit, Subtenant
shall within ten (10) days after written demand therefore, restore the Security
Deposit to the full amount originally deposited; Subtenant’s failure to do so
shall constitute an act of default hereunder and Sublandlord shall have the
right to exercise any remedy provided for in Section 21 hereof. Within fifteen
(15) days after the Term (or any extension thereof) has expired or Subtenant has
vacated the Premises, whichever shall last occur, and provided Subtenant is not
then in default on any of its obligations hereunder, Sublandlord shall return
the Security Deposit to Subtenant, or, if Subtenant has assigned its interest
under this Sublease, to the last assignee of Subtenant. If Sublandlord sells its
interest in the Premises, Sublandlord may deliver this deposit to the purchaser
of Sublandlord’s interest and thereupon be relieved of any further liability or
obligation with respect to the Security Deposit.
     6. SUBTENANT’S USE OF THE PREMISES. Subtenant may use the Premises solely
for the purposes set forth in Subtenant’s Use Clause in Section 1.7 (“Permitted
Uses”). Subtenant shall not use or occupy the Premises in violation of law or
any covenant, condition or restriction affecting the Building or the certificate
of occupancy issued for the Building, and shall, upon notice from Sublandlord,
immediately discontinue any use of the Premises which is declared by any
governmental authority having jurisdiction to be a violation of law or of
occupancy. Subtenant, at Subtenant’s own cost and expense, shall comply with all
laws, ordinances, regulations, rules and/or any directions of any governmental
agencies or authorities having jurisdiction which shall, by reason of the nature
of Subtenant’s unique use or occupancy of the Premises( as opposed to general
office, commercial or retail uses), impose any duty upon Subtenant or
Sublandlord with respect to the Premises or its use or occupation. Sublandlord
shall bear all other costs to comply with laws affecting the Property or the
Building. Subtenant shall not do or permit to be done anything which will
invalidate or increase the cost of any fire, extended coverage or other
insurance policy covering the Building and/or property located therein, and
shall comply with all rules, orders, regulations,

     
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requirements and recommendations of the Insurance Services Office or any other
organization performing a similar function. Subtenant shall promptly upon demand
reimburse Sublandlord for any additional premium charged for such policy by
reason of Subtenant’s failure to comply with the provisions of this Section 6.
Subtenant shall not do or permit anything to be done in or about the Premises
which will in any way obstruct or interfere with the rights of other Subtenants
or occupants of the Building or injure or annoy them, or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Subtenant cause, maintain or permit any nuisance in, on or
about the Premises. Subtenant shall not commit or suffer to be committed any
waste in or upon the Premises.
     During the term of this Sublease, no portion of the Building or Property
(other than the Premises) may be used, and no other subtenant shall be permitted
to operate, any business primarily engaged in the sale of carbonated beverages
(the “Exclusive Use”). Sublandlord shall not lease or sublease any portion of
the Building or Property to, or rename the Building to that of, any direct
competitor of Subtenant, and shall not permit any such direct competitor’s
signage on the exterior Building surfaces. The Exclusive Use restriction set
forth herein shall not prevent Sublandlord from leasing space in the Building to
any restaurant, bar or other similar hospitality business. No portion of the
Building or Property may be used for any of the Prohibited Uses attached hereto
and incorporated herein as Exhibit I.
     7. COMPLIANCE WITH LAWS. Subtenant shall not cause or permit the Premises
to be used in any way which violates any law, ordinance, or governmental
regulation or order. Subtenant shall be responsible for complying with all laws
applicable to the Premises solely as a result of Subtenant’s particular use,
such as modifications required by the Americans With Disabilities Act as a
result of Subtenant opening the Premises to the public as a place of public
accommodation. If the enactment or enforcement of any law, ordinance, regulation
or code during the Sublease Term requires any changes to the Premises during the
Sublease Term, Subtenant shall perform all such changes at its expense if the
changes are required due to the nature of Subtenant’s unique activities at the
Premises, or to alterations that Subtenant seeks to make to the Premises;
otherwise, Sublandlord shall perform all such changes at its expense.
Sublandlord shall not be in default of any of the terms of this Sublease in the
event Sublandlord is unable to obtain a building permit to complete any
Subtenant improvements specified in this Sublease, provided that the foregoing
shall not affect Subtenant’s rights described in Section 3.1 in the event
Sublandlord fails to deliver the Premises by the Commencement Date.
     8. GUARANTY. [Intentionally Left Blank.]
     9. UTILITIES. Sublandlord shall cause as of the Commencement Date hereof,
electricity, water, sewer and telephone utilities to be available at the
Premises. Subtenant shall pay directly to the applicable utility/service
provider for all water, sewer, gas, janitorial, electricity, garbage removal,
heat, telephone, and other utilities and

     
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services used by Subtenant on the Premises during the Term. Subtenant shall be
responsible for providing and paying directly for its own janitorial services to
the Premises, and will not be required to contribute toward janitorial costs
allocable to other subtenant spaces at the Building. Sublandlord, upon request
of Subtenant, and at the sole expense and liability of Subtenant, shall join
with Subtenant in any application required for obtaining or continuing such
utilities or services.
     10. TAXES. Subtenant shall pay all taxes, assessments, liens and license
fees (“Taxes”) levied, assessed or imposed by any authority having the direct or
indirect power to tax or assess any such liens, by reason of Subtenant’s
occupancy of the Premises, and all Taxes on Subtenant’s personal property
located on the Premises. Sublandlord shall pay all Taxes with respect to the
Building and the Property, including any Taxes resulting from a reassessment of
the Building and the Property due to a change of ownership or otherwise, which
shall be included in Operating Expenses, subject to Section 4.2(a) above.
     11. ALTERATIONS. Subtenant may make alterations, additions or improvements
to the Premises (“Alterations”) with the prior written consent of Sublandlord,
which consent shall not be unreasonably withheld. The term “Alterations” shall
not include the installation of shelves, partitions, Subtenant’s equipment and
trade fixtures which may be performed without damaging existing improvements or
the structural integrity of the Premises, and Sublandlord’s consent shall not be
required for Subtenant’s installation of those items. Subtenant shall complete
all Alterations at Subtenant’s expense in compliance with all applicable laws
and in accordance with plans and specifications approved by Sublandlord.
Sublandlord shall be deemed the owner of all Alterations except for those which
Sublandlord requires to be removed at the end of the Sublease term. Subtenant
shall remove all Alterations at the end of the Sublease term unless Sublandlord
conditioned its consent upon Subtenant leaving a specified Alteration at the
Premises, in which case Subtenant shall not remove such Alteration. Subtenant
shall immediately repair any damage to the Premises caused by removal of
Alterations.
     Notwithstanding the foregoing, in no event shall Subtenant be entitled to
make any changes, alterations, or modifications of structural portions or the
exterior of the Building, including, without limitation, anything which would
affect window treatments, paint, surface texture, awnings, light fixtures, or
signage, without first obtaining Sublandlord’s prior written consent, which may
be withheld in Sublandlord’s sole and absolute discretion.
     12. REPAIRS AND MAINTENANCE.
          12.1 Subtenant’s Repair and Maintenance Obligations. Subtenant shall
at all times throughout the Term, at its sole cost and expense, keep the
Premises in good order and repair, reasonable wear and tear excepted, including,
by way of illustration only, maintenance and repair of all exterior doors and
entrances, windows and moldings and trim on all doors and windows, bathrooms,
all partitions, door surfaces,

     
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fixtures, equipment and appurtenances as well as all Building Systems serving
only the Premises or that portion of the Building Systems serving the entire
Building which are physically located within the Premises. Subtenant shall have
the VAV located within the Premises serviced at least one time per year. After
each yearly servicing, Subtenant shall provide Sublandlord proof of servicing of
the Subtenant VAV within five (5) days of such servicing. Subtenant shall commit
no waste nor disturb the structural integrity of the Premises. Upon expiration
or termination of the Sublease Term, Subtenant shall promptly and peacefully
surrender the Premises, together with all keys, to Sublandlord in as good
condition as when received by Subtenant from Sublandlord or as thereafter
improved, reasonable wear and tear and casualty or condemnation which Subtenant
is not required elsewhere under this Sublease to repair or restore excepted.
          12.2 Sublandlord’s Repair and Maintenance Obligations. Sublandlord
shall maintain and repair in reasonably good working order and condition as
necessary the following areas of the Building: (i) all Common Areas, (ii) all
structural components, (iii) the foundation, and (iv) the roof. Sublandlord
shall also maintain those portions of the Building Systems not physically
located within the Premises or located within the premises of another subtenant.
Costs for the foregoing shall be includable in Operating Expenses and/or Common
Area Maintenance Expenses as set forth in and subject to Section 4.2(b) and
Section 4.2(c).
     13. ACCESS. After reasonable notice from Sublandlord (except in cases of
emergency, where no notice is required) Subtenant shall permit Sublandlord and
its agents and employees to enter the Premises at reasonable times for the
purposes of repair or inspection. This Section 13 shall not impose any repair or
other obligation upon Sublandlord not expressly stated elsewhere in this
Sublease. After reasonable notice to Subtenant, Sublandlord shall have the right
to enter the Premises for the purpose of showing the Premises to prospective
purchasers or lenders at any time, and to prospective Subtenants within one
hundred eighty (180) days prior to the expiration or sooner termination of the
Sublease Term. Sublandlord shall use commercially reasonable efforts to minimize
any adverse impacts on Subtenant’s use, enjoyment, and access of and to the
Premises as well as the visibility of its signage in connection with any entry
on or activities at the Premises.
     14. SIGNAGE. Except as described below, Subtenant shall obtain
Sublandlord’s written consent before installing any signs upon the Premises,
which consent shall not be unreasonably withheld. Subtenant shall install any
approved signage at Subtenant’s sole expense and in compliance with all
applicable laws. Subtenant shall not damage or deface the Premises in installing
or removing signage and shall repair any injury or damage to the Premises caused
by such installation or removal. Sublandlord reserves the right to remove any
offensive marketing, advertisement and/or materials at all times. Sublandlord
agrees to provide Subtenant with a lobby directory signage. In addition, Subject
to existing governmental, municipal and historical district building codes and
regulations Subtenant shall have the right to install the signage depicted on

     
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Exhibit H attached hereto and incorporated herein. Sublandlord shall assist with
the Subtenant in securing approval on Subtenant’s proposed signage from the City
of Seattle and the Pioneer Square Preservation Board. Subtenant shall have the
right to display banners, balloons, and other related to advertise Subtenant’s
product directly in front of Subtenant’s Premises on Occidental Street with
Sublandlord’s prior written reasonable consent. Such advertising shall be
contingent on requirements of the local ordinance. Sublandlord reserves the
right to remove any offensive displays and/or advertisement. Signage allowed in
this Section 14 shall not include any signs on the exterior walls of the
Building. Subtenant, at Subtenant’s sole expense, shall have (i) the ongoing
option, at its election to be made anytime and from time to time when no third
party is then leasing the external façade of the south facing wall of the
Building (the “Wall Sign”), to lease the Wall Sign for one or more periods as
may be elected at such times by Subtenant; and (ii) a first right of refusal to
lease the Wall Sign, to be exercised in writing by Subtenant within five
(5) business days after Sublandlord notifies Subtenant that Sublandlord has
received a bona fide third-party offer which Sublandlord would otherwise be
willing to accept, providing with such notice a copy of such third-party offer
(although Sublandlord may redact terms addressing rent or other consideration
therefrom); and, in either such event, Sublandlord and Subtenant will enter into
a separate Wall Sublease for Subtenant’s Wall Sign in the form attached hereto
as Exhibit K.
     15. DESTRUCTION OR CONDEMNATION.
          15.1. Damage and Repair. If the Premises are partially damaged but not
rendered untenantable, by fire or other insured casualty, then Sublandlord shall
diligently restore the Premises and this Sublease shall not terminate. The
Premises shall not be deemed untenantable if less than twenty-five percent (25%)
of the Premises are damaged. Sublandlord shall have no obligation to restore the
Premises if insurance proceeds are not available to pay the entire cost of such
restoration. If insurance proceeds are available to Sublandlord but are not
sufficient to pay the entire cost of restoring the Premises, then Sublandlord
may elect to terminate this Sublease and keep the insurance proceeds, by
notifying Subtenant within sixty (60) days of the date of such casualty.
     If the Premises are entirely destroyed, or partially damaged and rendered
untenantable, by fire or other casualty, Sublandlord may, at its option:
(a) terminate this Sublease as provided herein, or (b) restore the Premises to
its previous condition. If, within sixty (60) days after receipt by Sublandlord
from Subtenant of written notice that Subtenant deems the Premises untenantable,
Sublandlord fails to notify Subtenant of its election to restore the Premises,
or if Sublandlord is unable to restore the Premises within nine (9) months of
the date of the casualty event, then Subtenant may elect to terminate the
Sublease.
     If Sublandlord restores the Premises under this Section 15.1, Sublandlord
shall proceed with reasonable diligence to complete the work, and the Monthly
Base Rent shall be abated in the same proportion as the untenantable portion of
the Premises bears to the whole Premises, provided that there shall be a rent
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destruction of the Premises did not result from, or was not contributed to
directly or indirectly by the act, fault or neglect of Subtenant, or Subtenant’s
officers, contractors, licensees, agents, servants, employees, guests, invitees
or visitors. No damages, compensation or claim shall be payable by Sublandlord
for inconvenience, loss of business or annoyance directly, incidentally or
consequentially arising from any repair or restoration of any portion of the
Premises. Sublandlord will not carry insurance of any kind for the protection of
Subtenant or on Subtenant’s furniture or on any fixtures, equipment,
improvements or appurtenances of Subtenant under this Sublease, and Sublandlord
shall not be obligated to repair any damage thereto or replace the same unless
the damage is caused by Sublandlord’s negligence.
          15.2. Condemnation. If the Premises are made untenantable by eminent
domain or conveyed under a threat of condemnation, this Sublease shall
automatically terminate as of the earlier of the date title to the Property
vests in the condemning authority or the condemning authority first has
possession of the Premises and all Rent shall be paid to that date. In the event
of a taking of a portion of the Property that does not render the Premises
untenantable, then this Sublease shall continue in full force and effect and the
Monthly Base Rent shall be equitably reduced based on the proportion by which
the floor area of the Premises is reduced, such reduction in Monthly Base Rent
to be effective as of the earlier of the date the condemning authority first has
possession of such portion or title vests in the condemning authority.
Sublandlord shall be entitled to the entire award from the condemning authority
attributable to the value of the Premises and Subtenant shall make no claim for
the value of its leasehold. Subtenant shall be permitted to make a separate
claim against the condemning authority for moving expenses or damages resulting
from interruption in its business, provided that in no event shall Subtenant’s
claim reduce Sublandlord’s award.
     16. INSURANCE.
          16.1. Subtenant’s Insurance.
               (a) All insurance required to be carried by Subtenant hereunder
shall be issued by responsible insurance companies reasonably acceptable to
Sublandlord and Sublandlord’s lender and qualified to do business in the State
of Washington. Each policy of liability insurance shall name Sublandlord, and at
Sublandlord’s request any mortgagee of Sublandlord, as an additional insured.
Each policy shall contain (i) a cross-liability endorsement, (ii) a provisions
that such policy and the coverage evidenced thereby shall be primary and
non-contributing with respect to any policies carried by Sublandlord and that
any coverage carried by Sublandlord shall be excess insurance, and (iii) with
respect to property insurance policies only, a waiver by the insurer of any
right of subrogation against Sublandlord, its agents, employees and
representatives, which arises or might arise by reason of any payment under such
policy or by reason of any act or omission of Sublandlord, its agents, employees
or representatives. A copy of each paid up policy (authenticated by the insurer)
or an ACORD certificate of the insurer evidencing the existence and amount of
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delivered to Sublandlord before the date Subtenant is first given the right of
possession of the Premises, and thereafter within thirty (30) days after any
demand by Sublandlord therefore. Sublandlord may, at any time and from time to
time, inspect and/or copy any insurance policies required to be maintained by
Subtenant hereunder. No such policy shall be cancelable except after twenty
(20) days written notice to Sublandlord and Sublandlord’s lender. Subtenant
shall furnish Sublandlord with renewals or “binders” of any such policy at least
ten (10) days prior to the expiration thereof. Subtenant agrees that if
Subtenant does not take out and maintain such insurance, Sublandlord may (but
shall not be required to) procure said insurance on Subtenant’s behalf and
charge the Subtenant the premiums together with a twenty-five percent (25%)
handling charge, payable upon demand. Subtenant shall have the right to provide
such insurance coverage pursuant to blanket policies obtained by the Subtenant,
provided such blanket policies expressly afford coverage to the Premises,
Sublandlord, Sublandlord’s mortgagee and Subtenant as required by this Sublease.
               (b) Beginning on the date Subtenant is given access to the
Premises for any purpose and continuing until the expiration of the Term,
Subtenant shall procure, pay for and maintain in effect policies of property
insurance covering (i) all leasehold improvements (including any alterations,
additions or improvements that may be made by Subtenant), and (ii) trade
fixtures, merchandise and other personal property from time to time in, on or
about the Premises, in the amount not less than one hundred percent (100%) of
their actual replacement cost from time to time, providing protection against
any peril included within the classification “Fire and Extended Coverage”
together with insurance against sprinkler damage, vandalism and malicious
mischief. The proceeds of such insurance shall be used for the repair or
replacement of the property so insured. Upon termination of this Sublease
following a casualty as set forth herein, the proceeds under (i) shall be paid
to Sublandlord, and the proceeds under (ii) above shall be paid to Subtenant.
               (c) Beginning on the date Subtenant is given access to the
Premises for any purpose and continuing until the expiration of the Term,
Subtenant shall procure, pay for and maintain in effect workers’ compensation
insurance as required by law and comprehensive public liability and property
damage insurance with respect to the construction of improvements on the
Premises, the use, operation or condition of the Premises and the operation of
Subtenant in, on or about the Premises, providing personal injury and broad from
property damage coverage for not less than One Million Dollars ($1,000,000.00)
combined single limit for bodily injury, death and property damage liability.
               (d) Subtenant shall deposit the policy or policies of such
required insurance or ACORD certificates thereof with Sublandlord prior to the
Commencement Date, which policies shall name Sublandlord and Sublandlord’s
designee as additional named insured and shall also contain a provision stating
that such policy or

     
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policies shall not be canceled or materially altered except after thirty
(30) days written notice to Sublandlord.
               (e) Not less than every three (3) years during the Term,
Sublandlord and Subtenant shall mutually agree to increases in all Subtenant’s
insurance policy limits for all insurance carried by Subtenant as set forth in
this Section 16.1. In the event Sublandlord and Subtenant cannot mutually agree
upon the amounts of said increases, then Subtenant agrees that all insurance
policy limits as set forth in this Section 16.1 shall be adjusted for increases
in the same proportion as Monthly Base Rent.
          16.2. Sublandlord Insurance. Sublandlord shall carry standard form
extended coverage fire insurance of the Building shell and core in the amount of
their full replacement value, commercial general liability insurance with
respect to the Sublandlord’s activities at the Building and Property (including
the Common Areas), and such other insurance of such types and amounts as
Sublandlord, in its discretion, shall deem reasonably appropriate. The cost of
any such insurance may be included in the Operating Expenses by a “blanket
policy” insuring other parties and/or locations in addition to the Building, in
which case the portion of the premiums therefor allocable to the Building and
the Property shall be included in the Operating Expenses. In addition to the
foregoing, in the event Subtenant fails to provide or keep in force any of the
insurance as required above, Sublandlord, in its discretion, may provide such
insurance, in which event, the cost thereof shall be payable by Subtenant to
Sublandlord as Additional Rent on the first day of the calendar month
immediately following demand therefor from Sublandlord.
          16.3. Waiver of Subrogation. Sublandlord and Subtenant hereby release
each other and any other Subtenant, their agents or employees, from
responsibility for, and waive their entire claim of recovery for any loss or
damage arising from any cause covered by property insurance required to be
carried by each of them. Each party shall provide notice to the property
insurance carrier or carriers of this mutual waiver of subrogation, and shall
cause its respective property insurance carriers to waive all rights of
subrogation against the other. This waiver shall not apply to the extent of the
deductible amounts to any such properties policies or to the extent of
liabilities exceeding the limits of such policies.

     
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     17. INDEMNIFICATION.
          17.1. Subtenant’s Duty. Subtenant shall indemnify, defend and hold
Sublandlord harmless against and from liability and claims of any kind for loss
or damage to property of Subtenant or any other person, or for any injury to or
death of any person, arising out of: (1) Subtenant’s use and occupancy of the
Premises, or any work, activity or other things allowed or suffered by Subtenant
to be done in, on or about the Premises or the Property; (2) any breach or
default by Subtenant of any of Subtenant’s obligations under this Sublease; or
(3) any negligent or otherwise tortuous act or omission of Subtenant, its
agents, employees, invitees or contractors. Subtenant shall at Subtenant’s
expense, and by counsel satisfactory to Sublandlord, defend Sublandlord in any
action or proceeding arising from any such claim and shall indemnify Sublandlord
against all costs, attorneys’ fees, expert witness fees and any other expenses
incurred in such action or proceeding. As a material part of the consideration
for Sublandlord’s execution of this Sublease, except for Sublandlord’s gross
negligence or willful misconduct, Subtenant hereby assumes all risk of damage or
injury to any person or property in, on or about the Premises or the Property
from any cause.
          17.2. Sublandlord’s Duty. Sublandlord shall indemnify, defend and hold
Subtenant harmless from any liability, loss, cost, expense or claim (including
reasonable attorneys’ fees) of any nature resulting from any injury to person or
damage to property arising from the negligence or willful misconduct of
Sublandlord, its employees, contractors, agents, or invitees or any activities
conducted on or about the Premises by anyone other than Subtenant, its
employees, contractors or agents.
          When the claim is caused by the joint negligence or willful misconduct
of Subtenant and Sublandlord or Subtenant and a third party unrelated to
Subtenant (except Subtenant’s agents, officers, employees or invitees),
Subtenant’s duty to indemnify and defend shall be proportionate to Subtenant’s
allocable share of joint negligence or willful misconduct. When the claim is
caused by the joint negligence or willful misconduct of Subtenant and
Sublandlord or Sublandlord and a third party unrelated to Sublandlord (except
Sublandlord’s agents, officers, employees or invitees), Sublandlord’s duty to
indemnify and defend shall be proportionate to Sublandlord’s allocable share of
joint negligence or willful misconduct.
     In the absence of comparative or concurrent negligence on the part of the
party claiming indemnity under this Section 17 or its employees, contractors,
agents or invitees, the foregoing indemnity shall also include reasonable costs,
expenses and attorneys’ fees incurred in successfully establishing the right to
indemnity. The indemnifying party shall have the right to assume the defense of
any claim subject to this indemnity with counsel reasonably satisfactory to the
indemnified party. The indemnified party agrees to cooperate fully with the
indemnifying party and its counsel in any matter where the indemnifying party
elects to defend, provided the indemnifying party shall promptly reimburse the
indemnified party for reasonable costs and expenses incurred in connection with
its duty to cooperate.

     
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     Solely for the purpose of effectuating the parties’ respective
indemnification obligations under this Sublease, and not for the benefit of any
third parties (including but not limited to employees of either party), each
party specifically and expressly waives any immunity that may be granted it
under the Washington State Industrial Insurance Act, Title 51 RCW. Furthermore,
the indemnification obligations under this Sublease shall not be limited in any
way by any limitation on the amount or type of damages, compensation or benefits
payable to or for any third party under Worker Compensation Acts, Disability
Benefit Acts or other employee benefit acts. The parties acknowledge that the
foregoing provisions of this paragraph have been specifically and mutually
negotiated between the parties.
          17.3. Limitation on Sublandlord’s Liability. Sublandlord shall not be
liable for injury or damage which may be sustained by the person or property of
Subtenant, its employees, invitees or customers, or any other person in or about
the Premises, caused by or resulting from fire, steam, electricity, gas, water
or rain which may leak or flow from or into any part of the Premises, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, whether such damage
or injury results from conditions arising upon the Premises or upon other
portions of the Building or Property or from other sources. Sublandlord shall
not be liable for any damages arising from any act or omission of any other
Subtenant of the Building or the Property.
     18. ASSIGNMENT AND SUBLETTING. Subtenant shall not assign, sublet,
mortgage, encumber or otherwise transfer any interest in this Sublease
(collectively referred to as a “Transfer”) or any part of the Premises, without
first obtaining Sublandlord’s written consent which consent shall not be
unreasonably withheld or delayed. No Transfer shall relieve Subtenant of any
liability under this Sublease notwithstanding Sublandlord’s consent to such
transfer. Consent to any Transfer shall not operate as a waiver of the necessity
for Sublandlord’s consent to any subsequent Transfer.
     If Subtenant is a partnership, limited liability company, corporation, or
other entity, any transfer of this Sublease by merger, consolidation, redemption
or liquidation, or any change(s) in the ownership of, or power to vote, which
singularly or collectively represents a majority of the beneficial interest in
Subtenant, shall constitute a Transfer under this Section 18.
     As a condition to Sublandlord’s approval, if given, any potential assignee
approved by Sublandlord shall assume all obligations of Subtenant under this
Sublease accruing on and after the effective date of such assignment and shall
be jointly and severally liable with Subtenant for the payment of Rent and
performance of all terms of this Sublease, and any potential sub-sublessee shall
acknowledge that its sub-sublease is subject to and subordinate in all respects
to this Sublease and to the Master Lease. In connection with any Transfer,
Subtenant shall provide Sublandlord with copies of all assignments,
sub-subleases and assumption instruments.

     
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     19. LIENS. Subtenant shall keep the Property and the Premises free from any
liens created by or through Subtenant. Subtenant shall indemnify, defend and
hold Sublandlord harmless from liability from any such liens including, without
limitation, liens arising from any Alterations. If a lien is filed against the
Property or the Premises by any person claiming by, through or under Subtenant,
Subtenant shall, upon request of Sublandlord, at Subtenant’s expense, promptly
either satisfy the lien and cause it to be removed from title to the Property or
Premises, as applicable, or furnish to Sublandlord a bond in form and amount and
issued by a surety reasonably satisfactory to Sublandlord, indemnifying
Sublandlord and the Premises against all liabilities, costs and expenses,
including attorneys’ fees, which Sublandlord could reasonably incur as a result
of such lien(s).
     20. DEFAULT. The following occurrences shall each be deemed an event of
default (“Event of Default”) by Subtenant:
          20.1. Failure to Pay. Subtenant fails to pay any sum, including Rent,
due under this Sublease following ten (10) days’ written notice from Sublandlord
of the failure to pay.
          20.2. Abandonment. Subtenant abandons the Premises (defined as an
absence of ten (10) days or more while Subtenant is in breach of some other term
of this Sublease). Subtenant’s abandonment of the Premises shall not be subject
to any notice or right to cure.
          20.3. Insolvency. Subtenant becomes insolvent, voluntarily or
involuntary bankrupt or a receiver, assignee or other liquidating officer is
appointed for Subtenant’s business, provided that in the event of any
involuntary bankruptcy or other insolvency proceeding, the existence of such
proceeding such constitute an Event of Default only if such proceeding is not
dismissed or vacated within sixty (60) days after its institution or
commencement.
          20.4. Levy or Execution. Subtenant’s interest in this Sublease or the
Premises, or any part thereof, is taken by execution or other process of law
directed against Subtenant, or is taken upon or subjected to any attachment by
any creditor of Subtenant, if such attachment is not discharged within fifteen
(15) days after being levied.
          20.5. Other Non-Monetary Defaults. Subtenant breaches any agreement,
term or covenant of this Sublease other than one requiring the payment of money
and not otherwise enumerated in this Section 20, and the breach continues for a
period of thirty (30) days after notice by Sublandlord to Subtenant of the
breach.
          20.6. Failure to Take Possession. Subtenant fails to take possession
of the Premises on the Commencement Date.

     
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     21. REMEDIES. Sublandlord shall have the following remedies upon an Event
of Default. Sublandlord’s rights and remedies under this Sublease shall be
cumulative, and none shall exclude any other right or remedy allowed by law.
          21.1. Termination of Sublease. Sublandlord may terminate the Sublease
and re-enter the Premises and take possession thereof, but no act by Sublandlord
other than written notice from Sublandlord to Subtenant of termination shall
terminate this Sublease. The Sublease shall terminate on the date specified in
the notice of termination. Upon termination of this Sublease, Subtenant will
remain liable to Sublandlord for damages in an amount equal to the Rent and
other sums that would have been owing by Subtenant under this Sublease for the
balance of the Sublease Term, less the net proceeds, if any, of any reletting of
the Premises by Sublandlord subsequent to the termination, after deducting all
Sublandlord’s Reletting Expenses (as defined below). Sublandlord shall be
entitled to either collect damages from Subtenant monthly on the days on which
Rent or other amounts would have been payable under the Sublease, or
alternatively, Sublandlord may accelerate Subtenant’s obligations under the
Sublease and recover from Subtenant: (i) unpaid Rent which had been earned at
the time of termination; (ii) the amount by which the unpaid Rent which would
have been earned after termination until the time of award exceeds the amount of
Rent loss that Subtenant proves could reasonably have been avoided; (iii) the
amount by which the unpaid Rent for the balance of the Term of the Sublease
after the time of award exceeds the amount of Rent loss that Subtenant proves
could reasonably be avoided (discounting such amount by the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%)); and (iv) any other amount necessary to compensate Sublandlord for all the
detriment proximately caused by Subtenant’s failure to perform its obligations
under the Sublease, or which in the ordinary course would be likely to result
from the Event of Default, including without limitation Reletting Expenses
described in Section 21.2.
          21.2. Re-entry and Reletting. Sublandlord may continue this Sublease
in full force and effect, and without demand or notice, re-enter and take
possession of the Premises or any part thereof, expel the Subtenant from the
Premises and anyone claiming through or under the Subtenant, and remove the
personal property of either. Sublandlord may relet the Premises, or any part of
them, in Sublandlord’s or Subtenant’s name for the account of Subtenant, for
such period of time and at such other terms and conditions, as Sublandlord, in
its discretion, may determine. Sublandlord may collect and receive the Rents for
the Premises. Re-entry or taking possession of the Premises by Sublandlord under
this Section shall not be construed as an election on Sublandlord’s part to
terminate this Sublease, unless a written notice of termination is given to
Subtenant. Sublandlord reserves the right following any re-entry or reletting,
or both, under this Section to exercise its right to terminate the Sublease.
During the Event of Default, Subtenant will pay Sublandlord the Rent and other
sums which would be payable under this Sublease if repossession had not
occurred, plus the net proceeds if any, after reletting the Premises, after
deducting Sublandlord’s Reletting Expenses. “Reletting

     
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Expenses” is defined to include all expenses incurred by Sublandlord in
connection with reletting the Premises, including without limitation, all
repossession costs, brokerage commissions, attorneys’ fees, remodeling and
repair costs, costs for removing and storing Subtenant’s property and equipment,
and Rent concessions granted by Sublandlord to any new Subtenant, prorated over
the life of the new lease. Sublandlord shall use commercially reasonable efforts
to mitigate its damages in the event of any Subtenant default hereunder.
          21.3. Waiver of Redemption Rights. Subtenant, for itself, and on
behalf of any and all persons claiming through or under Subtenant, including
creditors of all kinds, hereby waives and surrenders all rights and privileges
which they may have under any present or future law, to redeem the Premises or
to have a continuance of this Sublease for the Sublease term, as it may have
been extended.
          21.4. Nonpayment of Additional Rent. All costs which Subtenant agrees
to pay to Sublandlord pursuant to this Sublease shall in the event of nonpayment
be treated as if they were payments of Rent, and Sublandlord shall have all the
rights herein provided for in case of nonpayment of Rent.
          21.5. Failure to Remove Property. If Subtenant fails to remove any of
its property from the Premises at Sublandlord’s request following an uncured
Event of Default, Sublandlord may, at its option and without notice, remove and
store the property at Subtenant’s expense and risk. If Subtenant does not pay
the storage cost within five (5) days of Sublandlord’s request, Sublandlord may,
at its option, have any or all of such property sold at public or private sale
(and Sublandlord may become a purchaser at such sale), in such manner as
Sublandlord deems proper, without notice to Subtenant. Sublandlord shall apply
the proceeds of such sale: (i) to the expense of such sale, including reasonable
attorneys’ fees actually incurred; (ii) to the payment of the costs or charges
for storing such property; (iii) to the payment of any other sums of money which
may then be or thereafter become due Sublandlord from Subtenant under any of the
terms hereof; and (iv) the balance, if any, to Subtenant. Nothing in this
Section shall limit Sublandlord’s right to sell Subtenant’s personal property as
permitted by law to foreclose Sublandlord’s lien for unpaid rent.
     22. MORTGAGE SUBORDINATION AND ATTORNMENT. This Sublease shall
automatically be subordinate to any mortgage or deed of trust created by
Sublandlord which is now existing or hereafter placed upon the Premises
including any advances, interest, modifications, renewals, replacements or
extensions (“Sublandlord’s Mortgage”), provided the holder of any Sublandlord’s
Mortgage or any person(s) acquiring the Premises at any sale or other proceeding
under any such Sublandlord’s Mortgage shall elect to continue this Sublease in
full force and effect. Subtenant shall attorn to the holder of any Sublandlord’s
Mortgage or any person(s) acquiring the Premises at any sale or other proceeding
under any Sublandlord’s Mortgage provided such person(s) assume the obligations
of Sublandlord under this Sublease. Subtenant shall promptly and in no event
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deliver documents which the holder of any Sublandlord’s Mortgage may reasonably
require as further evidence of this subordination and attornment.
Notwithstanding the foregoing, Subtenant’s obligations under this Section are
conditioned on the holder of each of Sublandlord’s Mortgage and each person
acquiring the Premises at any sale or other proceeding under any such
Sublandlord’s Mortgage not disturbing Subtenant’s occupancy and other rights
under this Sublease, so long as no uncured Event of Default exists.
     23. NON-WAIVER. Sublandlord’s waiver of any breach of any term contained in
this Sublease shall not be deemed to be a waiver of the same term for subsequent
acts of Subtenant. The acceptance by Sublandlord of Rent or other amounts due by
Subtenant hereunder shall not be deemed to be a waiver of any breach by
Subtenant preceding such acceptance.
     24. HOLDOVER. If Subtenant shall, without the written consent of
Sublandlord, hold over after the expiration or termination of the Term, such
tenancy shall be deemed to be on a month-to-month basis and may be terminated
according to Washington law. During such tenancy, Subtenant agrees to pay to
Sublandlord one hundred fifty percent (150%) the Monthly Base Rent last payable
under this Sublease, unless a different rate is agreed upon by Sublandlord. All
other terms of the Sublease shall remain in effect.
     25. NOTICES. All notices under this Sublease shall be in writing and
effective (i) when delivered by recognized overnight delivery service or in
person, or (ii) three (3) days after being sent by registered or certified mail
to Sublandlord or Subtenant, as the case may be, at the Notice Addresses set
forth in Section 1.8.
     26. COSTS AND ATTORNEYS’ FEES. If Subtenant or Sublandlord engage the
services of an attorney to collect monies due or to bring any action for any
relief against the other, declaratory or otherwise, arising out of this
Sublease, including any suit by Sublandlord for the recovery of Rent or other
payments, or possession of the Premises, the losing party shall pay the
Prevailing Party a reasonable sum for attorneys’ fees in such suit, at trial and
on appeal. “Prevailing Party” shall include without limitation (a) a party who
dismisses an action in exchange for sums allegedly due; (b) the party who
receives performance from the other party of an alleged breach or a desired
remedy that is substantially equivalent to the relief sought in an action or
proceeding; or (c) the party determined to be the prevailing party by an
arbitrator or a court of law.
     27. ESTOPPEL CERTIFICATES. Subtenant shall, from time to time, upon written
request of Sublandlord, execute, acknowledge and deliver to Sublandlord or its
designee a written statement specifying the following, subject to any
modifications necessary to make such statements true and complete: (i) the date
the Sublease Term commenced and the date it expires; (ii) the amount of Monthly
Base Rent and the date to which such Rent has been paid; (iii) that this
Sublease is in full force and effect and has not been assigned, modified,
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Sublease represents the entire agreement between the parties; (v) that all
conditions under this Sublease to be performed by Sublandlord have been
satisfied; (vi) that there are no existing claims, defenses or offsets which the
Subtenant has against the enforcement of this Sublease by Sublandlord;
(vii) that no Rent has been paid more than one month in advance; and (viii) that
no security has been deposited with Sublandlord (or, if so, the amount thereof).
Any such statement delivered pursuant to this Section may be relied upon by a
prospective purchaser of Sublandlord’s interest or assignee of any mortgage or
new mortgagee of Sublandlord’s interest in the Premises. If Subtenant shall fail
to respond within ten (10) business days of receipt by Subtenant of a written
request by Sublandlord as herein provided, Subtenant shall be deemed to have
given such certificate as above provided without modification and shall be
deemed to have admitted the accuracy of any information supplied by Sublandlord
to a prospective purchaser or mortgagee, or, in Sublandlord’s sole discretion,
such failure shall be deemed an un-curable Event of Default.
     28. TRANSFER OF SUBLANDLORD’S INTEREST. This Sublease shall be assignable
by Sublandlord without the consent of Subtenant. In the event of any transfer or
transfers of Sublandlord’s interest in the Property or the Premises, other than
a transfer for security purposes only, upon the assumption of this Sublease by
the transferee, Sublandlord shall be automatically relieved of obligations and
liabilities accruing from and after the date of such transfer, except for any
retained security deposit or prepaid rent, and Subtenant shall attorn to the
transferee.
     29. RIGHT TO PERFORM. If Subtenant shall fail to timely pay any sum or
perform any other act on its part to be performed hereunder, after expiration of
applicable notice and cure periods, Sublandlord may make any such payment or
perform any such other act on Subtenant’s part to be made or performed as
provided in this Sublease. Subtenant shall, on demand, reimburse Sublandlord for
its expenses reasonably incurred in making such payment or performance.
Sublandlord shall (in addition to any other right or remedy of Sublandlord
provided by law) have the same rights and remedies in the event of the
nonpayment of sums due under this Section 29 as in the case of default by
Subtenant in the payment of Rent.
     30. HAZARDOUS MATERIAL. Subtenant shall not cause or permit any Hazardous
Material (as defined below) to be brought upon, kept, or used in or about, or
disposed of on the Premises or the Property (or migrate off the Property) by
Subtenant, its agents, employees, contractors or invitees, except in strict
compliance with all applicable federal, state and local laws, regulations, codes
and ordinances. If Subtenant breaches the obligations stated in the preceding
sentence, then Subtenant shall indemnify, defend and hold Sublandlord harmless
from any and all claims, judgments, damages, penalties, fines, costs,
liabilities or losses including, without limitation, diminution in the value of
the Property or the Premises, damages for the loss or restriction on use of
rentable or usable space or of any amenity of the Property or the Premises, or
elsewhere, damages arising from any adverse impact on marketing of space at the
Property, and sums paid in settlement of claims, attorneys’ fees, consultant
fees and expert fees (collectively, “Claims”) incurred or suffered by
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and which relate to Hazardous Materials brought upon, kept, or used in or about,
or disposed of on the Premises or Property (or which migrate off the Property)
by Subtenant. Claims include without limitation, costs incurred in connection
with any investigation of site conditions or any cleanup, remedial, removal or
restoration work, whether or not required by any federal, state or local
governmental agency or political subdivision, because of Hazardous Material
present in, on or under the Property or the Premises, or in soil or groundwater
on or under the Property, or if same has migrated to adjacent property.
Subtenant shall immediately notify Sublandlord of any inquiry, investigation or
notice that Subtenant may receive from any third party regarding the actual or
suspected presence of Hazardous Material on the Property or the Premises or
regarding the actual or suspected presence of Hazardous Material on adjacent
property which has allegedly migrated from the Property.
     Without limiting the foregoing, if the presence of any Hazardous Material
brought upon, kept or used in or about the Property or the Premises by
Subtenant, its agents, employees, contractors or invitees, results in any
unlawful release or discharge of Hazardous Material on the Property or the
Premises or any other property, Subtenant shall promptly take all actions, at
its sole expense, as are necessary to properly remediate the Property, the
Premises or other property in accordance with federal and state standards
applicable to the release of any such Hazardous Material; provided that
Sublandlord’s approval of such actions shall first be obtained, which approval
may be withheld at Sublandlord’s sole discretion.
     Notwithstanding anything to the contrary herein, Subtenant’s obligations
under this Sublease to indemnify Sublandlord with respect to Hazardous Materials
and to remediate Hazardous Materials are not applicable to Hazardous Materials
on, in or under the Property or the Premises prior to the Commencement Date.
Sublandlord shall indemnify, defend and hold Subtenant harmless from any and all
Claims incurred or suffered by Subtenant either during or after the Sublease
Term and which relate to Hazardous Materials existing in, on, or under the
Premises or Property as of the Commencement Date or which are brought upon,
kept, or used in or about, or disposed of on the Premises or Property (or which
migrate off the Property) by Sublandlord.
     As used herein, the term “Hazardous Material” means any hazardous,
dangerous, toxic or harmful substance, material or waste including biomedical
waste which is or becomes regulated by any local governmental authority, the
State of Washington or the United States Government due to its potential harm to
the health, safety or welfare of humans or the environment.
     31. QUIET ENJOYMENT. So long as Subtenant pays the Rent and performs all of
its obligations set forth herein, Subtenant’s possession of the Premises will
not be disturbed by Sublandlord or anyone claiming by, through or under
Sublandlord, or by the Master Landlord or the holders of any Sublandlord’s
Mortgage or any successor thereto.

     
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     32. GENERAL.
          32.1. Heirs and Assigns. This Sublease shall apply to and be binding
upon Sublandlord and Subtenant and their respective heirs, executors,
administrators, successors and assigns.
          32.2. Brokers’ Fees. Leigh Callaghan and James Yalowitz represented
Sublandlord in connection with this Sublease, and Austin Cohn and Anne Marie
Koehler represented Subtenant in connection with this Sublease (collectively,
the “Brokers”). Subtenant represents and warrants to Sublandlord that it has not
engaged any other broker, and no other finder, broker or other person who would
be entitled to any commission or fees for the negotiation, execution, or
delivery of this Sublease other than as disclosed above. Subtenant shall
indemnify, defend and hold Sublandlord harmless against any loss, cost,
liability or expense incurred by Sublandlord as a result of any claim asserted
by any such other broker, finder or other person on the basis of any
arrangements or agreements made or alleged to have been made by or on behalf of
Subtenant. Sublandlord shall pay commissions due to the Brokers in connection
with this Sublease pursuant to a separate written commission agreement.
          32.3. Entire Agreement. This Sublease contains all of the covenants
and agreements between Sublandlord and Subtenant relating to the Premises. No
prior agreements or understanding pertaining to the Sublease shall be valid or
of any force or effect and the covenants and agreements of this Sublease shall
not be altered, modified or added to except in writing signed by Sublandlord and
Subtenant.
          32.4. Severability. Any provision of this Sublease which shall prove
to be invalid, void or illegal shall in no way affect, impair or invalidate any
other provision of this Sublease.
          32.5. Force Majeure. Time periods for either party’s performance under
any provisions of this Sublease (excluding payment of Rent) shall be extended
for periods of time during which the party’s performance is prevented due to
circumstances beyond such party’s control, including without limitation, fires,
floods, earthquakes, lockouts, strikes, embargoes, governmental regulations,
acts of God, public enemy, war or other strife.
          32.6. Governing Law. This Sublease shall be governed by and construed
in accordance with the laws of the State of Washington.
          32.7. Memorandum of Sublease. This Sublease shall not be recorded.
However, Sublandlord and Subtenant shall, at the other’s request, execute and
record a memorandum of Sublease in recordable form that identifies Sublandlord
and Subtenant, the Commencement and Expiration Dates of the Sublease, and the
legal description of the Premises as set forth on attached Exhibit B.

     
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          32.8. Submission of Sublease Form Not an Offer. One party’s submission
of this Sublease to the other for review shall not constitute an offer to lease
the Premises. This Sublease shall not become effective and binding upon
Sublandlord and Subtenant until it has been fully signed by both Sublandlord and
Subtenant.
          32.9. Authority of Parties. Any individual signing this Sublease on
behalf of an entity represents and warrants to the other that such individual
has authority to do so and, upon such individual’s execution, that this Sublease
shall be binding upon and enforceable against the party on behalf of whom such
individual is signing.
     33. PARKING. Subtenant and its customers shall be entitled to share parking
with Sublandlord’s other Subtenants and their customers at the designated
parking areas for the Property at no charge. Subtenant shall comply and shall be
responsible for the compliance of its customers with the terms of the Sublease
and any reasonable rules and regulations adopted by Sublandlord from time to
time for the safe and orderly sharing of parking.
     34. EMPLOYER INFORMATION FORM — IMMIGRANT INVESTOR PROGRAM. Subtenant
understands that the renovations to this premises were funded through
investments made by “Alien Entrepreneurs” pursuant to 8 CFR 204.6. This is a
Federal program that brings capital into employment generating enterprises by
encouraging immigrant investment in certain Regional Centers or Enterprise
Zones. A condition of the program is to substantiate employment created directly
or indirectly from the Alien’s investment. New employment refers to newly
created jobs as opposed to jobs transferred from a different location.
Periodically, U.S. Citizenship and Immigration Services will request proof of
new employment creation. Subtenant hereby agrees to cooperate with Sublandlord
with any requirements imposed on the Sublandlord by the U.S. Government to
substantiate Subtenant’s employment creation, in particular upon five days’
written notice, to provide an Affidavit in the form attached hereto and
incorporated herein as Exhibit D which may be amended from time to time by the
U.S. Government and to also provide within five days’ written notice any
supporting documentation required by the U.S. Government thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

     
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  Page 29 [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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In Witness Whereof this Sublease has been executed the date and year first above
written.

              Sublandlord:   Subtenant:
 
            1000 Master Tenant LLC,
a Washington limited liability company   Jones Soda Co.,
a Washington corporation
 
           

  By:  American Life, Inc.,   By:   /s/ William R. Meissner
 
           

          a Washington corporation
 Its: Managing Member       Willam R. Meissner, CEO & President
 
           
By:
  /s/ Henry G. Liebman        
 
 
 
       

  Henry G. Liebman, President        

Consent of Master Landlord
The undersigned Master Landlord pursuant to the Master Lease described above
hereby consents to the foregoing Sublease, confirms that the Sublease is an
“Approved Sublease” pursuant to the Tenant Operating Agreement as defined in the
Master Lease, and agrees to recognize the Sublease in the event the Master Lease
is terminated prior to scheduled expiration date of the Sublease Term and any
extension or renewal thereof.
1000 1st Avenue South Limited Partnership,
a Washington limited partnership
        By: American Life, Inc.,
               a Washington corporation
        Its: Managing General Partner

              By:   /s/ Henry G. Liebman     Henry G. Liebman, President       
   

     
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  Page 30 [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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STATE OF WASHINGTON
  )  
 
        )ss
COUNTY OF KING
    )  

On this 13th day of June, 2011, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn, personally
appeared Henry Liebman, to me known to be the President of American Life, Inc.
the corporation, that executed the foregoing instrument and acknowledged the
said instrument to be the free and voluntary act of and deed of said
corporation, for the uses and purposes therein mentioned, and on oath stated
that he was authorized to execute the said instrument as the Manager Member of
1000 Master Tenant, LLC.
In Witness Whereof I have hereunto set my hand and affixed my official seal the
day and year first above written.

     

  /s/ Karyne L. Pesho
 
   

  Notary Public residing at:
 
  Bellingham
 
   
 
  Karyne L. Pesho
 
   
 
  Notary’s Name (typed or legibly printed)
My Commission Expires:
 
  11-01-2012
 
   

 

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STATE OF WASHINGTON
  )  
 
        )ss
COUNTY OF KING
    )  

On this 13th day of June, 2011, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn, personally
appeared William Meissner to me known to be the CEO/President of Jones Soda Co.,
the corporation that executed the foregoing instrument and acknowledged the said
instrument to be the free and voluntary act of and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he was
authorized to execute the said instrument and that the seal affixed is the
corporate seal of said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official seal the
day and year first above written.

     
 
  /s/ Karyne L. Pesho
 
   
 
  Notary Public residing at:
 
  Bellingham
 
   
 
  Karyne L. Pesho
 
   
 
  Notary’s Name (typed or legibly printed)
My Commission Expires:
 
  11-01-2012
 
   

     
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  Page 32 [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit A
SITE PLAN AND PREMISES FLOOR PLAN
(GRAPHIC) [v59631v5963100.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit A [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963101.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit A [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit A-1
EXPANSION SPACE FLOOR PLAN
2ND FLOOR
(GRAPHIC) [v59631v5963102.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit A-1 [***] Indicates portions of this exhibit that have been omitted
and filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit B
LEGAL DESCRIPTION
The South 36.09 feet of Lot 9 and the North 44 feet of Lot 10 in Block 324,
Seattle Tidelands, situate in the City of Seattle, County of King, State of
Washington.
Together with an easement for access and utilities on the North 16 feet of
property lying on that portion of property legally described below, said
easement recorded under King County Office of Records and Elections File
No. 980717-1655.
Tax Parcel Number: 7666206678

     
Multi-Tenant Lease
Triple Net

  Exhibit B [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit C
GUARANTY
[ Intentionally Blank. ]

     
Multi-Subtenant Lease
Triple Net

  Exhibit C [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit D
AFFIDAVIT
State of Washington
County of King
My full name is ____________________. I am over the age of 18 and competent to
declare the following:
I am the ________________ (officer title) of ______________________(company).
__________________________(company name) moved into the premises located at
________________________ on _________ date and we occupy ______ square feet of
space. Our principle business is _____________________.
As of ______________ date _____________________________ (company) employs ___
full time employees each of whom work 35 or more hours per week; ___ employees
who specifically share ___ jobs; and part time employees who in the aggregate
work ________ hours per week.
I understand that this information is provided to the Department of Homeland
Security to support several permanent residence visa petitions and that the
Department of Homeland Security will rely on this information in making its
determination of eligibility.
I declare under penalty of perjury that the foregoing is true and correct.
Executed on ______________[date]
_____________________________[signature]

     
Multi-Subtenant Lease
Triple Net

  Exhibit D [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit E
Sublandlord’s Work
(Base Building Shell and Core Definition)

1.   All Building and site work completed per permit issued drawings.   2.   All
Building and Common Areas, including any multi-tenant floors will be completed.
  3.   Restrooms installed and “finished out” per building standard finishes on
each floor.   4.   HVAC service (any and all VAV boxes) installed in Subtenant’s
space and ready for distribution. Minimum of six (6) zones per floor; four
(4) exterior zones and two (2) interior zones with thermostatic controls and
wiring coiled for location by Subtenant. HVAC capacity to be one (1) ton of
cooling for each 250 square feet of net usable space. (Pending confirmation from
HVAC contractor regarding cooling capacity requirements for Subtenant’s
requested specifications.)   5.   Electrical service provided to Premises (the
meter panels are ready for distribution to the Premises). Electrical service
including anticipated Subtenant’s usage of approximately six (6) watts per
square foot will be installed to Subtenant’s multiple floors. The first floor
shall have all electrical panels installed adjacent to the electrical shaft
including one panel for shell & core equipment requirements, one panel for
lighting and one 120 volt panel (with step-down transformer if needed) for
Subtenant convenience outlets. Distribution from these Sublandlord installed
panels shall be by Subtenant. (Pending confirmation from electrical contractor
regarding power capacity requirements for Subtenant’s requested specifications.)
  6.   Please note that the interior walls remain as brick and therefore little
if any drywall will be required except for the restrooms and surrounding the
elevator core and stairwells.   7.   All fire and life safety equipment
including an oversized standpipe to all floors, with sprinklers installed and
turned down supplied to Lease Premises.   8.   All building security access
systems installed for Common Areas.     Subtenant shall perform the following
work items following delivery of the Premises to Subtenant, and shall receive
reimbursement for the reasonable costs incurred by Subtenant therefor, provided
that such reimbursement shall not exceed (a) $2.00 per SF for the lighting work
described in Item 9 below, and (b) $21 per square yard of carpet & floor
covering work described in Item 10 below:   9.   Building standard lighting
plans and fixture (or equivalent) to be applied to Subtenant lighting package.  
10.   Subtenant to choose finish upgrades from building standard carpet, vinyl,
and paint.

     
Multi-Tenant Lease
Triple Net

  Exhibit E [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit F
Letter of Credit
[See next page.]

     
Multi-Tenant Lease
Triple Net

  Exhibit F [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963114.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit F [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963115.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit F [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963116.gif]

Multi-Tenant Lease   Exhibit F Triple Net    

[***] Indicates portions of this exhibit that have been omitted and filed
separately with the Commission pursuant to a request for confidential treatment
under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Exhibit G
Subtenant Improvements
1. Plans. Subtenant shall provide to Sublandlord its plans for the Subtenant
Improvements in form suitable for (to the extent required) permit application
(collectively, the “Working Drawings”). Working Drawings, and all material
changes thereto, shall be subject to Sublandlord’s written approval, which shall
not be unreasonably conditioned or withheld.
2. Contractors. All contractors and subcontractors participating in construction
of the Subtenant Improvements shall be reputable and shall meet all licensing
and insurance requirements of the State of Washington. Prior to the commencement
of any of the foregoing work, Subtenant shall provide Sublandlord with the
general contractor’s state contractor’s registration number and final Working
Drawings and copies of permits.
3. Permits. Subtenant shall cause the approved Working Drawings to be submitted
to the appropriate governmental agencies for plan review and building permit.
Revisions which may be required by governmental agencies as a result of the plan
review process shall be reviewed by Subtenant and Sublandlord and modifications
reflecting same shall be mutually agreed upon in a timely manner.
4. Construction. Subtenant shall complete the Subtenant Improvements at
Subtenant’s sole risk, cost and expense (subject, however to payment of the TI
Allowance as described below). Construction shall be performed in a good and
workmanlike manner and in compliance with all applicable rules, laws, codes and
regulations.
5. Construction Representatives. Subtenant hereby appoints Melissa Kelley to act
on its behalf and represent its interests with respect to all matters requiring
Subtenant action in this Exhibit. All matters requiring the consent,
authorization or other actions by Subtenant with respect to matters set forth in
this Section shall be in writing and signed by the aforementioned person. No
consent, authorization, or other action by Subtenant with respect to the matters
set forth in this Exhibit shall bind Subtenant unless in writing and signed by
the aforementioned person. Sublandlord hereby appoints SoDo Builder’s LLC to act
on its behalf and represent its interests with respect to all matters requiring
Sublandlord action in this Exhibit. All matters requiring the consent,
authorization or other actions by Sublandlord with respect to matters set forth
in this Section shall be in writing and signed by the aforementioned person. No
consent, authorization, or other action by Sublandlord with respect to the
matters set forth in this Exhibit shall bind Sublandlord unless in writing and
signed by the aforementioned person.

     
Multi-Tenant Lease
Triple Net

  Exhibit G [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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6. Subtenant’s Access During Construction. Subtenant or its representatives may
enter upon the Premises during construction of Sublandlord’s Work and the
Subtenant Improvements for purposes of conducting all such activities as are
necessary, appropriate or desirable with respect to completing the Subtenant
Improvements. All terms and conditions of the Sublease shall be in full force
and effect upon the date possession is given to Subtenant, except as to Term and
the Commencement Date, which shall be as set forth elsewhere in the Sublease. If
Subtenant’s contractors enter onto the Premises prior to substantial completion
of the Sublandlord’s Work, Subtenant shall cause its contractors to ensure that
Sublandlord’s Work is not thereby materially interfered with or delayed.
7. Telecom Requirements. Unless otherwise agreed by the parties in the final
mutually approved Working Drawings, Subtenant is responsible for and shall
select Subtenant’s telephone and data services. Subtenant shall coordinate
installation of the telephone and telecom system with Sublandlord during
construction of the Subtenant Improvements.
8. TI Allowance Payment. Payment of the TI Allowance may be requested by
Subtenant, at its election, either pursuant to monthly draw requests or in one
lump sum following completion of construction of the Subtenant Improvements. If
Subtenant elects to receive the TI Allowance via monthly draw payments, then on
or before the thirtieth (30th) day of each calendar month during the
construction of the Subtenant Improvements, Subtenant shall deliver to
Sublandlord: (A) a request for payment showing the schedule, by trade, of
percentage of completion of the Subtenant Improvements and detailing the portion
of the work completed and the portion not completed; (B) invoices from all
subcontractors and material suppliers for the Subtenant Improvements for labor
rendered and materials delivered to the Premises; (C) executed conditional
mechanic’s lien releases from all subcontractors and material suppliers which
shall comply with the appropriate provisions, as reasonably determined by
Sublandlord. Within twenty (20) days thereafter, Sublandlord shall deliver a
check to Subtenant made jointly payable to the general contractor and Subtenant
in payment of the amounts so requested by Subtenant as set forth in this
paragraph that are subject to reimbursement herein, provided there remains TI
Allowance funds available.
9. Compliance. All Subtenant Improvements shall at all times be subject to and
in compliance with all applicable laws, codes, ordinances and the HTC
Regulations.

     
Multi-Tenant Lease
Triple Net

  Exhibit G [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit H
Subtenant’s Approved Signage
[See next page.]

     
Multi-Tenant Lease
Triple Net

  Exhibit H [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963105.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit H [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963106.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit H [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963107.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit H [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963108.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit H [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963109.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit H [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963110.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit H [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963111.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit H [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963112.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit H [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit I
Prohibited Uses
1. Bingo parlor, off track betting or other gambling facility.
2. Video or pinball arcade, or amusement arcades or game rooms, or amusement
centers.
3. Any living quarters, sleeping apartments or lodging rooms.
4. Any establishment selling, renting or exhibiting pornographic materials,
adult books, films, video tapes, compact discs, or computer software (which are
defined as stores in which a material portion of the inventory is not available
for sale or rental to children under eighteen (18) years old because such
inventory deals with or depicts human sexuality).
5. The performance of any illicit sexual activity, lewd or obscene performance,
including by way of illustration, but not by way of limitation, prostitution,
peep shows, topless restaurants or performances and the like.
6. Any use which is illegal or any establishment which stocks, displays, sells,
rents or offers, for sale or rent any merchandise or material commonly used or
intended for use with or in consumption of any narcotic, dangerous drug, or
other controlled substance (except for prescription drugs sold by pharmacies).

     
Multi-Tenant Lease
Triple Net

  Exhibit I [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit J
Depiction of the Deck and Patio Area
[See next page.]

     
Multi-Tenant Lease
Triple Net

  Exhibit J [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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(GRAPHIC) [v59631v5963113.gif]

     
Multi-Tenant Lease
Triple Net

  Exhibit J [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Exhibit K
Form of Wall Sublease
[See next page.]

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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WALL SUBLEASE
     THIS WALL SUBLEASE (“Sublease”) is entered into as of this ____ day of
_____, 20___, by and between 1000 Master Tenant LLC, a Washington limited
liability company (“Sublandlord”) and Jones Soda Co., a Washington corporation
(“Subtenant”).
     Sublandlord and Subtenant are also the parties to that certain Sublease
Agreement dated June __, 2011 (the “Office Space Sublease”), pursuant to which
Subtenant leases certain office space from Sublandlord as more particularly
described therein. This Sublease is the “Wall Sublease” as defined in Section 14
of the Office Space Sublease, and is entered into under the terms and conditions
more specifically set forth therein.
     This Sublease is subject and subordinate to that certain Master Lease
Agreement by and between Sublandlord, as tenant, and 1000 1st Avenue South
Limited Partnership, a Washington limited partnership, as landlord (the “Master
Landlord”), dated October 24, 2008 (“Master Lease”), and any recorded deed of
trust. Subtenant shall comply with all applicable provisions of the Master
Lease. This Sublease and Subtenant’s use and enjoyment of the Premises shall at
all times be subject to and in compliance with applicable laws, codes,
ordinances and regulations related to the Building’s status as a historic
building and promulgated by the National Park Service, the State of Washington,
the Pioneer Square Preservation Board and the City of Seattle (“HTC
Regulations”). To the extent that any provisions of this Sublease are
inconsistent with applicable HTC Regulations, the HTC Regulations shall control
and shall be applicable to Sublandlord and Subtenant.
     Sublandlord represents and warrants to Subtenant that the Master Lease is,
as of the date hereof, in full force and effect, and no uncured event of default
by either party thereto has occurred thereunder and, to Sublandlord’s knowledge,
no event has occurred and is continuing which would constitute an event of
default by any party thereto but for the requirement of the giving of notice
and/or the expiration of the period of time to cure. Sublandlord shall not agree
to terminate the Master Lease nor agree to any amendment to the Master Lease
which might have a material adverse effect on Subtenant’s occupancy of the
Premises or its use of the Premises for its intended purpose. Sublandlord shall
not exercise any right it may have under the Master Lease or applicable law to
elect to terminate the Master Lease (e.g., due to events of damage, destruction,
or condemnation, or in the event of Master Landlord’s bankruptcy and rejection
of the Master Lease) without the prior consent of Subtenant. Sublandlord shall
neither do nor permit anything to be done which would constitute a default or
breach under the Master Lease or which would cause the Master Lease to be
terminated or forfeited by reason of any right of termination or forfeiture
reserved or vested in the Master Landlord, and Sublandlord agrees to comply with
all terms, conditions, and covenants of the Master Lease. Sublandlord represents
and warrants that no consent to this Sublease is required from the Master
Landlord.

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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1. Sign Space. Sublandlord hereby agrees to sublease to Subtenant, and Subtenant
hereby agrees to sublease from Sublandlord, for the purposes set forth in
Section 3 below, the exterior surface of the south facing exterior wall (“Sign
Space”) on the building located at 1000 1st Avenue South, Seattle, Washington
(“Building”), which commercial real property is legally described in Exhibit A
attached hereto and incorporated herein (the “Property”).
2. Sublease Term. This Sublease shall commence on _______, 20__ and shall expire
on ________, 20__, unless the Sublease is sooner terminated as provided herein
(“Term”).
3. Use of Sign Space.
     3.1 Use. Subtenant is granted the use of the Sign Space solely for the
purpose of affixing on-premise advertising materials in a vinyl poster format
(“Advertising Materials”) for beverages manufactured by Tenant or a subsidiary
of Tenant.
     3.2 Approval. Subtenant shall submit to Sublandlord a copy of the proposed
Advertising Materials before affixing the same to the Sign Space. Sublandlord
shall have final approval regarding the content of the proposed Advertising
Materials, which approval shall not be unreasonably withheld. Sublandlord shall
deliver denial of such proposed Advertising Materials to Subtenant within five
(5) business days of receipt of such proposed Advertising Materials from
Subtenant, otherwise the proposed Advertising Materials shall be considered
approved.
     3.3 Prohibited Content.
     3.3.1 Subtenant shall not display any “Prohibited Content” which shall
mean:
     3.3.1.1 Advertising Materials in the Sign Space which (i) are not approved
by Sublandlord, (ii) are obscene, pornographic or sexually explicit, (iii) are
political in nature, and/or (iv) advertise cigarettes or related tobacco
products; and
     3.3.1.2 Use of the Sign Space for any purpose which is (i) a nuisance or
(ii) contrary to any law, ordinance, rule or regulation of any public authority,
including, but not limited to, discrimination against any person on the basis of
race, sex or national origin; and
     3.3.1.3 Any Advertising Materials which result in public protests or
negative coverage in the media because the public deems the Advertising
Materials as offensive or immoral by community norms.
     3.3.2 Sublandlord may require Subtenant to revise the Advertising Materials
if, over time, such Advertising Materials are deemed offensive or

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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immoral by community norms and results in public protests or negative coverage
in the media.
     3.4 Removal.
     3.4.1 In the event that any Advertising Materials, when complete,
materially differ from the plans, sketches or drawings as approved by
Sublandlord, Subtenant shall remove the Advertising Materials upon five (5) days
written notice from Sublandlord.
     3.4.2 In the event any Advertising Materials contain Prohibited Content,
Subtenant shall remove the Advertising Materials upon five (5) days written
notice from Sublandlord.
4. Permits.
     4.1 At its sole cost and expense, Subtenant shall undertake diligent
efforts to obtain permits from the City of Seattle and any approvals required by
the Pioneer Square Preservation Board for use of the Advertising Materials to be
placed on the Sign Space (the “Permits”).
     4.2 Sublandlord, when required by the City of Seattle and/or the Pioneer
Square Preservation Board, will make reasonable efforts at no cost to
Sublandlord, to assist Subtenant in seeking such Permits, including but not
limited to executing any necessary forms required by the City of Seattle and/or
the Pioneer Square Preservation Board.
     4.3 Subtenant shall provide copies of all Permits to Sublandlord within
five (5) days of the issuance of the Permits.
     4.4 Notwithstanding anything contained herein to the contrary, in the event
Subtenant shall be unable to obtain any of the Permits due to no fault of
Subtenant, Subtenant upon thirty (30) days written notice to Sublandlord, may
cancel this Sublease, provided any Rent accrued to the date of termination shall
not be refunded, and to the extent past due shall remain payable. Either party
may terminate this Sublease if the Permits have not been granted within one
hundred eighty (180) days of the date hereof without liability to the other,
except for the payment of the Rent accrued to the date of termination.
     4.5 Notwithstanding anything contained herein to the contrary, in the event
(i) Subtenant shall have obtained a Permit for the Sign Space but subsequently
such Permit shall be withdrawn or terminated for any reason other than as a
result of Subtenant deliberately causing such termination or withdrawal, or
(ii) Sublandlord or Subtenant shall receive a violation notice or summons
alleging a violation of zoning law which would prevent further use of the Sign
Space by Subtenant for the purpose contemplated

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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by this Sublease and such violation is not promptly dismissed (provided
Subtenant shall use good faith efforts to cure such violation if within its
control), Subtenant upon thirty (30) days written notice to Sublandlord, may at
any time thereafter cancel the balance of the Term of this Sublease, provided
any of the Rent accrued to the date of termination shall not be refunded, and to
the extent past due, shall remain payable. Subtenant will pay all violations,
fines or penalties resulting from or relative to the use of the Sign Space.
5. Rent. Subtenant shall pay to Sublandlord monthly rent (“Rent”) for the Sign
Space on the first day of each month throughout the Term as follows:
[*The Months described below correspond to the Term of the Office Space Sublease
described above, and Subtenant shall pay Monthly Rent for the Sign Space
according to the following table only during those month(s) when Subtenant has
exercised its option or right of first refusal rights to sublease the Sign
Space, as more particularly set forth in Section 14 of the Office Space
Sublease*]

          Month   Monthly Rent  
01-12
    [***]  
13-24
    [***]  
25-36
    [***]  
37-48
    [***]  
49-60
    [***]  
61-65
    [***]  

6. Installation of Advertising.
     6.1 Following execution of this Sublease, the granting of the Permits and
approval of the Advertising Materials by Landlord, Subtenant may commence to
install at the Sign Space vinyl flex face advertising copy.
     6.2 All work shall be undertaken and completed in a good and workmanlike
manner by qualified personnel and contractors. Subtenant shall fully comply with
all laws and regulations applicable to its work and occupancy of the Sign Space.
     6.3 Subtenant shall not permit to be created or to remain, and shall
promptly discharge, any lien, encumbrance or charge for any mechanics, laborers
or materialman’s lien resulting from work which it performs upon the Sign Space
or any part thereof.
7. Condition of Sign Space; Maintenance and Repair.
     7.1 Subtenant covenants and agrees to maintain the Sign Space in good
condition and repair throughout the Term.

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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     7.2 Sublandlord hereby grants to Subtenant, its agents, servants and
employees the limited right of access to the Sign Space in order to install,
maintain, operate and repair its Advertising Materials to be located at the Sign
Space and as necessary, access to the roof of the Building and to such other
portions of the Building, exterior or interior, as may be necessary or advisable
for the installation and/or maintenance of Subtenant’s signs subject to the
rights of other subtenants in the Building. All access shall be coordinated
through Sublandlord and shall be undertaken in a manner that will not interfere
with the use of the Building by other subtenants of the Building.
     7.3 Subtenant, at Subtenant’s sole cost and expense, shall promptly repair
all damage to the Sign Space, any other part of the Building, Property, or its
fixtures, equipment and appurtenances, whether requiring structural or
nonstructural repairs, caused by or resulting from:
     7.3.1 Careless, neglectful or improper use of the Sign Space or any other
portion of the Building or Property by Subtenant, its servants, employees or
agents; and
     7.3.2 Carelessness, omission, neglect or improper conduct by Subtenant, its
servants, employees or agents within the Sign Space, any other portion of the
Building; and
     7.3.3 The installation, repair and/or maintenance, or removal of
Subtenant’s signs, fixtures, equipment or structures.
     7.4 If after ten (10) days notice Subtenant fails to make repairs required
by Sublandlord, such repairs may be made by Sublandlord at the expense of
Subtenant and the expenses thereof incurred by Sublandlord shall be immediately
due and payable by Subtenant after delivery of a bill or statement therefore.
Sublandlord may make emergency repairs without any notice to Subtenant, provided
it shall thereafter provide immediate notice to Subtenant.
     7.5 Subtenant shall be solely responsible for, and pay all costs of
installation and use of all electricity and other utilities, if any, used or
consumed during installation of the Advertising Materials.
8. Alterations and Improvements. Subtenant shall not make any alterations,
additions or improvements to, nor install any fixtures or equipment on the Sign
Space without Sublandlord’s prior written consent, which consent may be
unreasonably withheld in Sublandlord’s sole discretion. Subtenant shall pay any
and all costs incurred by Sublandlord in reviewing and evaluating any request
for the consent required by this section. Any alteration, addition or
improvement consented to by Sublandlord shall be made in a good workmanlike
manner at Subtenant’s sole cost and expense and shall comply with all applicable
laws, codes, ordinances, rules, regulations and the HTC Regulations.

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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9. Surrender Upon Termination. At the end of the Term, or any extension thereof,
Subtenant shall surrender the Sign Space and return it to the same condition as
existed at the beginning of the Sublease, normal wear and tear from the elements
excepted. Subtenant shall remove anything that Subtenant installed in the Sign
Space and repair any damage to the wall surface caused by Subtenant’s use.
10. Compliance with Laws and Regulations.
     10.1 Subtenant, at its sole expense, shall comply with all federal, state
and municipal laws, codes, ordinances, regulations, laws, the Permits and all
lawful directives of public officers which impose any duty upon Subtenant or
Sublandlord with respect to the affixing of advertising upon the Sign Space.
     10.2 The parties acknowledge that there are certain federal, state and
local laws, regulations and guidelines now in effect and that additional laws,
regulations and guidelines may hereafter be enacted relating to or affecting the
Building and the Property, concerning the impact on the environment,
construction, land use, the maintenance and operation of structures, and the
conduct of business. Subtenant shall not cause, or permit to be caused, any act
or practice by negligence, or omission, or otherwise, that would adversely
affect the environment or do anything or permit anything to be done that would
violate any of said laws, regulations or guidelines. Any violation of this
covenant shall be an event of default under this Sublease. Subtenant shall
indemnify and hold Sublandlord harmless from any and all cost, expense, claims,
losses, damages, fines and penalties, including attorneys’ fees that may in any
manner arise out of or be imposed because of the failure of Subtenant to comply
with this covenant. The foregoing shall cover all requirements whether or not
foreseeable at the present time and regardless of the expense attendant thereto.
11. Relationship. Nothing herein authorizes Subtenant to act on behalf of
Sublandlord, whether as agent, representative or otherwise, and Subtenant shall
take no action to obligate or bind Sublandlord without Sublandlord’s prior
written consent.
12. Indemnification.
     12.1 Subtenant shall be responsible for any loss or damage whatsoever to
Property or persons, due to the installation, use, maintenance or operation of
the Sign Space and the signs thereon, including but not limited to the
installation, posting, painting or maintenance of same or the contents thereof.
Subtenant agrees to indemnify and hold Sublandlord harmless from any and all
loss or damage, including without limitation, reasonable attorneys’ fees,
resulting or arising out of any action or omission by Subtenant, its agents,
employees, licensees or contractors with respect to the installation, posting,
or maintenance of its signs at the Sign Space.
     12.2 The indemnification obligations contained in this Section shall not be
limited by any worker’s compensation benefit or disability laws, and each
indemnifying

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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party hereby waives (solely for the benefit of the indemnified party) any
immunity that said indemnifying party may have under the Industrial Insurance
Act, Title 51 RCW and similar worker’s compensation, benefit or disability laws.
SUBLANDLORD AND SUBTENANT ACKNOWLEDGE BY THEIR EXECUTION OF THIS SUBLEASE THAT
EACH OF THE INDEMNIFICATION PROVISIONS OF THIS SUBLEASE (SPECIFICALLY INCLUDING
BUT NOT LIMITED TO THOSE RELATING TO WORKER’S COMPENSATION BENEFITS AND LAWS)
WERE SPECIFICALLY NEGOTIATED AND AGREED TO BY SUBLANDLORD AND SUBTENANT.
13. Insurance.
     13.1 Subtenant, throughout the Term of this Sublease, shall procure and
maintain, at its sole cost and expense, a policy of public liability insurance
naming Sublandlord as a named additional insured respecting installation,
maintenance and use of the Sign Space, such policy to be issued by an insurance
carrier qualified to do business in Seattle, Washington and shall provide for
policy limits of not less than $1,000,000 per incident, $2,000,000 aggregate
combined coverage.
     13.2 Subtenant shall deliver a certificate evidencing such insurance
coverage which shall be kept in force at all times during the Term hereof. In
the event Subtenant fails after written notice to Subtenant to deliver such
certificate of insurance or keep same in force, Sublandlord may, but is not
obligated to, procure such insurance and the cost of premiums therefore shall be
added to the next month’s Rent thereafter to become due, and shall be deemed to
be additional Rent and shall be collectible as such.
     13.3 Subtenant shall require each contractor involved in the installation
and maintenance of the Sign Space to maintain insurance consistent with industry
standards for the service provided by such contractor.
     13.4 Each policy or certificate of insurance procured by Subtenant or its
contractor pursuant to this Section 13 shall, to the extent obtainable, contain
a provision that such policy shall not be canceled without at least thirty
(30) days prior written notice to Sublandlord.
     13.5 Sublandlord and Subtenant release each other, and their respective
authorized representatives, from any claims for damage to any person or to the
Sign Space, the Building and/or the Property and to Subtenant’s alterations,
trade fixtures and personal property that are caused by or result from risks
insured against under any insurance policies carried by the parties, in force at
the time of any such damage and collection. Sublandlord and Subtenant shall
cause each insurance policy obtained by it to provide that the insurance company
waives all right of recovery by way of subrogation against either party in
connection with any damage covered by any insurance policy.
14. Obstruction/Diminished Use. In the event that Subtenant is: (i) prevented by
law or governmental authority from using the Sign Space for advertising
purposes, or (ii) an

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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existing building or structure is altered or a sign structure is placed on an
existing building or a new building or structure is erected so as to materially
and adversely obstruct the view of the advertising at the Sign Space, then in
any of such events, Subtenant may cancel this Sublease by giving not less than
thirty (30) days written notice to Sublandlord which cancellation shall be
effective on the date the Subtenant is prevented from using the Sign Space by
law or governmental authority, or the date of the material and adverse
obstruction of the Sign Space, and neither party shall have any further rights
or obligations hereunder other than obligations that existed prior to such
termination. During the thirty (30) days following the effective date of
termination, Subtenant will remove the Advertising Materials from the Sign Space
at the Building and restore the Building to its prior condition, reasonable wear
and tear excepted.
15. Notices. All notices, demands or requests by the parties to each other shall
be given in person or by registered or certified mail, return receipt requested,
to the following addresses:

     
Sublandlord:
  1000 Master Tenant LLC
270 S Hanford St, Ste 100
 
  Seattle, WA 98134
 
   
Subtenant:
  Jones Soda Co.
 
   
Before Month 6:
  234 9th Ave. N.
Seattle, WA 98109-5120
 
   
On and After Month 6:
  The Premises demised by the
Office Space Sublease

Either party hereto may change its address by giving such change to the other
party in person or by certified or registered mail, return receipt requested.
16. Default.
     16.1 Subtenant’s Default. Subtenant shall be in breach of this Sublease if:
(a) Subtenant shall default in the payment of Rent and such default shall
continue for fifteen (15) days after Sublandlord shall have given Subtenant a
written notice of the same, or (b) Subtenant shall default in the performance of
any other term hereunder and such default shall continue for thirty (30) days
after written notice from Sublandlord of same. In the event of such breach,
Sublandlord may terminate this Sublease upon giving written notice, and re-enter
the Sign Space and remove any Advertising Materials.
     16.2 Default by Sublandlord. Sublandlord shall not be in default and
Subtenant may not terminate unless Sublandlord fails to perform obligations
required of Sublandlord within a reasonable time, but in no event later than
thirty (30) days after written notice by Subtenant to Sublandlord. Said notice
shall specify wherein

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Sublandlord has failed to perform such obligation; provided, however, that if
the nature of Sublandlord’s obligation is such that more than thirty (30) days
are required for performance then Sublandlord shall not be in default if
Sublandlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion. Subtenant further
agrees not to invoke any of its remedies under this Sublease until said thirty
(30) days have elapsed.
17. Assignment. Subtenant shall not assign or transfer this Sublease.
18. Successors and Assigns. The covenants, conditions and agreements contained
in this Sublease shall bind and inure to the benefit of Sublandlord and
Subtenant, their respective heirs, distributees, executors, administrators,
successors and except as otherwise provided in this Sublease, their assigns.
19. Entire Sublease; Modifications; No Third Party Rights. This Sublease
represents the entire understanding of the parties and supersedes any previous
documents, correspondence, conversations or other oral or written understanding
related to this Sublease. It may not be assigned, waived or modified by the
parties except in writing signed by authorized representatives of both parties,
nor shall the conduct or actions of any party be deemed a modification or
waiver. A modification or waiver of a part of this Sublease shall not constitute
a waiver or modification of any other portion of the Sublease. Nothing in this
Sublease shall create any enforceable rights in any person not a party hereto.
20. Choice of Law and Forum. This Sublease shall be governed by and construed
under laws of the State of Washington and the City of Seattle without regard to
its choice of law rules. Any disputes under this Sublease shall be litigated in
the local or federal courts located, and the parties hereby consent to personal
jurisdiction and venue, in the City of Seattle.
[See next page for signatures.]

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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     In Witness Where of this Sublease has been executed the date and year first
above written.

              Sublandlord:   Subtenant:
 
            1000 Master Tenant LLC,
a Washington limited liability company   Jones Soda Co.,
a Washington corporation
 
           

  By:  American Life, Inc.,   By:    
 
           

  Its:  a Washington corporation
        Managing Member       [Name, Title]
 
           
By:
           
 
 
 
       
 
  Henry G. Liebman, President        

Consent of Master Landlord
The undersigned Master Landlord pursuant to the Master Lease described above
hereby consents to the foregoing Sublease, confirms that the Sublease is an
“Approved Sublease” pursuant to the Tenant Operating Agreement as defined in the
Master Lease, and agrees to recognize the Sublease in the event the Master Lease
is terminated prior to scheduled expiration date of the Sublease Term and any
extension or renewal thereof.
1000 1st Avenue South Limited Partnership,
a Washington limited partnership
          By: American Life, Inc.,
                a Washington corporation
         Its: Managing General Partner

            By:         Henry G. Liebman, President                 

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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STATE OF WASHINGTON
  )  
 
        )ss
COUNTY OF KING
    )  

On this _____ day of _______, 20___, before me, the undersigned, a Notary Public
in and for the State of Washington, duly commissioned and sworn, personally
appeared Henry Liebman, to me known to be the President of American Life, Inc.
the corporation, that executed the foregoing instrument and acknowledged the
said instrument to be the free and voluntary act of and deed of said
corporation, for the uses and purposes therein mentioned, and on oath stated
that he was authorized to execute the said instrument as the Manager Member of
1000 Master Tenant, LLC.
In Witness Whereof I have hereunto set my hand and affixed my official seal the
day and year first above written.

     
 
   
 
  Notary Public residing at:
 
   
 
   
 
   
 
   
 
  Notary’s Name (typed or legibly printed)
My Commission Expires:
 
   
 
   

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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STATE OF WASHINGTON
    )  
 
  )ss
COUNTY OF KING
    )  

On this _____ day of ________, 20__, before me, the undersigned, a Notary Public
in and for the State of Washington, duly commissioned and sworn, personally
appeared _______________________, to me known to be the _______________ of JONES
SODA, Co., the corporation that executed the foregoing instrument and
acknowledged the said instrument to be the free and voluntary act of and deed of
said corporation, for the uses and purposes therein mentioned, and on oath
stated that ______________________ was authorized to execute the said instrument
and that the seal affixed is the corporate seal of said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official seal the
day and year first above written.

       
 
   
 
  Notary Public residing at:
 
   
 
   
 
   
 
   
 
  Notary’s Name (typed or legibly printed)
My Commission Expires:
 
   
 
   

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
The South 36.09 feet of Lot 9 and the North 44 feet of Lot 10 in Block 324,
Seattle Tidelands, situate in the City of Seattle, County of King, State of
Washington. Together with an easement for access and utilities on the North 16
feet of property lying on that portion of property legally described below, said
easement recorded under King County Office of Records and Elections File
No. 980717-1655.
Tax Parcel Number: 7666206678

     
Multi-Tenant Lease
Triple Net

  Exhibit K [***] Indicates portions of this exhibit that have been omitted and
filed separately with the Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.