SUBLEASE





THIS
      SUBLEASE ("Sublease") is dated as of December 13, 2005, by and between Anacomp,
      Inc., an Indiana corporation ("Sublandlord"), and American Technology
      Corporation, a Delaware corporation ("Subtenant").




RECITALS





A.  Sublandlord
      is tenant under that certain Office Lease dated June 14, 2002 (the "Main Lease")
      with Kilroy Realty, L.P., a Delaware limited partnership ("Master Landlord"),
      as
      landlord, whereby Master Landlord leases to Sublandlord a single story building
      containing approximately 68,910 rentable square feet of space located at 15378
      Avenue of Science, San Diego, California 92128 (the "Building", and together
      with the entirety of the premises leased by Sublandlord under the Main Lease,
      the "Original Premises").




B.  Sublandlord
      desires to sublet to Subtenant, and Subtenant desires to sublet from
      Sublandlord, a portion of the Building (the "Sublet Premises") comprised of
      approximately 23,698 square feet of office space, which square footage includes
      approximately 50% of the lobby
      area of the Building as depicted on the Floor Plan (defined below) (the "Lobby
      Area") and the
      computer room. A graphic depiction of the Sublet Premises is contained in Exhibit
      A attached
      hereto (the "Floor Plan").




C.  The
      parties are agreeable to entering into a sublease of the Sublet Premises on
      the
      terms and conditions set forth below.




D.  Unless
      otherwise defined in this Sublease, all capitalized terms used herein have
      the
      meanings ascribed to them in the Main Lease.




AGREEMENT





NOW,
      THEREFORE, for and in consideration of the mutual promises set forth herein
      and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, Sublandlord and Subtenant hereby agree as
      follows:




1.  Sublet
      Premises. Subject
      to the terms, conditions and covenants hereinafter set forth, Sublandlord hereby
      subleases the Sublet Premises to Subtenant, and Subtenant hereby hires and
      accepts the Sublet Premises from Sublandlord. In addition, and as part of this
      Sublease, Sublandlord shall lease to Subtenant, and Subtenant shall lease from
      Sublandlord, any and all existing permanently attached improvements in the
      Sublet Premises (the "Improvements") upon all of the terms, covenants and
      conditions herein contained. As used herein, the term "Sublet Premises" shall
      also include the Improvements for the purposes of Subtenant's
      maintenance , ,
      repair
      and surrender obligations. Consistent with the Main Lease, Subtenant shall
      use
      the Sublet Premises solely for general office, assembly, research and
      development, or any other legally permitted use pursuant to the M1B zoning
      (or
      successor zoning designation) applicable to the Building. The precise square
      footage of the Sublet Premises may vary slightly (not greater than 3% of the
      amount set forth thereon) from the square footage described in Recital B above
      because it is subject to space planning and final measurement. Before Subtenant
      takes possession of the Sublet Premises, Sublandlord and Subtenant shall
      mutually agree upon the precise rentable square footage of the Sublet Premises (the
      "Net
      Square Footage") using current industry measuring standards endorsed by the
      Building Owners
      and Managers Association but consistent with any such standard set forth in
      the
      Main Lease (the "BOMA Standard").




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(a)  As
      part
      of Subtenant's rights under this Sublease which are subject to its quiet
      enjoyment protections set forth in Section 40 below, Subtenant shall have the
      non-exclusive right in common with Sublandlord and any other subtenants and
      occupants of the Building to use the Lobby Area and, if applicable, any common
      areas of the Original Premises that are required for Subtenant's access to,
      and
      use and enjoyment of, the Sublet Premises (collectively, the "Building Common
      Areas"). Neither Sublandlord nor Subtenant shall cause or permit any obstruction
      of or interference with the other party's rights to use the Building Common
      Areas for their intended purposes.





(b)  Subtenant
      shall have the non-exclusive use of a portion of the exterior of the
      roof
      of the Building (the "Roof Area") for the installation of Telecommunications
      Equipment (as
      defined in Article 22 of the Main Lease), as such location shall be approved
      in
      advance by Sublandlord (which approval shall not be unreasonably withheld or
      delayed), and shall have the non-exclusive right to install connector cables
      within the Building as necessary to connect the Telecommunications Equipment
      to
      the equipment in the Sublet Premises subject to all of the terms and conditions
      of Article 22 of the Main Lease (including, without limitation, any and all
      approvals required from Landlord) and the following conditions: (1) prior to
      submission to the City of San Diego, if required and Landlord, Subtenant shall
      provide to Sublandlord for review and approval, complete plans and
      specifications for the Telecommunications Equipment which shall include a list
      of all such equipment and the proposed location for the installation of the
      same; (2) Subtenant shall, at Subtenant's sole cost and expense, obtain any
      and
      all required permits for any such installation and operation of such
      Telecommunications Equipment, including, without limitation all building permits
      and shall provide Landlord and Sublandlord with copies of the same; (3)
      Subtenant shall comply with all applicable covenants, conditions and
      restrictions and all governmental rules and regulations applicable to the
      installation and operation of such Telecommunications Equipment, including,
      without limitation, any requirements
      for screening of the same and FCC requirements; and (4) Subtenant shall, at
      its
      sole cost,
      remove such Telecommunications Equipment upon the expiration or earlier
      termination of this Sublease and shall return the affected portion of the
      Building and the roof of the Building to the condition required by Landlord
      pursuant to the terms and conditions of the Main Lease. Any costs
      related to Subtenant's installation or use of Telecommunications Equipment
      that
      are passed through
      to Sublandlord pursuant to the Main Lease shall be reimbursed to Sublandlord
      by
      Subtenant within ten (10) days after Sublandlord's delivery of a written demand
      therefor.





2.  Term. The term
      of this Sublease (the "Term") shall be the period commencing on January 1,
      2006
      (the "Commencement Date") and ending at midnight on May 31, 2011 (the
      "Expiration Date"), unless sooner terminated as herein provided.





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3.  Early
      Access. Prior to
      the Commencement Date of this Sublease (but after the Master Landlord has
      consented in writing to this Sublease). Subtenant shall have access to the
      Sublet Premises and the Building Common Areas and Roof Area to prepare the
      Sublet Space for occupancy (i.e., installing furniture, fixtures and equipment,
      telecommunications equipment and storing tiles). In particular, Sublandlord
      shall vacate the portion of the Sublet Premises designated as area "A" in the
      Floor Plan, and with the exception of the Improvements and the FF&E
      (hereinafter defined), such area shall be cleared of all persons and personal
      property, and following the execution and delivery of this Sublease by the
      parties, Sublandlord shall allow Subtenant to occupy such area, within 2
      business days after the execution and delivery of this Sublease by Sublandlord
      and Subtenant, for the purpose of commencing improvements and preparing such
      space for occupancy. If Subtenant occupies the Sublet Premises before the
      Commencement Date for any use other than construction of Subtenant's
      improvements thereto or staging Subtenant's personal property in the Sublet
      Premises, Subtenant shall be liable (for the period commencing on the date
      of
      such early access to the Commencement Date) for its share of the cost of
      utilities enjoyed by Subtenant during that period as reasonably determined
      by
      Sublandlord pursuant to invoices and other supporting documentation submitted
      to
      Subtenant. Any ear]y access shall not give rise to a right of possession in
      Subtenant's favor unless and until the condition precedent described in Section
      4 below has been met.




4.  Condition
      Precedent. The
      effectiveness of this Sublease is conditioned upon Master Landlord's signature
      and delivery of the "Consent to Sublease" at the end of this Sublease within
      ten
      (10) business days after Sublandlord and Subtenant have executed this Sublease.
      Sublandlord shall use commercially reasonable and diligent efforts to obtain
      Master Landlord's signature and to cause Master Landlord to deliver such Consent
      to Sublease within such period. Unless and until such signature is delivered
      by
      Master Landlord to Sublandlord, this Sublease shall not bind or benefit
      Sublandlord or Subtenant, and Subtenant shall have no right to access the Sublet
      Premises early or otherwise take possession of the Sublet Premises. If
      Sublandlord shall not have obtained Master Landlord's signature to the Consent
      to Sublease in the form attached hereto within such ten business day period,
      then Subtenant shall be entitled to negotiate the terms and conditions of such
      consent directly with Master Landlord, subject only to Sublandlord's right
      to
      review and approve the final form of the Consent to Sublease, which approval
      shall not be unreasonably withheld, conditioned or delayed by Sublandlord.
      If
      despite its reasonable efforts Subtenant is unable to obtain the Consent to
      Sublease in the form attached hereto by December 21, 2005, Subtenant shall
      have
      the right to terminate this Sublease by delivery of written notice of its
      election to terminate to Sublandlord on or before December 27,
      2005.





5.  Lobby
      Improvements. Subject
      to the requirements of Article 8 of the Main Lease and
      subject to Force Majeure as defined in Section 29.16 of the Main Lease,
      Sublandlord agrees to use its commercially reasonable efforts to cause those
      certain Lobby Area improvements set forth
      in
      the space plan prepared by Smith Consulting Architects and attached hereto
      as  Exhibit  D  (the
      "Lobby Improvements") to be substantially completed within thirty (30) days
      after the Master Landlord's signature and delivery of the Consent to Sublease
      pursuant to the terms of Article 4 above. Sublandlord shall pay up to a maximum
      of Ten Thousand Dollars ($10,000) toward the actual expenses of the Lobby
      Improvements (the "Sublandlord Costs"); any construction costs or other expenses
      in excess of the Sublandlord Costs (the "Subtenant Costs") shall be the sole
      obligation of Subtenant. Subtenant will reimburse Sublandlord for the Subtenant
      Costs within fifteen (15) days after Sublandlord delivers to Subtenant a written
      demand for reimbursement along with invoices reasonably acceptable to Subtenant
      evidencing such Subtenant Costs.




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6.  Intentionally
      Omitted.




7.  Subordinate
      to Main Lease. This
      Sublease is and shall be subject and subordinate to the
      Main Lease, a copy of which is attached hereto as Exhibit
      B, and to
      all matters of record concerning the Sublet Premises; provided, however, that
      in
      the event of any inconsistencies between the terms and provisions of the Main
      Lease and the terms and provisions of this Sublease, the terms and provisions
      of
      this Sublease shall govern as between Sublandlord and Subtenant only.
      Sublandlord agrees that it will not voluntarily enter into any agreement with Master
      Landlord hereafter which would result in the termination of flee Main Lease
      (insofar as it covers
      the Sublet Premises) prior to the Expiration Date.





8.  Compliance
      with Main Lease.





8.1  Except
      for the "Excluded Provisions" (defined below), all terms, covenants and
      conditions of the Main Lease (the "Incorporated Provisions") are incorporated
      herein by reference. The following terms and conditions contained in the Main
      Lease are excluded from this Sublease: Summary of Basic Lease Information,
      Sections 2.2, 3.1, 3.2, 6. 1, Article 21, Sections 29. 13, and 29.24, Exhibit
      B,
      Exhibit C, Exhibit G and Exhibit H (collectively, the `Excluded Provisions");
      and the following terms and conditions of the Main Lease are modified, as
      between Sublandlord and Subtenant only, as follows:  Section 1.1 is
      modified to eliminate any Tenant Work Letter, Section 4.4 is modified to provide
      that Subtenant shall pay Subtenant's Share (as defined in Section 10.3 below)
      of
      Direct Expenses for each Expense Year in excess of the Direct Expenses for
      the
      2006 Expense Year; Section 6.2 is modified to provide that Sublandlord shall
      maintain the Building Systems as a Direct Expense (provided that no expenses
      associated with such maintenance and repair obligations, which under prudent
      standards of building management would have been incur r ed
      during
      the 2006 Expense Year shall be payable by Subtenant if incurred after the 2006
      Expense Year); Article 7 is modified to provide that Sublandlord shall maintain
      the BS Exception items subject to the limitations of Section 6.2 as modified
      above, and further subject to Subtenant's obligation to pay for any repairs
      to
      the extent caused due to Subtenant's use of the Sublet Premises for other than
      normal and customary business operations; Article 7 is modified to provide
      that
      Sublandlord shall maintain the BS Exception items, and to provide that as
      between Sublandlord and Subtenant, if Master Landlord makes any repairs as
      the
      result of Sublandlord's or Subtenant's negligence or willful misconduct, the
      party causing such damage shall indemnify the other for the costs payable to
      Master Landlord pursuant to such repairs; Section 8.2 is modified to provide
      that Subtenant is not responsible for removing any Alterations to the Sublet
      Premises previously made by Sublandlord; Section 10.2 to the extent that the
      insurance coverages to be carried by Master Landlord shall be carried solely
      by
      Master Landlord and not Sublandlord, Section 10.3.2 is
      modified to provide that Subtenant shall not be obligated to insure any original
      improvements; as between Sublandlord and Subtenant only. Article 14 of the
      Lease
      is superseded by Section 22 below. Except to the extent that the Incorporated
      Provisions are inapplicable to, inconsistent with or are modified by the
      provisions of this Sublease, the Incorporated Provisions binding or inuring
      to
      the benefit of Master Landlord shall, in respect of this Sublease, bind or
      inure
      to the benefit of Sublandlord; provided Sublandlord will make reasonable efforts
      not to interfere with Subtenant's business on the Sublet Premises, and the
      Incorporated Provisions binding or inuring to the
      benefit of the tenant thereunder shall, in respect of this Sublease, bind or
      inure to the benefit of Subtenant, with the same force and effect as if the
      Incorporated Provisions were




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completely
      set forth in this Sublease, and as if the words "Landlord" and "Tenant" or
      words
      of similar import, wherever the same appear in the Incorporated Provisions,
      were
      construed to mean, respectively, "Sublandlord" and "Subtenant" in this Sublease,
      and as if the words "Premises" or words of similar import, wherever the same
      appear in the Incorporated Provisions, were construed to mean the Sublet
      Premises. Notwithstanding the foregoing, to the extent provisions of the Main
      Lease are unique and personal to Sublandlord's interest in the Retained Premises
      pursuant to the Main Lease such that only Sublandlord could feasibly comply
      with
      such provisions, then Subtenant shall not be required to comply with such
      provisions.





8.2 The
      time
      limits contained in the Main Lease for the giving of notices, making of demands
      or performing of any act, condition or covenant on the part of the tenant
      thereunder, or for the exercise by the tenant thereunder of any right, remedy
      or
      option, are changed for the purposes of incorporation herein by reference by
      shortening the same in each instance by two days, so that in each instance
      Subtenant shall have two days less time to observe or perform hereunder than
      Sublandlord has as the tenant under the Main Lease, except that:





(a)  Any
      such
      time limits which are seven days or less shall instead be shortened in each
      instance by three business days, and





(b)  any
      such
      time limits which are three days or less shall instead expire on the same day
      such time limit expires under the Main Lease.





8.3 Neither
      Subtenant nor Sublandlord shall do or permit to be done any act or thing
      which may constitute a breach or violation of the Incorporated Provisions.
      Each
      party hereto shall indemnify, defend, protect and hold the other party hereto
      harmless from any and all damages, claims, loss, liability, cost and expense
      (including, without limitation, court costs and reasonable attorneys' fees)
      incurred in connection with or arising from such indemnifying party's breach
      or
      violation of any of the Incorporated Provisions. Subject to any nondisturbance
      agreement between Master Landlord and Subtenant and the terms of the Main Lease
      (including, without limitation, the terms of Section 14.7 of the Main Lease),
      if
      Sublandlord's interest as tenant under the Main Lease terminates for any reason,
      then this Sublease shall terminate simultaneously therewith.





8.4  If
      any of
      the express provisions of this Sublease shall conflict with any of the
      Incorporated Provisions, such conflict shall be resolved in favor of the express
      provisions of this Sublease. If Subtenant receives any notice or demand from
      Master Landlord under the Main Lease, Subtenant shall deliver a copy thereof
      to
      Sublandlord by overnight courier the next business day or as soon thereafter
      as
      is reasonably possible but in no event later than two business days after
      Subtenant's receipt of such notice. If Sublandlord receives any notice of
      default from Master Landlord under the Main Lease or any other demand which
      affects the Sublet Premises, Sublandlord shall deliver a copy thereof to
      Subtenant by overnight courier the next business day or as soon thereafter
      as is
      reasonably possible but in no event later than two business days after
      Sublandlord's receipt of such notice.





8.5 Sublandlord
      hereby represents and warrants the following to Subtenant:





(a)  Sublandlord
      has paid all rent currently due under the Main Lease;




5




(b)  Sublandlord
      knows of no event which is or upon written notice and expiration of any cure
      period would be an event of default under the Main Lease;




(c)  Sublandlord
      knows of no defect as to Building Systems which would make any part of the
      Sublet Premises unsuitable for Subtenant's use; and




(d)  The
      copy
      of the Main Lease attached hereto is true, correct and complete and there are
      no
      other agreements affecting the Sublet Premises.




9.  Performance
      by Sublandlord. Sublandlord shall not be required to furnish, supply or install anything
      required to be furnished, supplied or installed by Master Landlord wider any
      article of the Main Lease. Notwithstanding the foregoing, with respect to work,
      services, repairs and restoration or the performance of other obligations
      required of Master Landlord under the Main Lease, Sublandlord, upon written
      request from Subtenant, shall use reasonable efforts to enforce Master
      Landlord's obligations tinder the Main Lease and/or cooperate with Subtenant
      in
      its efforts to do so. Sublandlord shall have no liability or responsibility
      whatsoever for Master Landlord's failure or refusal to perform under the
      Incorporated Provisions. Subtenant shall have the right to instruct Master
      Landlord with respect to the performance by Master Landlord of Master Landlord's
      obligations as landlord under the Main Lease. Upon Sublandlord's receipt of
      a
      written notice from Subtenant with respect to any of Sublandlord's obligations
      as Sublandlord under this Sublease, where Sublandlord has failed to perform
      such
      obligation because of a failure of Master Landlord to perform its obligation
      under the Main Lease, then Sublandlord will use its reasonable efforts to cause
      Master Landlord to observe and perform the same, provided, however, that
      Sublandlord does not guarantee Master Landlord's compliance with the
      Incorporated Provisions nor shall Sublandlord have any obligation to pursue
      any
      litigation against Master Landlord in order to enforce any obligation of Master
      Landlord's under the Main Lease, and provided further, if Sublandlord is
      unsuccessful in its efforts, Sublandlord shall direct Subtenant, in the name
      of
      Sublandlord if necessary, to pursue its claim directly against Master Landlord
      which shall be done at Subtenant's sole cost and expense. If Master Landlord
      fails to perform any obligation under the Main Lease for which Subtenant has
      given Sublandlord a written notice with respect thereto, Sublandlord and
      Subtenant shall cooperate with each other and keep each other reasonably
      informed as to the status of any efforts and/or litigation relating to enforcing
      Master Landlord's obligations under the Main Lease. Subtenant shall not in
      any
      event have any rights in respect of the Sublet Premises greater than
      Sublandlord's rights in respect of the Sublet Premises. As to the Incorporated
      Provisions, Sublandlord shall not be required to make any payment or perform
      any
      obligation, and Sublandlord shall have no liability to Subtenant for any matter
      whatsoever (except as expressly set forth in this Sublease), except for (i)
      Sublandlord's obligation to pay Rent due and to perform its other obligations
      arising under the Main Lease, and (ii) Sublandlord's obligation to use
      reasonable efforts, upon the written request of Subtenant, to cause Master
      Landlord to observe and/or perform its obligations under the Main Lease.
      Notwithstanding the foregoing or anything else herein to the contrary,
      Sublandlord covenants and agrees with Subtenant that Sublandlord will pay all
      basic rent and additional rent payable by Sublandlord pursuant to the Main
      Lease
      to the extent that failure to perform the same would adversely affect
      Subtenant's use or occupancy of the Sublet Premises and to the extent that
      Subtenant continues to pay Rent (as defined in Section 10.4 below) to
      Sublandlord as required under this Sublease, and that Sublandlord shall extend
      all reasonable cooperation to Subtenant to enable Subtenant to receive the
      benefits under this Sublease, as the same are dependent upon performance under
      the Main Lease.




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10.  Rent.




10.1  Base
      Rent. Subtenant shall pay to Sublandlord, as monthly base rent for the Sublet Premises
      ("Base Rent"), an amount equal to one dollar and twenty five cents ($1.25)
      per
      rentable square foot based on the Net Square Footage of the Sublet Premises.
      Subtenant shall pay Base Rent to Sublandlord in advance of the first day of
      each
      month during the Term at the offices of Sublandlord identified in Section 26
      below or elsewhere as Sublandlord shall direct. In accordance with the
      subletting obligations of the Main Lease, if Subtenant receives a written notice
      from Master Landlord that the Sublandlord is in default under the Main Lease beyond
      any applicable notice and cure period and Master Landlord directs Subtenant
      to
      pay Rent directly
      to Master Landlord, then Subtenant shall be permitted to pay the Rent due under
      this Sublease directly to or as directed by the Master Landlord, which payments
      shall be credited against any Rent payments due under this Sublease, and
      Sublandlord hereby consents to such payments by Subtenant to Master
      Landlord.




10.2  Initial
      Abatement Period. In lieu
      of Sublandlord contributing money toward the cost of tenant improvements in
      the
      Sublet Premises (other than toward the Lobby Improvements and Computer Room
      Improvements referred to in Section 5 above), Subtenant shall
      have no obligation to pay any Base Rent to Sublandlord that would otherwise
      be
      payable by Subtenant with respect to the period which begins on the Commencement Date
      and
      ends at midnight on March 15, 2006.





10.3  Additional
      Charges. Subtenant shall pay to Sublandlord, concur r ently
      with its payment of Base Rent, all Additional Charges. As used herein,
      "Additional Charges" shall mean Subtenant's Proportionate Share of the
      incremental increase in "Direct Expenses" (as defined in the Main Lease) plus
      Building System maintenance expenses above the actual Direct Expenses plus
      Building System maintenance expenses for the 2006 "Expense Year" (as defined
      in
      the Main Lease) plus Building System maintenance expenses for the Building,
      and
      all other amounts payable by Subtenant to Sublandlord under this Sublease.
      As
      used herein, "Subtenant's Proportionate Share" means a fraction, the numerator
      of which is the Net Square Footage of the Sublet Premises (to be determined
      in
      accordance with Section 1 above) and the denominator of which is the total
      square footage of the Building (i.e., 68,910, per the Main Lease).




10.4  Payment
      of Rent. "Rent"
      (which term shall include Base Rent and any Additional Charges) shall be paid
      promptly when due, without notice or demand and without deduction, abatement,
      counterclaim or setoff of any amount for any reason whatsoever: provided that
      (a) if Sublandlord's obligation to pay Rent (as such term is defined in the
      Main
      Lease) under the Main Lease shall be abated for a reason that is also applicable
      to the Sublet Premises (i.e., the Sublet Premises are affected in a
      substantially similar manner as the balance of space in the Building is
      affected), Subtenant's obligation to pay Rent under this Sublease shall be
      proportionately abated, (b) if Sublandlord is entitled to any rent credits
      wider
      the Main Lease for a reason that is also applicable to the Sublet Premises,
      Subtenant shall be entitled to a proportionate rent credit under this Sublease
      and (c) if Sublandlord receives any reimbursements for any payment of Direct
      Expenses under the Main Lease , ,
      Sublandlord shall pay to Subtenant




7




within
      30
      days of such receipt Subtenant's Proportionate Share of the amount reimbursed
      to
      Sublandlord. Rent shad be paid to Sublandlord by Subtenant at the address of
      Sublandlord set forth in Section 26 below or to such other person and/or at
      such
      other address as Sublandlord may from time to time designate by notice to
      Subtenant. No payment by Subtenant or receipt by Sublandlord of any lesser
      amount than the amount stipulated to be paid hereunder shall be deemed other
      than on account of the earliest stipulated Rent due under this Sublease; nor
      shall any endorsement or statement on airy check or letter be deemed an accord
      and satisfaction, and Sublandlord may accept any check or payment without
      prejudice to Sublandlord's right to recover the balance due or to pursue any
      other remedy available to Sublandlord.





10.5  Services. Subtenant shall arrange for janitorial, electrical and telephone service to
      be
      provided directly to the Sublet Premises and shall be responsible for all costs
      associated with the initiation of such service (including metering costs which
      may be accomplished by a separate meter) and all costs of Subtenant's janitorial
      service and electrical and telephone usage. Subtenant acknowledges and
      understands that the Base Rent payable by Subtenant
      to Sublandlord is "net" of the cost of supplying (i) electricity consumed by
      Subtenant and (ii)
      janitorial services for the Sublet Premises. If a separate meter cannot be
      installed then the determination of Subtenant's electrical usage shall be based
      on a reasonable estimate of Subtenant's share of electrical usage in the Sublet
      Premises.




10.6  Possession
      Date. Subtenant hereby agrees that if Subtenant takes possession of the Sublet
      Premises prior to the Commencement Date, then from and after the date Subtenant
      takes possession of the Sublet Premises (the "Possession Date"), all of
      Subtenant's obligations
      and duties under this Sublease shall be effective except for the obligation
      to
      pay Base Rent.
      Notwithstanding the foregoing, commencing on the Possession Date and continuing
      until the Commencement Date, Subtenant shall be responsible for payment of
      Subtenant's Proportionate Share of all utility costs attributable to its
      possession of the Sublet Premises.




11.  Security
      Deposit. On or
      before the Possession Date, there shall be due and payable by Subtenant a
      security deposit in the form of cash or an irrevocable letter of credit in
      form
      and content acceptable to Sublandlord, in an amount equal to two (2) months'
      Base Rent, (or in the amount of $55,265.00 if the Base Rent cannot then be
      calculated because the Net Square Footage of the Sublet Premises has not yet
      been determined in accordance with Section 1 above). Such deposit shall be
      held
      by Sublandlord (without any obligation to pay interest thereon or segregate
      such
      monies from Sublandlord's general funds) as security for the performance of
      Subtenant's obligations under this Sublease. It is expressly understood that
      the
      security deposit is not an advance payment of Base Rent or a measure of
      Sublandlord's damages in the event of Subtenant's default under this Sublease.
      Upon the occurrence of any event of default by Subtenant or breach by Subtenant
      of its covenants under this Sublease, Sublandlord may, from time to time,
      without prejudice to any other remedy provided herein or provided by law, use,
      apply, or retain all or part of the security deposit for the payment of any
      Base
      Rent or other sum in default or breach, or to compensate Sublandlord for any
      costs and expenses actually incurred by Sublandlord to cure such default or
      breach or incurred by Sublandlord as a result of any uncured default or breach
      in accordance with this Sublease. If any portion of the security deposit is
      so
      used or applied, Subtenant shall, within five (5) business days after written
      demand therefor, deposit cash with Sublandlord or replenish the letter of credit
      in an amount sufficient to restore the security deposit to the amount required
      hereunder. Subtenant's failure to do so shall




8




be
      a
      default under this Sublease. The balance of the security deposit shall be
      returned by Sublandlord to Subtenant at such time after termination of this
      Sublease and when all of Subtenant's obligations have been fulfilled. Subtenant
      shall not be entitled to any interest on the security deposit. Subtenant hereby
      waives the provisions of California Civil Code section 1950.7 or any successor
      statute (which waiver is intended to include, without limitation, any and all
      limitations on use of the deposit as security for all of Landlord's damages
      arising out of a tenant's breach of its obligations under a lease).




12.  Physical
      Condition. Subject
      to the terms of Article 3 above. Sublandlord shall vacate the Sublet Premises
      on
      or before the Commencement Date, and with the exception of the Improvements
      and
      the FF&E, the Sublet Premises shall be cleared of all persons and personal
      property, in a "broom clean" condition with all carpeting vacuumed and all
      cabling of the Sublet Premises left in a neat and orderly condition, and
      otherwise in "as is/where is" condition. Except as specifically provided herein,
      Sublandlord shall have no obligations under this Sublease or otherwise to
      perform any work, alterations, installations or to remove any asbestos or
      asbestos-containing materials, if any, from the Sublet Premises or elsewhere.
      In
      making and executing this Sublease, Subtenant has relied solely on such
      investigations, examinations and inspections as Subtenant has chosen to make.
      Subtenant acknowledges that Sublandlord has afforded Subtenant the opportunity
      for full and complete investigations, examinations and inspections of the Sublet
      Premises. Subtenant acknowledges that the Sublet Premises are in good order
      and
      condition and agrees that there are no representations and warranties except
      as
      specifically set forth herein, express or implied, by Sublandlord regarding
      the
      condition of the Sublet Premises or the Building. Notwithstanding the foregoing,
      Sublandlord represents that (a) as of the date hereof, to the best of
      Sublandlord's cur r ent,
      actual knowledge, it has received no written notice of violation from any
      governmental agency having jurisdiction over the Sublet Premises or the Building
      of applicable building codes, regulations, statutes, laws, rules, or ordinances
      (collectively, "Laws") including, those Laws relating to Hazardous Materials
      (as
      defined in the Main Lease) and the Americans with Disabilities Act ("ADA")
      and
      Title 24 requirements of the State of California, (b) as of the date hereof,
      Sublandlord has no current, actual knowledge of the existence or presence of
      any
      Hazardous Materials in, on, under or about the Sublet Premises or the Building,
      and has received no notice of the existence or presence of any Hazardous
      Materials in, on, under or about the Sublet Premises or the Building; and (c)
      all mechanical, electrical and other systems, including the HVAC systems serving
      the Sublet Premises, are in good working order. As used in this Section 12,
      Sublandlord's current, actual knowledge means the current, actual knowledge
      of
      Paul Najar, its General Counsel, and Chris vain der Woerd, its facilities
      manager, without the benefit of any inquiry or investigation and without the
      duty to conduct any inquiry or investigation and without the imputation of
      any
      knowledge from others. Sublandlord represents and warrants that Paul Najar
      and
      Chris van der Woerd are the individuals that are most likely to be the personnel
      of Sublandlord that is most knowledgeable as to the matters on which Sublandlord
      is making representations and warranties.




13.  Alterations. Subtenant shall not make any alterations or additions to the Sublet Premises
      without first complying fully with all of the requirements and conditions set
      forth in Article 8 of the Main Lease.


9




14.  Restoration. If the
      Sublet Premises or the Building are damaged by fire or other peril and Master
      Landlord is required or elects to and does repair same pursuant to Article
      11 of
      the Main Lease, Subtenant shall be entitled to a proportionate reduction of
      the
      Rent payable hereunder while such repairs are being made, based on the extent
      to
      which the malting of such repairs shall materially interfere with the business
      carried on by Subtenant on the Sublet Premises, such reduction in no event
      to
      exceed the proportional rent abatement actually received by Sublandlord for
      the
      Sublet Premises during such period. If Master Landlord elects to terminate
      the
      Main Lease pursuant to Article 11 of the Main Lease, this Sublease shall
      terminate simultaneously with termination of the Main Lease, and Subtenant
      shall
      be entitled to a rent abatement until the date of termination, in no event
      to
      exceed the proportional rent abatement actually received by Sublandlord under
      the Main Lease for the Sublet Premises during such period. This Sublease shall
      not terminate by reason of any such damage unless and until the Main Lease
      terminates as to the Sublet Premises. Except as provided in the Main Lease,
      Sublandlord shall have no obligation to repair any such damage to the Sublet
      Premises and, except as provided herein, Subtenant shall not be entitled to
      any
      compensation or damages from Sublandlord for loss of the use of the whole or
      any
      part of the Sublet Premises, Subtenant's personal property, or any inconvenience
      or annoyance occasioned by such damage, repair, reconstruction or
      restoration.




15.  Parking. Subtenant shall have the exclusive right, without charge, to use Subtenant's
      Proportionate Share of the 275 parking spaces for the Building during the Term
      in connection with Subtenant's occupancy of the Sublet Premises. Subtenant's
      Proportionate Share of the parking space shall be 93 parking spaces. Subtenant's
      guests and invitees may use parking spaces which are not allocated or reserved
      for Sublandlord or other occupants or visitors of the Building on a first-come,
      first-served basis.





16.  Heating.
      Ventilation and Air Conditioning. Heating,
      ventilation and air conditioning ("HVAC") shall be provided to the Sublet
      Premises during the hours of Monday through
      Friday, from 7:30 A.M. to 6:00 P.M., except for recognized national and local
      holidays. Subtenant acknowledges that Sublandlord contracts for and pays for all utilities
      (including without limitation electricity) pursuant to the Main Lease and,
      as
      such, Subtenant shall pay to Sublandlord the Subtenant's Proportionate Share
      of
      such costs on a monthly basis unless Subtenant contracts directly from the
      utility provider for any such utility services. Upon Subtenant's request,
      Sublandlord shall provide, subject to reimbursement from Subtenant at
      Sublandlord's actual cost, after-hours HVAC service to the Sublet Premises
      on an
      hourly basis.





17.  Signage. Subject
      to the terms and conditions of the Main Lease, Sublandlord shall cause Master
      Landlord or its contractor to install, at Subtenant's cost, monument signage
      located adjacent to the main entrance to the Building in a manner which
      adequately identifies Subtenant as an occupant of the Building and which is
      approved by Subtenant in its reasonable discretion. Such Subtenant signage
      rights shall be subject to and shall comply with the City of San Diego's Signage
      ordinance and related regulations and the CC&Rs. Subtenant also shall pay
      all costs associated with removal of such signage upon the expiration or earlier
      termination of this Sublease.





10





18.  Furniture,
      Fixtures and Equipment. During
      the term of this Sublease, Subtenant may use, without additional charge but
      as
      additional consideration for entering into this Sublease, certain furniture,
      fixtures and equipment ("FF&E") in its "As Is" condition presently located
      within the Sublet Premises as described in Exhibit
      C attached
      hereto. If Exhibit C is not attached hereto as of the Effective Date of this
      Sublease, Sublandlord and Subtenant shall agree upon a complete inventory of
      the
      FF&E within one week following the Commencement Date and include such
      inventory in Exhibit C. Upon the Expiration Date or earlier termination of
      this
      Sublease, Subtenant shall return to Sublandlord the FF&E in its "As Is"
      condition as of the Commencement Date, less normal wear and tear.




19.  Letter
      of Credit. On or
      before the Commencement Date, Sublandlord shall provide to Subtenant an
      irrevocable letter of credit in the amount of Fifty Thousand Dollars ($50,000)
      in favor of Subtenant (the "Letter of Credit"). If any of Subtenant's rights
      under this Sublease are adversely affected by any act or omission of Sublandlord
      which causes the Master Landlord
      to terminate the Main Lease precluding Subtenant's continued lawful occupancy
      of
      the Sublet
      Premises at the same rent prior to the Expiration Date, Subtenant may draw
      upon
      the Letter of Credit to the extent necessary to offset any relocation costs
      or
      increased rent for the Sublet Premises actually incurred by Subtenant or any
      other costs and expenses reasonably incurred by Subtenant arising therefrom
      and
      from Subtenant being so precluded from lawfully occupying the Sublet Premises
      at
      the same rent. Notwithstanding the foregoing, Sublandlord shall indemnify,
      defend, protect and hold Subtenant harmless from any and all damages, claims,
      loss, liability, cost and expense (including, without limitation, court costs
      and reasonable attorneys' fees) incurred in connection with or arising from
      Sublandlord's breach, or other termination of this Sublease or the Main Lease
      except as expressly permitted herein (including any provisions of the Main
      Lease
      incorporated herein); provided, however, that Subtenant shall have a duty to
      take commercially reasonable steps to mitigate any such damages, claims, loss,
      liability, cost and expense. Upon the termination or expiration of this Sublease
      in a manner not arising from a Sublandlord's act or omission, Sublandlord shall
      be entitled to a return of the Letter of Credit so that it can be
      cancelled.




20.  Compliance
      with ADA. As of
      the Possession Date, Sublandlord shall deliver to Subtenant the Sublet Premises
      in a condition which complies with all requirements of the federal Americans
      with Disabilities Act of 1990, as amended ("ADA"). Throughout the Term of this
      Sublease, upon making any additions or alterations to the Sublet Premises,
      Subtenant shall cause such additions or alterations to comply with all ADA
      requirements.




21.  Hazardous
      Materials. Subtenant shall in all respects comply with Section 29.33 of the
      Main Lease pertaining to Hazardous Materials and Environmental Laws. The
      parties' respective obligations, tights and remedies with respect to the release
      or discharge of Hazardous Materials or the violation of any Environmental Laws
      shall be governed by Section 29.33 of the Main Lease, as incorporated herein
      by
      Article 8 of this Lease. The violation of any Environmental Laws by Subtenant
      including, but not limited to, the release or discharge of any Hazardous
      Materials in violation thereof, shall be a material default by Subtenant under
      this Sublease. In addition to or in lieu of the remedies available under this
      Sublease as a result of such material default, Sublandlord shall have the right,
      without terminating this Sublease, to require Subtenant to suspend its
      operations and activities on the Sublet Premises until Sublandlord is satisfied
      that appropriate Remedial Work has been or is being adequately performed.
      Sublandlord's election of this remedy shall not constitute a waiver of
      Sublandlord's tight thereafter to declare a default and pursue other remedies
      set forth in this Sublease.




11




22.  Assignment  and  Subletting. Subtenant shall not, by operation of law, merger, consolidation
      or otherwise, assign, sell, mortgage, ple dg e
      or in
      any manner transfer this Sublease or any
      interest therein, or sublet the Sublet Premises or any part or puts thereof,
      or
      grant any concession or license or otherwise permit occupancy of all or any
      part
      of the Sublet Premises by any person (except for occupancy by Subtenant and
      Subtenant's employees in accordance with the terms of this Sublease); provided
      however, subject to complying with any requirements contained in the Main Lease,
      Subtenant shall be permitted to sublease up to and including 49% of the Net
      Square Footage of the Sublet Premises upon obtaining the advance written consent
      of Sublandlord, which consent shall not be unreasonably withheld.




23.  Right
      of First Refusal. If
      Sublandlord receives an acceptable bona fide offer from a third party ("Bona
      Fide Offer") desiring to sublease from Sublandlord any portion of the Premises
      (as defined in the Main Lease) retained by Sublandlord (the "Retained Premises")
      during the Term of this Sublease (the "First Refusal Space"), then Sublandlord
      agrees that Subtenant shall have a right of first refusal (the "Right of First
      Refusal") to sublet such First Refusal Space on the following terms and
      conditions. Sublandlord shall promptly provide Subtenant with a copy of the
      Bona
      Fide Offer, which shall set forth the anticipated date on which the First
      Refusal Space will be available for occupancy by Subtenant and the base rental
      applicable to the subletting of such First Refusal Space. Within a period of
      five (5) business days after Sublandlord provides to Subtenant a copy of the
      Bona Fide Offer, Subtenant may exercise by written notice to Sublandlord its
      Right of First Refusal to sublease the First Refusal Space for the balance
      of
      the Term, commencing on the commencement date set forth in Sublandlord's notice,
      on the same terms and conditions as those contained in this Sublease, except
      that Base Rent for the First Refusal Space shall be the base rent set forth
      in
      Sublandlord's notice. If Subtenant fails to provide such written notice within
      the five (5) business day period, Sublandlord shall be entitled to enter into
      a
      sublease with a third party on the same terms and conditions set forth in the
      Bona Fide Offer; provided that if Sublandlord and any third pity are
      unable to execute a mutually acceptable sublease within ninety (90) days after
      the date on which Subtenant's exercise of the Right of First Refusal was due
      (but not delivered), then Subtenant's Right of First Refusal shall be reinstated
      as to the First Refusal Space. Upon the timely and irrevocable exercise of
      Subtenant's Right of First Refusal, Sublandlord and Subtenant shall enter into
      a
      written amendment to this Sublease specifying that the First Refusal Space
      is
      part of the Sublet Premises under this Sublease and containing other appropriate
      terms and provisions relating to the subletting of the First Refusal Space
      by
      Subtenant, including without limitation any increase in Base Rent and
      Subtenant's Proportionate Share of Direct Expenses. Subtenant acknowledges
      and
      understands that its rights hereunder are subject to the rights of Master
      Landlord under the Main Lease.




24.  Consents
      and Approvals. Where
      Sublandlord's consent or approval is required under this Sublease, Sublandlord's
      refusal to consent to or approve any matter or thing shall be deemed reasonable
      and in good faith if Master Landlord's consent or approval is also required
      and
      such consent or approval has not been obtained from Master Landlord; provided,
      however, Sublandlord covenants to use reasonable efforts, at the sole cost
      and
      expense of Subtenant (including,
      without limitation, reasonable attorneys' fees and expenses), to obtain the
      consent or approval
      of Master Landlord and will indicate to Master Landlord in those cases where
      its
      approval is conditioned upon Master Landlord's approval that it has no objection
      thereto and agrees that if such consent of Master Landlord shall not be
      required, Sublandlord shall not unreasonably withhold or delay its consent
      to
      such matter. If Subtenant seeks the approval by or consent of Sublandlord,
      and
      Sublandlord fails or refuses to give such consent or approval without committing
      any violation or breach of this Sublease, Subtenant shall not be entitled to
      any
      damages from Sublandlord for any withholding or delay of such approval or
      consent.




12







25.  Reciprocal
      Indemnification. Based on
      the common occupancy of the Building by Sublandlord and Subtenant, the parties
      indemnity obligations shall be subject to a comparative negligence standard,
      such that (1) Subtenant shall indemnify, defend and hold harmless Sublandlord
      from and against all losses, costs, damages, expenses and liabilities,
      including, without limitation, reasonable attorneys' fees, to the extent
      Sublandlord may incur or pay such losses, costs, damages, expenses and
      liabilities by reason of. (a) Subtenant's use, occupancy or management of the
      Sublet Premises; (b) any accidents, damages or injuries to persons or property
      occurring in, on or about the Sublet Premises and caused by Subtenant; (c)
      any
      breach or default hereunder by Subtenant; (d) any work done by Subtenant in
      or
      to the Sublet Premises; or (e) any act, omission or negligence occurring in,
      on
      or about the Sublet Premises on the part of Subtenant and/or its officers,
      employees, agents, customers, invitees or any person claiming through or under
      Subtenant, and (2) Sublandlord shall indemnify, defend and hold harmless
      Subtenant from and against all losses, costs, damages, expenses and liabilities,
      including, without limitation, reasonable attorneys' fees, to the extent
      Subtenant may incur or pay such losses, costs, damages, expenses and liabilities
      by reason of (i) Sublandlord's use, occupancy, or management of the Original
      Premises; (ii) any accidents, damages or injuries to persons or property
      occurring in, on or about the Retained Premises; (iii) any breach or default
      hereunder or under the Main Lease by Sublandlord; (iv) any work done by or
      on
      behalf of Sublandlord in the Original Premises; or (v) any act, omission or
      negligence occurring in, on or about the Retained Premises on the part of
      Sublandlord and/or its officers, employees, agents, customers, invitees or
      any
      person claiming through or under Sublandlord.




26.  Notice. All
      notices, consents, approvals, demands and requests which are required
      or desired to be given by either party to the other hereunder shall be in
      writing and shall  be
      personally delivered, sent by telefax or by reputable overnight courier delivery
      service or sent by
      United States registered or certified mail and deposited in a United States
      post
      office, return receipt requested and postage prepaid. Notices, consents,
      approvals, demands and requests which are served upon Sublandlord or Subtenant
      in the manner provided herein shall be deemed to have been given or served
      for
      all purposes hereunder on the day personally delivered or refused, the next
      business day after sending by overnight courier as aforesaid or on the third
      business day after mailing as aforesaid. All notices, consents, approvals,
      demands, and requests given to Sublandlord or Subtenant shall be addressed
      as
      follows:





If
                to Sublandlord, to:
            Anacomp,
                Inc.15378
                Avenue of ScienceSan Diego, CA 92128Attn:
                Corporate Real Estate
              Facsimile:
                858-716-3750





13





with
                a copy to:
            Anacomp,
                Inc.
              15375
                Avenue of Science
              San
                Diego, CA 92128
              Attn:
                Legal Department
              Facsimile:
                858-716-3771If
                to Subtenant, to:
            American
                Technology Corporation
              15378
                Avenue of Science, Suite ___
              San
                Diego, CA 92128
              Attn:
                Michael A. Russell
              Facsimile:
                858-486-3471





or
      to
      such other address as such party may indicate by a notice given to the other
      party in accordance with this Section 26. If Subtenant's suite number is not
      known as of the date of this Sublease, Subtenant will provide such information
      to Sublandlord in writing promptly after it becomes known to
      Subtenant.




27.  Termination
      of Main Lease. If for
      any reason the term of the Main Lease shall terminate prior to the Expiration
      Date, Sublandlord shall not be liable to Subtenant by reason thereof unless
      both
      (a) Subtenant shall not then be in default hereunder, and (b) such termination shall
      have been effected because of the breach or default of Sublandlord as tenant
      under the Main Lease or
      this Sublease.




28.  Insurance. Subtenant shall provide and maintain throughout the tern of this Sublease a
      policy or policies of comprehensive public liability insurance in standard
      form
      naming Sublandlord and Master Landlord as additional insureds and otherwise
      complying with the Main Lease. Reasonable satisfactory evidence of such
      insurance shall be delivered to Sublandlord by Subtenant upon request. Subtenant
      shall procure and pay for renewals or replacements of such insurance from time
      to time before the expiration thereof, and Subtenant shall deliver to
      Sublandlord such renewal or replacement policy or binder or other reasonably
      satisfactory evidence of such insurance at least 30 days before the expiration
      of any existing policy. All such policies shall be issued by companies licensed
      to do business in the state where the Sublet Premises is located, and contain
      a
      provision whereby the same cannot be canceled or modified unless Sublandlord
      is
      given at least 30 days' prior written notice by certified or registered mail
      of
      such cancellation or modification.




29.  Right
      to Cure.




29.1  Right
      to Cure Subtenant's Defaults and Damages. If
      Subtenant shall at any time fail to make any payment or perform any other
      obligation of Subtenant hereunder within the applicable cure period, if any,
      then Sublandlord shall have the right, but not the obligation,
      after five days' notice to Subtenant, or without notice to Subtenant in the
      case
      of any emergency, and without waiving or releasing Subtenant from any obligations
      of
      Subtenant hereunder,
      to make such payment or perform such other obligation of Subtenant in such
      manner  and
      to
      such extent as Sublandlord shall deem necessary, and in exercising any such
      right, to pay any
      incidental costs and expenses, employ attorneys, and incur and pay reasonable
      attorneys' fees. Subtenant shall pay to Sublandlord within twenty (20) days
      after Subtenant's receipt of invoices
      therefor all sums so paid by Sublandlord and all incidental costs and expenses
      of Sublandlord
      in connection therewith, together with interest thereon at the rate of 10%
      on
      an  annualized
      basis or the then maximum rate of interest which may lawfully be collected
      from Subtenant, whichever shall be less, from the date of the making of such
      expenditures.




14




29.2  Right
      to Cure Sublandlord's Defaults and Damages. If
      Sublandlord shall at any time fail to make any payment or perform any other
      obligation of Sublandlord under the Main Lease within the applicable cure
      period, if any, then Sublandlord shall have the right, but not
      the
      obligation, after five days' notice to Sublandlord, or without notice to
      Sublandlord in the case of
      any emergency, and without waiving or releasing Sublandlord from any obligations
      of Sublandlord hereunder, to make such payment or perform such other obligation
      of Sublandlord in such manner and to such extent as Master Landlord shall deem
      necessary, and in exercising any such right, to pay any incidental costs and
      expenses, employ attorneys, and incur and pay reasonable attorneys' fees.
      Sublandlord shall pay to Subtenant within twenty (20) days after Sublandlord's
      receipt of invoices therefor all sums so paid by Subtenant and all incidental
      costs and expenses of Subtenant in connection therewith, together with interest
      thereon at the rate of 10% on an annualized basis or the then maximum rate
      of
      interest which may lawfully be collected from Sublandlord, whichever shall
      be
      less, from the date of the making of such expenditures.




30.  Remedies
      of Sublandlord.




30.1  "Default"
      shall mean a material default by Subtenant under any provision of this Sublease
      which default has not been cured within any applicable grace or cure period
      (as
      such grace and cure periods are set forth in Section 19.1 of the Main Lease,
      as
      incorporated herein by Article 8).




30.2  If
      a
      Default occurs, Sublandlord shall have, in addition to all its rights and
      remedies contained in the Incorporated Provisions, the following rights and
      remedies, all of which are distinct, separate and cumulative, and none of which
      will exclude any other right or remedy allowed by law:




(a)  Sublandlord
      may, with or without notice of such election and with or without entry or other
      action by Sublandlord, immediately terminate this Sublease, in which event
      the
      Term of this Sublease shall end and all right, title, and interest of Subtenant
      hereunder shall expire; or




(b)  Sublandlord
      may enforce the provisions of this Sublease and may enforce and protect the
      rights of Sublandlord hereunder by a suit or suits in equity or at law for
      the
      specific performance of any covenant or agreement herein or for the enforcement
      of any other appropriate legal or equitable remedy, including the recovery
      of
      all moneys due or to become due under any of the provisions of this
      Sublease.





30.3  Subtenant
      will pay upon demand all of Sublandlord's costs, charges, and expenses,
      including reasonable attorneys' fees, and fees and expenses of agents and others
      retained by Sublandlord in any litigation, negotiation or transaction in which
      Sublandlord seeks to enforce the terms or provisions of this
      Sublease.




15


31 .  Dual
      Broker. The
      parties each acknowledge the following: (i) CB Richard Ellis, Inc. ("Broker")
      has represented both Sublandlord and Subtenant in connection with this Sublease;
      (ii) they were timely advised of such dual representation by the Broker, they
      consent to such dual representation, and they do not expect Broker to disclose
      to either of them confidential information of the other party; and (iii) no
      person or entity other than Broker had any part, or was instrumental in any
      way,
      in bringing about this Sublease. Sublandlord agrees to pay to Broker a brokerage
      commission equal to four percent (4%) of the Rent received by Sublandlord during
      the first sixty (60) months of the Tern and two percent (2%) of the Rent
      received by Sublandlord during the remaining balance of the Term. Such brokerage
      commission shall be paid in two installments: (i) fifty percent (50%) upon
      execution of this Sublease by Sublandlord and Subtenant and the Consent to
      Sublease by Master Landlord; and (ii) fifty percent (50%) upon the Commencement
      Date. Sublandlord and Subtenant each hereby represents and warrants to the
      other
      that it has not incurred any liability for a commission or fee to any real
      estate broker or agent in connection with this Sublease, other than Broker,
      whose commission will be paid by Sublandlord in accordance with the terms above.
      Each party agrees to protect, defend, indemnify and hold the other harmless
      from
      and against any and all claims for commissions, finders fees or similar
      compensation resulting from the actions of the indemnifying party that are
      inconsistent with the foregoing representations and warranties for any
      brokerage, finder's or similar fee or commission in connection with this
      Sublease, if such claims are based on or relate to any act of the indemnifying
      party which is contrary to the foregoing representations and
      warranties.




32.  No
      Waiver. The
      failure of Sublandlord or Subtenant to insist in any one or more cases upon
      the
      strict performance or observance of any obligation of the other hereunder or
      to
      exercise any ri g ht
      or
      option contained herein shall not be construed as a waiver or relinquishment
      for
      the future of any such obligation of or any right or option. Sublandlord's
      receipt and acceptance of Rent, or Sublandlord's acceptance of performance
      of
      any other obligation by Subtenant, with knowled g e
      of
      Subtenant's breach of any provision of this Sublease, shall not be deemed a
      waiver of such breach. No waiver by Sublandlord of any term, covenant or
      condition of this Sublease shall be deemed to have been made unless expressed
      in
      writing and signed by Sublandlord.




33.  Incorporation. All of
      the Recitals set forth above, and all of the exhibits attached hereto, are
      hereby incorporated by reference into this Sublease.




34.  Complete
      Agreement. There
      are no representations, agreements, arrangements or understandings, oral or
      written, between the parties relating to the subject matter of this Sublease
      which are not fully expressed in this Sublease. This Sublease cannot be changed
      or terminated orally or in any other manner other than by a written agreement
      executed by both parties.





35.  Successors
      and Assigns. The
      provisions of this Sublease, except as herein otherwise specifically provided,
      shall extend to, bind and inure to the benefit of the parties hereto and their
      respective personal representatives, heirs, successors and permitted
      assigns.




36.  Interpretation. Irrespective of the place of execution or performance, this Sublease
      shall be governed by and construed in accordance with the laws of the state
      where the Sublet
      Premises is located. If any provision of this Sublease or the application
      thereof to any person
      or
      circumstance shall, for any reason and to any extent, be invalid or
      unenforceable, theremainder
      of this Sublease and the application of that provision to other persons or
      circumstancesshall
      not be affected but rather shall be enforced to the extent permitted by law.
      This Subleaseshall
      be
      construed without regard to any presumption or other vile requiring construction
      againstthe
      party causing this Sublease to be drafted.




16






37.  Holding
      Over. Subtenant shall pay Sublandlord a sum for each day that Subtenant retains
      possession of the Sublet Premises or any part thereof after termination of
      this
      Sublease, by lapse of time or otherwise, equal to 200% of the Base Rent that
      Subtenant is otherwise
      obligated to pay under this Sublease at the time of such termination (i.e.,
      the
      same rate payable
      by Sublandlord to Master Landlord under Article 16 of the Main
      Lease).




38.  Counterparts. This
      Sublease may be executed in two or more counterparts, each of which shall be
      deemed an original but all of which together shall constitute but one and the
      same instrument.




39.  Default
      by Sublandlord. Sublandlord shall be in default of this Sublease (a "Sublandlord
      Default ")
      if it
      shall fail to perform any duty or obligation imposed upon it under the Main
      Lease, and Sublandlord fails to cure such default during such time periods
      provided for by
      Master
      Landlord; if Sublandlord shall be in default under Section 19.1.3 of the Main
      Lease; or if
      Sublandlord shall fail to perform any duty or obligation imposed upon it by
      this
      Sublease, and such failure shall continue for a period of thirty (30) days
      after
      written notice thereof from Subtenant (provided, however. that if any such
      action is reasonably likely to result in any interference with Subtenant's
      rights under this Sublease, then such thirty (30) day period shall not be
      applicable and Subtenant may immediately take any action necessary to protect
      its rights hereunder, including, but not limited to, drawing amounts available
      under the Letter of Credit); provided, however, that if the event for which
      the
      notice is given is of a nature that may not reasonably be performed within
      said
      thirty (30) day period, Sublandlord shall not be in default for so long as
      Sublandlord commences its performance within said thirty day period and
      diligently pursues it to conclusion. Upon the occurrence of a Sublandlord
      Default under this Sublease or the Main Lease, Subtenant may exercise all rights
      or remedies Subtenant may have for such default at law or in equity, including
      the termination of this Sublease upon no less than five (5) additional business
      days notice thereof to Sublandlord. Any costs and expenses incurred by Subtenant
      to cure such Sublandlord Default shall be reimbursed by Sublandlord within
      ten
      (10) business days after written demand. If Sublandlord is in default of this
      Sublease after written notice and expiration of a reasonable time period,
      Subtenant may perform for Sublandlord and submit written demand for repayment
      to
      Sublandlord. Sublandlord shall reimburse Subtenant for its reasonable
      out-of-pocket expenses within ten (10) business days from receipt of
      invoice.




40.  Quiet
      Enjoyment. Subject
      to the provisions of this Sublease, Sublandlord covenants
      that so long as Subtenant is not in default in the performance of its covenants
      and agreements under this Sublease beyond all applicable cure periods, Subtenant's
      quiet and peaceable enjoyment of the Sublet Premises shall not be disturbed
      or
      interfered with by Sublandlord or any person claiming by, through or under
      Sublandlord.




17






41.  Mailing
      Address. As soon
      as reasonably possible after the Commencement Date, Subtenant shall obtain
      a
      separate mailing address for the Sublet Premises, without affecting or changing
      the current mailing address for the Retained Premises.




IN
      WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sublease as
      of the day
      and year first above written.


SUBLANDLORD:
            
            SUBTENANT:ANACOMP,
                INC., an Indiana corporation
            
            AMERICAN
                TECHNOLOGY CORPORATION
              a
                Delaware corporationBy:
                /s/ Paul Najar
            
            By:
                /s/ Rose Tomich-LitzPrint
                Name: Paul Najar
            
            Print
                Name: Rose Tomich-LitzTitle:
                EVP
            
            Title:
                VP, OperationsBy:
            
            By:
                /s/ John R. ZavoliPrint
                Name:
            
            Print
                Name: John R. ZavoliTitle:
            
            Title:
                President





18


CONSENT
      TO SUBLEASE


[To
      be
      attached using Kilroy form of consent]








19





EXHIBIT
      A


Description
      of Sublet Premises










20


EXHIBIT
      B


Copy
      of the Main Lease





[See
      Attached]





21


EXHIBIT
      C


Inventory
      of Furniture. Fixtures and Equipment in Sublet Premises







Quantity
            Description
                of Personal Property19
            9x12
                cubes each with 1 ea 2 drawer file and 1 ea 3 drawer
                fileI
            conference
                room table with 11 chairs3
            desks4
            desks
                w/returns3
            credenzas





22


EXHIBIT
      D





Lobby
      Improvements


(attached
      hereto)







23





24











25









26