Exhibit 10.1

FIRST AMENDMENT TO OFFICE LEASE

This FIRST AMENDMENT TO OFFICE LEASE (“First Amendment”) is made and entered
into as of the 26th day of August, 2013 (the “Amendment Date”), by and between
TALON PORTFOLIO SERVICES, LLC, a Washington limited liability company, as
General Receiver for W2007 Seattle Office 110 Atrium Place Realty, LLC, a
Delaware limited liability company, King County Case No. 12-2-21253-8-SEA
(“Landlord”), and BSQUARE CORPORATION, a Washington corporation (“Tenant”).

R E C I T A L S :

A. WA-110 Atrium Place, L.L.C. (predecessor-in-interest to Landlord) and Tenant
entered into that certain Office Lease Agreement dated as of January 1, 2004
(the “Lease”), whereby Landlord leases to Tenant and Tenant leases from Landlord
those certain premises consisting of a total of approximately 43,396 rentable
square feet commonly known as Suites 200, 215, 220, and 230 (the “Original
Premises”) and located on the second (2nd) floor of that certain office building
located at 110 110th Avenue NE, Bellevue, Washington, 98004 (the “Building”).

B. Landlord and Tenant desire to (i) substitute the Original Premises with that
certain space consisting of approximately 24,061 rentable square feet of space
and located on the third (3rd) floor of the Building, commonly known as Suite
300 (the “Substitute Premises”), as delineated on Exhibit A attached hereto and
made a part hereof, (ii) to extend the Term of the Lease, and (iii) to make
other modifications to the Lease, and in connection therewith, Landlord and
Tenant desire to amend the Lease as hereinafter provided.

A G R E E M E N T :

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

1. Capitalized Terms. All capitalized terms when used herein shall have the same
meaning as is given such terms in the Lease unless expressly superseded by the
terms of this First Amendment.

2. Substitution of Substitute Premises for Original Premises. Effective as of
the date (the “Substitute Premises Commencement Date”) which is the earliest to
occur of (i) the date on which the Tenant Improvements (as defined in the Tenant
Work Letter attached hereto as Exhibit B) in the Substitute Premises are
Substantially Completed (as defined in Exhibit B), or (ii) the date on which the
Tenant Improvements in the Substitute Premises would have been Substantially
Completed except to the extent such completion of the Tenant Improvements is
delayed due to any Tenant Delay (as defined in Exhibit B), (A) subject to the
terms of Section 3, below, the Lease shall terminate and be of no further force
or effect with respect to the Original Premises, and (B) Tenant shall lease from
Landlord and Landlord shall lease to Tenant the Substitute Premises on the terms
and conditions set forth in the Lease, as hereby amended. Effective upon the
Substitute Premises Commencement Date, the Substitute Premises shall be
substituted for the Original Premises and all references in the Lease, as hereby
amended, to the “Premises” shall mean and refer to the Substitute Premises.
Landlord shall use commercially reasonable efforts to Substantially Complete the
Tenant Improvements in the Substitute Premises within one hundred fifty
(150) days after the Amendment Date.

 

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3. Surrender of Original Premises. Tenant hereby agrees to vacate the Original
Premises and surrender and deliver exclusive possession of the Original Premises
to Landlord no later than the date (the “Surrender Date”) that is ten
(10) business days following the Substitute Premises Commencement Date. Tenant
shall surrender the Original Premises in broom clean condition. Notwithstanding
any conflicting provision of the Lease, Tenant shall not have any obligation to
(a) restore any portion of the Original Premises except to the extent the
Original Premises are damaged by the negligence or willful misconduct of Tenant,
or (b) remove any alterations or improvements within or a part of the Original
Premises, including built in furniture, and data, telecommunication and other
cabling. Upon surrender of the Original Premises in accordance with the
foregoing, Tenant shall not have any further obligations with respect to the
Original Premises except with respect to Tenant’s obligation to pay Rent and
indemnify Landlord pursuant to Section 13 of the Lease for the period of
Tenant’s tenancy prior to the Surrender Date. In the event that Tenant fails to
vacate the Original Premises and surrender and deliver exclusive possession of
the Original Premises to Landlord on or before the Surrender Date pursuant to
this Section 3, Tenant shall be deemed to be in holdover of the Original
Premises and commencing on the day immediately following the Surrender Date,
Tenant shall pay Landlord holdover Base Rent of $1,808.00 per day (i.e., one
hundred fifty percent (150%) of the per diem Base Rent currently in effect for
the Original Premises) as well as one hundred percent (100%) of all amounts of
Additional Rent due under the Lease for the Original Premises, on a daily basis,
until such time that Tenant surrenders the Original Premises to Landlord.

4. Representations of Tenant. Tenant represents and warrants to Landlord that as
of the Amendment Date (a) Tenant has not heretofore assigned its interest in the
Lease and there are no subleases in effect with respect to the Original
Premises; (b) no other person, firm or entity has any right, title or interest
in the Lease or in the Original Premises through Tenant; (c) Tenant has the full
right, legal power and actual authority to enter into this First Amendment and
to terminate Tenant’s lease with respect to the Original Premises without the
consent of any person, firm or entity; and (d) Tenant has the full right, legal
power and actual authority to bind Tenant to the terms and conditions hereof.
Tenant further represents and warrants to Landlord that as of the date hereof
there are no (and as of the Surrender Date there shall not be any) mechanic’s
liens or other liens encumbering all or any portion of the Original Premises, by
virtue of any act or omission on the part of Tenant, its predecessors,
contractors, agents, employees, successors or assigns. Notwithstanding the
termination of the Lease with respect to the Original Premises, the
representations and warranties set forth in this Section 4 shall survive the
Surrender Date and Tenant shall be liable to Landlord for any inaccuracy or any
breach thereof.

5. Lease Term; Option Term.

5.1 Extension of the Term of the Lease. Landlord and Tenant acknowledge that the
Term is scheduled to expire on August 31, 2014, pursuant to the terms of the
Lease. The parties hereby agree to extend the Term of the Lease for a period of
five (5) years and nine (9) months, commencing on September 1, 2014 and ending
on May, 31, 2020, unless sooner terminated as provided in the Lease, as hereby
amended. Any and all references to the “Term” in the Lease shall mean the Term
as extended pursuant to the foregoing and any and all references to the
“Termination Date” in the Lease shall mean May 31, 2020.

 

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5.2 Substitute Premises Term. For purposes of this First Amendment, the
eighty-four (84) month period commencing on June 1, 2013, and ending on May 31,
2020, shall be referred to as the “Substitute Premises Term.”

5.3 Option Term. The extension of the Term provided in Section 5.1 above shall
not constitute Tenant’s exercise of the Renewal Option provided in Section II of
Exhibit F of the Lease, and (notwithstanding anything contained in the Lease to
the contrary) the Renewal Option shall continue to apply to the Substitute
Premises as of the end of the Substitute Premises Term; provided, however, all
references in Section II of Exhibit F of the Lease to “initial Term” shall mean
and refer to the Term as extended pursuant to Section 5.1 above.

6. Base Rent.

6.1 Original Premises. Notwithstanding any contrary provisions set forth in the
Lease, effective as of June 1, 2013, Tenant shall pay to Landlord monthly
installments of Base Rent in connection with the Original Premises as follows:

 

Period During Substitute Premises Term

   Annualized
Base Rent     Monthly Installment
of Base Rent     Approximate Monthly
Rental Rate per
Rentable Square Foot  

June 1, 2013 through the day immediately prior to the Substitute Premises
Commencement Date *

   $ 741,396.00  *    $ 61,783.00  *      N/A   

Tenant shall have no obligation to pay Base Rent with respect to the Original
Premises on and after the Substitute Premises Commencement Date, except as a
result of holdover of the Original Premises by Tenant after the Surrender Date
and in accordance with the terms set forth in Section 3, above.

 

* The Base Rent applicable during the period of time above is subject to
abatement during the seven (7) month Base Rent Abatement Period as provided in
Section 6.3, below.

6.2 Substitute Premises. Effective as of the Substitute Premises Commencement
Date, Tenant shall pay to Landlord monthly installments of Base Rent in
connection with the Substitute Premises as follows:

 

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Period During Substitute Premises Term

   Annualized
Base Rent     Monthly Installment
of Base Rent     Approximate Monthly
Rental Rate per
Rentable Square Foot  

Substitute Premises Commencement Date through May 31, 2014 *

   $ 745,891.00 *    $ 62,157.58 *    $ 31.00 * 

June 1, 2014 through May 31, 2015

   $ 769,952.00      $ 64,162.67      $ 32.00   

June 1, 2015 through May 31, 2016

   $ 794,013.00      $ 66,167.75      $ 33.00   

June 1, 2016 through May 31, 2017

   $ 818,074.00      $ 68,172.83      $ 34.00   

June 1, 2017 through May 31, 2018

   $ 842,135.00      $ 70,177.92      $ 35.00   

June 1, 2018 through May 31, 2019

   $ 866,196.00      $ 72,183.00      $ 36.00   

June 1, 2019 through May 31, 2020

   $ 890,257.00      $ 74,188.08      $ 37.00   

 

* The Base Rent applicable during the period of time above is subject to
abatement during any remainder of the seven (7) month Base Rent Abatement Period
as provided in Section 6.3, below.

6.3 Abated Base Rent. Notwithstanding any conflicting provision of the Lease or
this First Amendment, provided that no event of Default then exists and is not
cured within any applicable cure period provided in the Lease, during the seven
(7) month period commencing on June 1, 2013 and ending on December 31, 2013 (the
“Base Rent Abatement Period”), Tenant shall not have any obligation to pay any
Base Rent attributable to the Original Premises or the Substitute Premises, as
applicable, during such Base Rent Abatement Period (the “Base Rent Abatement”).
Landlord and Tenant acknowledge that the aggregate amount of the Base Rent
Abatement equals $435,103.06 (i.e., $62,157.58 per month). Notwithstanding such
abatement of Base Rent (a) all other sums due under this Lease, including
Additional Rent, shall be payable as provided in this Lease, and (b) any
increases in Base Rent set forth in the Lease (as hereby amended) shall occur on
the dates scheduled therefor. The Base Rent Abatement provided for in this
Section 6.3 is conditioned upon Tenant’s full and timely performance of all of
its obligations under the Lease (as hereby amended). If Tenant shall be in
Default of the Lease (as hereby amended), and such Default is not cured within
any applicable cure period provided in the Lease, at any time during the Base
Rent Abatement Period, then Tenant’s right to receive any unapplied Base Rent
Abatement shall be suspended until the first day of the first calendar month
following the date upon which Tenant cured such event of Default.

7. Tenant’s Pro Rata Share of Expenses and Taxes.

7.1 Addition of Base Year Calculation. Notwithstanding any contrary provisions
set forth in the Lease, effective as of June 1, 2013, Tenant’s obligation to pay
Tenant’s Pro Rata Share of Expenses and Taxes shall be equal to Tenant’s Pro
Rata Share of any increase (the “Excess Expenses and Taxes”) in the aggregate
Expenses and Taxes for each calendar year above the aggregate Expenses and Taxes
for the 2013 calendar year (the “Base Year”). In no event,

 

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however, shall any decrease in the aggregate Expenses or Taxes for any calendar
year below the aggregate Expenses or Taxes for the Base Year entitle Tenant to
any decrease in Base Rent or any credit against sums due under the Lease (as
hereby amended). Effective as of June 1, 2013, all of the references to
“Expenses and Taxes” set forth in Sections 1.01 and 1.02 of Exhibit B of the
Lease shall be amended to read “Excess Expenses and Taxes” (other than the final
reference to “Expenses and Taxes” in the last sentence of Section 1.02, which
shall remain “Expenses and Taxes”). For the avoidance of doubt, effective as of
June 1, 2013, Tenant shall not have any obligation under the Lease to pay for
any Expenses or Taxes except as provided in this Section 7.1.

7.2 Original Premises. The provisions of the Lease with respect to payment of
Tenant’s Pro Rata Share of Expenses and Taxes in connection with the Original
Premises which arise or accrue prior to June 1, 2013 shall continue in effect
for such period. With respect to Tenant’s Pro Rata Share of Expenses and Taxes
in connection with the Original Premises which arise or accrue on or after
June 1, 2013, Tenant’s obligation to pay Tenant’s Pro Rata Share of Expenses and
Taxes shall be determined in accordance with Section 7.1 above, and the parties
agree that Tenant’s Pro Rata Share shall not be based on the 43,396 rentable
square feet of the Original Premises as set forth in the Lease, but shall
instead be based on 24,061 rentable square feet (i.e., an amount equal to the
rentable square footage of the Substitute Premises). As such, Tenant’s Pro Rata
Share with respect to the Original Premises shall equal 10.5190%.

7.3 Substitute Premises. Commencing on the Substitute Premises Commencement
Date, Tenant shall pay Tenant’s Pro Rata Share of Expenses and Taxes which arise
or accrue on and after the Substitute Premises Commencement Date in connection
with the Substitute Premises in accordance with the terms of the Lease as
amended by Section 7.1, above. Effective as of the Substitute Premises
Commencement Date, for purposes of calculating Tenant’s Pro Rata Share of
Expenses and Taxes in connection with the Substitute Premises, Tenant’s Pro Rata
Share shall equal 10.5190%.

8. Substitute Premises Improvements. Except as specifically set forth in the
Tenant Work Letter attached hereto as Exhibit B (the “Tenant Work Letter”),
Landlord shall not be obligated to provide or pay for any improvement work or
services related to the improvement of the Substitute Premises. Notwithstanding
any conflicting provision of the Lease or this First Amendment, Tenant shall not
have any obligation to remove any of the Tenant Improvements constructed in the
Substitute Premises pursuant to the Tenant Work Letter; provided, however, upon
the expiration or earlier termination of the Lease (as amended), with respect to
the “jet lab” portion of the Substitute Premises, Tenant shall remove (i) all
supplemental HVAC equipment (including, without limitation, all cables,
conduits, hoses, and connections, and all related equipment, if any, located
outside the Premises), as shall be more particularly set forth in the Approved
Working Drawings where specific supplemental HVAC equipment required to be
removed by Landlord will be specifically identified, (ii) all plumbing in and to
the jet lab portion of the Premises, as shall be more particularly set forth in
the Approved Working Drawings where the specific plumbing required to be removed
by Landlord shall be specifically identified, and (iii) all communications and
computer wires, cables, fibers, connections and related telecommunications
equipment and/or other facilities for telecommunications (collectively,
“Cables”), and repair any damage to the Substitute Premises and the Building
caused by such removal; provided further, however, in the event that Tenant
exercises its right to the Renewal Term (as set forth in Section 5.3 above) and
occupies the Substitute Premises during the Renewal Term, then provided that
there is no uncured Default under

 

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the Lease (as hereby amended) as of the date of the expiration of the Renewal
Term, Tenant shall not have any obligation to remove any of the “jet lab” Tenant
Improvements pursuant to the foregoing (other than Cables which, notwithstanding
the foregoing, Tenant shall remove upon the expiration or earlier termination of
the Lease).

9. Letter of Credit.

9.1 Replacement Letter of Credit. As of the date of this First Amendment,
Landlord is holding the Letter of Credit as set forth under the terms of Section
I of Exhibit F of the Lease in the current amount of $875,000.00, which Letter
of Credit shall (subject to the terms of this Section 9) be maintained in effect
throughout the Substitute Premises Term as required in Section I of the Lease.
However, notwithstanding the foregoing, or any contrary provisions set forth in
the Lease, effective as of the date of this First Amendment, Tenant shall have
the right to replace the existing Letter of Credit with a stand by unconditional
and irrevocable letter of credit in the amount of $250,000.00 (the “Replacement
Letter of Credit”) in form and content reasonably acceptable to Landlord and
issued by a nationally recognized bank reasonably acceptable to Landlord The
Replacement Letter of Credit shall be held by Landlord under the same terms and
conditions set forth in the Lease with respect to the Letter of Credit, except
as set forth herein. Provided that no event of Default then exists by Tenant
under the terms of the Lease, Landlord shall return the existing Letter of
Credit to Tenant within five (5) business days following Landlord’s receipt of
the Replacement Letter of Credit.

9.2 Springing Additional Letter of Credit. Notwithstanding any provision to the
contrary contained in the Lease, Tenant shall be required to deliver an
additional Letter of Credit (the “Additional Letter of Credit”), in the
applicable “Additional Letter of Credit Amount” indicated below, in the event
that at any time during the Substitute Premises Term Landlord delivers a Demand
Notice to Tenant as set forth below. Except as provided herein, such Additional
Letter of Credit shall be subject to all of the terms and conditions applicable
to the Replacement Letter of Credit. The Additional Letter of Credit shall be
either (i) an amendment to the existing Replacement Letter of Credit, reasonably
acceptable to Landlord, increasing the amount thereof by the Additional Letter
of Credit Amount, or (ii) an entirely new Letter of Credit (in the form and
content otherwise required under the terms of this Lease and reasonably
acceptable to Landlord) in the Additional Letter of Credit Amount. The
Additional Letter of Credit shall be held by Landlord throughout the remainder
of the Term on the same terms as are otherwise applicable to the Letter of
Credit.

9.2.1 Within thirty (30) days following the end of each financial quarter
occurring each year during the Substitute Premises Term (i.e., January through
March, April through June, July through September, and October through
December), Tenant shall provide Landlord, for Landlord’s review, a copy of
Tenant’s financial statements for such financial quarter prepared on the basis
of generally accepted accounting principles (“GAAP”), consistently applied, and
certified as correct by Tenant (for purposes of this Section 9.2.1, “Financial
Statement”). Notwithstanding the foregoing, so long as Tenant is a publicly
traded corporation, Tenant shall not have any obligation to deliver the
Financial Statement to Landlord as aforesaid but shall make such Financial
Statement available to Landlord as such information is released to the general
public pursuant to applicable regulatory requirements (e.g., Tenant’s 10K and
10Q statements). In the event that Tenant fails to timely deliver any Financial
Statement, or if any such Financial Statement indicates that has failed to
maintain at least $7,500,000.00 in the aggregate of “cash,” “cash equivalents.”
and “short term

 

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investments” (as each of the forgoing are defined by GAAP), and $3,000,000.00 of
the foregoing $7,500,000.00 amount in cash or cash equivalents (collectively,
the “Minimum Financial Requirements”) as of the effective date of the subject
Financial Statement, then upon written notice from Landlord (the “Demand
Notice”), Tenant shall deliver to Landlord an Additional Letter of Credit in the
Additional Letter of Credit Amount set forth in Section 9.2.2 below.

9.2.2 The Demand Notice shall set forth the Additional Letter of Credit Amount.
The “Additional Letter of Credit Amount” shall be as follows:

 

Date on which Demand Notice

is delivered to Tenant

   Additional Letter of
Credit Amount  

Prior to May 31, 2018

   $ 500,000.00   

Prior to May 31, 2020

   $ 250,000.00   

10. Parking. Effective as of June 1, 2003, Section III.A of Exhibit F of the
Lease is amended and restated in its entirety as follows:

“During the Term, Landlord shall lease to Tenant, or cause the operator (the
“Parking Facility Operator”) of the garage servicing the Building (the “Parking
Facility”) to lease to Tenant, and Tenant shall lease from Landlord or the
Parking Facility Operator, two and three-tenths (2.3) unreserved parking spaces
for every 1,000 rentable square feet of the Premises (i.e., fifty-five
(55) unreserved parking spaces as of the date of the First Amendment) (the
“Spaces”) for the use of Tenant and its employees. Tenant shall pay to Landlord
$150.00 for each space per month (plus any applicable taxes) (the “Parking
Rate”) throughout the remainder of the Substitute Premises Term, and such
amounts shall be deemed Additional Rent hereunder. If requested by Landlord with
respect to any Space(s), Tenant shall execute and deliver to Landlord the
standard parking agreement used by Landlord (the “Parking Agreement”) in the
Parking Facility for such Space(s).

In addition, effective as of June 1, 2013, Tenant shall have the right to lease
from Landlord up to forty (40) monthly valet parking passes for valet parking in
the Parking Facility (the “Valet Parking Passes”) on a monthly as needed basis.
The Parking Rate applicable to such Valet Parking Passes shall be $150.00 for
each pass per month (plus any applicable taxes) throughout the remainder of the
Substitute Premises Term, and such amounts shall be deemed Additional Rent
hereunder. For the avoidance of doubt, (a) Landlord shall issue such Valet
Parking Passes following receipt of Tenant’s written request therefor at any
time during the Substitute Premises Term, (b) Tenant may elect to terminate any
Valet Parking Pass upon not less than ten (10) days’ notice to Landlord
(provided, however, in no event shall Tenant be entitled to any refund or credit
with respect to any remaining portion of any calendar month to which such Valet
Parking Pass applied), and (c) Tenant’s right to forty (40) Valet Parking Passes
shall continue so long as this Lease is in effect notwithstanding any prior
discontinuance or non-use of any Valet Parking Passes. In

 

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the event that Tenant leases all forty (40) of the foregoing Valet Parking
Passes, but desires to lease additional valet parking passes, then subject to
availability (as reasonably determined by Landlord), Tenant may rent, on a
month-to-month basis, additional valet parking passes (the “Month-to-Month
Parking Passes”), and the Parking Rate applicable to such Month-to-Month Parking
Passes shall be the prevailing rate charged by Landlord from time-to-time at the
parking facility for valet parking passes. The Month-to-Month Parking Passes
shall be automatically renewed each subsequent calendar month so long as this
Lease is in effect unless either Landlord or Tenant delivers written notice to
the other party of termination for particular Month-to-Month Parking Passes not
less than ten (10) days prior to the end of the current calendar month;
provided, however, in no event shall Landlord have the right to elect to
terminate any such Month-to-Month Parking Passes except to the extent that the
Month-to-Month Parking Passes that Landlord elects to terminate are required (as
reasonably determined by Landlord) to be provided to another tenant in the
Building in order to satisfy such other tenant’s parking requirements in the
ratio of 2.3 parking stalls per one thousand (1,000) rentable square feet of
such tenant’s premises (or such other ratio as may then be required by
Applicable Laws). Notwithstanding anything to the contrary set forth in this
Section 10, Landlord shall have the right, in its sole and absolute discretion
and upon the delivery of notice to Tenant, to convert any of Tenant’s Valet
Parking Passes into an equal number of unreserved parking spaces. Except as set
forth in this Section 10, Tenant’s lease of Spaces and Valet Parking Passes
shall be in accordance with the provisions of Section III of Exhibit F of the
Lease.

In addition to the Parking Rate, Tenant shall also pay Tenant’s Pro Rata Share
(i.e., the same Tenant’s Pro Rata Share as used in connection with Expenses and
Taxes under the Lease) of the costs incurred by Landlord in providing valet
parking service to the Building.

Notwithstanding any conflicting provision of the Lease or this First Amendment,
during the period beginning on June 1, 2013, and ending on November 30, 2014,
the Parking Rate for Tenant’s initial fifty-five (55) Spaces and any Valet
Parking Passes in effect during such period (but not with respect to any
Month-to-Month Parking Passes) shall be abated in their entirety; provided,
however, such abatement shall terminate if an event of Default occurs under the
Lease by Tenant during such period.”

11. Insurance and Waiver of Subrogation. Effective as of the date of this First
Amendment, Sections 14 and 15 of the Lease are amended and restated in their
entirety as follows:

“14. Insurance.

14.1 Tenant’s Insurance. Tenant shall maintain the following insurance policies:

 

 

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(1) Commercial general liability insurance on the current ISO CG 00 01 12 07
occurrence form or equivalent acceptable to Landlord in amounts of Three Million
Dollars ($3,000,000.00) per occurrence, Three Million Dollars ($3,000,000.00)
personal injury and advertising injury, Three Million Dollars ($3,000,000.00)
products-completed operations aggregate and Three Million Dollars
($3,000,000.00) general aggregate with defense costs provided in addition to
policy limits, insuring Tenant, as well as Landlord (including both Talon
Portfolio Services, LLC, a Washington limited liability company, as general
receiver, and W2007 Seattle Office 110 Atrium Place Realty, LLC, a Delaware
limited liability company), Landlord’s property management company, Landlord’s
asset management company and, if requested in writing by Landlord, and any of
Landlord’s Mortgagees (collectively, the “Additional Insureds”) thereunder and
under Tenant’s commercial excess or umbrella liability policy, if any, against
all liability for personal injury, bodily injury (including mental anguish and
death) or property damage or destruction (including loss of use thereof) arising
from the use and occupancy of the Premises, the Building and all areas
appurtenant thereto, including the Parking Facility and (without implying any
consent by Landlord to the installation thereof) the installation, operation,
maintenance, repair or removal of Tenant’s equipment or other property that may
be located on the grounds of the Property (other than inside the Premises),

(2) Primary “special form” perils property damage insurance covering the full
value of all alterations, additions and improvements and betterments in the
Premises, including the Tenant Improvements and other Alterations, naming
Landlord and each of Landlord’s Mortgagees as additional loss payees as their
interests may appear,

(3) Primary “special form” perils property damage insurance covering the full
value of all furniture, trade fixtures, electronic data and media, business
records, and personal property (including property of Tenant or others) in the
Premises or otherwise placed in the Property by or on behalf of Tenant; any
assignees claiming by, through, or under Tenant; any subtenants claiming by,
through, or under Tenant; and any of their respective agents, contractors,
employees, licensees, guests and invitees (each a “Tenant Party”), without
deduction for depreciation,

(4) Workers’ compensation insurance as required by the State of Washington,
together with employers’ liability insurance of at least One Million Dollars
($1,000,000.00) for each accident for bodily injury by accident, One Million
Dollars ($1,000,000.00) each employee for bodily injury by disease, and One
Million Dollars ($1,000,000.00) policy limit for bodily injury by disease,

(5) Business income with extra expense insurance in an amount reasonably
acceptable to Landlord, and

(6) Comprehensive automobile insurance, and if necessary, commercial umbrella
insurance, with a limit of not less than Three Million Dollars ($3,000,000.00)
each accident, which automobile insurance shall cover liability arising out of
any automobile (including hired and non-owned automobiles), insuring the
Additional Insureds as additional insureds thereunder.

 

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For the avoidance of doubt, any Additional Insured will be required to provide
the insurer reasonable evidence of such Additional Insured’s interest in the
subject insurance policy.

All of Tenant’s insurance shall be primary insurance as to all claims thereunder
and provide that any insurance carried by any of the Additional Insureds is
excess over, and non-contributing with, any insurance of Tenant. Tenant shall
furnish to Landlord certificates of such insurance and such other evidence
satisfactory to Landlord of the maintenance of all insurance coverages required
hereunder (including copies of endorsements) at least ten (10) days prior to the
earlier of the Commencement Date or the date Tenant first enters upon or
occupies the Premises, and at least ten (10) days prior to each renewal of said
insurance (and such liability insurance certificates or other evidence shall
include an endorsement or policy excerpt showing that Tenant’s coverage is
primary and non-contributing with respect to any insurance afforded to any of
the Additional Insureds). Tenant shall obtain a written obligation on the part
of each insurance company to endeavor to notify Landlord and each of Landlord’s
Mortgagees at least forty-five (45) days before cancellation or material change
of any such insurance policies (ten [10] days in the event of nonpayment of
premiums). Tenant shall carry and maintain during the Term, at its expense such
increased amounts of insurance required to be carried under this Section 14.1,
and such other types and amounts of insurance covering the Premises and Tenant’s
operation therein, as may be reasonably requested by Landlord from time to time,
but not in excess of the amounts and types of insurance then being required by
landlords of the Comparison Buildings. If the use or occupancy of the Premises
includes any activity or matter that is or may be excluded from coverage under a
commercial general liability policy (e.g., the sale, service or consumption of
alcoholic beverages), Tenant shall obtain such endorsements to the commercial
general liability policy or otherwise obtain insurance to insure all liability
arising from such activity or matter in such amounts as Landlord may reasonably
require. All such insurance policies shall be in form, and issued by companies
with an A.M. Best rating of A-VII or better, reasonably satisfactory to
Landlord. If Tenant fails to comply with the foregoing insurance requirements or
to deliver to Landlord the certificates or evidence of coverage required herein
within five business days after Landlord’s written request, Landlord, in
addition to any other remedy available pursuant to this Lease or otherwise, may,
but shall not be obligated to, obtain such insurance and Tenant shall pay to
Landlord within thirty (30) days after Tenant’s receipt of an invoice from
Landlord, together with reasonable supporting evidence, the premium costs
thereof, plus an administrative fee of five percent (5%) of such cost.

14.2 Landlord’s Insurance. Throughout the Term, Landlord shall maintain, as a
minimum, the following insurance policies: (1) property insurance for at least
ninety percent (90%) of the Building’s replacement value (excluding property
required to be insured by Tenant and the costs of excavation, foundations,
underground utilities and footings), less a commercially reasonable deductible
and/or

 

10

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self-insured retention if Landlord so chooses, and (2) commercial general
liability insurance in an amount of not less than Three Million Dollars
($3,000,000.00) general aggregate for damages because of personal injury, bodily
injury or death, or property damages or destruction (including loss of use
thereof). Landlord may, but is not obligated to, maintain such other insurance
and additional coverages as it may deem appropriate or as required by any of
Landlord’s Mortgagees. The cost of all insurance carried by Landlord with
respect to the Property shall be included in Expenses. The foregoing insurance
policies and any other insurance carried by Landlord shall be for the sole
benefit of Landlord and under Landlord’s sole control, and Tenant shall have no
right or claim to any proceeds thereof or any other rights thereunder.

15. No Subrogation; Waiver of Property Claims. The following waivers in this
Section 15 are intended to be cumulative, rather than mutually exclusive.

15.1 Policies Other than Property Insurance. Tenant waives all rights against
the Additional Insureds for recovery of damages occurring to the extent those
damages are covered under Tenant’s commercial general liability, automobile
liability, umbrella/excess liability or any other insurance policies carried by
Tenant related to the Property, the Premises or this Lease (excluding Tenant’s
property insurance policy, which is covered in Section 15.2 below), or if Tenant
fails to carry any of such insurance required under this Lease, would ordinarily
have been covered by the required insurance. If any such policy does not allow
Tenant to waive rights of recovery against others prior to a loss, Tenant shall
obtain an endorsement from its insurance carrier waiving the carrier’s rights of
recovery under subrogation or otherwise against the Additional Insureds.

15.2 Property Insurance Policies. Each of Landlord and Tenant waives any claim
it might have against the other (and in the case of Tenant’s waiver, against the
other Additional Insureds) for any damage to, or theft, destruction, loss, or
loss of use of, any property, to the extent the same is insured against under
any property insurance policies of the types described in Section 14.1 above
that cover the Property, the Premises, Landlord’s or Tenant’s fixtures, personal
property, leasehold improvements, or business (or if the insurance required
under this Lease had been carried, would have been insured against), regardless
of whether the negligence of the other party caused such loss or damage.
Additionally, Tenant waives any claim it may have against the Additional
Insureds for any loss to the extent such loss or damage is caused by a terrorist
act. Each party shall cause its insurance carrier to endorse all applicable
policies waiving the carrier’s rights of recovery under subrogation or otherwise
against the other party as provided hereinabove. For the purposes of this
Section 15.2, any deductible with respect to a party’s property insurance shall
be deemed covered by, and recoverable by such party under, valid and collectible
policies of insurance.”

12. Broker. Neither Landlord nor Tenant has dealt with any broker or agent in
connection with the negotiation or execution of this Lease, other than
Washington Partners (representing Tenant) and Talon Portfolio (representing
Landlord), whose commissions (if any) shall

 

11

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be paid by Landlord pursuant to separate written agreements. Each party
acknowledges receipt of a copy of the pamphlet described in RCW 18.86.030(f)
entitled “The Law of Real Estate Agency,” as required by Washington Law. Tenant
and Landlord shall each indemnify the other against all costs, expenses,
attorneys’ fees, liens and other liability for commissions or other compensation
claimed by any broker or agent claiming the same by, through or under the
indemnifying party. The terms of this Section 12 shall survive the expiration or
earlier termination of the term of the Lease, as hereby amended.

13. Deletion. The parties acknowledge and agree that Section VIII. of Exhibit F
to the Lease is hereby deleted in its entirety.

14. OFAC/FCPA Representation. Neither Tenant nor any of its affiliates, nor any
of their respective brokers or other agents acting in any capacity in connection
with the transactions contemplated by this Lease is or will be (a) conducting
any business or engaging in any transaction or dealing with any person appearing
on the U.S. Treasury Department’s OFAC list of prohibited countries,
territories, “specifically designated nationals” (“SDNs”) or “blocked person”
(each a “Prohibited Person”) (which lists can be accessed at the following web
address: http://www.ustreas.gov/offices/enforcement/ofac/), including the making
or receiving of any contribution of funds, goods or services to or for the
benefit of any such Prohibited Person; (b) engaging in certain dealings with
countries and organizations designated under Section 311 of the USA PATRIOT Act
as warranting special measures due to money laundering concerns; (c) dealing in,
or otherwise engaging in any transaction relating to, any property or interests
in property blocked pursuant to Executive Order No. 13224 dated September 24,
2001, relating to “Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism”; (d) a foreign shell bank
or any person that a financial institution would be prohibited from transacting
with under the USA PATRIOT Act; or (e) engaging in or conspiring to engage in
any transaction that evades or avoids, or has the purpose of evading or
avoiding, or attempting to violate, any of the prohibitions set forth in (i) any
U.S. anti-money laundering law, (ii) the Foreign Corrupt Practices Act,
(iii) the U.S. mail and wire fraud statutes, (iv) the Travel Act, (v) any
similar or successor statutes or (vi) any regulations promulgated under the
foregoing statutes. If at any time this representation becomes false, then it
shall be considered an Event of Default under this Lease as to which there shall
be no right to notice or an opportunity to cure, notwithstanding anything
contained in this Lease to the contrary, and Landlord shall have the right to
exercise all of the remedies set forth in this Lease including, without
limitation, immediate termination of this Lease.

15. Counterparts. This First Amendment may be executed in multiple counterparts,
each of which is to be deemed original for all purposes, but all of which
together shall constitute one and the same instrument. Delivery by facsimile, or
e-mail of a PDF copy, of a counterpart of this First Amendment executed by
Landlord or Tenant shall constitute delivery by such party of such party’s
executed counterpart of this First Amendment.

16. Notices. Notwithstanding anything to the contrary contained in the Lease
(i) as of the Substitute Premises Commencement Date, any notices to Tenant must
be sent, transmitted, or delivered, as the case may be to the Substitute
Premises, and (ii) as of the date of this First Amendment, any notices to
Landlord must be sent, transmitted, or delivered, as the case may be, to the
following addresses:

 

12

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Talon Portfolio Services, LLC

1800 Ninth Avenue, Suite 1600

Seattle, Washington 98101

Attention: Lease Administration

With a copy to:

Pircher, Nichols & Meeks

1925 Century Park East, Suite 1700

Los Angeles, California 90067-2512

Attention: Real Estate Notices (SCS/KMH)

17. Payment of Rent. Notwithstanding anything to the contrary set forth in the
Lease, effective as of the date of this First Amendment, Tenant shall pay Rent,
without prior notice or demand, to Landlord or Landlord’s agent at the address
set forth below, or, at Landlord’s option, at such other place as Landlord may
from time to time designate in writing:

W2007 Seattle Office 110 Atrium Place Realty, LLC

P.O. Box 730732

Dallas, Texas 75373-0732

18. Effectiveness of Agreement. In no event shall any draft of this First
Amendment create any rights, obligations or liabilities, it being intended that
only a fully executed and delivered copy of this First Amendment will bind the
parties hereto.

19. No Further Modification. Except as set forth in this First Amendment, all of
the terms and provisions of the Lease shall apply with respect to the Substitute
Premises and shall remain unmodified and in full force and effect. In the event
of a conflict between the terms of the Lease and the terms of this First
Amendment, the terms of this First Amendment shall control. The provisions of
the Lease, as amended and supplemented by this First Amendment, are hereby
ratified and confirmed by Tenant and Landlord in all respects.

[signatures follow on next page]

 

13

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[Signature Page to the Lease Agreement between Talon Properties Services, LLC,

a Washington limited liability company, as General Receiver for W2007 Seattle
Office 110

Atrium Place Realty, LLC, a Delaware limited liability company, King County

Case No. 12-2-21253-8-SEA, as Landlord, and BSQUARE CORPORATION,

a Washington corporation, as Tenant]

This First Amendment is executed on the respective dates set forth below, but
for reference purposes, this First Amendment shall be dated as of the date first
above written. If the execution date is left blank, this First Amendment shall
be deemed executed as of the date first written above.

 

LANDLORD:

  

TALON PORTFOLIO SERVICES, LLC,

  

a Washington limited liability company,

  

as General Receiver for W2007 Seattle Office

  

110 Atrium Place Realty, LLC,

  

a Delaware limited liability company,

  

King County Case No. 12-2-21253-8-SEA

  

By:

 

/s/ William Pollard                        

  

Name:

 

William Pollard

  

Title:

 

Managing Principal

  

Execution Date: 8/26, 2013

TENANT:

  

BSQUARE CORPORATION,

  

a Washington corporation

  

By:

 

/s/ Brian Crowley

  

Name:

 

Brian Crowley

  

Title:

 

President & CEO

  

Execution Date: August 23, 2013

  

By:

      

Name:

      

Title:

      

Execution Date: ___________, 20__

 

14

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LANDLORD ACKNOWLEDGMENT

 

STATE OF WASHINGTON    }          } ss.       COUNTY OF KING    }      

I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.

On this 26th of August, 2013, before me personally appeared William R. Pollard
[Insert name of the individual executing the Lease on behalf of Landlord], to me
known to be the Managing Principal of Talon Portfolio Services, LLC, a
Washington limited liability company, as General Receiver for W2007 seattle
office 110 Atrium Place Realty [Insert name of the property-owning entity], a
Delaware limited liability company, King County Case No. 12-2-21253-8-SEA, the
company that executed the within and foregoing instrument, and acknowledged the
said instrument to be the free and voluntary act and deed of said limited
liability company, for the uses and purposes therein mentioned, and on oath
stated that he was authorized to execute said instrument.

WITNESS my hand and seal hereto affixed the day and year first above written.

 

 

/s/ Pamela S. Mattingly

 

Pamela S. Mattingly

 

                                 Type or print name

 

Notary Public in and for the State of WA

 

Residing at Redmond

 

My commission expires: June 29, 2016

 

15

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TENANT ACKNOWLEDGMENT

 

STATE OF Washington    }          } ss.       COUNTY OF King    }      

On this 23rd day of August, 2013, before me, a Notary Public in and for the
State of Washington, personally appeared Brian Crowley [Insert name of person
executing the Lease on behalf of Tenant], personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person who executed this
instrument; on oath stated that said individual was authorized to execute the
instrument, and acknowledged it as the President & CEO [Insert corporate office
held by person executing the Lease on behalf of Tenant] of Bsquare Corporation
[Insert name of Tenant], a Washington [Insert jurisdiction in which the
Tenant-entity is organized and the type of entity] to be the free and voluntary
act and deed of said corporation for the uses and purposes mentioned in the
instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day and
year first above written.

 

 

/s/ Naney K. Ozols

 

Naney K. Ozols

 

                             Type or print name

 

Notary Public in and for the State of Washington

 

Residing at Kirkland, WA

 

My commission expires: May 24, 2014

 

16

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EXHIBIT A

110 ATRIUM

OUTLINE OF SUBSTITUTE PREMISES1

 

LOGO [g591834g16o54.jpg]

 

 

1  the purpose of Exhibit A is to show the approximate location of the Premises
in the Building only, and such Exhibit is not meant to constitute an agreement,
representation or warranty as to the construction of the Premises, the
improvements therein, or the elements thereof.

 

EXHIBIT A

--------------------------------------------------------------------------------

EXHIBIT B

110 ATRIUM

TENANT WORK LETTER

This Tenant Work Letter (“Tenant Work Letter”) shall set forth the terms and
conditions relating to the construction of improvements for the Substitute
Premises. All references in this Tenant Work Letter to Sections of “this
Amendment” shall mean the relevant portion of the First Amendment to which this
Tenant Work Letter is attached as Exhibit B and of which this Tenant Work Letter
forms a part, all references in this Tenant Work Letter to Articles or Sections
of “this Lease” shall mean the relevant portions of the Lease (as amended) being
amended by this Amendment.

SECTION 1

DELIVERY OF THE SUBSTITUTE PREMISES

1.1 In General. Tenant shall accept the Substitute Premises, as well as the
base, shell and core of (i) the Substitute Premises and (ii) the floor of the
Building on which the Substitute Premises is located (collectively, the “Base,
shell and Core”), in their current “AS-IS” condition and configuration existing
as of the date of this Amendment, subject to the Substantial Completion of the
Tenant Improvements as provided herein. Following the date of this Amendment,
Landlord shall construct in the Substitute Premises the “Tenant Improvements”
(defined below) pursuant to the provisions of this Tenant Work Letter. Except
for the Tenant Improvement work described in this Tenant Work Letter, and except
for the Tenant Improvement Allowance set forth below, Landlord shall not be
obligated to make or pay for any alterations, additions or improvements to the
Substitute Premises, or the Building.

1.2 Mechanical Load Capacity. Tenant hereby acknowledges and agrees that the
Substitute Premises does not meet the mechanical load capacity required for
Tenant’s proposed “jet lab” to be constructed in the Substitute Premises, and
that Landlord makes no representation, warranty or promise as to the condition
or suitability of the jet lab portions of the Substitute Premises for the
purpose intended by Tenant; provided, however, Landlord and Tenant hereby
acknowledge and agree that (i) the Building’s mechanical, electrical and
plumbing systems are sufficient to satisfy the mechanical, electrical and
plumbing system requirements for Tenant’s jet lab equipment as the same has been
represented to Landlord in the plans and specifications for the same reviewed by
Landlord prior to the date of this First Amendment (“Tenant’s Jet Lab Plans”),
and (ii) the Premises floor load capacity is sufficient to satisfy the floor
load requirements for Tenant’s jet lab equipment as the same has been
represented to Landlord in Tenant’s Jet Lab Plans. Landlord shall only be
obligated to construct the Tenant Improvements in the jet lab portion of the
Premises in accordance with the Approved Working Drawings (as that term is
defined hereinbelow), and Landlord’s review of the JPC Work Letter, the Approved
Working Drawings, or any other Construction Drawings, shall be for Landlord’s
sole purpose and shall not imply Landlord’s review of the same (or obligate
Landlord to review the same) for mechanical (including, without limitation,
HVAC) load capacity requirements, design, Code compliance or other like matters.
Accordingly, notwithstanding that any Construction Documents are reviewed by
Landlord or any of its space

 

EXHIBIT B - 1

--------------------------------------------------------------------------------

planner, engineers or consultants, and notwithstanding any advice or assistance
which may be rendered to Tenant by Landlord or any of its space planner,
engineers or consultants, Landlord shall have no liability whatsoever in
connection therewith.

SECTION 2

CONSTRUCTION DRAWINGS FOR THE SUBSTITUTE PREMISES

Prior to the execution of this Amendment, Landlord and Tenant have approved that
certain Work Letter dated as of July 18, 2013, prepared by JPC Architects, for
the construction of certain improvements in the Substitute Premises (the “JPC
Work Letter”). Based upon and in conformity with the JPC Work Letter, Landlord
shall cause its architect and engineers to prepare and deliver to Tenant, for
Tenant’s approval, detailed specifications and engineered working drawings for
the tenant improvements shown on the JPC Work Letter (the “Working Drawings”).
The Working Drawings shall incorporate modifications to the JPC Work Letter as
necessary to comply with the floor load and other structural and system
requirements of the Building; provided, however, in no event shall Landlord have
any obligation in connection with any mechanical (including, without limitation,
HVAC) load capacity requirements for the “jet lab” portion of the Premises, and
Tenant shall be solely responsible for the compliance of such Working Drawings
with Tenant’s mechanical (including, without limitation, HVAC) load capacity
requirements for the “jet lab” portion of the Premises. To the extent that the
finishes and specifications are not completely set forth in the JPC Work Letter
for any portion of the tenant improvements depicted thereon, the actual
specifications and finish work shall be in accordance with the specifications
for the Building’s standard components (the “Specifications”) to be used in the
construction of tenant improvements (collectively, the “Standard Improvement
Package”), which Specifications have been received and reviewed by Tenant.
Landlord may make changes to the Specifications for the Standard Improvement
Package from time to time. Within three (3) Business Days after Tenant’s receipt
of the Working Drawings, Tenant shall approve or disapprove the same, which
approval shall not be unreasonably withheld; provided, however, that Tenant may
only disapprove the Working Drawings to the extent such Working Drawings are
inconsistent with the JPC Work Letter and only if Tenant delivers to Landlord,
within such three (3)-Business Day period, specific changes proposed by Tenant
that are consistent with the JPC Work Letter and do not constitute changes that
would result in any of the circumstances described in items (i) through
(iii) below. If any such revisions are timely and properly proposed by Tenant,
Landlord shall cause its architect and engineers to revise the Working Drawings
to incorporate such revisions and submit the same for Tenant’s approval in
accordance with the foregoing provisions, and the parties shall follow the
foregoing procedures for approving the Working Drawings until the same are
finally approved by Landlord and Tenant. Upon Landlord’s and Tenant’s approval
of the Working Drawings, the same shall be referred to as the “Approved Working
Drawings”. Landlord and Tenant shall make no changes, change orders or
modifications to the Approved Working Drawings without the prior written consent
of the other party, which consent shall not be unreasonably withheld; provided,
however, Landlord may withhold its consent in Landlord’s sole discretion if such
change or modification would: (i) directly or indirectly delay the Substantial
Completion of the Substitute Premises; (ii) be of a quality lower than the
quality of the Specifications set forth in the Standard Improvement Package;
and/or (iii) require any changes to the base, shell and core work, the
Building’s Structure structural improvements or any of the Building’s Systems;
provided further, however, Tenant shall have no right to withhold its consent to
any changes, change orders or modifications that are due to, or are the result
of, actual

 

EXHIBIT B - 2

--------------------------------------------------------------------------------

field conditions and that are consistent with, and/or which are a logical
extension of, the Approved Working Drawings. The JPC Work Letter and Approved
Working Drawings shall be collectively referred to herein as the “Construction
Drawings”. The tenant improvements shown on the Approved Working Drawings shall
be referred to herein as the “Tenant Improvements”.

SECTION 3

CONSTRUCTION AND COST OF TENANT IMPROVEMENTS

3.1 In General. Landlord shall cause a contractor designated by Landlord and
reasonably acceptable to Tenant (the “Contractor”) to (i) obtain all applicable
building permits for construction of the Tenant Improvements, and (ii) construct
the Tenant Improvements as substantially depicted on the Construction Drawings,
excepting only minor variations (i.e., variations that are not inconsistent with
the intent of the Construction Drawings) as Landlord may deem advisable and any
Change Orders (as defined below) approved by Landlord in compliance with such
building permits and all Applicable Laws; provided, however, that the issuance
of a temporary or permanent certificate of occupancy or final sign off on the
job card upon Substantial Completion (as defined below) of the Tenant
Improvements shall be deemed conclusive evidence of the compliance of the Tenant
Improvements with Applicable Laws. Landlord shall pay for the cost of the design
and construction of the Tenant Improvements (which shall include (a) a
Landlord’s supervision fee equal to four percent (4%) of construction costs and
(b) a construction management fee equal to one percent (1%) of construction
costs payable to a construction manager selected by Tenant) in an amount up to,
but not exceeding, $1,178,989.00 (i.e., $49.00 per rentable square foot of the
Substitute Premises) (the “Tenant Improvement Allowance”). Tenant shall pay for
all costs in excess of the Tenant Improvement Allowance (including any costs
associated with Change Orders (as that term is defined in Section 4, below)),
which amount shall be paid to Landlord within five (5) business days after
Tenant’s receipt of invoice therefor from Landlord, together with reasonable
supporting backup documentation. In no event shall Landlord be obligated to pay
for any of Tenant’s furniture, computer systems, telephone systems, equipment or
other personal property that may be depicted on the Construction Drawings, all
of which items shall be paid for by Tenant.

3.2 Space Planning Allowance. Landlord shall also reimburse Tenant for an
initial space plan for the Substitute Premises in an amount not to exceed
Fifteen Cents ($0.15) per rentable square foot of the Substitute Premises.

3.3 Unused Tenant Improvement Allowance. In the event that the aggregate final
cost of the design, permitting, supervision and construction of the Tenant
Improvements, including any increase in such final costs due to any Change
Orders or due to any other revisions, changes, or substitutions made to any of
the Construction Documents or the Tenant Improvements at the request of Tenant
(collectively, the “Total Construction Cost”), is less than the Tenant
Improvement Allowance, then the balance of the Tenant Improvement Allowance (the
“Unused Tenant Improvement Allowance”), may be applied by Tenant upon written
notice to Landlord, (a) as a credit (the “Base Rent Credit”) against the payment
of Base Rent as it becomes due and owing for the Substitute Premises (not to
exceed the aggregate of $120,305.00), and (b) as an allowance (the “FF&E
Allowance”) to reimburse Tenant for costs incurred by Tenant (not to exceed the
aggregate of $119,580.00) in the purchase of furniture, fixtures and equipment
used in the Substitute Premises (the “FF&E”). For the avoidance of doubt, the
aggregate amount of the Unused Tenant

 

EXHIBIT B - 3

--------------------------------------------------------------------------------

Improvement Allowance that may be used by Tenant for the Base Rent Credit and
FF&E Allowance is $240,610.00. The FF&E Allowance will be disbursed by Landlord
in accordance with Landlord’s standard disbursement procedures, including,
without limitation, following Landlord’s receipt of (i) evidence (i.e.,
invoices, contracts, or other documentation reasonably satisfactory to Landlord)
of payment for the FF&E, (ii) if applicable, fully executed, unconditional lien
releases from all contractors, subcontractors, laborers, materialmen, and
suppliers used by Tenant in connection with the installation of the FF&E, and
(iii) written notice from Tenant requesting such disbursement. In no event shall
any of the terms set forth in this Section 3.3 be deemed to obligate Landlord to
disburse any amount in excess of the amount of the Tenant Improvement Allowance.

SECTION 4

CHANGE ORDERS

If, prior to the Substantial Completion of the Tenant Improvements, Tenant shall
request improvements or changes to the Substitute Premises in addition to,
revision of or substitution for the Tenant Improvements identified on the
Construction Drawings and Specifications, including, without limitation, any
request for above-Building standard finishes or other detailed specifications
(individually or collectively, “Change Orders”), Tenant shall deliver to
Landlord for its approval plans and specifications for such change Orders. If
Landlord does not approve of the plans for such Change Orders, Landlord shall
advise Tenant of the revisions required. Tenant shall revise and redeliver the
plans and specifications to Landlord within five (5) days of Landlord’s advice
or Tenant shall be deemed to have abandoned its request for such Change Orders.
Tenant shall pay for all preparations and revisions of plans and specifications,
and the increase in the cost of construction, resulting from all Change Orders
as set forth in Section 3 above.

SECTION 5

SUBSTANTIAL COMPLETION

5.1 Substantial Completion. For purposes of this Amendment, including this
Tenant Work Letter, “Substantial Completion” (and any correlative variations
thereof) of the Tenant Improvements shall mean completion of construction of the
Tenant Improvements pursuant to the Approved Working Drawings, with the
exception of any “Punch List Items” (as defined below). For the purposes of this
Tenant Work Letter, the term “Punch List Items” shall mean minor details of
construction or decoration or mechanical adjustments that can reasonably be
corrected or competed after the date Tenant commences its operations within the
Substitute Premises without causing substantial interference with Tenant’s
operations therein.

5.2 Tenant Delays. If there shall be a delay or there are delays in the
Substantial Completion of the Tenant Improvements as a result of any of the
following (individually, a “Tenant Delay”, and collectively, “Tenant Delays”):

(i) Tenant’s failure to timely approve the Working Drawings or any other matter
requiring Tenant’s approval;

(ii) a breach by Tenant of the terms of this Tenant Work Letter or the Lease;

 

EXHIBIT B - 4

--------------------------------------------------------------------------------

(iii) Tenant’s request for any Change Orders or any changes in any of the
Construction Drawings;

(iv) any changes in the Construction Drawings and/or the Tenant Improvements
required by applicable Laws if such changes are directly attributable to
Tenant’s use of the Substitute Premises or Tenant’s specialized Tenant
Improvements (as reasonably determined by Landlord); or

(v) any other acts or omissions of Tenant, or its agents or employees; then,
notwithstanding anything to the contrary set forth in this Amendment and
regardless of the actual date of Substantial Completion of the Tenant
Improvements, the Substitute Premises Commencement Date shall be deemed to be
the date the Substitute Premises Commencement Date would have occurred if no
Tenant Delay or Tenant Delays, as set forth above, had occurred.

SECTION 6

MISCELLANEOUS

6.1 Tenant’s Entry Into the Substitute Premises Prior to Substantial Completion.
Subject to the terms hereof and provided that Tenant and its agents do not
interfere with Contractor’s work at the Project or in the Substitute Premises,
at Landlord’s reasonable discretion Contractor shall allow Tenant access to the
Substitute Premises prior to the Substantial Completion of the Tenant
Improvements for the purpose of Tenant installing equipment or fixtures
(including Tenant’s data and telephone equipment) in the Substitute Premises.
Prior to Tenant’s entry into the Substitute Premises as permitted by the terms
of this Section 5.1, Tenant shall submit a schedule to Landlord and Contractor,
for their approval, which schedule shall detail the timing and purpose of
Tenant’s entry. In connection with any such entry, Tenant acknowledges and
agrees that Tenant’s employees, agents, contractors, consultants, workmen,
mechanics, suppliers and invitees shall fully cooperate, work in harmony and
not, in any manner, interfere with Landlord or Landlord’s contractors (including
the Contractor), agents or representatives in performing work at the Project or
in the Substitute Premises, or interfere with the general operation of the
Project or any portion thereof. If at any time any such person representing
Tenant shall not be cooperative or shall otherwise cause or threaten to cause
any such disharmony or interference, including, without limitation, labor
disharmony, and Tenant fails to immediately institute and maintain corrective
actions as directed by Landlord, then Landlord may revoke Tenant’s entry rights
upon twenty-four (24) hours’ prior notice to Tenant. Tenant acknowledges and
agrees that any such entry into and occupancy of the Substitute Premises or any
portion thereof by Tenant or any person or entity working for or on behalf of
Tenant shall be deemed to be subject to all of the terms, covenants, conditions
and provisions of the Lease, excluding only the covenant to pay Rent (until the
occurrence of the Substitute Premises Commencement Date). Tenant further
acknowledges and agrees that Landlord shall not be liable for any injury, loss
or damage that may occur to any of Tenant’s work made in or about the Substitute
Premises in connection with such entry or to any property placed therein prior
to the Substitute Premises Commencement Date except for such injury, loss or
damage to the extent arising from Landlord’s gross negligence or willful
misconduct. Tenant shall be liable to Landlord for any damage to any portion of
the Substitute Premises, including the Tenant Improvements, to the extent caused
by Tenant or any of Tenant’s employees, agents, contractors, consultants,
workmen, mechanics, suppliers and invitees. In the event that the performance of
Tenant’s work in connection

 

EXHIBIT B - 5

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with such entry causes extra costs to be incurred by Landlord or requires the
use of any Building or other Project services, Tenant shall reimburse Landlord
for such extra costs and/or shall pay Landlord for such Building or other
Project services, as the case may be, at Landlord’s standard rates then in
effect within thirty (30) days of Tenant’s receipt of an invoice from Landlord,
together with reasonable supporting evidence.

6.2 Tenant’s Representative. Tenant has designated Bonnie Hanson as its sole
representative with respect to the matters set forth in this Tenant Work Letter,
who shall have full authority and responsibility to act on behalf of the Tenant
as required in this Tenant Work Letter.

6.3 Landlord’s Representative. Landlord has designated Mr. Doug Swan as its sole
representative with respect to the matters set forth in this Tenant Work Letter,
who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.

6.4 Time of the Essence in This Tenant Work Letter. Unless otherwise indicated,
all references herein to a “number of days” shall mean and refer to calendar
days. If any item requiring Landlord’s approval is timely disapproved by
Landlord, the procedure for preparation of the item and approval thereof shall
be repeated until the item is approved by Landlord. In all instances where
Tenant is required to approve or deliver an item, if no written notice of
approval is given or the item is not delivered within the stated time period, at
Landlord’s sole option, at the end of said period the item shall automatically
be deemed approved or delivered by Tenant and the next succeeding item period
shall commence.

6.5 Tenant’s Lease Default. Notwithstanding any provision to the contrary
contained in the Lease, if an event of Default by Tenant as described in
Section 18 of the Lease or any default by Tenant under this Tenant Work Letter
(and such default is not cured within five (5) days after Tenant’s receipt of
written notice of such default from Landlord) has occurred at any time on or
before Substantial Completion of the Tenant Improvements, then (i) in addition
to all other rights and remedies granted to Landlord pursuant to the Lease, at
law and/or in equity, Landlord shall have the right to cause Contractor to cease
the construction of the Tenant Improvements (in which case, Tenant shall be
responsible for any delay in the Substantial Completion of the Tenant
Improvements caused by such work stoppage as set forth in Section 5.2 of this
Tenant Work Letter), and (ii) all other obligations of Landlord under the terms
of this Tenant Work Letter shall be suspended until such time as such default is
cured pursuant to the terms of the Lease or this Tenant Work Letter (in which
case, Tenant shall be responsible for any delay in the Substantial Completion of
the Tenant Improvements caused by such inaction by Landlord). In addition, if
the Lease is terminated prior to the Substitute Premises Commencement Date, for
any reason due to an event of Default by Tenant as described in Section 18 of
the Lease or any default by Tenant under this Tenant Work Letter, in addition to
any other remedies available to Landlord under the Lease, at law and/or in
equity, Tenant shall pay to Landlord, as additional Rent under the Lease, within
five (5) days of receipt of a statement therefor, any and all costs incurred by
Landlord (including any portion of the Tenant Improvement Allowance disbursed by
Landlord) and not reimbursed or otherwise paid by Tenant through the date of
such termination in connection with the Tenant Improvements to the extent
planned, installed and/or constructed as of such date of termination, including,
but not limited to, any costs related to the removal of all or any portion of
the Tenant Improvements and restoration costs related thereto.

 

EXHIBIT B - 6

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EXHIBIT B - 7