Document:

Exhibit 10.10

 

	
  

  	
   

  	
  SUBLEASE

  
	
   

  	
   

  
	
   

  	
  CB RICHARD ELLIS, INC.

  
	
   

  	
  BROKERAGE AND MANAGEMENT

  
	
   

  	
   

  	
  LICENSED REAL ESTATE BROKER

  

 

1.              PARTIES.

This Sublease, dated                                                       March 20                                           ,  2007                    ,
is made between TBA Entertainment Corporation, a Delaware corporation                                                                                              (“Sublessor”), Zogenix, Inc.,
a Delaware corporation
                                                                                                                           (“Sublessee”).

 

2.      MASTER
LEASE.

Sublessor is the lessee under
a written lease dated April 23                                                                                  ,  
1998                ,
wherein Pacific Torrey Reserve Holdings L.P., a California limited partnership                                                            (“Lessor”)
leased to Sublessor the real property located in the City of   San Diego                                                                                            ,
County of   San Diego                                                   , State of
California                                                                                         ,
described as  Suite 310-3,
794 rentable square feet, 11682 El Camino Real, San Diego, CA 92130                                                    

                                                                                                                                                                                                                

(“Master Premises”). Said Lease has been amended by the following
amendments First Amendment to Lease dated June 22, 2003 and
Second Amendment to Lease dated September 24, 2004                                                                                                               
                                                                                                                                                                                                               ;
said lease and amendments are herein collectively referred to as the “Master Lease” and are attached hereto as Exhibit “A.”

 

3.      PREMISES.

Sublessor hereby subleases to Sublessee on the terms
and conditions set forth in this Sublease the following portion of the
                                       4,193
rentable square feet (“RSF”)/3,646 usable square feet (“USF”) referred to as Suite 320,
11682 Master Premises (“Premises”): El Camino Real,                                                                                                                             
San Diego, CA 92130 per the attached Exhibit “C”.                                                                                                                              

 

4.              WARRANTY BY
SUBLESSOR.

Sublessor warrants and represents to Sublessee that
the Master Lease has not been amended or modified except as expressly set forth
herein, that Sublessor is not now, and as of the commencement of the Term
hereof will not be, in default or breach of any of the provisions of the Master
Lease, and that Sublessor has no knowledge of any claim by Lessor that
Sublessor is in default or breach of any of the provisions of the Master Lease.

 

5.      TERM.

The
term of this Sublease shall commence on                              June 1                                , 2007                          (Commencement
Date”), and end on                                              May 31                                        , 2010               (“Termination
Date”), unless otherwise sooner terminated in accordance with the provisions of
this Sublease. In the event the Term commences on a date other than the
Commencement Date, Sublessor and  Sublessee shall execute a
memorandum setting forth the actual date of commencement of the Term.
Possession of the Premises (“Possession”) shall be delivered to Sublessee on
the commencement of the Term. If for any
reason Sublessor does not deliver Possession to Sublessee on the
commencement of the Term, Sublessor shall not be subject to any liability for
such failure, the Termination Date shall not be extended by the delay, and the
validity of this Sublease shall not be impaired, but rent shall abate until
delivery of Possession. Notwithstanding the foregoing, if Sublessor has not
delivered Possession to Sublessee within thirty (30) days after the
Commencement Date, then at any time thereafter and before delivery of
Possession, Sublessee may give written notice to Sublessor of Sublessee’s
intention to cancel this Sublease. Said notice shall set forth an effective
date for such cancellation which shall be at least ten (10) days after
delivery of said notice to Sublessor. If Sublessor delivers Possession to
Sublessee on or before such effective date, this Sublease shall remain in full
force and effect. If Sublessor fails to deliver Possession to Sublessee on or
before such effective date, this Sublease shall be cancelled, in which case all
consideration previously paid by Sublessee to Sublessor on account of this
Sublease shall be returned to Sublessee, this Sublease shall thereafter be of
no further force or effect, and Sublessor shall have no further liability to Sublessee
on account of such delay or cancellation. If Sublessor permits Sublessee to
take Possession prior to the commencement of the Term, such early Possession
shall not advance the Termination Date and shall be subject to the provisions
of this Sublease, including without limitation the payment of rent.
Notwithstanding the above, the Sublessee may utilize the period of May 16-31,
2007 for installation of carpet and furniture, fixtures and equipment (“FF&E”)
on a rent free basis.

 

6.      RENT.
(Please See  Addendum)

6.1 Minimum
Rent. Sublessee shall pay to Sublessor as minimum rent, without deduction,
setoff, notice, or demand, at 21700 Oxnard St., Ste. 1430,
Woodland Hills, CA 91367, Attn: Accounts Receivable
                                                                               
or at such other place as Sublessor shall designate from time to time by
notice to Sublessee, the sum of Fourteen thousand four hundred
sixty-five dollars and eighty-five cents per month                                                 Dollars ($14,465.85                                ) per month, in
advance on the first day of each month of the Term. Sublessee shall pay to
Sublessor upon execution of this Sublease the sum of Fourteen
thousand four hundred sixty-five dollars and eighty-five cents                             Dollars ($14,465.85                          ) as rent for June, 2007                                                                                                                                            . If the Term
begins or ends on a day other than the first or last day of a month, the rent
for the partial months shall be prorated on a per diem basis. Additional
provisions:

Please See Addendum                                                                                                                                                                            

 

1

 

7.              SECURITY
DEPOSIT. (Please See Addendum)

Sublessee shall deposit with
Sublessor upon execution of this Sublease the sum of   Fourteen thousand four hundred sixty-five Dollars and eighty-five
cents                                                                                                 Dollars
($ 14,465.85                               )
as security for Sublessee’s faithful performance of Sublessee’s obligations
hereunder (“Security Deposit”. If Sublessee fails to pay rent or other charges
when due under this Sublease, or fails to perform
any of its other obligations hereunder, Sublessor may use or apply all or any
portion of the Security Deposit for the payment of any rent or other amount
then due hereunder and unpaid, for the payment of any other sum for which
Sublessor may become obligated by reason of Sublessee’s default or breach, or
for any loss or damage sustained by Sublessor as a result of Sublessee’s
default or breach. If Sublessor so uses any portion of the Security Deposit,
Sublessee shall, within ten (10) days after written demand by Sublessor,
restore the Security Deposit to the full amount originally deposited, and
Sublessee’s failure to do so shall constitute a default under this Sublease.
Sublessor shall not be required to keep the Security Deposit separate from its
general accounts, and shall have no obligation or liability for payment of
interest on the Security Deposit. In the event Sublessor assigns its Interest
in this Sublease, Sublessor shall deliver to its assignee so much of the
Security Deposit as is then held by Sublessor. Within ten (10) days after
the Term has expired, or Sublessee has vacated the Premises, or any final
adjustment pursuant to Subsection 6.2 hereof has been made, whichever shall
last occur, and provided Sublessee is not then in default of any of its
obligations hereunder, the Security Deposit, or so much thereof as had not
theretofore been applied by Sublessor, shall be returned to Sublessee or to the
last assignee, If any, of Sublessee’s interest hereunder.

 

8.              USE OF
PREMISES.

The Premises shall be used and occupied only for general
office space                                                                                            
                                                                                                                                                           ,
and for no other use or purpose.

 

9.              ASSIGNMENT
AND SUBLETTING.

Sublessee may assign this Sublease or further sublet
all or any part of the Premises with the prior written consent of Sublessor
(and the consent of Lessor, if such is required under the terms of the Master
Lease) which shall not be unreasonably withheld. Sublessor shall approve or
deny Sublessee’s request within ten (10) days of Sublessee’s providing
information to Sublessor as required in the Lease.

 

10.       OTHER PROVISIONS OF SUBLEASE.

All applicable terms and conditions of the Master
Lease are  Incorporated into and made a part of this Sublease
as if Sublessor were the lessor thereunder. Sublessee the lessee thereunder,
and the Premises the Master Premises, except
for the following: N/A                                                                                                                                                                                                         
                                                                                                                                                                                                                
                                                                                                                                                                                                               .
Sublessee assumes and agrees to perform the lessee’s obligations under the
Master Lease during the Term to the extent that such obligations are applicable
to the Premises, except that the obligation to pay rent to Lessor under the
Master Lease shall be considered performed by Sublessee to the extent and in
the amount rent is paid to Sublessor in accordance with Section 6 of this
Sublease. Sublessee shall not commit or suffer any act or omission that will
violate any of the provisions of the Master Lease. Sublessor shall exercise due
diligence in attempting to cause Lessor to perform its obligations under the
Master Lease for the benefit of Sublessee. If the Master Lease terminates, this
Sublease shall terminate and the parties shall be relieved of any further
liability or obligation under this Sublease, provided however, that if the
Master Lease terminates as a result of a default or breach by Sublessor or
Sublessee under this Sublease and/or the Master Lease, then the defaulting
party shall be liable to the nondefaulting party for the damage suffered as a
result of such termination. Notwithstanding the foregoing, if the Master Lease
gives Sublessor any right to terminate the Master Lease in the event of the
partial or total damage, destruction, or condemnation of the Master Premises or
the building or project of which the Master Premises are a part, the exercise
of such right by Sublessor shall not constitute a default or breach hereunder.

 

11.       ATTORNEYS’ FEES.

If Sublessor, Sublessee, or Broker shall commence an
action against the other arising out of or in connection with this Sublease,
the prevailing party shall be entitled to recover its costs of suit and
reasonable attorney’s fees.

 

12.       AGENCY DISCLOSURE:

Sublessor and Sublessee each warrant that they have
dealt with no other real estate broker in connection with this transaction  except: CB
RICHARD ELLIS, INC., who represents TBA Entertainment Corporation, a
Delaware corporation (“Sublessor”)       
                                                                                                                                                                                                               ,
and  Burnham Real Estate Services                                                                                                                                              
, who represents  Zogenix Inc., a
Delaware corporation (“Sublessee”)                                                                                                           
                                                                                                                                                                                                               .
In the event that CB RICHARD ELLIS, INC. represents both Sublessor and
Sublessee, Sublessor and Sublessee hereby confirm that they were timely advised
of the dual representation and that they consent to the same, and that they do
not expect said broker to disclose to either of them the confidential
information of the other party.

 

13.       COMMISSION.
(Please See Addendum)

Upon execution of this Sublease, and consent thereto
by Lessor (if such consent is required under the terms of the Master Lease),
Sublessor shall pay Broker a real estate brokerage commission in accordance
with Sublessor’s contract with Broker for the subleasing of the Premises, if
any, and otherwise in the amount of Thirty-four thousand eight hundred
thirty-one dollars and          
twenty-five cents                                                                                                                          Dollars
(S34,831.25                     ),
for services rendered in effecting this Sublease. Broker is hereby made a third
party beneficiary of this Sublease for the purpose of enforcing its right to
said commission.

 

14.       NOTICES.

All notices and demands which may or are to be
required or permitted to be given by either party on the other hereunder shall
be in writing. All notices and demands by the Sublessor to Sublessee shall be
sent by United States Mail, postage prepaid. addressed to the Sublessee at the
Premises, and to the address hereinbelow, or to such other place as Sublessee
may from time to time designate in a notice to the Sublessor. All notices and
demands by the Sublessee to Sublessor shall be sent by United States Mall,
postage prepaid, addressed to the Sublessor at the address set forth herein,
and to such other person or place as the Sublessor may from time to time
designate in a notice to the Sublessee.

 

To Sublessor:  11682
El Camino Real, Suite 310, San Diego, CA 92130, Attn: Robert E. Geddes                                                     

 

To Sublessee:  11682 El Camino Real, Suite 320, San Diego,
CA 92130, Attn: Chief Financial Officer 

 

 4435 Eastgate Mall, Ste. 200, San Diego, CA
92121, Attn: Pat Rohan/Burnham Real Estate                                   

 

2

 

15.       CONSENT BY
LESSOR.

THIS SUBLEASE SHALL BE OF NO FORCE OR EFFECT UNLESS
CONSENTED TO BY LESSOR WITHIN 10 DAYS AFTER EXECUTION HEREOF, IF SUCH CONSENT
IS REQUIRED UNDER THE TERMS OF THE MASTER LEASE.

 

16.       COMPLIANCE. 

The parties hereto agree to comply with all
applicable federal, state and local laws, regulations, codes, ordinances and administrative
orders having jurisdiction over the parties, property or the subject matter of
this Agreement, including, but
not limited to, the 1964 Civil Rights Act and all amendments thereto, the Foreign
Investment In Real Property Tax Act, the Comprehensive Environmental Response Compensation
and Liability Act, and The Americans With Disabilities Act.

 

	
  TBA
  Entertainment Corporation, a Delaware

  	
   

  	
   

  
	
  Sublessor:
  

  	
  corporation

  	
   

  	
  Sublessee:  

  	
  Zogenix, Inc., a Delaware
  corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  Robert E. Geddes  /s/ R.E. Geddes

  	
   

  	
  By:

  	
  Roger L. Hawley  /s/ Roger L. Hawley

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
  Title: 

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:
  

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:
  

  	
   

  	
   

  	
  Title:
  

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  3/20/07

  	
   

  	
  Date:
  

  	
   

  
									

 

	
   

  CONSULT YOUR ADVISORS- This document
  has been prepared for approval by your attorney. No representation or
  recommendation is made by CB Richard Ellis, Inc. as to the legal
  sufficiency or tax consequences of this document or the transaction to which
  it relates. These are questions for your attorney.

   

  In any real estate transaction, it is recommended
  that you consult with a professional, such as a civil engineer, industrial
  hygienist or other person with experience in evaluating the condition of the
  property, including the possible presence of asbestos, hazardous materials
  and underground storage tanks.

   

  

 

3

 

ADDENDUM TO THAT CERTAIN OFFICE BUILDING SUBLEASE DATED MARCH    ,
2007 BY AND BETWEEN TBA ENTERTAINMENT CORPORATION, A DELAWARE CORPORATION,
HEREINAFTER REFERRED TO AS SUBLESSOR, AND ZOGENIX, INC., A DELAWARE
CORPORATION, HEREINAFTER REFERRED TO AS SUBLESSEE, FOR THE PROPERTY LOCATED AT
11682 EL CAMINO REAL, CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA.

 

1.              Minimum
Rent: The Minimum Rent for Year 1 is determined as follows:

 

ØBase monthly
rental rate - $2.76/RSF/month, net of utilities

ØAllowance for
operating expense pass throughs - $.06/RSF/month

ØAllowance for
leasing commission amortization - $.20/RSF/month

ØAllowance for
furniture acquisition amortization - $.30/RSF/month 

ØAllowance for
electricity/utilitites - $.13

ØTOTAL
- $3.45/RSF/month

 

As provided for in the Master Lease, utilities and
air conditioning are provided from 7:00 A.M. to 7:00 P.M. Monday
through Friday and from 9:00 A.M. to 1:00 P.M. on Saturdays with
Sundays and publicly recognized holidays excluded. All other services provided
by the Lessor as part of the Master Lease shall be per the attached Master
Lease Agreement.

 

It is understood that the above Minimum Rent includes
a provision for electricity/utilities such that no payment will be made by
Sublessee to Sublessor for electricity/utilities. Should the cost for
electricity/utilities exceed $1,628/mo ($.20/RSF/month) for the  combined
Suites 310 & 320, Sublessor may make an adjustment and be compensated
by Sublessee. As an example: Monthly average electricity/utilities charges to
Sublessor over a 6 month period are $.24/RSF/month, Sublessee shall pay
Sublessor as follows: $.24-$.20= $.04 average x 4,193 SF = $167.72/month x 6
months - $1,006.32

 

Sublessee, regardless what is described in the Master
Lease, shall not be responsible for any rent other than the rent in Item 6 of
the Sublease and Item 1 (Minimum Rent) of this Addendum as well as Rental Adjustments
of Item 2 of this Addendum. Additional Rent is described in the Lease, Article 4,
Sections 4.1 through 4.6 are solely the responsibility of the Sublessor.

 

2.              Rental
Adjustments: The Minimum Rent as outlined above shall be adjusted
annually by a fixed three percent (3%) amount.

 

3.              Delivery of
Premises: The Sublessor shall be responsible for the costs
associated with the installation of a demising/dividing partition section
separating the Sublease premises from the balance of Sublessor’s space. The
costs involved in separating lighting and light switches between Suites 310 and
320 shall be borne by the Sublessor. All improvements in the Premises prior to
Sublease commencement shall be in proper working order and condition. Should
repairs be necessary, Sublessor shall pay the cost.

 

It is hereby agreed and understood that the Sublessor
shall be responsible for costs, as applicable, for space planning and
construction drawings, City of San Diego tenant improvement permits and tenant
improvement construction as noted above.

 

Other than the installation of the demising/dividing
partition and separation of lighting and light switches, the Sublease premises
shall be delivered in an “as is” condition. Any additional tenant improvement
work required by Sublessee shall be at the Sublessee’s sole cost and expense,
and shall require the approval of the Sublessor and Lessor.

 

Sublessor consents to Sublessee’s installation of
carpeting matching carpeting currently in place in Suite 310, the
potential expansion space. Sublessor does not require the removal of Sublessee’s
carpeting, should the carpeting match that in Suite 310, at the end of the
Sublease. Sublessee may install the carpeting after approval of the Sublease by
Lessor (but in no event prior to May 16, 2007) or at any time during the
Sublease term. Sublessee is not required by Sublessor to carpet the Premises.
Carpeting is the sole expense of Sublessee. Any carpeting installation is
subject to Lessor’s consent as described in the Master Lease.

 

4.              Existing
Furniture and Furniture Systems: Use of the Sublessor’s
existing furniture and furniture systems are added to the Minimum Rent as
provided for in the preceeding Paragraph 1 of this Addendum at an amount
equivalent to thirty cents ($.30)/RSF/month

 

 

($1,257.90/month). Exact furniture items are
identified on the attached Exhibit “B” and do include the audio/visual
items located in the conference room.

 

Provided the Sublessee is not in rental default,
beyond any cure period, during the 36- month Sublease term for Suite 320,
the furniture, furniture systems and audio/visual equipment shall become the
property of the Sublessee as of May 31, 2010.

 

5.              Parking: The Sublessee
shall be entitiled to a parking ratio of 4 spaces per 1,000 USF leased,
twenty-five percent (25%) of which are reserved parking spaces. Therefore,
Sublessee shall have access to fourteen (14) total parking spaces, four (4) of
which shall be located in the reserved subterranean parking area of the
building. Should the Premises be expanded per Item 8, Sublessee’s parking shall be increased pro rata (reserved
and non-reserved) based on the ratio applicable to the initial premises. All
parking shall be free of charge during the initial Sublease term and, if
exercised, the Option to Extend term.

 

6.              Security
Deposit: Pursuant to Paragraph 7 (Security Deposit) of the
Sublease, Sublessee shall deposit with Sublessor on execution of the Sublease,
the sum of $14,465.85. In the event Sublessee fails to pay rent when due under
this Sublease more than one (1) time in any calendar year, after receiving
written notice from Sublessor, Sublessee shall, within five (5) business
days, deposit with Sublessor the additional sum of $14,465.85 as an additional
Security Deposit.

 

7.              Option to
Extend: Provided the Sublessee is not in default of any terms
and conditions of the Sublease, Sublessee shall be entitled to extend the term
of the Sublease for a period of seventeen (17) months (the “Option Term”), upon
first giving Sublessor six (6) months prior written notification. The rent
for the Option Term is as follows:

 

ØJune 1,
2010 – May 31, 2011         $14,465.85
per month ($3.45/RSF/mo.)

ØJune 1,
2011 – October 31, 2011    $14,885.15 per month
($3.55/RSF/mo.)

 

8.              Expansion: If at any time,
Sublessor elects to vacate and/or sublease any or all of its space in Suite 310,
Sublessor shall notify Sublessee in writing and Sublessee, upon ten (10) days
written notice, may add the proposed space to its premises at the Monthly
Minimum Rental Rate applicable for the appropriate time frames of this sublease
reduced, however, by $.30/RSF/month due to the fact that no furniture purchase
is included. The occupancy and rent commencement for the expansion space will
occur between 30 and 60 days after Sublessee’s acceptance with the exact date
to be mutually agreed upon. Should Sublessee elect to add the additional space,
Sublessor shall remove the demising/dividing wall at Sublessor’s expense. The
Sublease term of the expansion space shall be coterminus with the term for Suite 320
including an extension of the term for Suite 320. Should Sublessee expand
into all of Suites 310 and 320, the electricity/utilities for the combined Suite 310
and Suite 320 shall be switched into the name of Sublessee (and thereafter
paid by the Sublessee), and the electricity/utilities component of Minimum Rent
($.13/RSF/month) shall be reduced from the Minimum Rent payable to Sublessor.

 

9.              Signage: Building
standard directory and building standard suite entry signage shall be at the
Sublessee’s expense.

 

10.       Use of IT
Area: The Sublessee, at its option, may place its server in the Sublessor’s IT  closet
and use, if practical, Sublessor’s local area network cabling and phone lines.

 

11.       Commission: Upon execution
of this Sublease, the Sublessor agrees to pay CB Richard Ellis, Inc., a
leasing commission equivalent to $34,831.25 which is equavilent to 61/2
% of Months 1-36 total lease consideration. It is understood that Burnham Real
Estate Services shall be entitled to a fee equivalent to 4% of the 61/2%
described herein of Months 1-36 total lease consideration, or $21,434.62. The
CB Richard Ellis, Inc., share is 21/2% of the 61/2%
described herein of the Months 1-36 total lease consideration, or $13,396.63.
The commission shall be paid 50% upon Sublease execution and 50% upon occupancy
and Sublease commencement.

 

In the event the Sublease is extended pursuant to the
Option to Renew terms and/or if the Sublessee elects to expand per the
Expansion provisions of the Sublease, Sublessor shall pay CB Richard Ellis, Inc.,
a commission equivalent to 6 1/2% of the total Sublease consideration of
the lease extension or expansion as applicable. It is understood that the
commission for lease extension and/or expansion shall be shared between Burnham

 

 

Real Estate Services and CB Richard Ellis, Inc.
as outlined above and shall be paid 50% upon execution and 50% upon occupancy
or commencement of the extended term or expansion as applicable.

 

 

 

EXHIBIT “A”

 

FIRST AMENDMENT TO LEASE

 

This First Amendment to
Lease (“1st Amendment”) is made, for reference purposes only, this 22nd day of
June, 2003, between Pacific North Court Holdings, L.P., a California
Limited partnership as successor in interest in pacific, Torrey Reserve
Holdings L.P. (“Landlord”) and TBA Entertainment Corporation a Delaware
Corporation, as successor in interest to Avalon Entertainment Corp. a
California corporation (“Tenant”) with reference to the following facts:

 

RECITALS

 

A.            Landlord and Tenant entered into that certain Lease
dated April 23, 1998 (the “Lease”) for that certain premises located at
11682 El Camino Real, Suite 310, San Diego CA 92130. 

 

B.             The parties desire to amend the Lease as set forth in
this 1st Amendment. 

 

C.              All capitalized terms used in this 1st Amendment
unless specifically defined herein shall          have
the same meaning as the capitalized terms used in the Lease.

 

NOW, THEREFORE, for
valuable consideration, the receipt and adequacy of which are expressly
acknowledged, Landlord and Tenant agrees as follows:

 

AGREEMENT

 

1.               Term:  The term of
the Lease shall hereby be extended for the period of Three (3) years,
commencing September 1, 2003 and terminating August 31, 2006
(“Extension Term”).

 

2.               Rent.  The Basic
Monthly Rent provided for under Article 3 of the Lease shall be adjusted to
$10,433.50 effective September 1, 2003. Subsequent adjustments to the
Basic Monthly Rent for the term of this Extension shall be effective Commencing
on September 1 and continuing annually on September 1 each year
thereafter for the term of this Extension. The basic monthly rent adjustment
shall be calculated as follows:

 

	
  Lease Year

  	
   

  	
  Monthly Rent

  	
   

  	
  Annual Rent

  	
   

  
	
  1

  	
   

  	
   

  	
  $10,433.50

  	
   

  	
  $125,202.00

  	
   

  
	
  2

  	
   

  	
   

  	
  $10,746.51

  	
   

  	
  $128,958.06

  	
   

  
	
  3

  	
   

  	
   

  	
  $11.068.90

  	
   

  	
  $132,826.80

  	
   

  

 

3.               Contingency. Execution of this 1st Lease Amendment
is contingent upon the immediate payment by Tenant to Landlord in the amount of
$3,258.00 for the 2002 Actual Common Area Maintenance Expense
Reconciliation.

 

4.               Base Year.  The base
calendar year for the purpose of determining building operating expense
adjustments pursuant to Part 1, Paragraph 7(a) of the Lease shall be 2003 for
the Extension Term.

 

5.               Tenant Improvement Allowance.  No
later than November 1, 2003 Landlord shall provide new interior point for the Premises,
and minor carpet repair at Landlord’s expense.

 

6.               Tenant Certification.  By execution
of this 1st Amendment, Tenant hereby certifies that as of the
date hereof, and to the best of Tenant’s knowledge, that Landlord is not in
default of the performance of its obligations pursuant to the Lease, and Tenant
has no claim, defense, or offset with respect to the Lease.

 

7.               Confirmation.  Except, as
and to the extent modified by this 1st Amendment to Lease all       
provisions of the Lease shall remain in full force and effect. In the event of
a conflict between the terms of the Lease and the terms of this Amendment, the
terms in this Amendment shall control.

 

THIS SPACE LEFT BLANK
INTENTIONALLY

 

	
   

  	
   

  	
   

  	
  Landlord 

  	
  

  	
  Tenant

  	
   

  	
   

  
	
   

  	
   

  

 

 

SIGNATURE PAGE

 

IN WITNESS WHEREOF,
Landlord and Tenant agree to the foregoing as evidence by affixing their
signatures below.

 

 

	
   

  	
  LANDLORD: Pacific North Court Holdings, L.P., a
  California limited partnership 

  a successor in interest to Pacific Torrey Reserve Holdings, L.P.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  AMERICAN ASSETS, INC. as agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Jamie Cronemeyer

  	
   

  
	
   

  	
   

  	
  Jamie Cronemeyer

  
	
   

  	
  Its: 

  	
  Vice President, Commercial Real Estate

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  7/7/03

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Amy White

  	
   

  
	
   

  	
   

  	
  Amy White

  
	
   

  	
  Its: 

  	
  Senior Portfolio Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  7/03/03

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TENANT: TBA Entertainment Corporation

  
	
   

  	
  a Delaware Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bryan Cusworth

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Printed Name:

  	
  Bryan Cusworth

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its: 

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  7/1/03

  	
   

  
												

 

 

	
   

  	
  Landlord 

  	
    

  	
  Tenant

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

 

SECOND AMENDMENT TO LEASE

 

BETWEEN

 

PACIFIC NORTH COURT
HOLDINGS, L.P.,

A California limited
partnership

 

as LANDLORD

 

AND

 

TBA ENTERTAINMENT
CORPORATION, a Delaware corporation

as Tenant

 

 

SECOND AMENDMENT TO LEASE

 

This Second Amendment to Lease
(this “Second Amendment”), entered into as of September 24, 2004 by and
between Pacific North Court Holdings, L.P., a California limited partnership,
(“Landlord”) as successor-in-interest under the Lease to Pacific Torrey Reserve
Holdings, L.P., a California limited partnership (“Original Landlord”), and TBA
Entertainment Corporation, a Delaware corporation (“Tenant”), as successor-in-interest
under the Lease to Avalon Entertainment Group, a California corporation
(“Original Tenant”), modifies that certain Office Lease dated as of April 23,
1998 (the “Original Lease”), by and between Original Landlord and Original Tenant,
as modified by that certain First Amendment to Lease dated as of June 22, 2003
(the “First Amendment” and together with the Original Lease, the “Lease”). All
capitalized terms used in this Second Amendment and not specifically defined
herein shall have the meanings set forth in the Lease.

 

The parties hereto desire
that the Lease be amended to provide for, among other things, an extension of
the Term and expansion of the Premises.

 

AGREEMENT

 

NOW THEREFORE, in
consideration of the mutual promises and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree to the above recitals and
as follows:

 

1.                                       Extension of Term.  The
Term of the Lease is hereby extended for an additional period of sixty-two (62)
months, commencing September 1, 2006 and expiring October 31, 2011 (the “Second
Extension Term”). Consistent with the foregoing Paragraph 5 of part I of the
Original Lease (Summary of Basic Lease Information) and Paragraph 1 of the First
Amendment are hereby deemed deleted in their entirely and replaced with the
following:

 

“5. “Lease Term”

 

(a)          “Duration”: One hundred fifty-eight (158) months.

(b)         “Lease Commencement date”: September 1, 1998

(c)          “Lease Expiration Date”: October 31, 2011”

 

2.                                       Renewal Option.  The
parties agree that Tenant’s Option to Extend, as set forth in Section 2.4 of Part
II of the Original Lease (the “Option”) shall remain in full force and effect
in accordance with all terms and conditions of such section 2.4, except that:
(a) the “Option” to be exercised shall occur by Tenant sending Landlord a
notice nine (9) months prior to the October 31, 2011 Lease Expiration Date, and
(b) the “Extension Term” and the “Option,” as such icons are used in section
2.4, shall be deemed modified to provide for one (1) option to renew for three
(3) years only.

 

3.                                       New Premises.  As
of the Expansion Commencement Date (as hereinafter defined), Paragraph 4(d) of
Part I of the Original Lease (Summary of Basic Lease Information) shall be
deemed to be revised to reflect that Tenant has expanded its Premises - which
currently consists only of Suite 310 (comprised of 3,794 rentable square feet
of space on the 3rd floor of the Building) - to also include Suite
320 (comprised of 4,346 rentable square feet of space on the 3rd
floor of the Building) for a total of 8,140 rentable square feet of space and
7,084 usable square feet of space (Suite 320 is referred to herein as the “Expansion
Space” and, together with Suite 310, as the “New Premises”.) “Expansion
Commencement Date” shall be defined to mean the later of either. (i) November
1, 2004 or (ii) the earlier of (x) the date Tenant commences business operations
from Suites 310 and 320 or (y) the first business day of the week following Tenant’s
receipt of a factually correct notice from Landlord that substantial completion
of the 2004 Tenant Improvements has occurred. As of the Expansion Commencement
Date, all references in the Lease to “Premises” shall be deemed to refer to the
new Premises, with the demining plan shown or Exhibit A to this Second Amendment.

 

4.                                       Monthly Basic Rent.  Commencing
on the Expansion Commencement Date, Paragraph 6 of the Lease shall be deemed
modified to reflect Tenant’s Monthly Base Rent as follows:

 

	
  Effective Dates

  	
   

  	
  Monthly Base Rent Per

  Rentable Square Foot

  	
   

  	
  Monthly Base Rent

  for the New Premises

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11/1/2004 - 10/31/2005

  	
   

  	
  $2.60

  	
   

  	
  $21,164.00

  	
   

  
	
  11/1/2005 - 10/31/2006

  	
   

  	
  $2.678

  	
   

  	
  $21,798.92

  	
   

  
	
  11/1/2006 - 10/31/2004

  	
   

  	
  $2.758

  	
   

  	
  $22,452.89

  	
   

  
	
  11/1/2007 - 10/31/2008

  	
   

  	
  $2.841

  	
   

  	
  $23,126.47

  	
   

  
	
  11/1/2008 - 10/31/2009

  	
   

  	
  $2.926

  	
   

  	
  $23,820.27

  	
   

  
	
  11/1/2009 - 10/31/2010

  	
   

  	
  $3.014

  	
   

  	
  $24,534.88

  	
   

  
	
  11/1/2010 - 10/31/2011

  	
   

  	
  $3.105

  	
   

  	
  $25,270.92

  	
   

  

 

Such payments shall be in
addition to all additional rent and other amounts payable by Tenant under the Lease.

 

5.                                       Tenant’s Base Year.  Effective on the Expansion Commencement Date, Paragraph
7(a) of part I of the Original Lease (Summary of Basic Lease Information), and Paragraph
4 of the First Amendment, shall be deemed modified to reflect Tenant’s Base Year
as 2005.

 

-1-

 

6.                                       Tenant’s Operating Expense Percentage.  Effective
on the Expansion Commencement Date, Paragraph 7(b) of part I of the Original
Lease (Summary of Basic Lease Information) shall be deemed modified to reflect
Tenant’s Share of Direct Expenses to be 10.839%.

 

7.                                       Parking.  Effective on
the Expansion Commencement Date, Paragraph 10 of Part I of the Original Lease
(Summary of Basic Lease Information) shall be deemed deleted in its entirety
and replaced with following.

 

“Tenant’s shall be
entitled to the use of twenty-eight (28) parking spaces, of which seven (7)
parking spaces shall be reserved parking spaces in the subbermean reserved
executive parking area of the Building and twenty-one (21) parking spaces shall
be unreserved parking spaces (subject to reduction for Tenant’s prorata share
of Project handicapped and visitor parking spaces). All seven (7) reserved
parking spaces and twenty-one (21) unreserved parking spaces shall be provided
at no charge to the Tenant through October 31, 2011.

 

8.                                       Broker: Paragraph 12 of part I of the Original Lease
(Summary of Basic Lease Information) shall be deleted in its entirety and
replaced by the following:

 

“Brokers:     CBRE
(Dick Balentri) representing Landlord and so broker representing Tenant.”

 

9.                                       Tenant Improvements.  To be constructed by Landlord. See Exhibit B
to this Second Amendment.

 

10.                                 Guaranty.  In connection
with the execution of the Original Lease, a Guaranty dated 4/23/98 (“Guaranty”)
was signed by TBA Entertainment Corporation, Inc. which has now succeeded to
the interests of the Tenant so that the same exact entity is both the Tenant
and the Guarantor. Therefore, in order to avoid any confusion, the parties
agree that the Guaranty is terminated and is no longer in force or effect.

 

11.                                 SNDA.  Tenant and
Bear Stares Funding, Inc. are parties to that certain Subordination,
Nodisturbance, Attunement and Agreement dated March 26, 1999 (the “SNDA”),
which is still in effect as of the date hereof. Landlord covenants that the
security Instrument referenced in the SNDA is the only deed of trust or
mortgage encumbering the Project as of the date of this Second Amendment.

 

12.                                 Further Assurances.  Each of the parities hereto agrees to execute
all documents and instruments and to take all other actions as may specifically
be provided for herein or is the Lease as may be required in order to
consumarate the purposes of this Second Amendment.

 

13.                                 Integration Interpretation.  This
Second Amendment in combination with the Lease contains or expressly incorporates
by reference the entire agreement of the parties with respect to the matters contemplated
herein and supersedes all prior negotiations. Except as specifically set forth
herein, the Lease remains unmodified and in fall force and effect.

 

14.                                 No Default.  Tenant
represents and warrants to Landlord that Tenant is not in default under the
Lease and that Tenant has made no assignment, sublease, transfer or other
disposition of the Lease, any interest in the Lease or any demand, obligation,
liability or cause of action arising out of the Lease.

 

-2-

 

 

IN WITNESS WHEREOF, this Second Amendment has been executed as of the
date first above set forth.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  PACIFIC NORTH COURT HOLDINGS, L.P.,

  	
   

  	
  TBA ENTERTAINMENT CORPORATION,

  
	
  a California limited partnerships

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  American Assets, Inc.,

  	
   

  	
  By:

  	
  /s/ Eugene L. Cobuzzi

  
	
   

  	
  a California corporation

  	
   

  	
   

  	
   

  
	
   

  	
  Agent for Owner

  	
   

  	
  Print Name: 

  	
  Eugene L. Cobuzzi

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Durfey

  	
   

  	
  Its: 

  	
   

  	
  C.O.O.

  
	
   

  	
   

  	
  James Durfey

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  V.P., Office Leasing and Management

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Peter Castor

  	 

	
   

  	
   

  	
   

  	
   

  	
  Print Name:

  	
  Peter Castor

  	 

	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
                    CFO

  	 

															

 

-3-

 

EXHIBIT B

 

TENANT IMPROVEMENTS TO
THE PREMISES

 

General recital: Landlord
shall provide tenant improvements for the Premises, subject to the terms and
conditions as more completely described herein.

 

Section 1.               Tenant’s Plan Approval.  Concurrently with, or within ten calendar
days following, the execution of this Second Amendment, Tenant shall cause
space plant (“Space Plans”) to be delivered to Landlord for its approval which
Space Plans shall show all partition walls, doors, exists. Landlord shall
approve, or disapprove if a Design Problem, as defined below, exists, within
three (3) business days of receipt of such space Plans. Within forty-five (45)
days following the execution of this Second Amendment, Tenant shall cause
Facility Solutions to prepare detailed plans and specifications (the “Plan”) to
be prepared and delivered to Landlord, which Plans shall reflect the work to be
performed within the Premises by Landlord in order to suitably prepare the
Premises for Tenant’s use (the “2004 Landlord’s work”), Landlord shall, within
five (5) business days following its receipt of the Plans, either approve such
Plans (consent to which shall not be withhold, conditioned or delayed unless
and to the extent a Design Problem exists) or provide Tenant with the reasons
that Landlord is withholding such consent because a Design Problem exists. If
Landlord does not approve the Plans, Tenant shall promptly exists the Plans to
be revised, consistent with Landlord’s comments to the extent necessary to
eliminate the Design Problem, and then resubmit the Plans to Landlord for
review within seven (7) business days of Landlord’s notice to Tenant of said
non-approval of Tenant’s Plan. No work shall be undertaken by Landlord until
the Plans have been finally approved by Landlord. This, procedure shall be
repeated until the Space Plans and the Plans have been approved by Landlord.
Performance of the 2004 Landlord’s Work shall strictly conform to the approval
Plans and any deviation will required Landlord and Tenant’s prior approval.

 

A Design Problem will be
deemed to exist to the extent that the Plans and the improvements to be
constructed pursuant to the Plans (a) do not comply with Laws and Orders (as
defined in Section 7.1 of the Lease) (b) could affect the exterior appearance
of the Building (c) would unreasonably interfere with any other tenant’s use of
their premises for general business office questions, (d) would adversely
affect the Base Building Systems (as defined in Section 11.1 of the Lease) or
(e) adversely affect the structural integrity of the Building.

 

Section 2.               2004 Landlord’s Work.  Following mutual approval of the Plans,
Landlord shall cause the Premises to be built-out and delivered to Tenant as
soon as reasonably possible. (Notwithstanding the foregoing Landlord and
Tenant acknowledge that Tenant has been occupying Suite 310 pursuant to the
term of Lease and that tenant shall continue to accept and occupy the Suite 310
in its currently existing “as-is” condition, subject only to the completion of
2004 Landlord’s Work on Suite 310). The build-out of the Premises shall be
completed by Landlord in a good and workmanlike manner, and in accordance with
the Plans. The 2004 Landlord’s Work contractor shall be either Human
Constructing or Pacific Building Group, and Landlord agrees to require the
selected contractor to competitively bid major subcontractor trade. Landlord
shall instruct the Contractor to first complete the work in Suite 320 and allow
Tenant to move into Suite 320 whereupon the Contractor shall then complete the
work in Suite 310. Landlord shall cause the Contractor to perform such work at
such times and in such a manner to as to reasonably mitigate any interference
with Tenant’s ongoing business operations from the Premises.

 

Section 3.               Landlord’s Contribution -
Tenant Improvement Allowance. 
Landlord shall be responsible for bearing all costs and expenses of
completing the Landlord’s Work up to a maximum of $212,520 (based on $30 per
usable square foot multiplied by 7,084 unable square feet in the New Premises
(the “2004 Tenant Improvement Allowance” or “2004 Allowance”). All costs and
expenses in excess of such 2004 Tenant Improvement Allowance shall be payable
by Tenant after the 2004 Allowance has been exhausted and the Landlord’s Work
has been substantially completed within five (5) days following written demand
from Landlord, accompanied by supporting invoices. If after the Landlord’s Work
in Suite 310 and 320 has been substantially completed and the 2004 Allowance
has not been exhausted, the Landlord shall credit the caused and undisturbed
portion of the 2004 Allowance to the rents next due and owing under the Lease.

 

Section 4.               Use of Landlord’s Tenant
Improvement Allowance

 

4.1           The 2004 Allowance that Landlord
agrees to contribute toward the cost of the 2004 Landlord’s Work shall in no
event be applied toward Tenant’s furniture, fixtures, furnishings (including modular
furniture systems), personal property, signs, consultant fee or any monetary
obligations of Tenant under the lease or the Second Amendment, except as
provided in Section 3 above, and in Sections 4.2 and 4.3 below. Such funds will
be used to pay the cost of the 2004 Tenant Improvements which shall become the
property of Landlord and remain upon and be surrendered with the Premises, as a
part thereof, at the end of the Term of the Lease.

 

4.2           The 2004 Allowance shall be applied
toward space planning, construction drawings, City of San Diego tenant
improvement building permits and the cost of the tenant improvement
construction.

 

4.3           All fees, permits, utility charges,
or assessments associated with the construction of 2004 Landlord’s Work (or, in
the event of Future Improvements under Paragraph 8 of this Exhibit “B”,
Tenant’s Work) are Tenant’s responsibility to pay, but may be paid by the
Landlord on Tenant’s behalf from the Tenant Improvement Allowance if not paid
directly by Tenant.

 

Section
5.             Estimated
Completion Date.  Landlord shall make
reasonable efforts to cause the 2004 Landlord’s Work to be substantially
completed within 75 days following mutual approval of the Plans, subject to
extensions caused by Force Majeure Delays (as defined below) or Tenant Delays
(as defined in Section 6, below).

 

-1-

 

For
purposes of this Exhibit, the term “substantial completion” or” substantially
completed” shall have the meaning set forth is Paragraph 5 of Exhibit C to the
Original Lease. For purposes of this Exhibits, “Force Majaure Delaya” shall
mean and refer to a period of delay or delaya encountered by Landlord or
Tenants affecting the work of design or construction of the Landlord’s work
because of delays due t to excess time in obtaining governmental permits or
approvals beyond the time period normally required to obtain such permits or
approvals for similar space, similarly improved, in comparable office buildings
in Sen Diego, California, fire, earthquake or other acts of God: weather
conditions: acts of the public enemy: riot: public earnest; in corrections:
governmental regulations of the sales of materials or supplies or the
transportation thereof: strikes or boycotter, work stoppage, shortages of
material or labor: defaults by contractors or subcontractor, or any other
cause  beyond the reasonable control of
Landlord or Tenant.

 

Section
6.               Delay of the
Substantial completion of the premises. Expect as provided in this Section
6. Tenant’s obligation to pay rent for the premises shall occur as set forth in
the Second Amendment. However, if there shall be a delay or there are delays in
the Substantial Completion of the 2004 Landlord’s Work as a result of the
following (collectively, “Tenant Delays”):

 

6.1           Tenant’s failure to comply with the
Ties Deadlines (except where such delay otherwise qualifies as a Force Majeure
Dalay):

 

6.2           Tenant’s failure to timely approve
any matter requiring Tenant’s approval:

 

6.3           A breach by Tenant of the terms of
this Exhibit “B” or the Lease, as modified by the First and Second Amendment thereto,
beyond any applicable notice and care period but only to the extent such breach
results in an actual delay in Substantial Completion:

 

6.4           Changes in any of the place after the
required submission date for the places or after disapproval of the same by
Landlord (for reasonable reasons) or because the same do not comply with
building codes or other applicable laws; provided, however, that if Tenant
submits any Plans prior to the date due under this Exhibit “B”, then any
additional time required as a result of the changes described in this Section
6.4 shall not constitute a Tenant Delay until and unless such delay exceeds
beyond the date Tenant is required to submit such Plans under the terms of this
Exhibit “B”;

 

6.5           Tenant’s request for changes in the
approved Plans.

 

6.6           Tenant’s requirement for materials, components,
finishes or improvements which are not available in a commercially reasonable
time given the anticipated date of Substantial Completion of the 2004
Landlord’s Work, or which are different from or not included in, Landlord’s
standard tenant improvement specifications; provided, however, that this Section
6.6 shall not apply to the extent Tenant agrees to substitute for such item
another item that is available and can be installed within the required time
frames;

 

6.7           Changes to the base, shall and core
requested by Tenant as specified on the approved Plans; or

 

6.8           Any other negligent act or omission
of Tenant, or its agents, or employees;

 

then, notwithstanding
anything to the contrary set forth in the Lease or this Exhibit “B” and
regardless of the actual date of the Substantial Completion of Landlord’s Work,
the date of Substantial Completion thereof shall be deemed to be the date that Substantial
Completion would have occurred if no Tenant Delay(s), as set forth above, had
occurred. No Tenant Delay shall be deemed to have occurred to the extent such
delay is a result of Force Majors Delays nor shall a Tenant Delay occur unless
Landlord shall within one(1) business day after the occurrence give Tenant
written notice specifying such Tenant Delay, and Tenant shall not within such
one(1) business day correct or cure them. The number of days of Tenant Delay
shall then commence as of the date of Landlord’s delivery of such notice to
Tenant. Any delays to the extent due to any negligent or wrongful act or
omission of Landlord, its agents or contractors, shall be excluded from the
number of days of Tenant Delays.

 

Section 7.               Expansion Commencement Date.
Landlord shall provide Tenant with an “Acceptance of Expansion Premises” letter
upon Tenant’s acceptance of possession of the Expansion Space, and a “Confirmation
of Lease Terms” written memorandum reflecting the exact Expansion Commencement
Date; however, say failures to do so shall not affect the Expansion
Commencement Date. If the Expansion Commencement Date provided for by this in
the Confirmation of lease Terms memorandum is different then the Expansion Commencement
Date set forth in Paragraph 3 of the Second Amendment, then (a) the Expansion
Commencement Date provided for by the Confirmation of Lease Terms memorandum
shall control and (b) Paragraph 3 of the Second Amendment shall be deemed
amended accordingly. Tenant shall execute the Acceptance of Expansion Premises
letter on the date of Landlord’s turnover of possession of the Expansion Space
to Tenant, subject to any punch-list items identified therein. Tenant shall
execute and return to Landlord the Confirmation of Lease Terms memorandum
within ten days of submitted by Landlord. Failure by Tenant to execute the
Acceptance of Expansion Premises letter or the Confirmation of Lease Terms
memorandum shall not amend the terms thereof and, unless Tenant has objected in
writing to such letter and/or memorandum within ten (10) days or receipt
thereof, shall be deemed as Tenant’s final and conclusive acceptance of the
terms of such letter and/or memorandum.

 

Section 8.               Future Improvements by Tenant
to Premises, Plan Approval. In that event the Tenant shall desire to
perform future improvements to the Premises (in addition to the Landlord work
to be done utilizing the 2004 Tenant Improvement Allowance) during the term of
the Lease or any extension thereof, Tenant shall cause

 

-2-

 

detailed plans and
specifications (the “Future Improvement plans”) to be prepared and delivered to
Landlord; which Future Improvement Plans shall reflect the work to be performed
within the Promises by Tenant in order to suitably prepare the Premises for
Tenant’s use (“Tenant’s Work”). Landlord shall, within 10 calendar days
following its receipt of the Future improvement Plans, approve such Future
Improvement Plans unless a Design Problems exists or provide Tenant with the
reasons that a Design Problem exists and Landlord is withholding such consent.
Performance of the Tenant’s Work shall strictly conform to the approved Future
Improvement Plans and any deviation will repairs Landlord’s prior approval. All
costs arising from said future Tenant’s Work shall be the sole and exclusive
responsibility of Tenant to pay, in a prompt and timely fashion as said costs
become due.

 

8.1           Construction of Tenant
Improvements by Tenant’s Contractor. After the Future Improvement Plans for
the Tenant’s Work have been approved  by
Landlord, Tenant, and the local governing agencies, Tenant shall submit to
Landlord the name, address, license number, evidence of insurance, and any
other information required by Landlord of Tenant’s proposed contractor(s)
(“Contractor”) for Landlord’s review and approval. If Landlord deems, in
Landlord’s reasonable discretion, that Tenant’s proposed Contractor is
unacceptable or is not bondable, Tenant shall resubmit information on a
replacement contractor until a mutually approved Contractor is selected. Upon
said selection, Tenant shall enter into a construction contract with the
Contractor which shall include a provision for compliance with Landlord’s rules
and regulations as defined herein, and Tenant shall provide Landlord with a
copy of said contract. In no event shall Tenant be permitted to perform
Tenant’s Work prior to providing all information requested by Landlord relating
to Tenant’s work. Failure by Tenant to provide any information reasonable
requested by Landlord, including but not limited to evidence of Tenant’s and
Tenant’s Contractor’s compliance with all of the insurance requirements hereof,
shall constitute a default of the Lease in the event Tenant proceeds with
Tenant’s Work. Violations of Landlord’s rules, regulations, and requirements as
set forth herein or as otherwise established by Landlord shall constitute a
default of the Lease if not accepted by Tenant and/or Tenant’s Constructor
within twenty four (24) hours notice, either written or oral, by Landlord to
Tenant. Landlord shall have the right to post 
a notice of non-responsibility at a prominent location within Tenant’s Premises.

 

If shall be the
responsibility of Tenant to enforce the following requirements of Tenant’s
Contractor, and all subcontractions of Tenant’s Contractor, at every level:

 

8.1.1        Tenant’s Contractor shall perform
Tenant’s Work in a manner and at times which do not impede or delay Landlord’s
contractor in the Project. Any delays in the completion work by the Landlord or
Landlord’s contractor on the Project, or the commencement of the  annual rental and any damage to any work
caused by Tenant’s Contractor shall be at the sole cost and expense of Tenant.

 

8.1.2        Tenant’s Contractor shall be responsible
for the repair, replacement or clean-up of my damage by such Contractor to
other contractors’ work which specifically includes access ways to the Premises
which may be concurrently used by others. Firelesses, aidowalks, hallways, and
access to other tenant’s suites may not be blocked or obstructed at any time.

 

8.1.3        [Intentionally omitted.]

 

8.1.4        Tenant’s Contractor shall contain his or
her storage of materials and his or her operations within the Premises and such
other space as he or the say be assigned by Landlord. Should he or she be
assigned space outside of the Premises, he or she shall move to such other
space as Landlord shall direct from time to time to avoid interference or
delays with other work. Tenant’s Contractor shall park construction vehicles in
areas designed by Landlord.

 

8.1.5        All trade and surplus construction
materials shall be stored within the Premises and shall be promptly removed
from the Premises. Tenant’s Contractor shall not use common area trade enclosures
or waste bins for disposal of trash or surplus construction material.

 

8.1.6        [Intentionally omitted.]

 

8.1.7        Noise shall be kept to a minimum at all
times, and shall not be permitted to interfere with the conduct of other
tenant’s business, or the general operations of the Project. Tenant’s Contractor
shall notify Landlord or Landlord’s project manager of any planned work to be
done on weekends or other than normal job hours.

 

8.1.8        Tenant and Tenant’s Contractor are
responsible for compliance with all applicable codes and regulations of duly
constituted authorities having jurisdiction as far as the performance of the
Tenant’s Work is concerned and for all applicable safety regulations
established by the Landlord, OBHA, or other regulatory agencies, and Tenant
further agrees to save and hold Landlord harmless for Tenant’s actions arising
from Tenant’s Work. Prior to commencement of construction, Tenant shall submit
to Landlord evidence of insurance as required by this Lease and evidence of
insurance for Tenant’s Contractor.

 

8.1.9        Tenant’s Contractor shall not post signs
on any part of the Project or on the Premises, without Landlord’s prior writes
approval.

 

8.1.10      Tenant shall be responsible for and shall
obtain and record a Notice of Completion promptly following completion of
Tenant’s work.

 

-3-

 

8.1.11      [Intentionally omitted.]

 

8.1.12      Tenant shall provide to Landlord a copy of
the fully executed construction contract, including all addendum and a line
item breakdown by trade thereto, between Tenant and its Contractor for the
Tenant’s Work.

 

8.1.13      All required permits and approvals,
including but not limited to Planning, Building, Fire, and Health department
permits, must be obtained and all necessary calculations, including, but not
limited to, those required under Title 24, must be submitted to the local
governing agencies for all work to be performed by Tenant or Tenant’s
Contractor in the Promises.

 

8.1.14      Any modifications to the building exterior
shall be subject to Landlord’s prior approval. No romex wiring shall be
allowed, nor shall water lines be placed in slabe, unless approved by Lanlord
prior to installations. All equipment placed upon the roof as a result of the
Tenant’s Work, and all roof penetrations, shall be approved by Landlord prior
to the commencement of work.

 

8.1.15      Landlord, at Landlord’s reasonable
discretion, may from time to time establish such other rules and regulations
for protection of property and the general safety of occupants and invitees of
the Project. Such rules and regulations shall apply to Tenant and Tenant’s
Contractor as though established upon the execution of this Exhibit “B”.

 

8.2           Coordination of Construction. Tenant
covenants and agrees the Tenant and Tenant’s Contractor shall not destroy or in
any way damage any portion of the Project. Further, Tenant covenants and agrees
that Tenant and Tenant’s Contractor shall coordinate the Tenant’s Work with any
construction schedule for any work being performed by or an behalf of Landlord
or any other tenant, and that the performance of the Tenant’s Work shall not
interfere with Landlord’s or any other tenant’s construction activities. If
there be such interference or conflict, notice thereof shall be given to Tenant
and immediately after receipt of such notice the Tenant agrees to cause or came
to be terminated such interference or conflict. Further, should Tenant delay
Landlord’s work due to acts of Tenant or Tenant’s Contractor, Construction
Change Orders, subsequent review and approvals required or other matters that
materially affect Landlord’s construction program, Tenant shall be responsible
to Landlord for any lost rents due to the delay of the commencement of the
Lease Term. Tenant further convenants and agrees that Tenant and Tenant’s
Contractor shall comply with all rules and regulations promulgated by Landlord,
or its agent, and all directives of Landlord governing construction or
installation activities, including but not limited to, permissible hours for
construction or installation activities, storage of equipment and
responsibility for cleaning of work area. If Tenant or Tenant’s Contractor
shall fail to comply with the provisions of this Section any costs incurred by
Landlord as a result of such failure shall be at Tenant’s sale and exclusive expense.

 

8.3           No Landlord Liability.
Landlord shall not be liable for any loss, cost, damage, or expense incurred or
claimed by Tenant or any other person or party on account of the construction
or installation of the Tenant’s Work or any other person or party on account of
the construction or installation of the Tenant’s Work or any other improvements
to the Premises made by Tenant. Tenant hereby acknowledges and agrees that the
compliance of the Tenant’s Work, or other Alterations made to the Premises by
the Tenant and any plans therefore, with all applicable governmental laws,
codes, and regulations shall be solely Tenant’s responsibility. Landlord
assumes no liability or responsibility resulting from the failure of the Tenant
to comply with all applicable governmental laws, codes and regulations or for
any defect in any of the Tenant’s Work or other Alteration to the Premises made
by Tenant. Tenant further agrees to Indemnify, defected, and hold harmless
Landlord from any loss, cost, damage or expense Incurred, claimed, asserted, or
arising in connection with any of the foregoing, except as may be caused by
Landlord’s gross negligence or willful misconduct.

 

-4-

 

Exhibit
A

 

TBA
Entertainment Corporation

 

New
Premises

 

 

	
  TORREY RESERVE

  
	
  NORTH COURT

  
	
  BUILDING 1 - 3rd FLOOR

  
	
  11662 EL CAMNO REAL

  

 

 

THIRD
AMENDMENT TO LEASE

 

This
Third Amendment to Lease ((this “Third Amendment”) entered into as of March 20, 2007
by and between Pacific North Court Holdings, L.P., a California limited
partnership (“Original Landlord”), and TBA Entertainment Corporation, a
Delaware corporation (“Tenant”), as successor-in-interest under the Lease to
Avalon Entertainment Group, A California corporation (“Original Tenant”),
modifies that certain Office Lease dated as of April 23, 1998 (the “Original
Lease”), by and between Original Landlord and Original Tenant, as modified by
that certain First Amendment to Lease dated as of June 22, 2003 (the “First
Amendment”) and that certain Second Amendment to Lease dated as of September
24, 2004 (together with the Original Lease, the “Lease”). All capitalized terms
used in this Third Amendment and not specifically defined herein shall have the
meanings set forth in the Lease.

 

The parties hereto desire that
the Lease be amended to provide for, among other things, a change to the
insurance provisions of the Lease.

 

AGREEMENT

 

NOW
THEREFORE, in consideration of the mutual promises and agreements contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree to the above
recitals and as follows:

 

1.                                             Insurance. Sections 13.5
through 13.7 of the Lease are hereby deleted in their entirety and replaced by
Exhibit A hereto.

 

2.                                             Further
Assurances. Each of the parties hereto agrees to execute all
documents and instruments and to take all other actions as may specifically be
provided for herein or in the Lease as may be required in order to consummate
the purposes of this Third Amendment.

 

3.                                             Integration;
Interpretation. This Third Amendment in combination with the Lease
contains or expressly incorporates by reference the entire agreement of the
parties with respect to the matters contemplated herein and supersedes all
prior negotiations. Except as specifically set forth herein, the Lease remains
unmodified and in full force and effect.

 

IN WITNESS WHEREOF, this
Third Amendment has been executed as of the date first above set forth.

 

	
  LANDLORD:

  	
  TENANT:

  
	
   

  	
   

  
	
  PACIFIC NORTH COURT
  HOLDINGS

  	
  TBA ENTERTAINMENT

  
	
  L.P., a California
  limited partnership

  	
  CORPORATION, a Delaware
  corporation

  
	
   

  	
   

  
	
  By:

  	
  American Assets, Inc.,

  	
   

  	
  By:

  	
  /s/ R.E.Geddes

  	
   

  
	
   

  	
  A California
  corporation

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Agent for Owner

  	
   

  	
  Print Name:

  	
  R.E.Geddes

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John W. Chamberlain

  	
   

  	
  Its: 

  	
   

  	
  CEO

  	
   

  
	
   

  	
   

  	
  John W. Chamberlain -
  CEO

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James R. Durfey –
  VP – Office

  	
   

  	
   

  
	
   

  	
   

  	
  James R. Durfey – VP –
  Office

  	
   

  	
   

  
	
   

  	
   

  	
  Leasing and Management

  	
   

  	
   

  
											

 

 

EXHIBIT A

 

13.5 Tenant’s Insurance Coverage.  Tenant shall, at Tenant’s sole expense, throughout
the Lease Term maintain the following coverages:

 

13.5.1. Commercial General Liability.  Tenant shall, at Tenant’s sole expense, obtain
and maintain Commercial General Liability insurance (i) with a single combined
liability limit and property damage limit of not less than $2,000,000.00,
(ii) insuring (a) against all liability of Tenant and Tenant’s agents,
employees, contractors, licensees, and invitees arising out of or in connection
with Tenant’s use or occupancy of the Premises, (iii) naming Landlord, its
agent, and any lender having a security interest against the Project (“Lender”)
as additional insureds, (iv) containing cross-liability endorsements, and (v)
which includes products liability insurance (if Tenant is to sell merchandise
or other products derived from the Premises). Not more frequently than once
every year, if in the opinion of Landlord the amount or scope of such insurance
at that time is not adequate, Tenant shall increase such insurance as
reasonably required by Landlord.

 

13.5.2. Fire and Extended Coverage Insurance.  Tenant shall, at Tenant’s sole expense,
maintain on Tenant’s Alterations and Tenant's personal property and fixtures a
policy of standard fire and extended coverage insurance, with vandalism and
malicious mischief endorsements, coverage with respect to boiler and machinery
insurance, and sprinkler leakage coverage, in each case to the extent of at
least 100 percent of full replacement value, issued in the names of Tenant, and
Landlord’s Lender, as their interest may appear. Such “full replacement value”
shall be determined by the company issuing such policy at the time the policy
is initially obtained. Not more frequently than once every two years, either
Landlord or Tenant may, at its election, notify the other that it elects to
have the replacement value redetermined. Such redetermination shall be made
promptly and in accordance with the rules and practices of the Board of Fire
Underwriters, or a like board recognized and generally accepted by the
insurance company, and Landlord and Tenant shall be promptly notified of the
results by the company. Such policy shall be promptly adjusted according to
such redetermination.

 

13.5.3. Tenant’s Workers’ Compensation and Employer
Liability Coverage.  Tenant shall
procure and maintain workers’ compensation insurance as required by law and
employer’s liability insurance with limits of no less than the greater of (i)
the statutorily required limits, or (ii) one million dollars ($1,000,000).

 

13.6. Delivery of Certificate, Policy, and
Endorsements.  Before the Lease
Commencement Date, Tenant shall deliver to Landlord the endorsements referred
to in this Article as well as an original certificate of insurance, executed by
an authorized agent of the insurer or insurers, evidencing compliance with the
liability insurance requirements. The certificate shall provide for not less
than thirty (30) days’ advance written notice to Landlord from the insurers of
any cancellation, non-renewal, or material change in coverage or available
limits of liability and shall confirm compliance with the liability insurance requirements
of this Lease. The “endeavor to” and “failure to mail such notice shall impose
no obligation or liability of any kind upon the Company” language and any
similar language shall be stricken from the certificate.

 

13.7. Insurance Generally.  If Tenant fails during the Lease Term to
maintain any insurance required to be maintained by Tenant under this Lease,
then Landlord may, at its election, arrange for any such insurance, and Tenant
shall reimburse Landlord for any premiums for any such insurance within five
days after Tenant receives a copy of the premium notice. If any such premiums
arc allocable to a period, a portion of which occurs during the Lease Term and
the remainder of which occurs before or after the Lease Term, then such
premiums shall be apportioned between Landlord and Tenant based upon the number
of days during such period that occur during the Lease Term and the number of
days that occur before or after the Lease Term, such that Tenant pays for the
premiums that are allocable to the period during the Lease Term. 

 

 

Insurance required to be maintained by Tenant under this Lease (i)
shall be issued as a primary policy by insurance companies authorized to do
business in the state in which the Premises are located with a Best's Rating of
at least “A-” and a Best’s Financial Size Category rating of at least “X”, as
set forth in the most current edition of "Best's Insurance Reports”
(unless otherwise approved by Landlord), or such higher rating as may be required
by Landlord's lender, (ii) shall name Landlord and Landlord’s lender as
additional named insureds (the additional insured endorsement must be on ISO
Form CG 20 11 11 85 or an equivalent acceptable to Landlord, with such
modifications as Landlord may require), (iii) shall consist of “occurrence”
based coverage, without provision for subsequent conversion to “claims” based
coverage, (iv) shall not be cancelable or subject to reduction of coverage or
other modification except after 30 days’ prior written notice to Landlord, (v)
the coverage afforded to Landlord and any lender of Landlord must be at least
broad as that afforded to Tenant and may not contain any terms, conditions,
exclusions, or limitations applicable to Landlord or any lender of Landlord
that do not apply to Tenant, and (vi) shall not provide for a deductible or
co-insurance provision in excess of $5,000.00. Tenant shall, at least 30 days
prior to the expiration of each such policy, furnish Landlord with a renewal of
or “binder” extending such policy. Tenant shall promptly upon request deliver
to Landlord copies of such policy or policies or certificates evidencing the
existence and amounts of such insurance together with evidence of payment of
premiums.

 

 

TORREY RESERVE

 

OFFICE LEASE

 

Between

 

Pacific Torrey Reserve Holdings, L.P.,

a California limited partnership

 

(LANDLORD)

 

and

 

Avalon Entertainment Group,

a California  corporation

 

(TENANT)

 

	
   

  	
  Date: 

  	
  4/23/98

  	
   

  

 

 

TABLE OF CONTENTS

 

	
   

  	
  SUBJECT MATTER

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  Article 1

  	
  PROJECT, BUILDING AND PREMISES

  	
  1

  
	
  Article 2

  	
  LEASE TERM

  	
  1

  
	
  Article 3

  	
  BASE RENT

  	
  3

  
	
  Article 4

  	
  ADDITIONAL RENT

  	
  3

  
	
  Article 5

  	
  SECURITY DEPOSIT

  	
  7

  
	
  Article 6

  	
  USE

  	
  7

  
	
  Article 7

  	
  COMPLIANCE WITH LAWS

  	
  8

  
	
  Article 8

  	
  HAZARDOUS MATERIAL

  	
  8

  
	
  Article 9

  	
  UTILITIES AND SERVICES

  	
  10

  
	
  Article 10

  	
  REPAIRS AND MAINTENANCE

  	
  11

  
	
  Article 11

  	
  ALTERATIONS AND ADDITIONS

  	
  12

  
	
  Article 12

  	
  COVENANT AGAINST LIENS

  	
  13

  
	
  Article 13

  	
  EXCULPATION, INDEMNIFICATION, AND INSURANCE

  	
  14

  
	
  Article 14

  	
  DAMAGE AND DESTRUCTION

  	
  17

  
	
  Article 15

  	
  CONDEMNATION

  	
  18

  
	
  Article 16

  	
  ASSIGNMENT AND SUBLEASING

  	
  20

  
	
  Article 17

  	
  SURRENDER OF PREMISES

  	
  22

  
	
  Article 18

  	
  HOLDING OVER

  	
  23

  
	
  Article 19

  	
  ESTOPPEL CERTIFICATES

  	
  23

  
	
  Article 20

  	
  SUBORDINATION, NONDISTURBANCE, AND

  	
   

  
	
   

  	
  ATTORNMENT

  	
  24

  
	
  Article 21

  	
  DEFAULTS AND REMEDIES

  	
  25

  
	
  Article 22

  	
  LATE PAYMENTS

  	
  26

  
	
  Article 23

  	
  NON-WAIVER

  	
  27

  
	
  Article 24

  	
  WAIVER OF RIGHT TO JURY TRIAL

  	
  27

  
	
  Article 25

  	
  ATTORNEY FEES AND COSTS

  	
  27

  
	
  Article 26

  	
  LANDLORD’S ACCESS TO PREMISES

  	
  28

  
	
  Article 27

  	
  SIGNS

  	
  28

  
	
  Article 28

  	
  TENANT PARKING

  	
  29

  
	
  Article 29

  	
  SECURITY

  	
  29

  
	
  Article 30

  	
  MISCELLANEOUS

  	
  30

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  A

  	
  SITE
  PLAN OF PROJECT

  	
   

  
	
  EXHIBIT
  B

  	
  DIAGRAM
  OF PREMISES

  	
   

  
	
  EXHIBIT
  C

  	
  TENANT IMPROVEMENT AGREEMENT

  	
   

  
	
  EXHIBIT
  D

  	
  NOTICE OF BASIC LEASE INFORMATION

  	
   

  
	
  EXHIBIT
  E

  	
  RULES
  AND REGULATIONS

  	
   

  
	
  EXHIBIT
  F

  	
  ESTOPPEL
  CERTIFICATE

  	
   

  

 

 

Part I

SUMMARY OF BASIC LEASE INFORMATION

 

The basic terms of this
Lease are as follows. All terms in quotations are defined terms used elsewhere
in this Lease:

 

1.          Date of Lease:                4/23/98                                                                                     

 

2.          “Landlord”: Pacific Torrey Reserve Holdings, L.P.,
a California limited partnership

 

3.          “Tenant”: Avalon Entertainment Group, a California
corporation

 

4.          Description of Involved Property:

 

(a)        “Project”: That certain mixed-use project commonly
referred to as Torrey Reserve Unit No. 2, as more particularly described
on attached Exhibit A.

 

(b)        “Building”: Building 1 - North Court, 11682 El Camino
Real;

 

(c)        Number of Rentable Square Feet in Building: 75,043;

 

(d)        “Premises”: That certain office space consisting of
approximately 3,794 Rentable Square Feet of space and 3,307
Usable Square Feet of space located on the 3rd floor of the Building, as more
particularly described on Exhibit B, known as Suite TBD.

 

5.          “Lease Term”:

 

(a)      Duration:     5 years
and 0 months;

 

(b)     “Lease Commencement Date”: The earlier of (1) the
date on which Tenant occupies all or part of the Premises, or (2) the date
on which the Tenant Improvements are Substantially Complete (as defined below),
subject to acceleration due to Tenant delays;

 

The
anticipated Lease Commencement Date is September 1, 1998;

 

(c)      “Lease Expiration Date”: The last day of the Lease
Term which, subject to extension or earlier termination upon Tenant’s default,
will be the last day of the month in which the fifth (5th) anniversary of the
Lease Commencement Date occurs;

 

6.          “Base Rent”:

 

	
  Lease
  Year

  	
   

  	
  Monthly
  Base Rent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  $

  	
  8,157.10

  	
   

  
	
  2

  	
   

  	
  $

  	
  8,401.81

  	
   

  
	
  3

  	
   

  	
  $

  	
  8,653.86

  	
   

  
	
  4

  	
   

  	
  $

  	
  8,913.48

  	
   

  
	
  5

  	
   

  	
  $

  	
  9,180.88

  	
   

  

 

7.          Additional Expenses:

 

(a)        “Base Year”: The calendar year of 1999;

 

(b)        Tenant’s Share of Direct Expenses: Approximately  5.06%.

 

1

 

8.          Security Deposit:     An
amount equal to one month’s rent.

 

9.          “Permitted Use”: General office space or
any other legally permitted use compatible with a first-class office building.

 

10.        Parking: Tenant shall be entitled to the use of 13
parking spaces, of which 3 shall be under building reserved parking
spaces and 10 shall be unreserved parking spaces, subject to Tenant’s
pro rata share of Project handicapped and visitor parking spaces.

 

11.        Addresses for notices:

 

	
   

  	
  (a)

  	
  Landlord’s address:

  	
  c/o American
  Assets, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
  11455 El Camino Real, Suite 200

  	
   

  
	
   

  	
   

  	
   

  	
  San Diego,CA 92130-2045

  	
   

  
	
   

  	
   

  	
   

  	
  Attn.: Property Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Tenant’s address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (1)

  	
  Before Lease
  Commencement Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Attn:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2)

  	
  After Lease
  Commencement Date: 

  	
  At the Premises

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Address of Landlord’s
  lender:

  	
  Wells Fargo Bank

  
	
   

  	
   

  	
   

  	
   

  	
  401 B Street, Suite 304

  
	
   

  	
   

  	
   

  	
   

  	
  San Diego, CA 92101

  
	
   

  	
   

  	
   

  	
   

  	
  Attn.: Mr. Jeffrey
  C. Reed

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Brokers:

  	
  CB Commercial (Dick
  Balestri) representing Landlord and The Irving Hughes Group, Inc.
  (George Champion III) representing Tenant.

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Guarantor:

  	
  TBA Entertainment
  Corporation

  
								

 

Each reference in this
Lease to any provision in this Summary shall be construed to incorporate all
the terms provided under that provision of the Summary. In the event of any
conflict between a provision in this Summary and a provision in the balance of
the Lease, the latter shall control.

 

2

 

Part II

LEASE PROVISIONS

 

Article 1

PROJECT, BUILDING AND PREMISES

 

1.1. Lease of Premises.  Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the Premises. Tenant acknowledges that Landlord has
made no representation or warranty regarding the condition of the Premises, the
Building, and/or the Project except as specifically stated in this Lease.

 

1.2. Appurtenant Rights.  Tenant is granted the right at all times
during the Lease Term (as defined below) to the nonexclusive use,  in common with
others, of the main lobby, common corridors and hallways, stairwells,
elevators, restrooms, driveways, underground, unreserved parking areas, and
other common areas located within and below the Building. Landlord, however,
has the right in its sole, reasonable discretion to determine the manner in
which all such common areas are maintained and operated, and the use of those
common areas shall be subject to the Rules and Regulations (as defined
below), and Landlord reserves the right to change all elements of the Project,
provided that such changes do not materially and adversely affect Tenant’s
rights under this Lease.

 

1.3. Preparation of Premises:
Acceptance.  The
rights and obligations of the parties regarding the construction of the
Premises before the commencement of the Lease Term are stated in the Tenant
Improvement Agreement attached to this Lease as Exhibit C. If this Lease
conflicts with the Tenant Improvement Agreement, the Tenant Improvement
Agreement shall prevail.

 

1.4.
Rentable Area and Usable Area.

 

1.4.1. Standard of Calculation.  For purposes of this Lease, “Rentable Area”, “Rentable
Square Feet”, “Rentable Square Footage”, “Usable Area”, “Usable Square Feet”,
and “Usable Square Footage” will be calculated under the American National
Standard Method for Measuring Floor Area in Office Buildings, ANSI Z65.1C1996
(revised and adopted June 7, 1996) or successor standard(s), adopted by the
Building Owners and Managers Association International (BOMA).

 

1.4.2. Verification of Rentable
Area of Premises and Building.  The Rentable Area of the Premises and the
Building is subject to verification by Landlord’s space planner or architect.
That verification shall be made in accordance with this Section. Tenant’s space
planner or architect may consult with Landlord’s space planner or architect
regarding that verification. Verification of the Rentable Area of the Premises
shall be done, if at all, within 90 days of the
Lease Commencement Date. Verification of the Rentable Area of the Building may
be accomplished within such 90-day period or at any time thereafter that there
is a change to the Building necessitating such verification. If Landlord’s space
planner or architect determines that the Rentable Area of the Premises or the
Building is different from that stated in this Lease, all Rent that is based on
that incorrect amount shall be modified in accordance with that determination.
If that determination is made, it shall be confirmed in writing by Landlord to
Tenant.

 

Article 2

LEASE TERM

 

2.1. Lease Term.  The provisions of this Lease shall be
effective as of the date of this Lease. The Lease Term shall commence on the
Lease Commencement Date and shall expire on the Lease Expiration Date, unless this Lease is
sooner terminated as provided in this Lease or extended pursuant to Section 2.4.4,
below.

 

1

 

2.2. Confirmation of
Lease Information.  At any time during the Lease
Term, Landlord may deliver to Tenant a notice in the form set forth in Exhibit D,
attached to this Lease, which Tenant shall execute and return to Landlord
within five (5) days after receipt.

 

2.3. Lease Year.  The
term “Lease Year” shall mean (i) as to the first Lease Year, that twelve
(12) month period commencing on the Commencement Date (provided; however, if
the Commencement Date falls on a day other than the first day of a calendar
month, then the first Lease Year will be extended through the final day of the
calendar month in which the first anniversary of the Commencement Date occurs),
(ii) as to every subsequent Lease Year other than the final Lease Year of
the Term, the twelve (12) month period following the prior Lease Year, and (iii) as
to the final Lease Year of the Term, the period commencing on that day
immediately following the final day of the penultimate Lease Year of the Term
and ending on the Expiration Date or earlier date of termination. (As an
example of the foregoing, a Commencement Date of April 20, 1951 would
yield a first Lease Year of April 20, 1951 through April 30, 1952.
The following Lease Year would be May 1, 1952 through April 30, 1953. A “three (3) year”
Term would end on April 30, 1954.)

 

2.4. Option to Extend.  Tenant
shall have the option to extend the Lease Term (the “Option”) for one (1) additional
term of five (5) years (the “Extension Term”), provided Tenant is in full
occupancy of the Premises at the time of exercise of the Option, and Tenant
gives Landlord written notice of its election to exercise the Option no less
than nine (9) months prior to the expiration of the Lease Term. Time is of
the essence  of Tenant’s notice obligation hereunder.

 

2.4.1. Restrictions on
Transferability of Option.  The Option is
personal to the Tenant originally named in this Lease and may not be exercised
by any Transferee (as defined below) other than an entity controlling,
controlled by, or under common control with Tenant.

 

2.4.2.
Conditions Negating Tenant’s Right to Exercise Option.  Tenant
shall not have the right to exercise the Option, notwithstanding anything set
forth above to the contrary: (a) during any period of time commencing from
the date Landlord gives to Tenant a written notice that Tenant is in default
under any provision of this Lease, and continuing until the default alleged in
said notice is cured; or (b) during the period of time commencing on the
day after a monetary obligation to Landlord is due from Tenant and unpaid
(without any necessity for notice thereof to Tenant) and continuing until the
obligation is paid. The period of time within which the Option may be exercised
shall not be extended or enlarged by reason of Tenant’s inability to exercise
the Option because of the foregoing provisions of this paragraph, even if the
effect thereof is to eliminate Tenant’s right to exercise the Option.

 

2.4.3.
Conditions Terminating Tenant’s Rights Under Exercised Option.  All
rights with respect to the Option shall terminate and be of no further force or
effect even after Tenant’s due and timely exercise of the Option, if, after
such exercise, but prior to the commencement of the Extension Term, (a) Tenant
fails to cure a monetary default within fifteen (15) days after the date
Landlord gives notice to Tenant of such default; (b) Tenant fails to cure
a non-monetary default within thirty (30) days after the date the Landlord
gives notice to Tenant of such default; or (c) Landlord gives to Tenant
two or more notices of default or a late charge becomes payable for any such
default, whether or not such defaults are cured.

 

2.4.4. Terms and Conditions of
Extension Term.  If Tenant exercises the Option
for the Extension Term, then the Base Rent and all other terms and conditions
of renewal shall be at the then prevailing rental rate and terms and conditions
for comparable office space in the Project at the time of commencement of the
Extension Term; provided, however, Tenant shall not be entitled to any tenant
improvement allowance.

 

2.5. Delay in
Delivery of Premises.  If Landlord is unable to
deliver possession of the Premises to Tenant on or before the Lease
Commencement Date, Landlord shall not be subject to any liability for its failure to do so.
This failure shall not affect the validity of this Lease or the obligations of
Tenant under it, but the Lease Term shall commence on the date on which
Landlord delivers possession of the Premises to Tenant; provided, however, if
the

 

2

 

Premises are not
delivered to Tenant within ninety (90) days of the scheduled Lease Commencement
Date, then Tenant shall have the right to terminate this Lease at any time
prior to delivery of the Premises with no liability to Tenant or Landlord.

 

Article 3

BASE RENT

 

3.1. Definition of “Base
Rent”: No Set Off.  Tenant shall pay the Base Rent
to Landlord in equal monthly installments as set forth in the Summary of Basic
Lease Information, in advance on or before the first day of every calendar
month during the Lease Term, without any notice, demand, set-off, or deduction.
Payment must be in United States dollars and shall be made at the management
office of the Building or at any other place that Landlord may from time to
time designate in writing.

 

3.2. Initial Payment:
Proration.  The Base Rent for the first
full calendar month of the Lease Term shall be paid when Tenant executes this
Lease. If any payment date (including the Lease Commencement Date) falls on a
day other than the first day of that calendar month, or if any Base Rent
payment is for a period shorter than one calendar month, the Base Rent for that
fractional calendar month shall accrue on a daily basis for each day of that
fractional month at a daily rate equal to 1/365 of the total annual Base Rent.
All other payments or adjustments that are required to be made under the terms
of this Lease shall be prorated on the same basis.

 

3.3. Application of
Payments.  All payments received by
Landlord from Tenant shall be applied first to obligations other than Base
Rent, and then to Base Rent (and within any category of obligations, in the order
incurred). No designation by Tenant, either in a separate writing or on a check
or money order, shall modify this clause or have any force or effect.

 

3.4. Certified Funds.  If
any two non-cash payments made by Tenant are not paid by the bank or other
institution on which they are drawn, Landlord shall have the right, exercisable
by notice to Tenant, to require that Tenant make all future payments by
certified funds or cashier’s check.

 

Article 4

ADDITIONAL RENT

 

4.1. Additional Rent:
Rent.  In addition to paying the Base Rent specified
in Article 3, Tenant shall pay as additional rent Tenant’s Share of the
annual Direct Expenses (as defined below) that are in excess of the amount of
Direct Expenses applicable to the Base Year (as defined below). That additional
rent, together with other amounts of any kind (other than Base Rent) payable by
Tenant to Landlord under the terms of this Lease, shall be collectively
referred to in this Lease as “Additional Rent”. Base Rent and Additional Rent
are collectively referred to in this Lease as “Rent”. All amounts due under
this Article as Additional Rent are payable for the same periods and in
the same manner, time, and place as the Base Rent. Without limitation on other
obligations of Tenant that survive the expiration of the Lease Term, Tenant’s
obligations to pay the Additional Rent provided for in this Article will
survive the expiration of the Lease Term.

 

4.2. Definitions.  The
following definitions apply in this Article (and elsewhere in this Lease):

 

4.2.1.
Base Year. “Base Year” means the period defined as such in the Summary of Basic
Lease Information.

 

4.2.2.
Building’s Operating Costs. “Building’s Operating Costs” means all expenses, costs, and amounts of every kind or nature that
Landlord pays or incurs because of or in connection with the ownership,
operation, management, maintenance, or repair of the Building. Building
Operating Costs include, without limitation, the following amounts paid or
incurred (collectively, “Operating Costs”) relative to the Building (a) the
cost of supplying any utilities to the common areas, (b) janitorial costs
and the cost of operating, managing,

 

3

 

maintaining,
and repairing the common areas and the following building systems: utility,
mechanical, sanitary, storm drainage, and elevator, (c) the cost of
supplies and tools and of equipment, maintenance, and service contracts in
connection with those systems, (d) the cost of licenses, certificates,
permits, and inspections, (e) the cost of contesting the validity or
applicability of any government enactments that may affect the Operating
Expenses (as defined below), (f) costs incurred in connection with the
implementation and operation of a parking or transportation management program
or similar program, (g) the cost of insurance carried by Landlord pursuant
to this Lease, in amounts reasonably determined by Landlord and any deductibles
or coinsurance amounts, (h) fees, charges, and other costs including
management fees (or amounts in lieu of such fees), consulting fees, legal fees,
and accounting fees of all persons engaged by Landlord or otherwise reasonably
incurred by Landlord in connection with the operation, management, maintenance,
and repair of the Building and the Project, provided that with regard to
management fees only, the fees for each Lease Year following the Base Year
shall not increase by more than five percent (5%) of the fees for the prior
Lease Year, (i) the cost of parking area maintenance, repair, and
restoration, including resurfacing, repainting, restriping, and cleaning, (j) wages,
salaries, and other compensation and benefits of all persons engaged in the
operation, maintenance, or security of the Building and the Project plus
employer’s Social Security taxes, unemployment taxes, insurance, and any other
taxes imposed on Landlord that may be levied on those wages, salaries, and
other compensation and benefits. If any of Landlord’s employees provide
services for more than one project of Landlord, only the prorated portion of
those employees’ wages, salaries, other compensation and benefits, and taxes
reflecting the percentage of their working time devoted to the Project shall be
included in Building Operating Costs, (k) payments under any easement,
license, operating agreement, declaration, restrictive covenant, or instrument
relating to the sharing of costs, that is either in existence at the time of
execution of this Lease or is necessary for the operation of the Building or
Project, (l) amortization (including interest on the unamortized cost at a
rate equal to the floating commercial loan rate announced from time to time by
Bank of America as its reference rate plus two (2) percentage points per annum)
of the cost of acquiring or renting personal property used in the maintenance,
repair, and operation of the Building and/or the Project, (m) the cost of
capital improvements or other costs incurred that (1) are intended as a
labor saving device or to effect other economies in the maintenance or
operation of all or part of the Building and/or the Project, or (2) are
required under any government law or regulation but that were not required when
permits for construction were obtained. All permitted capital expenditures
shall be amortized (including interest on the unamortized cost at the rate
stated in subparagraph (1)) over their useful life, as reasonably determined by
Landlord; but Building Operating Costs will exclude the following (“Excluded
Costs”): (a) depreciation, interest, and amortization on mortgages or
ground lease payments, except as otherwise provided herein, (b) legal fees
incurred in negotiating and enforcing tenant leases, (c) real estate
brokers’ leasing commissions, (d) initial improvements or alterations to
tenant spaces, (e) the cost of providing any service directly to and paid
directly by any tenant, (f) any costs expressly excluded from Operating
Expenses elsewhere in this Lease, (g) costs of any items for which
Landlord receives reimbursement from insurance proceeds or a third party
(insurance proceeds shall be excluded from Operating Expenses in the year in
which they are received), but any deductible amount under any insurance policy
shall be included within Operating Expenses, (h) costs of capital
improvements, except as specifically provided above, (i) costs incurred
for the benefit of a single tenant (for example, tenant improvement costs to
build-out a particular suite), (j) costs incurred due to Landlord’s breach
of a lease, law, or ordinance, and (m) repairs necessitated by the gross
negligence or willful misconduct of Landlord.

 

4.2.3. Building’s Pro Rata Share.  “Building’s Pro Rata Share” means a fraction,
the numerator of which is the total aggregate Rentable Square Feet in the
Building, and the denominator of which is the total aggregate Rentable Square
Feet in all of the buildings in the Project for which certificates of occupancy
have been issued. The Building’s Pro Rata Share will be calculated as of January 1
of each calendar year; which calculation will remain in effect (regardless of
changes to the Project) until the following January 1.

 

4.2.4. Direct Expenses.  “Direct Expenses” means the sum of Operating
Expenses plus Tax Expenses (as such terms are defined below).

 

4

 

4.2.5. Expense Year. “Expense Year”
means each calendar year in which any portion of the Lease Term falls, through
and including the calendar year in which the Lease Term expires.

 

4.2.6. Operating Expenses. “Operating
Expenses” means the sum of (i) all Building Operating Costs, (ii) the
Building’s Pro Rata Share of the Project Operating Costs, and (iii) any
costs or expenses payable pursuant to the provisions of any reciprocal easement
and maintenance agreement (or similar agreement) recorded against the Project
either now or in the future including any owner’s association or similar fees,
assessments or dues presently or hereafter established for the Project.

 

4.2.7. Project Operating Costs. “Project
Operating Costs” means (i) all expenses, costs, and amounts of every kind
or nature which are incurred because of or in connection with the ownership,
operation, management, maintenance, or repair of the common areas of the
Project, and (ii) all Taxes relating to or assessed against the common
areas of the Project. Project Operating Costs include all Operating Costs paid or incurred in
connection with the common areas of the Project but excluding any Building
Operating Costs and Excluded Costs (relative to the Project).

 

4.3. Adjustment of Operating
Expenses.  Operating
Expenses shall be adjusted as follows:

 

4.3.1. Gross Up Adjustment When
Building Is Less Than Fully Occupied. If the occupancy of the
Building during any part of any Expense Year (including the Base Year) is less
than 95%, Landlord shall make an appropriate adjustment of the
variable components of Operating Expenses for that Expense Year, as reasonably
determined by Landlord using sound accounting and management principles, to
determine the amount of Operating Expenses that would have been incurred had
the Building been 95% occupied. This amount shall be considered to have been
the amount of Operating Expenses for that Expense Year. For purposes of this
paragraph, “variable components” include only those component expenses that are
affected by variations in occupancy levels.

 

4.3.2. Adjustment When Landlord Does
Not Furnish a Service to All Tenants. If, during any part of any
Expense Year (including the Base Year), Landlord is not furnishing a particular
service or work (the cost of which, if furnished by Landlord, would be included
in Operating Expenses) to a tenant (other than Tenant) that has undertaken to
perform such service or work in lieu of receiving it from Landlord, Operating
Expenses for that Expense Year shall be considered to be increased by an amount
equal to the additional Operating Expenses that Landlord would reasonably have
incurred during such period if Landlord had furnished such service or work to
that tenant.

 

4.4. Tax Expenses.

 

4.4.1. Definition of Tax Expenses.  “Tax Expenses” means the sum of all federal,
state, county, or local government or municipal taxes, fees, charges, or other
impositions of every kind or nature, whether general, special, ordinary, or
extraordinary (“Taxes”) that are paid or incurred by Landlord because of or in
connection with the ownership, leasing, and operation of the Building. Taxes
include taxes, fees, and charges such as real property taxes, general and
special assessments, transit taxes, leasehold taxes, and taxes based on the
receipt of rent (including gross receipts or sales taxes applicable to the
receipt of rent, unless required to be paid by Tenant); personal property taxes
imposed on the fixtures, machinery, equipment, apparatus, systems, and
equipment; appurtenances; furniture; and other personal property used in
connection with the Building and the common areas of the Project.
Notwithstanding the foregoing, the following shall be excluded from Taxes: (a) all
excess  profits taxes,
franchise taxes, gift taxes, capital stock taxes, inheritance and succession
taxes, estate taxes, federal, state, and local income taxes, and other taxes
applied or measured  by Landlord’s general or net income (as
opposed to rents, receipts, or income attributable to operations at
the Building), (b) any items included as Operating Expenses, and (c) personal
property taxes attributable to property owned or installed by or for other
tenants of the Building.

 

5

 

4.4.2. Adjustment of Taxes.  For purposes of this Lease, Tax Expenses (and
Taxes included in the definition of Project Operating Costs) shall be
calculated as if the tenant improvements in the Building were fully constructed
and the Project, the Building, and all tenant improvements in the Building were
fully assessed for real estate tax purposes. Landlord specifically agrees that
the gross receipts component of Tax Expenses for the Base Year and each
subsequent year shall be calculated as if the Building were one hundred percent
(100%) occupied with rent paying tenants. Accordingly, during the portion of
any Expense Year occurring after the Base Year, Tax Expenses shall be
considered to be increased appropriately.

 

4.4.3. Tenant’s Share.  “Tenant’s Share’ means a percentage which is
calculated by multiplying the number of Rentable Square Feet of the Premises by
100 and dividing the product by the total Rentable Square Feet in the Building.
If either the Premises or the Building are expanded or reduced, Tenant’s Share
shall be appropriately adjusted. Tenant’s Share for the Expense Year in which
that change occurs shall be determined on the basis of the number of days
during the Expense Year in which each such Tenant’s Share was in effect.
Notwithstanding any other provision in this Lease to the contrary, Tenant’s
Share of the Tax Expenses will not include any increase in the Tax Expenses due
to a reassessment of the Building or Project occurring after two previous
changes of ownership during the initial Lease Term.

 

4.5. Calculation and Payment of
Additional Rent.  Tenant’s
Share of any Direct Expenses for any Expense Year shall be calculated and paid
as follows:

 

4.5.1. Calculation of Excess.  If Tenant’s Share of Direct Expenses for any
Expense Year ending or beginning within the Lease Term exceeds Tenant’s Share
of the amount of Direct Expenses applicable to the Base Year, Tenant shall pay
as Additional Rent to Landlord an amount equal to that excess (the “Excess”),
in the manner stated below.

 

4.5.2. Statement/Payment of Direct
Expenses.  Tenant
shall pay to Landlord, on the first day of each calendar month during the Lease
Term, commencing with January 1, 2000, as Additional Rent, an amount (“Tenant’s
Monthly Payment”) equal to one-twelfth of Tenant’s Share of the amount by which
the Direct Expenses for such calendar year exceed the Base Year Direct Expenses
(“Increased Direct Expenses”), as estimated by Landlord in the most recently
delivered Estimated Statement (as defined below). Landlord intends to deliver
to Tenant, prior to the commencement of each calendar year during the Lease
Term, a written statement (“Estimated Statement”) setting forth Landlord’s
estimate of the Direct Expenses and Increased Direct Expenses allocable to the
ensuing calendar year, and Tenant’s Share of such Increased Direct Expenses.
Landlord may, at its option, during any calendar year, deliver to Tenant a
revised Estimated Statement, revising Landlord’s estimate of the Direct
Expenses and Increased Direct Expenses, in accordance with Landlord’s most
current estimate. Within approximately ninety (90) days after the end of each
calendar year during the Lease Term, Landlord intends to deliver to Tenant a
written statement (“Actual Statement”) setting forth the actual Direct Expenses
allocable to the preceding calendar year or, in the case of the calendar year
in which the Commencement Date occurs, such Actual Statement will set forth the
Base Year Direct Expenses. Tenant’s failure to object to Landlord regarding the
contents of an Actual Statement, in writing, within 30 days after delivery to
Tenant of such Actual Statement, shall constitute Tenant’s absolute and final
acceptance and approval of the Actual Statement. If the sum of Tenant’s Monthly
Payments actually paid by Tenant during any calendar year exceeds  Tenant’s Share
of the actual Increased Direct Expenses allocable to such calendar year, then
such excess will be credited against future Tenant’s Monthly Payments, unless
such calendar year was the calendar year during which the Lease Expiration Date
occurs (the “Last Calendar Year”), in which event either (i) such excess
shall be credited against any monetary default of Tenant under this Lease, or (ii) if
Tenant is not in default under this Lease, then Landlord shall pay to Tenant
such excess. If the sum of Tenant’s Monthly Payments actually paid by Tenant
during any calendar year is less than Tenant’s Share of the actual
Increased Direct Expenses allocable to such calendar year, then
Tenant shall, within ten days of delivery of the Actual Statement, pay to
Landlord the amount of such deficiency. Landlord’s delay in delivering any
Estimated Statement or Actual Statement will not release Tenant of its
obligation to pay any Tenant’s Monthly

 

6

 

Payment or any such
excess upon receipt of the Estimated Statement or the Actual Statement, as the
case may be. The references in this paragraph to the actual Increased Direct
Expenses allocable to a calendar year, shall include, if such calendar year is
the last calendar year of the Lease Term, the actual Increased Direct Expenses
allocable to the portion of such year prior to the Lease Expiration Date.

 

4.6. Landlord’s Books and Records.  If
Tenant disputes the amount of Additional Rent stated in an Actual Statement,
Tenant may designate, within ninety (90) days after receipt of that Actual
Statement, an independent certified public accountant to inspect Landlord’s
records which inspection shall be at Tenant’s sole cost and expense unless such
inspection correctly discloses a discrepancy (in Tenant’s favor) of greater
than three (3) percent of the total Direct Expenses, in which case
Landlord shall pay the reasonable costs of such inspection. Tenant is not
entitled to request the inspection, however, if Tenant is then in default under
this Lease. The accountant must be a member of a nationally or locally
recognized accounting firm and must not charge a fee based on the amount of
Additional Rent that the accountant is able to save Tenant by the inspection.
Tenant must give reasonable notice to Landlord of the request for inspection,
and the inspection must be conducted in Landlord’s offices at a reasonable time
or times. If, after that inspection, Tenant still disputes the Additional Rent,
such dispute will be resolved by arbitration in accordance with the commercial rules and
procedures of the American Arbitration Association; however, Tenant shall pay
such disputed amount (under protest) until such arbitration is completed. Any
failure by Tenant to dispute the information set forth on any Actual Statement
from Landlord within ninety (90) days of the date such Actual Statement is
delivered to Tenant will constitute Tenant’s conclusive acceptance of such
Statement.

 

Article 5

SECURITY DEPOSIT

 

5.1. Security
Deposit.  Concurrently with Tenant’s
execution of this Lease, Tenant shall deposit with Landlord a cash sum in the
amount of the Security Deposit stated in the Summary of Basic Lease
Information. Landlord shall hold the Security Deposit as security for the
performance of Tenant’s obligations under this Lease. If Tenant defaults on any
provision of this Lease, Landlord may, without prejudice to any other remedy it
has, apply all or part of the Security Deposit to: (a) any Rent or other
sum in default; (b) any amount that Landlord may spend or become obligated
to spend in exercising Landlord’s rights following a default by Tenant (as
provided below); or (c) any expense, loss, or damage that Landlord may
suffer because of Tenant’s default. Tenant waives the provisions of California
Civil Code Section 1950.7, and all other provisions of law now in force or
that become in force after the date of execution of this Lease, that provide
that Landlord may claim from a security deposit only those sums reasonably
necessary to remedy defaults in the payment of Rent, to repair damage caused by
Tenant, or to clean the Premises. Landlord and Tenant agree that Landlord may,
in addition, claim those sums reasonably necessary to compensate Landlord for
any other foreseeable or unforeseeable loss or damage caused by the act or
omission of Tenant or Tenant’s officers, agents, employees, independent
contractors, or invitees. If Landlord disposes of its interest in the Premises,
Landlord shall deliver or credit the Security Deposit to Landlord’s successor in
interest in the Premises and thereupon be relieved of further responsibility
with respect to the Security Deposit. If Landlord applies any portion of the
Security Deposit, Tenant shall, within thirty (30) days after demand by
Landlord, deposit with Landlord an amount sufficient to restore the Security
Deposit to its original amount. Tenant is not entitled to any interest on the
Security Deposit and may commingle the Security Deposit with other funds of
Landlord. The unused portion of the Security Deposit, if any, shall be returned
to the last known address of Tenant or the last assignee of Tenant’s interest
under this Lease, within thirty (30) days following the expiration or
termination of the Lease Term.

 

Article 6

USE

 

6.1. Permitted
Use.  Tenant shall use the Premises
solely for the Permitted Use. Tenant shall not use or permit the Premises to be
used for any other purpose without 

 

7

 

Landlord’s prior written
consent, which consent will not unreasonably be withheld. Tenant shall comply
with the rules attached to this Lease as Exhibit E and any
reasonable, non-discriminatory amendments or additions promulgated by Landlord
from time to time for the safety, care, and cleanliness of the Premises, the
Building, and the Project or for the preservation of good order (the “Rules and
Regulations”). Landlord shall not discriminate against Tenant in the
enforcement of the Rules and Regulations in relation to the other tenants
in the Building. No provision of the Rules and Regulations will permit
Landlord to obstruct access to the Premises or otherwise unreasonably interfere
with Tenant’s use of the Premises. Landlord shall not be responsible to Tenant
for the failure of any other tenants or occupants of the Building to comply
with the Rules and Regulations. In addition to complying with other
provisions of this Lease concerning the use of the Premises: (a) Tenant
shall not use or allow any person to use the Premises for any purpose that is
contrary to the Rules and Regulations, that violates any Laws and Orders
(as defined below), that constitutes waste or nuisance, or that would
unreasonably annoy other occupants of the Building or the owners or occupants
of other buildings; and (b) Tenant shall comply with all recorded covenants,
conditions, and restrictions, easement agreements, and like recorded
instruments that now or later affect the Project that have been recorded prior
to the execution of this Lease.

 

Article 7

COMPLIANCE WITH LAWS

 

7.1. Definition
of “Laws and Orders”.  For purposes
of this Lease, the term “Laws and Orders” includes all laws, statutes,
ordinances, standards, rules, requirements, or orders now in force or hereafter
enacted, promulgated, or issued by any federal, state, county, city, or
governmental agency. Such term also includes government measures regulating or
enforcing public access, occupational, health, or safety standards for
employers, employees, landlords, or tenants.

 

7.2. Repairs,
Replacements, Alterations, and Improvements.  After the Commencement Date, Tenant, at Tenant’s
sole expense, shall promptly make all repairs, replacements, alterations, or
improvements to the Premises, including tenant improvements, Alterations,
fixtures, and furnishings, needed to comply with all Laws and Orders to the
extent that the Laws and Orders relate to or are triggered by (a) Tenant’s
particular use of the Premises, (b) the tenant improvements located in the
Premises, or (c) any Alterations located in the Premises. Landlord shall
make all repairs and alterations required to comply with the provisions of the
Americans With Disabilities Act other than those for which Tenant is
responsible pursuant to clauses (a), (b), and (c), above. Additionally,
Landlord shall promptly make all repairs, replacements, alterations, or
improvements needed to comply with all other Laws and Orders to the extent that
the Laws and Orders relate to the Building and are not needed due to the causes
specified in clauses (a) through (c), above. If, however, such compliance
work on the Building is triggered by any tenant improvements or Alterations,
Tenant shall bear all expense of such work.

 

Article 8

HAZARDOUS MATERIAL

 

8.1. Use
of Hazardous Materials.  Tenant shall
not cause or permit
any Hazardous Material (as defined below) to be generated, brought onto, used,
stored, or disposed of in or about the Premises, the Building, or the Project
by Tenant or its agents, employees, contractors, subtenants, or invitees,
except for limited quantities of standard office and janitorial supplies.
Tenant shall: (a) use, store, and dispose of all such permitted Hazardous
Material in strict compliance with all applicable statutes, ordinances, and
regulations in effect during the Lease Term that govern and/or relate to
Hazardous Material, public health and safety and protection of the environment
(“Environmental Laws”), and (b) comply at all times during the Lease Term
with all Environmental Laws.

 

8.2. Notice of Release or Investigation.  If,
during the Lease Term, Tenant becomes aware of (a) any actual or
threatened release of any Hazardous Material on, under, or about the Premises,
the Building, or the Project, or (b) any inquiry, investigation,
proceeding, or

 

8

 

 

claim
by any governmental agency or other person regarding the presence of Hazardous
Material on, under, or about the Premises, the Building, or the Project, Tenant
shall give Landlord written notice of the release or investigation within five (5) days
after learning of it and shall simultaneously furnish to Landlord copies of any
claims, notices of violation, reports, or other writings received by Tenant
that concern the release or investigation.

 

8.3. Indemnification by Tenant.    Tenant shall, at Tenant’s sole expense, and
with counsel reasonably acceptable to Landlord, indemnify, defend, and hold
harmless Landlord and Landlord’s shareholders, directors, officers, employees,
partners, affiliates, and agents with respect to all losses, of every kind and
nature, arising out of or resulting from, directly or indirectly, the release
of any Hazardous Material in or about the Premises, the Building, or the
Project, or the violation of any Environmental Law, by Tenant or Tenant’s
agents, employees, contractors, or invitees. This indemnification shall survive
the expiration or termination of this Lease.

 

8.4. Indemnification by Landlord.   Landlord shall, at Landlord’s sole expense
and with counsel reasonably acceptable to Tenant, indemnify, defend, and hold
harmless Tenant and Tenant’s shareholders, directors, officers, employees,
partners, affiliates, and agents with respect to all losses
arising out of or resulting from the release of any Hazardous Material in or
about the Building or the Project, or the violation of any Environmental Law by
Landlord or Landlord’s agents, employees, contractors, or invitees (but
excluding any other tenant of the Project or their agents, contractors, or
invitees). This indemnification shall survive the expiration or termination of
this Lease.

 

8.5. Remediation Obligations.    If the presence of any Hazardous Material
brought onto the Premises, the Building, or the Project by Tenant or Tenant’s
agents, employees, contractors, or invitees results in contamination of the
Building or the Project, Tenant shall promptly take all necessary actions, at
Tenant’s sole expense, to return the Premises, the Building, and/or the Project
to the condition that existed before the introduction of such Hazardous
Material. Tenant shall first obtain Landlord’s approval of the proposed
remedial action. This provision does not limit the indemnification obligation
set forth in the preceding paragraph.

 

8.6. Definition of “Hazardous
Material”.    As
used in this Lease, the term “Hazardous Material” shall mean any hazardous or
toxic substance, material, or waste that is or becomes regulated by the United
States, the State of California, or any local government authority having
jurisdiction over the Building. Hazardous Material includes, without
limitation: (a) any “hazardous substance”, as that term is defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA) (42 United States Code Sections 9601-9675); (b) “Hazardous waste”,
as that term is defined in the Resource Conservation and Recovery Act of 1976
(RCRA) (42 United States Code Sections 6901-6992k); (c) any pollutant,
contaminant, or hazardous, dangerous, or toxic chemical, material, or
substance, within the meaning of any other applicable federal, state, or local
law, regulation, ordinance, or requirement (including consent decrees and
administrative orders imposing liability or standards of conduct concerning any
hazardous, dangerous, or toxic waste, substance, or material, now or hereafter
in effect); (d) petroleum products; (e) radioactive material,
including any source, special nuclear, or byproduct material as defined in 42
United States Code Sections 2011-2297gB4; (f) Asbestos in any form or
condition; and (g) polychlorinated biphenyls (PCBs) and substances or compounds
containing PCBs.

 

8.7. Existence of
Hazardous Materials.    To
the best of Landlord’s actual knowledge, no Hazardous Materials exist in, on,
or about the Premises, the Building, or the Project except in legally
permissible amounts; provided, however, Landlord knows or has reason to believe
that tenants in the Building (and elsewhere in the Project) utilize standard
office and janitorial supplies constituting Hazardous Materials in connection
with their tenancy at the Project.

 

9

 

 

Article 9

UTILITIES AND SERVICES

 

9.1. Standard Tenant Utilities and
Services.    Subject
to applicable government rules, regulations, and guidelines and the rules or
actions of the public utility furnishing the service, Landlord shall provide
(as a Direct Expense) the following utilities and services:

 

9.1.1. Heating and Air Conditioning.    Landlord shall provide heating and air
conditioning when necessary for normal comfort for normal office use in the
Premises, as reasonably determined by Landlord, on Mondays through Fridays from
7 a.m. through 7 p.m. and on Saturdays from 9 a.m. through 1 p.m.
except for the dates of observation of New Year’s Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and other locally
or nationally recognized holidays (“Normal Business Hours”).

 

9.1.2. Electricity.   Landlord shall provide wiring, outlets, and
systems sufficient to provide electrical current to the Premises for ordinary
and customary office uses. In addition to the foregoing, Landlord shall replace
lamps, starters, and ballasts for Building-standard lighting fixtures within
the Premises upon Tenant’s request and at Landlord’s expense. Tenant shall
replace lamps, starters, and ballasts for non-Building-standard lighting
fixtures within the Premises at Tenant’s sole expense. All electricity used by
Tenant in the Premises (including the portion of the electricity utilized in
connection with the HVAC system serving the Premises) shall be separately
metered and shall be paid by Tenant directly to the utility provider.

 

9.1.3. Water.    Landlord shall provide city water from the
regular Building outlets for ordinary and customary drinking, lavatory, and
toilet purposes.

 

9.1.4. Janitorial Services.    Landlord shall provide five (5) day per week
ordinary and customary, basic janitorial services in and about the Premises
consistent with other first class office buildings in the vicinity of the
Building. Landlord shall not be required to provide janitorial services to
above-standard improvements installed in the Premises including but not limited
to metallic trim, wood floor covering, glass panels, interior windows,
kitchens, executive washrooms, or shower facilities. Any janitorial services
required by Tenant and provided by Landlord in excess of such ordinary and
customary, basic janitorial services shall be separately paid for by Tenant.

 

9.2. Over-Standard Tenant Use.    Tenant shall not over-tax the Building
electrical and other utility systems. In the event of any damage to any
Building systems caused by Tenant’s use thereof in excess of ordinary and
customary usage for an office, Tenant shall be responsible for all costs and
expenses incurred by Landlord as a result of such over-use. In addition, if
Tenant requires any utilities or services described in this Article in
excess of the standard levels being provided by Landlord, or during hours other
than Normal Business Hours, Tenant may request such services from Landlord’s
property manager and Landlord shall have the right to impose reasonable
restrictions on such usage and/or commercially reasonable charges therefor. The
cost for after hours heating and air conditioning is estimated to be
Twenty-Five Dollars ($25.00) per hour, subject to increase
over the Lease Term, including the Extension Term, if any.

 

9.3. Interruption of
Utilities.    Tenant
agrees that Landlord shall not be liable for damages, by abatement of Rent or
otherwise, for failure to furnish or delay in furnishing any service (including
telephone and telecommunication services) or for diminution in the quality or
quantity of any service when the failure, delay, or diminution is entirely or
partially caused by: (a) breakage, repairs, replacements, or improvements
which is corrected within two (2) business days; (b) strike, lockout,
or other labor trouble; (c) inability to secure electricity, gas, water,
or other fuel at the Building despite reasonable efforts to do so; (d) accident
or casualty; (e) act or default of Tenant or other parties other than
Landlord; or (f) any other cause beyond Landlord’s reasonable
control. Such failure, delay, or diminution shall not be considered to constitute an
eviction or a disturbance of Tenant’s use and possession of the Premises or
relieve Tenant from paying Rent or performing any of its obligations under this
Lease, except that Tenant shall be entitled to an equitable abatement of Rent
for the period of such failure,

 

10

 

 

delay,
or diminution to the extent such failure, delay, or diminution is directly
attributable to Landlord’s negligence or intentional misconduct and continues
for more than two (2) business days. Landlord shall not be liable under
any circumstances for a loss of or injury to property or for injury to or
interference with Tenant’s business, including loss of profits through, in
connection with, or incidental to a failure to furnish any of the utilities or
services under this Article. Notwithstanding the foregoing, Landlord agrees to
use reasonable efforts to promptly correct any such interruption of utilities
or services. Landlord may also comply with mandatory or voluntary controls or
guidelines promulgated by any government entity relating to the use or
conservation of energy, water, gas, light, or electricity or the reduction of
automobile or other emissions without creating any liability of Landlord to
Tenant under this Lease as long as compliance with voluntary controls or
guidelines does not materially and unreasonably interfere with Tenant’s use of
the Premises.

 

Article 10

REPAIRS AND MAINTENANCE

 

10.1. Tenant’s Repair and Maintenance Obligations.    Tenant shall not take any action (or neglect
to take any action within the Premises) which will cause any damage to any
portion of the Premises or the Base Building Systems (as defined below) or
otherwise increase Landlord’s obligations or expenses under Paragraph 10.2,
below. In addition, Tenant shall maintain all of Tenant’s furniture, trade
fixtures, and equipment within the Premises, as well as all Alterations, in
good condition and repair and in a manner which will not damage or overburden
the Building or the Base Building Systems. Further, Tenant shall promptly
notify Landlord of any damage to (or need for repair in connection with) any
portion of the Building located within the interior of the Premises including,
without limitation, any damaged or broken Base Building Systems, fixtures,
and/or appurtenances.

 

10.2. Landlord’s
Repair and Maintenance Obligations.    Subject to Articles 15 and 16 (regarding
damage, destruction and condemnation), Landlord shall, as part of the Building
Operating Costs, repair and maintain in good order and condition (reasonable
wear and tear excepted), consistent with first class office buildings in the
vicinity of the Building: (a) the structural portions, fixtures, and
appurtenances of the Premises, and all Tenant Improvements constructed by
Landlord; (b) the structural portions and common area of the Building; (c)
the Base Building Systems, including those located within the Premises; (d) the
exterior portions of the Building and Project; and (e) all other common areas
located in the Building, or in or on the Project, including the parking
facilities serving the Building. Repairs shall be made promptly when appropriate
to keep the applicable portion of the Building, the Project, and other items in
the condition described in this paragraph. To the extent that the need for
repair and maintenance is due to Tenant’s or Tenant’s agents, employees,
contractors, or invitees’ negligence, misuse, or use of the Building or the
Base Building Systems in a manner which exceeds what is normal and customary
for office space, such repair and maintenance shall be at Tenant’s sole
expense. After receipt of an invoice from Landlord, Tenant shall pay Landlord,
Landlord’s actual costs incurred in connection with such repairs and
replacements plus a reasonable percentage of such costs, to be uniformly established for the
Building, sufficient to reimburse Landlord for all overhead, general
conditions, fees, and other costs and expenses arising from Landlord’s
involvement with such repairs and replacements. Landlord shall not be in
default of its repair and maintenance obligations under this paragraph if
Landlord performs the repairs and maintenance within three (3) days after
written notice by Tenant to Landlord of the need for such repairs and
maintenance. Furthermore, if due to the nature of the particular repair or
maintenance obligation or to causes beyond Landlord’s reasonable control, more
than three (3) days
are reasonably required to complete it, Landlord shall not be in default under
this paragraph if Landlord begins its efforts to repair within such three (3) day
period and diligently prosecutes the required work to completion. No abatement
of Rent and, except as otherwise specifically provided herein, no liability of
Landlord shall result from any injury to or interference with Tenant’s business
arising from the making of or failure to make any repairs, replacements,
alterations, or improvements in or to any portion of the Premises, the
Building, or the Project. As part of the consideration to Landlord hereunder,
Tenant waives and releases its rights, including its right to make repairs at
Landlord’s expense, under California Civil Code Sections 1941-1942 or any similar
law, statute, or ordinance now or hereafter in effect. If, after written
notification to Landlord by Tenant of the need for

 

11

 

 

repairs
and maintenance, Landlord has not performed the repairs and maintenance within
three (3) days after written notice, or Landlord has failed to diligently
prosecute the required work if more than three (3) days are reasonably
required to complete it, Tenant may, upon twenty-four (24) hours telephonic
notice, perform the requested repairs and maintenance. After final adjudication
in a court of law of competent jurisdiction, if the court determines that such
repairs and maintenance were properly Landlord’s responsibility, Landlord shall
reimburse Tenant for the reasonable third-party costs incurred by Tenant in
undertaking such repair or maintenance, to the extent the court has determined
Landlord was liable to perform the repairs and maintenance, and if Landlord
fails to do so within ten (10) days of such adjudication, Tenant may
deduct such amount from its Rent obligations hereunder.

 

Article 11

ALTERATIONS AND ADDITIONS

 

11.1. Landlord’s Consent to Alterations.    Tenant may not make any improvements,
alterations, additions, or changes to the Premises (“Alterations”) without
obtaining Landlord’s prior written consent. Tenant shall request such consent
by written notice to Landlord, which written notice must be accompanied by
detailed and complete plans and specifications for the proposed work. As a
condition of its consent to Alterations, Landlord may impose any reasonable
requirements that Landlord considers appropriate under the circumstances
including, without limitation, evidence of adequate financial capability and
provision of appropriate insurance. Landlord shall not unreasonably withhold
its consent to any proposed Alterations. Landlord will be deemed to be acting
reasonably if it withholds consent for, among other Alterations, any
Alterations that would or could: (a) affect the structure of the Building
or any portion of the Building other than the interior of the Premises; (b) affect
the Base Building Systems; (c) result in the Landlord being required under
any Laws and Orders to perform any work that Landlord could otherwise avoid or
defer (“Additional Required Work”); (d) result in an increase in the
demand for utilities or services that Landlord is required to provide; or (e) cause
an increase in the premiums for hazard or liability insurance carried by
Landlord. The term “Base Building Systems” means all systems and equipment
(including, without limitation, plumbing; heating, ventilation, and air
conditioning; electrical; fire/life safety; elevator; and security systems)
that serve all or part of the Building. Tenant shall reimburse Landlord for the
reasonable fees and costs of any architects, engineers, or other consultants
reasonably retained by Landlord to review the proposed Alterations.

 

11.2. Compliance of Alterations With Laws and
Insurance Requirements.    If
Landlord approves any Alterations, Tenant shall cause all Alterations to comply
with the following: (a) applicable Laws and Orders; (b) applicable
requirements of a fire rating bureau; or (c) applicable requirements of
Landlord’s hazard insurance carrier to the extent that Tenant is informed of
them. Tenant shall also comply with those requirements in the course of
constructing the Alterations. Before beginning construction of any Alteration,
Tenant shall obtain a valid building permit and any other permits required by
any government entity having jurisdiction over the Premises. Tenant shall
provide copies of those permits to Landlord before the work begins. Tenant
shall, at Tenant’s sole expense, perform any Additional Required Work, which
shall be subject to the same requirements as any Alteration. If any Additional
Required Work must be performed outside the Premises, Landlord may elect to
perform that work at Tenant’s expense. No consent by Landlord to any proposed
Alterations shall constitute a waiver of Tenant’s obligations under this
paragraph.

 

11.3. Manner of Construction.    Tenant shall build all Alterations entirely
within the Premises and in conformance with Landlord’s construction rules and
regulations, using only contractors and subcontractors approved in writing by
Landlord (which approval will not unreasonably be withheld). All work relating
to any Alterations shall be done in a good and workmanlike manner, using new
materials equivalent in quality to those used in the construction of the
initial improvements to the Premises. All work shall be diligently prosecuted
to completion. Tenant shall ensure that all work is performed in a manner that
does not obstruct access  to or through the Building or its common areas and
that it does not interfere either with other tenants’ use of their premises or
with any other work being undertaken in the Building. Tenant shall take all
measures necessary to ensure that labor peace is maintained at all times.
Within twenty (20) days after completion of any Alterations,

 

12

 

 

Tenant
shall deliver to Landlord a reproducible copy of the drawings of the
Alterations, as built.

 

11.4. Payment for Improvements.    Tenant shall promptly pay all charges and
costs incurred in connection with any Alteration, as and when required by the
terms of any agreements with contractors, designers, or suppliers. On
completion of any Alteration, Tenant shall: (a) cause a timely notice of
completion to be recorded in the office of the San Diego County Recorder in
accordance with Civil Code Section 3093 or any successor statute; (b) deliver
to Landlord evidence of full payment and unconditional final waivers of all
liens for labor, services, or materials; and (c) pay Landlord any
reasonable expenses incurred by Landlord in connection with Tenant’s work.

 

11.5. Landlord’s Property.    All Alterations and fixtures that may be
installed or placed in or about the Premises from time to time shall be and
become the property of Landlord upon installation; except that Tenant may
remove any trade fixtures or freestanding office equipment and furniture that
Tenant can substantiate to Landlord has not been paid for with any tenant
improvement allowance funds (if any) provided to Tenant by Landlord. Tenant
must repair any damage to the Premises and the Building caused by such removal.
In addition, by written notice to Tenant at the time consent to install any
Alteration(s) is given, Landlord may require Tenant, at Tenant’s sole
expense, to remove any Alterations upon termination or expiration of this
Lease, and restore the Premises to their configuration and condition before the
Alterations were made. If Tenant fails to complete that restoration before
expiration of the Lease Term or, in the case of earlier termination, within fifteen
(15) days after written notice from Landlord requesting the restoration,
Landlord may do so and charge the cost of the restoration to Tenant.
Notwithstanding the foregoing, Tenant shall not be required to remove (or pay
Landlord to remove) the tenant improvements made pursuant to attached Exhibit C.

 

11.6. Initial Improvements.    The terms of the Tenant Improvement
Agreement, attached to this Lease as Exhibit C, and not the terms of this Article shall
govern the construction of the initial tenant improvements to the Premises.

 

Article 12

COVENANT AGAINST LIENS

 

12.1. Covenant
Against Liens.    Tenant shall not be
the cause or object of any liens or allow such liens to exist, attach to, be
placed on, or encumber Landlord’s or Tenant’s interest in the Premises, the
Building, or the Project by operation of law or otherwise. Tenant shall not
suffer or permit any lien of mechanics, material suppliers, or others to be
placed against the Premises, the Building, or the Project with respect to work
or services performed or claimed to have been performed for Tenant or materials
furnished or claimed to have been furnished to Tenant or the Premises (other
than by Landlord). Landlord has the right at all times to post and keep posted
on the Premises any notice that it considers necessary for protection from such
liens. At least seven (7) days before beginning construction of any
Alteration or Tenant Improvements, Tenant shall give Landlord written notice of
the expected commencement date of that construction to permit Landlord to post
and record a notice of non-responsibility in connection therewith. If any such
lien attaches or Tenant receives notice of any such lien, Tenant shall cause
the lien to be immediately released and removed of record or, if Tenant in good
faith disputes such lien, Tenant may post a bond acceptable to Landlord
provided that Tenant then diligently pursues the resolution of such matter and
the removal of such lien. Despite any other provision of this Lease, if the
lien is not released and removed within five (5) days after Landlord
delivers notice of the lien to Tenant, Landlord may immediately take all action
necessary to release and remove the lien, without any duty to investigate the
validity of it. All expenses (including reasonable attorney fees) incurred by
Landlord in connection with the lien shall be considered Additional Rent under
this Lease and be immediately due and payable by Tenant.

 

13

 

 

Article 13

EXCULPATION, INDEMNIFICATION, AND

INSURANCE

 

13.1. Definition of “Tenant
Parties” and “Landlord Parties”.    For purposes of this Article, the term “Tenant
Parties” refers singularly and collectively to Tenant and Tenant’s officers,
members, partners, agents, employees, and independent contractors as well as to
all persons and entities claiming through any of these persons or entities. The
term “Landlord Parties” refers singularly and collectively to Landlord and
Landlord’s officers, directors, shareholders, members, parents, subsidiaries,
and any other affiliated entities, personal representatives, executors, heirs,
assigns, licensees, invitees, beneficiaries, agents, servants, employees, and
independent contractors of these persons or entities.

 

13.2. Exculpation.    To the fullest extent permitted by law,
Tenant, on its behalf and on behalf of all Tenant Parties, (i) waives all
claims (in law, equity, or otherwise) against Landlord Parties arising out of, (ii) knowingly
and voluntarily assumes the risk of, and (iii) agrees that Landlord Parties
shall not be liable to Tenant Parties for any of the following: (a) injury
to or death of any person; or (b) loss of, injury or damage to, or
destruction of any tangible or intangible property, including the resulting
loss of use, economic losses, and consequential or resulting damage of any kind
from any cause. This exculpation clause shall not apply, however, to claims
against Landlord Parties to the extent that a final judgment of a court of competent
jurisdiction establishes that the injury, loss, damage, or destruction was
proximately caused by the Landlord Parties’ fraud, gross negligence, willful
injury to person or property, or violation of law. The provisions of this
paragraph will survive the expiration or earlier termination of this Lease until
all claims within the scope of this paragraph are fully, finally, and
absolutely barred by the applicable statutes of limitations. Tenant
acknowledges that this paragraph was part of the consideration to Landlord
under this Lease.

 

13.3. Indemnification.

 

13.3.1. Tenant’s
Indemnification of Landlord Parties.    To the fullest extent permitted by law,
Tenant shall, at Tenant’s sole expense and with counsel reasonably acceptable
to Landlord, indemnify, defend, and hold harmless the Landlord Parties from and
against all Claims (as defined below), from any cause, arising out of or
relating (directly or indirectly) to this Lease, the tenancy created under this
Lease, or the Premises, including: (a) the use or occupancy, or manner of
use or occupancy, of the Premises or Building by the Tenant Parties; (b) any
act, error, omission, or negligence of the Tenant Parties or of any invitee,
guest, or licensee of Tenant in, on, or about the Project; (c) Tenant’s
conduct of its business; (d) any Alterations, activities, work, or things
done, omitted, permitted, allowed, or suffered by Tenant Parties in, at, or
about the Premises, the Building, or the Project, including the violation of or
failure to comply with any applicable Laws and Orders, or judgments in
existence on the Lease Commencement Date or enacted, promulgated, or issued
after the date of this Lease; and (e) any breach or default in performance
of any obligation on Tenant’s part to be performed under this Lease, whether
before or during the Lease Term or after its expiration or earlier termination.
The indemnification in this paragraph shall not apply to the extent that a
final judgment of a court of competent jurisdiction establishes that a Claim
against one Landlord Party was proximately caused by the gross negligence or
willful misconduct of that Landlord Party. In that event, however, this
indemnification shall remain valid for all other Landlord Parties. This
indemnification extends to and includes Claims for: (a) injury to any
persons (including death at any time resulting from that injury); (b) loss
of, injury or damage to, or destruction of property (including all loss of use
resulting from that loss, injury, damage, or destruction); and (c) all
economic losses and consequential or resulting damage of any kind.

 

13.3.2. Definition of
Claims.    For purposes of this Lease, “Claims”
means any and all claims, losses, costs, damage, expenses, liabilities, liens,
actions, causes of action (whether in tort or contract, law or equity, or
otherwise), charges, assessments, fines, and penalties of any kind (including
consultant and expert expenses, court costs, and attorney fees actually
incurred).

 

14

 

 

13.3.3. Indemnification Independent of Insurance
Obligations.    The indemnifications provided
in this Article may not be construed or interpreted as in any way
restricting, limiting, or modifying Tenant’s or Landlord’s insurance or other
obligations under this Lease and is independent thereof. Compliance with the
insurance requirements and other obligations under this Lease shall not in any
way restrict, limit, or modify Tenant’s or Landlord’s indemnification
obligations under this Lease. Notwithstanding the foregoing, the
indemnification provisions of this Article shall not apply to the extent
that the loss for which indemnification is sought is fully covered by
insurance, as long as such insurance is not invalidated by this provision.

 

13.3.4. Attorney Fees.    The prevailing party shall be entitled to
recover its actual attorney fees and court costs incurred in enforcing the
indemnification clauses set forth in this Article.

 

13.3.5. Survival of Indemnification.    The indemnification clauses in this Article shall
survive the expiration or earlier termination of this Lease until all claims
involving any of the indemnified matters are fully, finally, and absolutely
barred by the applicable statutes of limitations.

 

13.4. Compliance with Insurer Requirements.    Tenant shall, at Tenant’s sole expense,
comply with all requirements, guidelines, rules, orders, and similar mandates
and directives pertaining to the use of the Premises and the Building, whether
imposed by Tenant’s insurers, Landlord’s insurers, or both. If Tenant’s
business operations, conduct, or use of the Premises or the Building cause any
increase in the premium for any insurance policies carried by Landlord, Tenant
shall, within ten (10) business days after receipt of written notice from
Landlord, reimburse Landlord for the increase. Tenant shall, at Tenant’s sole
expense, comply with all rules, orders, regulations, or requirements of the
American Insurance Association (formerly the National Board of Fire
Underwriters) and of any similar body.

 

13.5. Tenant’s Insurance Coverage.    Tenant shall, at Tenant’s sole expense,
throughout the Lease Term maintain the following coverages:

 

13.5.1. Public Liability and Property Damage
Insurance.    Tenant shall, at Tenant’s sole expense,
obtain and maintain public liability and property damage insurance (i) with
a single combined liability limit and property damage limit of not less than
$2,000,000.00, (ii) insuring (a) against all liability of Tenant and
Tenant’s agents, employees, contractors, licensees, and invitees arising out of
or in connection with Tenant’s use or occupancy of the Premises, and (b) performance
by Tenant of the indemnity provisions set forth in this Lease, (iii) naming
Landlord, its agent, and any lender having a security interest against the
Project (“Lender”) as additional named insureds, (iv) containing
cross-liability endorsements, and (v) which includes products liability
insurance (if Tenant is to sell merchandise or other products derived from the
Premises). Not more frequently than once every year, if in the opinion of
Landlord the amount or scope of such insurance at that time is not adequate,
Tenant shall increase such insurance as reasonably required by Landlord.

 

13.5.2. Fire and Extended Coverage Insurance.    Tenant shall, at Tenant’s sole expense,
maintain on Tenant’s Alterations and Tenant’s personal property and fixtures a
policy of standard fire and extended coverage insurance, with vandalism and
malicious mischief endorsements, coverage with respect to increased costs due
to building ordinances, demolition coverage, boiler and machinery insurance,
and sprinkler leakage coverage, in each case to the extent of at least 100
percent of full replacement value, issued in the names of Landlord, Tenant, and
Landlord’s Lender, as their interests may appear. Such “full replacement value”
shall be determined by the company issuing such policy at the time the policy
is initially obtained. Not more frequently than once every two years, either
Landlord or Tenant may, at its election, notify the other that it elects to
have the replacement value redetermined by an insurance company. Such
redetermination shall be made promptly and in accordance with the rules and
practices of the Board of Fire Underwriters, or a like board recognized and
generally accepted by the insurance company, and Landlord and Tenant shall be
promptly notified of the results by the company. Such policy shall be promptly
adjusted according to such redetermination.

 

15

 

 

13.5.3.
Tenant’s Workers’ Compensation and Employer Liability Coverage.    Tenant shall procure and maintain workers’
compensation insurance as required by law and employer’s liability insurance
with limits of no less than the greater of (i) the statutorily required
limits, or (ii) one million dollars ($1,000,000).

 

13.6. Delivery of Certificate, Policy, and
Endorsements.    Before the Lease Commencement
Date, Tenant shall deliver to Landlord the endorsements referred to in this Article as
well as a certified copy of Tenant’s liability policy or policies and an
original certificate of insurance, executed by an authorized agent of the
insurer or insurers, evidencing compliance with the liability insurance
requirements. The certificate shall provide for no less than thirty (30) days’
advance written notice to Landlord from the insurer or insurers of any
cancellation, non-renewal, or material change in coverage or available limits
of liability and shall confirm compliance with the liability insurance
requirements in this Lease. The “endeavor to” and “failure to mail such notice
shall impose no obligation or liability of any kind upon the Company” language
and any similar language shall be stricken from the certificate.

 

13.7. Insurance Generally.    If Tenant fails during the Lease Term to
maintain any insurance required to be maintained by Tenant under this Lease,
then Landlord may, at its election, arrange for any such insurance, and Tenant
shall reimburse Landlord for any premiums for any such insurance within five
days after Tenant receives a copy of the premium notice. If any such premiums
are allocable to a period, a portion of which occurs during the Lease Term and
the remainder of which occurs before or after the Lease Term, then such
premiums shall be apportioned between Landlord and Tenant based upon the number
of days during such period that occur during the Lease Term and the number of
days that occur before or after the Lease Term, such that Tenant pays for the
premiums that are allocable to the period during the Lease Term. Insurance
required to be maintained by Tenant under this Lease (i) shall be issued
as a primary policy by insurance companies authorized to do business in the
state in which the Premises are located with a Best’s Rating of at least “A-”
and a Best’s Financial Size Category rating of at least “X,” as set forth in
the most current edition of “Best’s Insurance Reports” (unless otherwise
approved by Landlord), or such higher rating as may be required by Landlord’s
lender, (ii) shall name Landlord and Landlord’s lender as additional named
insureds  (the additional insured endorsement must
be on ISO Form CG 20 11 11 85 or an equivalent acceptable to Landlord,
with such modifications as Landlord may require), (iii) shall consist of “occurrence”
based coverage, without provision for subsequent conversion to “claims” based
coverage, (iv) shall not be cancelable or subject to reduction of coverage
or other modification except after 30 days’ prior written notice to Landlord
and Landlord’s lender, (v) the coverage afforded to Landlord and any
lender of Landlord must be at least as broad as that afforded to Tenant and may
not contain any terms, conditions, exclusions, or limitations applicable to
Landlord or any lender of Landlord that do not apply to Tenant, and (vi) shall
not provide for a deductible or co-insurance provision in excess of $5,000.00.
Tenant shall, at least 30 days prior to the expiration of each such policy,
furnish Landlord with a renewal of or “binder” extending such policy. Tenant
shall promptly upon request deliver to Landlord copies of such policy or
policies or certificates evidencing the existence and amounts of such insurance
together with evidence of payment of premiums.

 

13.8. Waiver of Subrogation.    Landlord and Tenant agree to cause the
insurance companies issuing their respective property (first party) insurance
to waive any subrogation rights that those companies may have against Tenant or
Landlord, respectively, as long as the insurance is not invalidated by the
waiver. If the waivers of subrogation are contained in their respective insurance
policies, Landlord and Tenant waive any right that either may have against the
other on account of any loss or damage to their respective property to the
extent that the loss or damage is insured under their respective insurance
policies.

 

13.9. Landlord’s Insurance.    Landlord shall at all times while this Lease
is in effect maintain (subject to recoupment as an Operating Expense) the
following types of insurance: (a) insurance against fire and such other
perils as may be included in a standard fire and extended coverage insurance
policy on the Building in an amount not less than 95% of its actual replacement cost (exclusive
of footings and foundations); and (b) commercial general

 

16

 

 

liability insurance
on an occurrence basis with limits of liability in an amount not less than
$2,000,000.00 combined single limit for each occurrence. Tenant understands and
agrees that Landlord will not be required to insure Tenant’s property and that
any insurance maintained by Landlord may be maintained under a blanket or
umbrella policy.

 

Article 14

DAMAGE AND DESTRUCTION

 

14.1 . Repair of Damage by Landlord.    Tenant agrees to notify Landlord in writing
promptly of any damage to the Premises resulting from fire, earthquake, or any
other identifiable event of a sudden, unexpected, or unusual nature (“Casualty”).
If the Premises are damaged by a Casualty or any common areas of the Building
providing access to the Premises are damaged to the extent that Tenant does not
have reasonable access to the Premises and if neither Landlord nor Tenant has
elected to terminate this Lease in the manner provided below, Landlord shall
promptly and diligently restore such damaged areas (excluding Tenant’s
Alterations) to substantially the same condition as existed before the
Casualty, except for modifications required by building codes and other laws
and except for any other modifications to the common areas considered desirable
by Landlord. In making these modifications, Landlord shall not materially
impair Tenant’s access to the Premises. Landlord’s obligation to restore is
subject to reasonable delays for insurance adjustment and other matters beyond
Landlord’s reasonable control and subject to the other clauses of this Article.
If Tenant requests that Landlord modify the original Landlord constructed
tenant improvements in connection with the rebuilding, Landlord may condition
its consent to those modifications on: (a) Tenant’s payment to Landlord
before construction is begun of any sums in excess of the amount of insurance
proceeds received by Landlord that are needed to complete the tenant
improvements; and (b) Confirmation by Landlord’s architect or contractor
that the modifications will not materially increase the scope of work or the
time necessary to complete the tenant improvements.

 

14.2. Repair Period Notice.    Landlord shall, within the earlier of (a) fifteen
(15) days after the date on which Landlord determines the full extent of the
damage caused by the Casualty, (b) twenty (20) days after Landlord has
determined the extent of the insurance proceeds available to effectuate
repairs, or (c) sixty (60) days after the occurrence of the Casualty
provide written notice to Tenant indicating the reasonably anticipated period
for repairing the Casualty (the “Repair Period Notice”). The Repair Period
Notice shall also state, if applicable, Landlord’s election either to repair or
to terminate the Lease as provided below).

 

14.3. Landlord’s Option to Terminate or Repair.    If: (a) the Repair Period Notice
estimates that the period for repairing the Casualty exceeds one hundred and
eighty (180) days from the date of the commencement of the repair; (b) the
estimated repair cost exceeds the insurance proceeds, if any, available for
such repair (not including the deductible, if any, on Landlord’s casualty
insurance), plus any amount that Tenant is obligated or elects to pay for such
repair; (c) the
estimated repair cost of the Premises or the Building, even though covered by
insurance, exceeds fifty percent (50%) of the full replacement cost thereof; or
(d) the Building cannot be restored except in a substantially different
structural or architectural form than existed before the Casualty, Landlord may
elect either to terminate this Lease or to effectuate repairs. Landlord’s
election shall be stated in the Repair Period Notice.

 

14.4. Tenant’s Option To Terminate.    If the Repair Period Notice provided by
Landlord indicates that the anticipated period for repairing the Casualty
exceeds two hundred and ten (210) days, Tenant may elect to terminate this
Lease by providing written notice (“Tenant’s Termination Notice”) to Landlord
within ten (10) days after receiving the Repair Period Notice. If Tenant
does not elect to terminate within this ten (10) day period, Tenant shall
be considered to have waived the option to terminate.

 

14.5. Rent Abatement Due to Casualty.    Landlord and Tenant agree that, if the
Casualty was not the result of the negligence or willful misconduct of Tenant
or Tenant’s agents, employees, contractors, licensees, or invitees, Tenant
shall be provided with a proportionate abatement of Rent based on the Rentable
Square Footage of the Premises rendered unusable and not used by Tenant. That
proportional abatement, if any, shall be

 

17

 

 

provided during the period beginning on the later of (a) the
date of the Casualty or (b) the date on which Tenant ceases to occupy the
affected portion of the Premises and ending on the date of Substantial
Completion of Landlord’s restoration obligations as provided in this Article.
Subject to Tenant’s termination right described above, the Rent abatement
provided in this paragraph is Tenant’s sole remedy due to the occurrence of the
Casualty. Landlord shall not be liable to Tenant or any other person or entity
for any direct, indirect, or consequential damage (including but not limited to
lost profits of Tenant or loss of or interference with Tenant’s business),
whether or not caused by the negligence of Landlord or Landlord’s employees,
contractors, licensees, or invitees, due to, arising out of, or as a result of
the Casualty (including but not limited to the termination of the Lease in
connection with the Casualty). If deemed appropriate by Tenant, Tenant may
maintain business interruption insurance to provide coverage regarding such
matters.

 

14.6. Damage Near End of Term.    Despite any other provision of this Article,
if the Premises or the Building is destroyed or damaged by a Casualty during
the last twelve (12) months of the Lease Term, Landlord and Tenant shall each
have the option to terminate this Lease by giving written notice to the other
of the exercise of that option within thirty (30) days after the occurrence of
the Casualty.

 

14.7. Effective Date of Termination: Rent
Apportionment.    If Landlord or Tenant elects to terminate
this Lease under this Article in connection with a Casualty, such
termination shall be effective thirty (30) days after delivery of notice of
such election. Tenant shall pay Rent, properly apportioned up to the date of
the Casualty. After the effective date of the termination, Landlord and Tenant
shall be discharged of all future obligations under this Lease, except for
those provisions that, by their terms, survive the expiration or earlier
termination of the Lease.

 

14.8. Waiver of Statutory Provisions.    The provisions of this Lease, including
those in this Article, constitute an express agreement between Landlord and
Tenant that applies in the event of any Casualty to the Premises, the Building,
or the Project. Tenant, therefore, fully waives the provisions of any statute
or regulation, including California Civil Code Sections 1932(2)

and 1933(4), for any rights or obligations concerning a Casualty.

 

Article 15

CONDEMNATION

 

15.1. Definition of “Condemnation Date”.    As used in this Lease,
the term “Condemnation” means a permanent taking through (a) the
exercise of any government power (by legal proceedings or otherwise) by any
public or quasi public authority or by any other party having the right of
eminent domain (“Condemnor”) or (b) a voluntary sale or transfer by
Landlord to any Condemnor, either under threat of exercise of eminent domain by
a Condemnor or while legal proceedings for condemnation are pending.

 

15.2. Effect on Rights and
Obligations. If, during the
Lease Term or the period between the date of execution of this Lease and the
date on which the Lease Term begins, there is any Condemnation of all or part
of the Premises, Building, or Project on which the Premises and Building are
constructed, the rights and obligations of the parties shall be determined
under this Article, and Rent shall not be affected or abated except as
expressly provided in this Article. Landlord shall notify Tenant in writing of
any Condemnation within thirty (30) days after the later of (a) the filing
of a complaint by Condemnor or (b) the final agreement and determination
by Landlord and Condemnor of the extent of the taking (“Condemnation Notice”).

 

15.3. Termination of Lease.

 

15.3.1. Definition of “Termination Date”.    The “Termination Date” shall be the earliest
of: (a) the date on which Condemnor takes possession of the property that
is subject to the Condemnation; (b) the date on which title to the
property subject to the Condemnation is vested in Condemnor; (c) if
Landlord has elected to terminate, the date on which Landlord requires
possession of the property in connection with the Condemnation, as

 

18

 

specified in a written
notice delivered to Tenant no less than thirty (30) days before that date; or (d) if
Tenant has elected to terminate, as provided below, thirty (30) days after
Landlord’s receipt of written notice of termination from Tenant. If both
Landlord and Tenant have elected to terminate under this Article, the
Termination Date shall be the earliest of the dates described in (a) - (c) above.

 

15.3.2. Automatic Termination.    If the Premises are totally taken by Condemnation,
this Lease shall terminate as of the Termination Date, and the Condemnation
Award shall be allocated between Landlord and Tenant as provided below.

 

15.3.3. Landlord’s Right to Terminate.    Landlord shall have the option to terminate
this Lease if: (a) ten percent (10%) or more of the Rentable Square Feet
of the Building or the Premises is taken through Condemnation; (b) any
portion of the Building or Project necessary for Landlord to operate the
Building efficiently is taken through Condemnation; or (c) any other areas
providing access to the Premises or Building are taken through Condemnation. To
elect to terminate the Lease under this paragraph, Landlord must provide
written notice of its election (“Landlord’s Taking Termination Notice”) to
Tenant within thirty (30) days after the later of (a) the filing of a
complaint by Condemnor or (b) the final agreement and determination by
Landlord and Condemnor of the extent of the taking. In that event, this Lease
shall be terminated on the Termination Date, and all Rent shall be prorated to
that date. If Landlord does not elect to terminate under this paragraph,
Landlord shall be obligated to reasonably restore (to the extent feasible) the
Premises (excluding Tenant’s Alterations) or access to the Premises, subject to
Landlord’s obtaining all necessary approvals, permits, and authorizations
relating to such work.

 

15.3.4. Tenant’s Right To Terminate.    Tenant shall have the option to terminate
this Lease by providing thirty (30) days’ written notice to Landlord if one or
both of the following are taken through Condemnation: (a) ten percent
(10%) or more of the Usable Square Feet of the Premises; or (b) any
portion of the Building that provides Tenant with its access to the Premises
and that, if taken, would eliminate Tenant’s access to the Premises. Tenant’s
notice must be given within thirty (30) days after Tenant’s receipt of the
Condemnation Notice.

 

15.3.5. Tenant’s Waiver.    Tenant agrees that its rights to terminate
this Lease due to partial Condemnation are governed by this Article. Tenant
waives all rights it may have under California Code of Civil Procedure Section 1265.130,
or otherwise, to terminate this Lease based on a partial Condemnation.

 

15.3.6. Proration of Rent.    If this Lease is terminated under this
Article, the termination shall be effective on the Termination Date, and
Landlord shall prorate Rent to that date. Tenant shall be obligated to pay Rent
for the period up to, but not including, the Termination Date as prorated by
Landlord. Landlord shall return to Tenant any prepaid Rent allocable to any
period on or after the Termination Date.

 

15.4.  Effect of Condemnation if Lease Is
Not Terminated.    If any part of the
Premises is taken by Condemnation and this Lease is not terminated, Rent shall
be proportionately reduced based on the Rentable Square Footage of the Premises
taken. Landlord and Tenant agree to enter into an amendment to this Lease
within thirty (30) days after the partial taking, confirming the reduction in
Rentable Square Footage of the Premises and the reduction in Rent.

 

15.5. Allocation
of Award.

 

15.5.1.  Landlord’s Right to Award.    Except as provided in the next paragraph, in
connection with a Condemnation: (a) Landlord shall be entitled to receive all
compensation and anything of value awarded, paid, or received in settlement or
otherwise (Award); and (b) Tenant irrevocably assigns and transfers to
Landlord all rights to and interests in the Award and fully releases and
relinquishes any claim to, right to make a claim on, or interest in the Award,
including any amount attributable to any excess of the market value of the
Premises for the remainder of the Lease Term over the present value as of the
Termination Date of the

 

19

 

Rent payable for the
remainder of the Term (commonly referred to as the “bonus value” of the Lease).

 

15.5.2. Tenant’s Right to
Compensation.    Notwithstanding the
foregoing, Tenant shall have the right to make a separate claim in the
Condemnation proceeding, as long as the Award payable to Landlord is not
reduced thereby, for: (a) the taking of the unamortized or under
appreciated value of any leasehold improvements owned by Tenant that Tenant has
the right to remove at the end of the Lease Term and that Tenant elects not to
remove; (b) reasonable removal and relocation costs for any leasehold
improvements that Tenant has the right to remove and elects to remove (if
Condemnor approves of the removal); and (c) relocation costs under
Government Code Section 7262.

 

15.6.  Temporary Taking.    If a temporary taking of part of the
Premises occurs through (a) the exercise of any government power (by legal
proceedings or otherwise) by a Condemnor or (b) a voluntary sale or
transfer by Landlord to any Condemnor, either under threat of exercise of
eminent domain by a Condemnor or while legal proceedings for condemnation are
pending, Rent shall abate during the time of such taking in proportion to the
portion of the Premises taken. The entire Award relating to the temporary
taking shall be and remain the property of Landlord. Tenant irrevocably assigns
and transfers to Landlord all rights to and interest in the Award and fully
releases and relinquishes any claim to, right to make a claim on, and any other
interest in the Award.

 

Article 16

ASSIGNMENT AND SUBLEASING

 

16.1.  Restricted
Transfers.

 

16.1.1.  Consent Required.    Definition of “Transfer”. Tenant shall
obtain Landlord’s written consent before entering into or permitting any
Transfer. A “Transfer” consists of any of the following, whether voluntary or
involuntary and whether effected by death, operation of law, or otherwise: (a) any
assignment, mortgage, pledge, encumbrance, or other transfer of any interest in
this Lease; (b) any sublease or occupancy of any portion of the Premises
by any persons other than Tenant and its employees; and (c) any change of
ownership or reorganization included in the definition of Transfer as provided
below. Any person to whom any Transfer is made or sought to be made is a “Transferee”.

 

16.1.2. Landlord’s Remedies.    If a Transfer fails to comply with this
Article, Landlord may, at its option, do either or both of the following: (a) void
the Transfer or (b) declare Tenant in material and incurable default
hereunder notwithstanding any cure period specified below.

 

16.2. Transfer Procedure.    Before entering into or permitting any
Transfer, Tenant shall provide to Landlord a written “Transfer Notice” at least
twenty (20) days before the proposed effective date of the Transfer. The
Transfer Notice shall include all of the following: (a) information
regarding the proposed Transferee, including the name, address, and ownership
of Transferee; the nature of Transferee’s business; Transferee’s character and
reputation; and Transferee’s current financial statement (certified by an
officer, a partner, or an owner of Transferee); (b) all the terms of the
proposed Transfer, including the consideration payable by Transferee; the
portion of the Premises that is subject to the Transfer (“Subject Space”); a
general description of any planned alterations or improvements to the Subject
Space; the proposed use of the Subject Space; the effective date of the
Transfer; a calculation of the “Transfer Premium” (as defined below), payable
in connection with the Transfer; and a copy of all documentation concerning the
proposed Transfer; (c) any other information or documentation reasonably
requested by Landlord; and (d) an executed estoppel certificate from
Tenant in the form attached to this Lease as Exhibit F. As a condition to
the effectiveness of the Transfer Notice, Tenant shall, when providing a
Transfer Notice, pay an application fee of $300.00 toward Landlord’s administrative and
other costs in reviewing and processing the Transfer Notice. If Landlord
consents to any Transfer or if Landlord’s consent is not required pursuant to
Paragraph 16.6.2, below, the following limits apply: (i) Landlord does not
agree to waive or modify the terms and conditions of this Lease; (ii) Landlord
does

 

20

 

not consent to any
further Transfer by either Tenant or Transferee; (iii) Tenant shall remain
liable under this Lease, and any guarantor of the Lease shall remain liable
under the guaranty; (iv) Tenant may enter into that Transfer in accordance
with this Article if: (1) the Transfer occurs within six (6) months
after Landlord’s consent; (2) the Transfer is on substantially the same
terms as specified in the Transfer Notice; and (3) Tenant delivers to
Landlord, promptly after execution, an original, executed copy of all
documentation pertaining to the Transfer in a form reasonably acceptable to
Landlord; (v) if the Transfer does not occur within six (6) months of
delivery of the Transfer Notice, or the terms of the Transfer have materially
changed from those in the Transfer Notice, Tenant shall submit a new Transfer
Notice, requesting Landlord’s consent. A material change is one the terms of
which would have entitled Landlord to refuse to consent to the Transfer
initially or would cause the proposed Transfer to be more favorable to
Transferee than the terms in the original Transfer Notice.

 

16.3. Landlord’s
Consent.

 

16.3.1. Reasonable Consent.    Landlord may not unreasonably withhold its
consent to any proposed Transfer that complies with this Article. Reasonable
grounds for denying consent include (among other grounds) any of the following:
(a) Transferee’s character, reputation, credit history, or business is not
consistent with the character or quality of the Building; (b) Transferee
would be a significantly less prestigious occupant of the Building than Tenant;
(c) Transferee is either a government agency or an instrumentality of one;
(d) Transferee’s intended use of the Premises is inconsistent with the
Permitted Use or will materially and adversely affect Landlord’s interest; (e) Transferee’s
financial condition is or may be inadequate to support the Lease obligations of
Transferee under the Transfer documents; (f) the Transfer would cause Landlord
to violate another lease or agreement to which Landlord is a party or would
give a tenant of the Project the right to cancel or modify its lease;
or (g) the rent charged by Tenant to Transferee during the term of that
Transfer, using a present value analysis, is less than ninety percent (90%) of
the rent then being quoted by Landlord for comparable space in the Building for
a comparable term (“Quoted Rent”), using a present value analysis.

 

16.3.2. Landlord’s Written Response.    Within five (5) business days after
receipt of a proper and complete Transfer Notice, Landlord shall approve or
disapprove the proposed Transfer in writing. Landlord’s failure to respond
within such five (5) business day period shall be deemed Landlord’s
disapproval of the proposed Transfer unless the Transfer Notice specifies, in
bold capital letters at the top of the Transfer Notice, “LANDLORD’S FAILURE TO
RESPOND WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT SHALL BE DEEMED
LANDLORD’S APPROVAL OF TRANSFER”, in which event Landlord’s failure to respond
within such five (5) business day period shall be deemed Landlord’s
approval of Tenant’s proposed Transfer.

 

16.4. Transfer Premium.

 

16.4.1. Transfer Premium.    As a reasonable condition to Landlord’s
consent to any Transfer, Tenant shall pay to Landlord fifty percent (50%) of
any Transfer Premium (as defined below). “Transfer Premium” means all Base
Rent, additional rent, and other consideration payable by Transferee to Tenant
(including key money and bonus money and any payment in excess of fair market
value for services rendered by Tenant to Transferee or assets, fixtures,
inventory, equipment, or furniture transferred by Tenant to Transferee in
connection with the Transfer (“Transferee Rent”)), after deducting amounts
payable by Tenant on account of the Transfer, such as leasing commissions and
Tenant improvement costs, and the Rent payable by Tenant under this Lease
(excluding the Transfer Premium) for the Subject Space (“Tenant Rent”). Tenant
shall pay the Transfer Premium on a monthly basis, together with its payment of
Base Rent. In calculating the Transfer Premium, Tenant Rent, Transferee Rent,
and Quoted Rent, the parties shall first adjust the rent to the actual effective rent to be paid,
taking into consideration any and all leasehold concessions, including any rent
credit and tenant improvement allowance. For purposes of calculating the
effective rent, all those concessions shall be amortized on a straight-line
basis over the relevant term. On Landlord’s request, Tenant shall furnish a
complete statement, certified by an independent certified public accountant or
Tenant’s chief financial officer, describing in detail the

 

21

 

computation of any Transfer Premium that Tenant has
derived or will derive from the Transfer. If Landlord’s independent certified
public accountant finds that the Transfer Premium for any Transfer has been
understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency and, if such understatement exceeds three (3) percent of the
total Transfer Premium, Landlord’s costs of that audit.

 

16.5.  Effect of Transfer.    If, with Landlord’s consent, this Lease is
assigned, Landlord may collect Rent directly from the Transferee. If all or
part of the Premises is subleased and Tenant defaults, Landlord may collect
Rent directly from the Transferee. Landlord may then apply the amount collected
from the Transferee to Tenant’s monetary obligations under this Lease.
Collecting Rent from a Transferee or applying that Rent to Tenant’s monetary
obligations does not waive any provisions of this Article.

 

16.6.  Transfers of Ownership Interests and Other
Organizational Changes.

 

16.6.1.  Change of Ownership:
Reorganization.    For
purposes of this Article, “Transfer” also includes: (a) if Tenant is a
partnership or limited liability company: (1) a change in ownership
effected voluntarily, involuntarily, or by operation of law within a twelve
(12) month period, of forty-nine percent (49%) or more of the partners or
members or forty-nine percent (49%) or more of the partnership or membership
interests; or (2) the dissolution of the partnership or limited liability
company without its immediate reconstitution. (b) if Tenant is a closely
held corporation (i.e., one whose stock is not publicly held and not traded
through an exchange or over the counter): (1) the sale or other transfer,
within a twelve (12) month period, of more than an aggregate of forty-nine
percent (49%) of the voting shares of Tenant (other than to immediate family
members or a family trust by reason of gift or death); (2) the sale,
mortgage, hypothecation, or pledge, within a twelve (12) month period, of more
than an aggregate of forty-nine percent (49%) of the value of Tenant’s
unencumbered assets; or (3) the dissolution, merger, consolidation, or
other reorganization of Tenant.

 

16.6.2.  Transfer to Affiliate.    Despite any other provision of this Lease,
Landlord’s consent is not required for any Transfer to an Affiliate, as defined
below, as long as the following conditions are met: (a) at least ten (10) business
days before the Transfer, Landlord receives written notice of the Transfer (as
well as any documents or information reasonably requested by Landlord regarding
the Transfer or Transferee); (b) the Transfer is not a subterfuge by
Tenant to avoid its obligations under the Lease; (c) if the Transfer is an
assignment, Transferee assumes in writing all of Tenant’s obligations under
this Lease relating to the Subject Space; and (d) Transferee has a
tangible net worth, as evidenced by financial statements delivered to Landlord
and certified by an independent certified public accountant in accordance with
generally accepted accounting principles that are consistently applied (“Net
Worth”), at least equal to Tenant’s Net Worth either immediately before the
Transfer or as of the date of this Lease, whichever is greater.

 

16.6.3.  Definition of “Affiliate”.    An “Affiliate” means any entity that
controls, is controlled by, or is under common control with Tenant. “Control”
means the direct or indirect ownership of more than fifty percent (50%) of the
voting securities of an entity or possession of the right to vote more than
fifty percent (50%) of the voting interest in the ordinary direction of the
entity’s affairs.

 

Article 17

SURRENDER OF PREMISES

 

17.1.  Surrender of Premises.    No act of Landlord or its authorized
representatives shall constitute Landlord’s acceptance of a surrender of the
Premises by Tenant unless that intent is specifically acknowledged in a writing
signed by Landlord. At the option of Landlord, a surrender and termination of
this Lease shall operate as an assignment to Landlord of all subleases or
sub-tenancies. Landlord shall exercise this option by giving notice of that
assignment to all subtenants within ten (10) days after the effective date
of the surrender and termination.

 

22

 

17.2. Removal of Tenant Property by Tenant.    On the expiration or earlier termination of
the Lease Term, Tenant shall quit the Premises and surrender possession to
Landlord in accordance with this paragraph. Tenant shall leave the Premises in
as good order and condition as when Tenant took possession of the Premises,
except for reasonable wear and tear. On expiration or termination, Tenant
shall, without expense to Landlord, remove or cause to be removed from the
Premises: (a) all debris and rubbish; (b) any items of furniture,
equipment, freestanding cabinet work, and other articles of personal property
owned by Tenant or installed or placed by Tenant at its expense in the
Premises; (c) any similar articles of any other persons claiming under
Tenant that Landlord, in Landlord’s sole discretion, requires to be removed;
and (d) any alterations and improvements that Tenant is required to remove
in accordance with the provisions of this Lease relating to Alterations. Tenant
shall, at Tenant’s sole expense, repair all damage or injury that may occur to
the Premises or the Building caused by Tenant’s removal of those items.

 

Article 18

HOLDING OVER

 

18.1. Holdover Rent.    If Tenant remains in possession of the
Premises after expiration or earlier termination of this Lease with Landlord’s
express written consent, Tenant’s occupancy shall be a month to month tenancy
at a rent agreed on by Landlord and Tenant but in no event less than the Base  Rent and Additional Rent payable under
this Lease during the last full month before the date of expiration or earlier
termination of this Lease. The month to month tenancy shall be on the terms and
conditions of this Lease except as provided in (a) the preceding sentence
and (b) the lease clauses (if any) concerning lease term, expansion
rights, purchase option, and extension rights. Landlord’s acceptance of rent
after such holding over with Landlord’s written consent shall not result in any
other tenancy or in a renewal of the original term of this Lease. If Tenant
remains in possession of the Premises after expiration or earlier termination
of this Lease without Landlord’s express written consent, Tenant’s continued
possession shall be on the basis of a tenancy at sufferance and Tenant shall
pay as rent during the holdover period an amount equal to one hundred twenty
percent (120%) of the Base Rent and Additional Rent payable under this Lease
for the last full month before the date of expiration or termination.

 

18.2. No Consent or Waiver Implied.    Tenant shall construe nothing in this Article as
Landlord’s implied consent to any holding over by Tenant. Landlord expressly
reserves the right to require Tenant to surrender possession of the Premises to
Landlord as provided in this Lease on expiration or other termination of this
Lease. The provisions of this Article shall not be considered to limit or
constitute a waiver of any other rights or remedies of Landlord provided in this
Lease or at law.

 

Article 19

ESTOPPEL CERTIFICATES

 

19.1. Tenant’s
Obligation to Provide Estoppel Certificates.    Within ten (10) days after a written
request by Landlord, Tenant shall execute and deliver to Landlord an estoppel
certificate, substantially in the form of Exhibit F (or such other form
reasonably required by any existing or prospective lender, mortgagee, or
purchaser of all or part of the Project), indicating in the certificate any
exceptions to the statements in the certificate that may exist at that time.
The certificate shall also contain any other information reasonably requested
by Landlord or any existing or prospective lender, mortgagee, or purchaser.

 

19.2. Additional Requested Documents or Instruments.
   Within ten (10) days after a
written request by Landlord (but only in connection with a proposed sale or
financing transaction related to the Building or the Project), Tenant shall
execute and deliver whatever other documents or instruments may be reasonably
required for sale or financing purposes, including (if requested by Landlord) a
current financial statement and financial statements for the year preceding the
current financial statement year. Those statements shall be prepared in
accordance with generally accepted accounting principles or tax method
accounting principles. Within ten (10) days after a written request by
Tenant, Landlord shall execute and deliver to

 

23

 

Tenant
an estoppel certificate in a form acceptable to Landlord; provided, however,
Landlord shall not be obligated to respond to more than three (3) such
requests during the Lease Term.

 

19.3.  Failure to Deliver.    Tenant’s failure to execute or deliver an
estoppel certificate in the required time period shall constitute an
acknowledgment by Tenant that the statements included in the estoppel
certificate are true and correct, without exception. Tenant’s failure to
execute or deliver an estoppel certificate, financial statement, or other
document or instrument required under this Article in a timely manner
shall additionally be a material breach of this Lease.

 

Article 20

SUBORDINATION, NONDISTURBANCE, AND

ATTORNMENT

 

20.1.  Automatic Subordination.    This Lease is subject and subordinate to: (a) the
lien of any mortgages, deeds of trust, or other encumbrances (“Encumbrances”)
of the Building and Project; (b) all present and future ground or
underlying leases (“Underlying Leases”) of the Building and the Project now or
hereafter in force against the Building and the Project; (c) all renewals,
extensions, modifications, consolidations, and replacements of the items
described in clauses (a) and (b); and (d) all advances made or
hereafter to be made on the security of the Encumbrances. Despite any other
provision of this Article, any Encumbrance holder or lessor under an Underlying
Lease may elect that this Lease shall be senior to and have priority over that
Encumbrance or Underlying Lease whether this Lease is dated before or after the
date of the Encumbrance or Underlying Lease. Upon the written request to
Landlord from Tenant, Landlord will exercise good faith efforts to obtain a
commercially reasonable nondisturbance agreement (which may be part of a
subordination and attornment agreement) recognizing Tenant’s right to possession
and quiet enjoyment of the Premises upon the transfer of Landlord’s
interest to such senior party.

 

20.2.  Subordination Agreement; Agency.    The subordination provided for in this Article is
self-operative, and no further instrument of subordination is required to make
it effective. To confirm this subordination, however, Tenant shall, within five
(5) days after Landlord’s request, execute any further instruments or
assurances in recordable form that Landlord reasonably considers necessary or
desirable to evidence or confirm the subordination or superiority of this Lease
to any such Encumbrances or Underlying Leases. Tenant’s failure to execute and
deliver such instrument(s) shall constitute a default under this Lease.
Any such instrument of subordination shall include a provision indicating that
in the event of any foreclosure sale, deed in lieu of foreclosure, or similar
event by which the holder of an encumbrance or Underlying Lease succeeds to the
Landlord’s interest in the Premises, Tenant’s use, possession, and enjoyment of
the Premises shall not be disturbed and this Lease shall continue in full force
and effect as long as Tenant is not in default under the terms hereof.

 

20.3.  Attornment.    Tenant covenants and agrees to attorn to the
transferee of Landlord’s interest in the Building and/or Project by
foreclosure, deed in lieu of foreclosure, exercise of any remedy provided in
any Encumbrance or Underlying Lease, or operation of law (without any
deductions or setoffs), if requested to do so by the transferee, and to
recognize the transferee as the lessor under this Lease. The transferee shall
not be liable for: (a) any acts, omissions, or defaults of Landlord that
occurred before the sale or conveyance; or (b) the return of any security
deposit except for deposits actually paid to the transferee.

 

20.4.  Notice of Default; Right to
Cure.    Tenant agrees to give written
notice of any default by Landlord to the holder of any prior Encumbrance or
Underlying Lease provided Tenant has received a written request giving the name
and address of such holder. Tenant agrees that, before it exercises any rights
or remedies under the Lease,  the lien-holder or lessor
shall have the right, but not the obligation, to cure the default within the
same time, if any, given to Landlord to cure the default plus an additional ten
(10) days.

 

24

 

Article 21

DEFAULTS AND REMEDIES

 

21.1.  Tenant’s Default.    The occurrence of any of the following shall
constitute a default by Tenant under this Lease: (a) Tenant’s failure to
pay when due any monetary obligation required to be paid under this Lease
(including, without limitation, Base Rent or Additional Rent) if the failure
continues for five (5) days after written notice of the failure from
Landlord to Tenant; (b) Tenant’s failure to provide any instrument or
assurance as required by this Lease (including, without limitation, estoppel
certificates, financial statements, and subordination agreements) if the
failure continues for ten (10) days after written notice of the failure
from Landlord to Tenant; (c) Tenant’s failure to perform any other
obligation under this Lease if the failure continues for fifteen (15) days
after written notice of the failure from Landlord to Tenant (provided, however,
in the event such failure cannot be cured within such 15-day period, despite
Tenant’s best efforts, then such 15-day period shall be extended to the extent
necessary to allow such cure to be completed, but in no event longer than 60
days); (d) to the extent permitted by law: (1) a general assignment
by Tenant or any guarantor of the Lease for the benefit of creditors; (2) the
filing by or against Tenant, or any guarantor, of any proceeding under an
insolvency or bankruptcy law, unless (in the case of an involuntary proceeding)
the proceeding is dismissed within sixty (60) days; (3) the appointment of
a trustee or receiver to take possession of all or substantially all the assets
of Tenant or any guarantor, unless possession is unconditionally restored to
Tenant or that guarantor within thirty (30) days and the trusteeship or
receivership is dissolved; (4) any execution or other judicially
authorized seizure of all or substantially all the assets of Tenant located on
the Premises, or of Tenant’s interest in this Lease, unless that seizure is
discharged within thirty (30) days; (e) the committing of waste on the
Premises; or (f) Tenant’s failure to occupy the Premises within thirty
(30) business days after the Premises are ready for occupancy. It is agreed
that Tenant shall have the right to vacate the Premises without creating a
default under this Lease provided Tenant continues to pay the Rent due
hereunder and otherwise complies with the terms and conditions of this Lease.

 

21.2.  Replacement of Statutory Notice
Requirements.    When this
Lease (including, specifically, the preceding paragraph) requires service of a
notice, that notice shall replace rather than supplement any equivalent or
similar statutory notice, including any notices required by Code of Civil
Procedure Section 1161 or any similar or successor statute. When a statute
requires service of a notice in a particular manner, service of that notice (or
a similar notice required by this Lease) in the manner in which notices are
required to be delivered by this Lease shall replace and satisfy the statutory
service of notice procedures, including those required by Code of Civil
Procedure Section 1162 or any similar or successor statute.

 

21.3.  Landlord’s Remedies on Tenant’s Default.    On the occurrence of a default by Tenant,
Landlord shall have the right to pursue any one or more of the following
remedies in addition to any other remedies now or later available to Landlord
at law or in equity. These remedies are not exclusive but cumulative.

 

21.3.1.  Termination of Lease.    Landlord may, by written notice, terminate
this Lease and recover possession of the Premises. Once Landlord has terminated
this Lease, Tenant shall immediately surrender the Premises to Landlord. On
termination of this Lease, Landlord may recover from Tenant all of the
following: (a) the worth at the time of the award of any unpaid Rent that
had been earned at the time of the termination, to be computed by allowing
interest at the Default Rate (as defined below); (b) the worth at the time
of the award of the amount by which the unpaid Rent that would have been earned
between the time of the termination and the time of the award exceeds the
amount of unpaid Rent that Tenant proves could reasonably have been avoided, to
be computed by allowing interest at the Default Rate; (c) the worth at the
time of the award of the amount by which the unpaid Rent for the balance of the
Lease Term after the time of the award exceeds the amount of unpaid Rent that
Tenant proves could reasonably have been avoided, to be computed by discounting
that amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of the award plus
one percent (1%); (d) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant’s failure to perform
obligations under this Lease, or which in the ordinary course of things would
be likely to result therefrom; and (e)

 

25

 

any other amounts, in
addition to or in lieu of those listed above, that may be permitted by
applicable law.

 

21.3.2. Continuation of Lease in Effect.    Landlord may exercise the remedy described
in California Civil Code Section 1951.4, which provides that, when a
tenant has the right to sublet or assign (subject only to reasonable
limitations), the landlord may continue the lease in effect after the Tenant’s
breach and abandonment and recover Rent as it becomes due. Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may enforce all of Landlord’s rights and remedies under this
Lease, including the right to recover all Rent as it becomes due.

 

21.3.3. Tenant’s Subleases.    Whether or
not Landlord elects to terminate this Lease on account of any default by
Tenant, Landlord may: (a) terminate any sublease, license, concession, or
other consensual arrangement for possession entered into by Tenant and
affecting the Premises. (b) choose to succeed to Tenant’s interest in such
an arrangement. If Landlord elects to succeed to Tenant’s interest in such an
arrangement, Tenant shall, as of the date of notice by Landlord of that
election, have no further right to, or interest in, the Rent or other
consideration receivable under that arrangement.

 

21.4. Efforts to Relet.    For purposes
of this Article, Tenant’s right to possession shall not be considered to have
been terminated by Landlord’s efforts to relet the Premises, by Landlord’s acts
of maintenance or preservation with respect to the Premises, or by appointment
of a receiver to protect Landlord’s interests under this Lease. This list is
merely illustrative of acts that may be performed by Landlord without
terminating Tenant’s right to possession. No act other than a written notice of
termination from Landlord shall constitute an election by Landlord to terminate
this Lease.

 

21.5. Acceptance of Rent Without Waiving Rights.    Landlord may accept Tenant’s payments
without waiving any rights under this Lease, including rights under a previously
served notice of default, other than the right to pursue Tenant for non-payment
of the amount so accepted. If Landlord accepts payments after serving a notice
of default, Landlord may nevertheless commence and pursue an action to enforce
rights and remedies under the previously served notice of default without
giving Tenant any further notice or demand.

 

21.6. Landlord’s Right to Perform Tenant’s Obligations.    In addition to the foregoing rights, if
Tenant’s failure to perform a non-monetary obligation under this Lease
continues for five (5) days after notice to Tenant, Landlord may perform
the obligation on Tenant’s behalf, without waiving Landlord’s rights for Tenant’s
failure to perform such obligation and without releasing Tenant from such
obligations. Within five (5) days after receiving a statement from
Landlord, Tenant shall pay to Landlord the amount of expense reasonably
incurred by Landlord in performing Tenant’s obligation, including a reasonable
charge for Landlord’s overhead/supervision.

 

Article 22

LATE PAYMENTS

 

22.1. Late Charges.    If any Base Rent or Additional Rent payment
is not received by Landlord or Landlord’s designee within five (5) days
after that payment is due, Tenant shall pay to Landlord a late charge equal to
the greater of One Hundred Dollars ($100), or ten percent (10%) of the overdue
amount as liquidated damages, in lieu of actual damages (other than interest
under the next paragraph and attorneys’ fees and costs as provided below). The
parties agree that this late charge represents a reasonable estimate of the
expenses that Landlord will incur because of any late payment of Rent (other
than interest and attorney fees and costs) and that such amount is fair and
reasonable under the facts and circumstances existing as of the date of this
Lease. Landlord’s acceptance of any liquidated damages shall not constitute a
waiver of Tenant’s default with respect to the overdue amount or prevent Landlord from
exercising any of the rights and remedies available to Landlord under this Lease. Tenant shall pay the late charge
as Additional Rent with the next installment of Base Rent.

 

26

 

22.2. Interest.    If any monetary obligation of Tenant is not
received by Landlord or Landlord’s designee within thirty (30) days after that
obligation is due, Tenant shall pay to Landlord interest on the past due
amount, from the date due until paid, at the rate of four percent (4%) per
annum above the then applicable Wall Street Journal “prime rate”, or an equivalent
rate if there is then no published prime rate (the “Default Rate”). Despite any
other provision of this Lease, the Default Rate shall not exceed the limits, if
any, imposed in such instance by the usury laws of the State of California. Any
interest paid in excess of those limits shall be refunded to Tenant by
application of the amount of excess interest paid against any sums outstanding
in any order that Landlord requires. If the amount of excess interest paid
exceeds the sums outstanding, Landlord shall refund the portion exceeding those
sums in cash to Tenant.

 

Article 23

NON-WAIVER

 

23.1.  Non-Waiver.    No waiver of any provision of this Lease
shall be implied by any failure of either party to enforce any remedy for the
violation of that provision, even if that violation continues or is repeated.
Any waiver by either party of any provision of this Lease must be in writing.
Such written waiver shall affect only the provision specified and only for the
time and in the manner stated in the writing.

 

23.2. Acceptance and Application of Payment. Not
Accord and Satisfaction.    No
receipt by Landlord of a lesser payment than the Rent required under this Lease
shall be considered to be other than on account of the earliest amount due, and
no endorsement or statement on any check or letter accompanying a payment or
check shall be considered an accord and satisfaction. Landlord may accept
checks or payments without prejudice to Landlord’s right to recover all amounts
due and pursue all other remedies provided for in this Lease. Landlord’s
receipt of monies from Tenant after giving notice to Tenant terminating this
Lease shall in no way reinstate, continue, or extend the Lease Term or affect
the Termination Notice given by Landlord before the receipt of those monies.
After serving notice terminating this Lease, filing an action, or obtaining
final judgment for possession of the Premises, Landlord may receive and collect
any Rent due, and the payment of that Rent shall not waive or affect such prior
notice, action, or judgment.

 

Article 24

WAIVER OF RIGHT TO JURY TRIAL

 

24.1. Waiver of Right to Jury Trial.    Landlord and Tenant waive their respective
rights to trial by jury of any contract or tort claim, counterclaim, cross
complaint, or cause of action in any action, proceeding, or hearing brought by
either party against the other on any matter arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, or Tenant’s
use or occupancy of the Premises, including any claim of injury or damage or
the enforcement of any remedy under any current or future law, statute,
regulation, code, or ordinance.

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Landlord’s
  Initials

  	
   

  	
   

  	
  Tenant’s
  Initials

  	
   

  

 

Article 25

ATTORNEY FEES AND COSTS

 

25.1. Legal Costs.    If either party incurs any costs or expenses
in connection with any action instituted by either party by reason of any
dispute pursuant to this Lease or for the recovery of any sum due under this
Lease, or because of the breach of any provisions of this Lease by either party, or for any other relief
pursuant to this Lease, or in the event of any other litigation between
the parties with respect to this Lease, then all costs and expenses, including without limitation,
its actual professional fees such as appraisers’, accountants, and attorneys’
fees, incurred by the prevailing party therein shall be paid by the other
party, which obligation on the part of the other party shall be deemed to have
accrued on the date of

 

27

 

the commencement of such action or dispute and shall
be enforceable whether or not the action is prosecuted to judgment. The
provisions contained in this paragraph shall survive the expiration or earlier
termination of this Lease, and in the event any action or proceeding is
instituted to recover possession of the Premises following the expiration or
earlier termination of this Lease, the provisions contained in this paragraph
shall be applicable.

 

Article 26

LANDLORD’S ACCESS TO PREMISES

 

26.1.  Landlord’s Access to Premises.    Landlord and its agents shall have the right
at all reasonable times and upon reasonable notice (except where circumstances
make giving of prior notice impractical or unreasonable, such as in the case of
an emergency, or where risk to personal property exists) to enter the Premises
to: (a) inspect the Premises; (b) show the Premises to prospective
purchasers, mortgagees, or tenants or to ground lessors or underlying lessors; (c) serve,
post, and keep posted notices required by law or that Landlord considers
necessary for the protection of Landlord or the Building; or (d) make
repairs, replacements, alterations, or improvements to the Premises or Building
that Landlord considers necessary or desirable. Despite any other provision of
this Article, Landlord may enter the Premises at any time to: (a) perform
services required of Landlord; (b) take possession due to any breach of
this Lease; or (c) perform any covenants of Tenant that Tenant fails to
perform. Landlord shall make reasonable efforts to minimize interference with
Tenant’s use of the Premises when Landlord exercises its rights under this Section 26.1.

 

26.2.  Tenant’s Waiver.    Landlord may enter the Premises without the
abatement of Rent and may take steps to accomplish the above-stated purposes.
Tenant waives any claims for damages caused by Landlord’s entry, including
damage claims for: (a) injuries; (b) inconvenience to or interference
with Tenant’s business; (c) lost profits; and (d) loss of occupancy
or quiet enjoyment of the Premises, other than claims resulting from Landlord’s
gross negligence or intentional misconduct.

 

Article 27

SIGNS

 

27.1.  Building Name; Landlord’s
Signage Rights.    Subject
to Tenant’s signage rights under this Article, Landlord may at any time change
the name of the Building and install, affix, and maintain all signs on the
exterior and interior of the Building as Landlord may, in Landlord’s sole
discretion, desire. Tenant shall not have or acquire any property right or
interest in the name of the Building. Tenant may use the name of the Building
or pictures or illustrations of the Building in advertising or other publicity
during the Lease Term.

 

27.2.  Tenant’s Signage Rights
Within the Building.

 

27.2.1.  Single Tenant Floor.    If the Premises comprise an entire floor of
the Building, Tenant may, at Tenant’s sole expense, install identification
signs (including its logo) anywhere in the Premises, including the elevator
lobby of the Premises, subject to the following requirements: (a) Tenant
must obtain Landlord’s prior written approval for such signs, which Landlord
may, in Landlord’s sole, reasonable discretion, grant or deny; (b) all
signs must be in keeping with the quality, design, and style of the Building;
and (c) no sign may be visible from the exterior of the Building.

 

27.2.2.  Multi-Tenant Floor.    If other tenants occupy space on the floor
on which the Premises are located, Landlord shall provide Tenant’s identifying
signs in the form of a door plaque and elevator lobby signage at Tenant’s
expense. The signs shall be comparable to those used by Landlord for other
similar floors in the Building and shall comply with Landlord’s Building
standard signage program. Tenant shall receive space on the Building directory
board in the main lobby proportionate to the ratio of the Rentable Square Feet
of space in the Premises to the number of Rentable Square Feet in the Building.

 

27.2.3.  Prohibited Signs and Other
Items.    Tenant may not display any
signs on the exterior or roof of the Building or in the common areas of the
Building or the Project.

 

28

 

 

Tenant
may not install or display any signs, window coverings, blinds (even if located
behind the Landlord approved window coverings for the Building), or other items
visible from the exterior of the Premises without Landlord’s prior written
approval, which Landlord may, in Landlord’s sole discretion, grant or withhold.
Any signs, notices, logos, pictures, names, or advertisements that are
installed by or for Tenant without Landlord’s approval may be removed without
notice by Landlord at Tenant’s expense.

 

Article 28

TENANT PARKING

 

28.1. Number of Parking Passes. Tenant shall be
entitled to receive, at no charge, parking passes from Landlord for the number
of parking spaces for Tenant’s use
as  is set forth in the Summary
of Basic Lease Information. Tenant shall pay Landlord the standard charge for
any parking passes which must be replaced due to loss or destruction. Tenant
shall have no right to use any parking spaces in excess of the number of
parking passes provided to Tenant pursuant hereto and neither Tenant nor Tenant’s
employees may use any guest parking spaces in the Project.

 

28.2. Location of Parking. Landlord
specifically reserves the right to designate and to change the location, size,
configuration, design, layout, and all other aspects of the parking facilities,
including the initiation or discontinuance of a valet system. Landlord may
close off or restrict access to the parking facilities from time to time to
facilitate construction, alteration, or improvements, without incurring any
liability to Tenant and without any abatement of Rent under this Lease.

 

28.3. Parking Rules and
Regulations. Tenant’s continued right to use the parking
passes is conditioned upon Tenant abiding by all non-discriminatory rules and
regulations prescribed from time to time by Landlord for the orderly operation
and use of the parking facilities. Tenant shall use all reasonable efforts to
ensure that Tenant’s employees and visitors also comply with such rules and
regulations.

 

28.4. Nontransferable Passes. The parking passes
issued by Landlord to Tenant under this Article are provided to Tenant
solely for use by Tenant’s personnel (not including Tenant’s invitees and
guests). These passes may not be transferred, assigned, subleased, or otherwise
alienated by Tenant without Landlord’s prior approval, which approval Landlord
may withhold in its sole discretion.

 

Article 29

SECURITY

 

29.1. Security. Tenant
acknowledges (i) that the Base Rent does not include the cost of any
security measures for any portion of the Project (ii) that Landlord shall
have no obligation to provide any such security measures, (iii) that
Landlord has made no representation to Tenant regarding the safety or security
of the Project, and (iv) that Tenant will be solely responsible for
providing any security it deems necessary to protect itself, its property, and
Tenant’s employees, agents, contractors, and invitees in, on, or about the
Project. If Landlord provides any security measures at any time, then the cost
thereof shall be included as part of the Direct Expenses, but Landlord will not
be obligated to continue providing such security measures for any period of
time, Landlord may discontinue such service without notice and without
liability to Tenant, and Landlord will not be obligated to provide such
security measures with any particular standard of care. Tenant assumes all
responsibility for the security and safety of Tenant, Tenant’s property, and
Tenant’s employees, agents, contractors, and invitees. Tenant releases Landlord
from all claims for damage, loss, or injury to Tenant, Tenant’s employees,
agents, contractors, and invitees, and/or to the personal property of Tenant
and/or of Tenant’s employees, agents, contractors, and invitees, even if such
damage, loss, or injury is caused by or results from the criminal or negligent
acts of third parties. Landlord shall have no duty to warn Tenant of any
criminal acts or dangerous conduct that has occurred in or near the
Project, regardless of Landlord’s knowledge of such crimes or conduct, and
Tenant is hereby instructed to conduct its own investigation through local
police agencies regarding any criminal acts or dangerous conduct that has
occurred in or near the 

 

29

 

Project.
Tenant shall have access to the Premises at all times other than in the case of
an emergency. Landlord may institute a controlled access device for after hours
access.

 

Article 30

MISCELLANEOUS

 

30.1. Captions. The captions of
articles and sections and the table of contents of this Lease are for
convenience only and have no effect on the interpretation of the provisions of
this Lease.

 

30.2. Word Usage. Unless the
context clearly requires otherwise, the plural and singular numbers shall each
be considered to include the other; the masculine, feminine, and neuter genders
shall each be considered to include the others; “Shall”, “will”, “must”, “agrees”,
and “covenants” are each mandatory; “May” is permissive; “Or” is not exclusive;
and “Includes” and “including” are not limiting.

 

30.3. Counting Days. Days shall be
counted by excluding the first day and including the last day. If the last day
is a Saturday, Sunday, or legal holiday as described in Government Code
Sections 6700-6701, it shall be excluded. Any act required by this Lease to be
performed by a certain day shall be timely performed if completed before 5 p.m.
local time on that date. If the day for performance of any obligation under
this Lease is a Saturday, Sunday, or legal holiday, the time for performance of
that obligation shall be extended to 5 p.m. local time on
the first following date that is not a Saturday, Sunday, or legal holiday.

 

30.4. Entire Agreement; Amendments. This Lease and
all exhibits addenda, schedules, and agreements referred to in this Lease
constitute the final, complete, and exclusive statement of the terms of the
agreement between Landlord and Tenant pertaining to Tenant’s lease of space in
the Building and supersede all prior and contemporaneous understandings or
agreements of the parties. Neither party has been induced to enter into this
Lease by, and neither party is relying on, any representation or warranty
outside those expressly set forth in this Lease. This Lease may be amended only
by an agreement in writing signed by Landlord and Tenant.

 

30.5. Exhibits. The Exhibits
and Addendum, if applicable, attached to this Lease are a part of this Lease
and incorporated into this Lease by reference.

 

30.6. Reasonableness and Good
Faith. Except as otherwise provided elsewhere in this Lease, whenever this Lease
requires Landlord or Tenant to give its consent or approval to any action on
the part of the other, such consent or approval shall not be unreasonably
withheld or delayed.

 

30.7. Partial Invalidity. If a court or
arbitrator of competent jurisdiction holds any Lease clause to be invalid or
unenforceable in whole or in part for any reason, the validity and
enforceability of the remaining clauses, or portions of them, shall not be
affected unless an essential purpose of this Lease would be defeated by loss of
the invalid or unenforceable provision.

 

30.8. Binding Effect. Subject to the
limitations on Transfer contained herein, this Lease shall bind and benefit the
parties to this Lease and their legal representatives and successors in
interest.

 

30.9. Independent Covenants. This Lease
shall be construed as though the covenants between Landlord and Tenant are
independent and not dependent. Tenant expressly waives the benefit of any
statute to the contrary and agrees that if Landlord fails to perform its obligations
under this Lease, Tenant shall not be entitled: (a) to make any repairs or
perform any acts at Landlord’s expense; or (b) to any setoff of the Rent
or other amounts owing under this Lease against Landlord. The foregoing,
however, shall in  no way impair
Tenant’s right to bring a separate action against Landlord for any
violation by Landlord of the provisions of this Lease if notice is first given
to Landlord and any lender of whose address Tenant has been 

 

30

 

notified,
and an opportunity is granted to Landlord and that lender to correct those
violati as provided above.

 

30.10.
Governing Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California.

 

30.11. Notices. All notices
(including requests, demands, approvals, or other communications) under this
Lease shall be in writing. Notice shall be sufficiently given for all purposes
as follows: (a) when personally delivered to the recipient, notice is
effective on delivery, (b) when mailed first class to the last address of
the recipient known to the party giving notice, notice is effective on
delivery, (c) when mailed by certified mail with return receipt requested,
notice is effective on receipt if delivery is confirmed by a return receipt, (d) when
delivered by overnight delivery (FedEx/Airborne/United Parcel Service/DHL
WorldWide Express) with charges prepaid or charged to the sender’s account,
notice is effective on delivery if delivery is confirmed by the delivery
service, (e) when sent by telex or fax to the last telex or fax number of
the recipient known to the party giving notice, notice is effective on receipt
as long as (1) a duplicate copy of the notice is promptly given by first
class or certified mail or by overnight delivery or (2) the receiving
party delivers a written confirmation of receipt. Any notice given by telex or
fax shall be considered to have been received on the next business day if it is
received after 5 p.m. (recipient’s time) or on a non-business day.
Any correctly addressed notice that is refused, unclaimed, or undeliverable
because of an act or omission of the party to be notified shall be considered
to be effective as of the first date that the notice was refused, unclaimed, or
considered undeliverable by the postal authorities, messenger, or overnight
delivery service. Addresses for purposes of giving notice are set forth in the
Summary of Basic Lease Information. Either party may change its address or
telex or fax number by giving the other party notice of the change in any
manner permitted by this paragraph. If Tenant is notified of the identity and address  of Landlord’s
lender or ground or underlying lessor, Tenant shall give to that lender or
ground or underlying lessor written notice of any default by Landlord under the
terms of this Lease.

 

30.12. Force Majeure. If performance
by a party of any portion of this Lease is made impossible by any prevention,
delay, or stoppage caused by strikes; lockouts; labor disputes; acts of
God; inability to obtain services, labor, or materials or reasonable
substitutes for those items; government actions; civil commotion; fire or other
casualty; or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage is excused. Tenant’s obligation to pay
Rent, however, is not excused by this paragraph.

 

30.13. Time of the Essence. Time is of the
essence of this Lease and each of its provisions.

 

30.14. Modifications Required by Landlord’s Lender. If any lender
of Landlord or ground lessor of the Building and/or Project requires a
modification of this Lease that will not increase Tenant’s cost or expense or
materially or adversely change Tenant’s rights and obligations, this Lease
shall be so modified and Tenant shall execute whatever documents are required
and deliver them to Landlord within ten (10) days after the request.

 

30.15. Recording. Neither this
Lease nor any memorandum, affidavit, or other writing relating to this Lease
may be recorded by Tenant or anyone acting through, under, or on behalf of
Tenant. Recordation in violation of this provision constitutes an act of
default by Tenant.

 

30.16. Liability of Landlord. Except as
otherwise provided in this Lease or applicable law, for any breach of this
Lease the liability of Landlord (including all persons and entities that
comprise Landlord, and any successor landlord) and any recourse by Tenant
against Landlord shall be limited to the interest of Landlord and Landlord’s
successors in interest in and to the Building and Project and the income
therefrom. On behalf of itself and all persons claiming by, through, or
under Tenant, Tenant expressly waives and releases  Landlord (and its officers,
directors, and shareholders) from any personal liability for breach of this
Lease.

 

31

 

30.17. Transfer of Landlord’s
Interest. Landlord has the right to transfer all or
part of its interest in the Building and Project and in this Lease. On such a
transfer, Landlord shall automatically be released from all liability
thereafter accruing under this Lease, and Tenant shall look solely to that
transferee for the performance of Landlord’s obligations under this Lease after
the date of transfer. Landlord may assign its interest in this Lease to a
mortgage lender as additional security. This assignment shall not release
Landlord from its obligations under this Lease, and Tenant shall continue to
look to Landlord for the performance of its obligations under this Lease.

 

30.18. Joint and Several Obligations of Tenant. If more than
one individual or entity comprises Tenant, the obligations imposed on each
individual or entity that comprises Tenant under this Lease shall be joint and
several.

 

30.19. Submission of Lease. Submission of
this document for examination or signature by the parties does not constitute
an option or offer to lease the Premises on the terms in this document or a
reservation of the Premises in favor of Tenant. This document is not effective
as a lease or otherwise until executed and delivered by both Landlord and
Tenant.

 

30.20. Legal Authority.

 

30.20.1. Corporate Authority. If Tenant is a
corporation, each individual executing this Lease on behalf of that corporation
represents and warrants that: (a) the individual is authorized to execute  and deliver this
Lease on behalf of that corporation in accordance with a duly adopted
resolution of the corporation’s board of directors and in accordance with that
corporation’s articles of incorporation or charter and bylaws; (b) the
corporation is a duly organized and legally existing corporation in good
standing in the State of California; and (c) the execution and delivery of
this Lease by that corporation shall not result in any breach of or constitute
a default under any mortgage, deed of trust, lease loan, credit agreement,
partnership agreement, or other contract or instrument to which that
corporation is a party or by which that corporation may be bound.

 

30.20.2. Partnership Authority. If Tenant is a
partnership, each individual executing this Lease on behalf of the partnership
represents and warrants that: (a) the individual is duly authorized to
execute and deliver this Lease on behalf of the partnership in accordance with
the partnership agreement, or an amendment to the partnership agreement, now in
effect; (b) the partnership is a duly organized and legally existing
partnership and has filed all certificates required by law; and (c) the
execution and delivery of this Lease shall not result in any breach of or
constitute a default under any mortgage, deed of trust, lease, loan, credit
agreement, partnership agreement, or other contract or instrument to which the
partnership is a party or by which the partnership may be bound.

 

30.20.3. Limited Liability Company Authority. If Tenant is a
limited liability company, each individual executing this Lease on behalf of
that company represents and warrants that: (a) the individual(s) executing
this Lease on behalf of the company has/have full power and authority under the
company’s governing documents to execute and deliver this Lease in the name of
and on behalf of the company and to cause the company to perform its
obligations under this Lease; (b) the company is a limited liability
company duly organized and validly existing under the laws of the State of
California; and (c) the company has the power and authority under
applicable law and its governing documents to execute and deliver this Lease
and to perform its obligations under this Lease.

 

30.21. Right to Lease. Landlord
reserves the absolute right to contract with any other person or entity to be a
tenant in the Building as Landlord, in Landlord’s sole business judgment,
determines best to promote the interests of the Building. Tenant does not rely
on the expectation, and Landlord does not represent, that any specific
tenant or type or number of tenants will, during the
Lease Term, occupy any space in the Building.

 

30.22. No Air Rights. No rights to any view from the Premises or to
exterior light or air to the Premises are created under this Lease.

 

32

 

30.23.
Brokers. Landlord and Tenant each represents to the other that it has had no
dealings with any real estate broker or agent in connection with the
negotiation of this Lease, except for the real estate brokers or agents
specified in the Summary of Basic Lease Information and that they know of no
other real estate broker or agent who is entitled to a commission or finder’s
fee in connection with this Lease. Each party shall indemnify, protect, defend,
and hold harmless the other party against all claims, demands, losses,
liabilities, lawsuits, judgments, and costs and expenses (including reasonable
attorney fees) for any leasing commission, finder’s fee, or equivalent
compensation alleged to be owing on account of the indemnifying party’s
dealings with any real estate broker or agent other than the Brokers. The terms
of this Section shall survive the expiration or earlier termination of the
Lease Term.

 

30.24.
Transportation Management. Tenant shall fully comply with all current or future
compulsory programs imposed by any public authority, intended to manage
parking, transportation, or traffic in and around the Building. In connection
with this compliance, Tenant shall take responsible action for the
transportation planning and management of all employees located at the Premises
by working directly with Landlord, any government transportation management
organization, or other transportation related committees or entities. This
provision includes programs such as the following: (a) restrictions on the
number of peak hour vehicle trips generated by Tenant; (b) encouragement
of increased vehicle occupancy through employer sponsored financial or in kind
incentives; (c) implementation of an in house or area wide ridesharing
program and appointment of an employee transportation coordinator; and (d) flexible
work shifts for employees.

 

30.25.
Quiet Enjoyment. So long as Tenant timely and completely performs all
of its obligations hereunder, Landlord covenants that Tenant shall have the
quiet enjoyment of the Premises subject to all of the terms, provisions, and
conditions of this Lease.

 

30.26.
Disclaimer. Nothing in this Lease shall constitute an offer to lease, nor shall
the terms of this Lease be binding until signed by both Tenant and Landlord.

 

	
  DATE:

  	
  4/23/98

  	
   

  
	
   

  	
   

  
	
  LANDLORD:

  	
   

  	
  TENANT

  
	
   

  	
   

  
	
  Pacific
  Torrey Reserve Holdings, L.P.,

  	
   

  	
  Avalon
  Entertainment Group, Inc., 

  
	
  a
  California limited partnership

  	
   

  	
  a
  Tennessee corporation

  
	
   

  	
   

  	
   

  
	
  By: 

  	
    American
  Assets, Inc.,

  	
   

  
	
   

  	
    a California corporation 

  	
   

  	
  By:

  	
   /s/
  Thomas Miserendind

  
	
   

  	
    Agent for Owner

  	
   

  	
  Its:
  

  	
    Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
    /s/
  John W. Chamberlain

  	
   

  
	
  John W. Chamberlain 

  	
   

  
	
  Chief Executive Officer

  	
   

  
								

 

33

 

EXHIBIT A

SITE PLAN OF PROJECT

 

This
Exhibit A is intended to show the general configuration
of the Project and the Building as of the Commencement Date and is not a
representation or warranty by Landlord as to the size, nature or exact
configuration of the Project or Building.

 

 

 

EXHIBIT B

DIAGRAM OF PREMISES

 

This Exhibit B
is intended to show the general configuration of the Premises as of the
Commencement Date and is not a representation or warranty by Landlord as to the
size, nature or exact configuration of the Premises.

 

 

 

EXHIBIT C

TENANT IMPROVEMENT AGREEMENT

 

Landlord
and Tenant are executing simultaneously with this Tenant Improvement Agreement
(“Agreement”), a written lease (“Lease”) covering those certain premises more
particularly described in Exhibit B to the Lease (“Premises”), in the
Building more particularly described in the Lease. Landlord and Tenant agree
that Landlord shall improve and prepare the Premises on Tenant’s behalf and for
Tenant’s occupancy, on the terms and conditions set forth in this Agreement. To
induce Landlord and Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Agreement
may apply thereto) and in consideration of the mutual covenants hereinafter
contained, Landlord and Tenant mutually agree as follows:

 

1. Definitions and
Representatives. All terms used herein which are not defined shall have the meanings
ascribed to them in the Lease. Landlord appoints Landlord’s Representative to
act for Landlord and Tenant appoints Tenant’s Representative to act for Tenant
in all matters covered by this Agreement. All inquiries, requests,
instructions, authorizations and other communications with respect to the
matters covered by this Agreement will be made to Landlord’s Representative or
Tenant’s Representative, as the case may be. Tenant will not make any inquiries
of or requests to, and will not give any instructions or authorizations to, any
other employee or agent of Landlord, including Landlord’s architect, engineers
and contractors or any of their agents or employees, with regard to matters
covered by this Agreement. Either party may change its Representative under
this Agreement at any time with three business (3) days’ prior written
notice to the other party.

 

	
  Tenant’s
  Representative:

  	
   

  
	
   

  
	
  Landlord’s
  Representative:

  	
    Rick
  McKee, Vice President, c/o American Assets, Inc.,

  
	
   

  	
   

  
	
  Landlord’s Space
  Planner (“Space Planner”): 

  	
    Facility
  Solutions

  
	
   

  	
   

  
	
  Landlord’s Contractor
  (“Contractor”): 

  	
    Ninteman
  Construction Company

  
					

 

2. Plans and
Specifications/Tenant Improvements. The Premises shall be improved by
Landlord with certain tenant improvements (“Tenant Improvements”) in accordance
with plans and specifications prepared by Landlord’s Space Planner, dated TBD, (“Plans and Specifications”). The Plans
and Specifications have been approved by Landlord and Tenant prior to the date
of this Agreement. Landlord’s approval of the Plans and Specifications for the
Tenant Improvements shall create no responsibility or liability on the part of
Landlord for their completeness, design sufficiency, or compliance with all
laws, rules, and regulations of governmental agencies or authorities. The cost
of the Tenant Improvements shall be allocated between Landlord and Tenant as
provided in Section 7 of this Agreement. In the event Tenant discovers
latent defects in the Tenant Improvements and notifies Landlord of such
defects, Landlord will assign to Tenant any warranty it receives from the
Contractor or any subcontractor performing the Tenant Improvements which may be
applicable to the defect.

 

3. Change Orders. Tenant may authorize changes in the work
during construction, only by written instructions from Tenant’s Representative to
Landlord’s Representative on a form approved by Landlord. All such changes
shall be subject to Landlord’s prior written approval in accordance with Section 4 of this Agreement. Prior to commencing
any change, Landlord shall prepare and deliver to Tenant, for Tenant’s
approval, a change order (the “Change Order”) setting forth the additional time
required to perform the change and the total cost of such change, which will
include associated architectural, engineering and construction contractor’s
fees, delay costs, additional coordination costs, and the cost of Landlord’s
overhead at the rate of fifteen percent (15%) of the amount of the Change
Order. If Tenant fails to approve such Change Order within two (2) business
days after delivery by Landlord, Tenant shall be deemed to have withdrawn the
proposed Change Order and Landlord shall not proceed to perform the change.
Upon Landlord’s receipt of Tenant’s

 

1

 

approval, Contractor
shall proceed to perform the change and Tenant shall pay for such Change Order
at the time Contractor starts work on such Change Order.

 

4. Landlord’s Approval. Landlord may withhold its approval of
any revisions to the Plans and Specifications requested by Tenant, or any
Tenant Change Orders which require work which: (i) exceeds or affects the
structural integrity of the Building or any part of the Utility Installations
or HVAC System; (ii) is not approved by the holder of any Mortgage encumbering
the Building at the time the work is proposed; (iii) violates any
agreement which affects the Building or which binds Landlord; (iv) Landlord
reasonably believes will increase the cost of operation or maintenance of any
of the systems of the Building; (v) Landlord reasonably believes will reduce
the market value of the Building at the end of the Term; (vi) does not
conform to applicable building codes or is not approved by any governmental
authority with jurisdiction over the Premises and/or the Building; (vii) does
not conform to Landlord’s “Building Standard” tenant improvement specifications
unless otherwise approved by Landlord; or (vii) Landlord reasonably
believes will result in a delay in the completion of the Tenant Improvements,
or result in an increase in the cost of the Tenant Improvements (unless Tenant
pays such excess in advance).

 

5. Substantial Completion and Commencement
Date. The
Commencement Date under the Lease shall not occur until the earlier to occur of
(i) Substantial Completion of the Tenant Improvements and tender of possession
of the Premises to Tenant; or (ii) the date Tenant opens for business in
the Premises; or (iii) the date that Substantial Completion of the Tenant
Improvements would have occurred but for Tenant Delays. If Substantial
Completion of the Tenant Improvements shall be delayed as a result of a Tenant
Delay, the Commencement Date shall be accelerated by the number of days of such
Tenant Delay. Each of the following events shall be deemed a “Tenant Delay”: (a) delays
resulting from any direction by Tenant that Landlord suspend work or otherwise
hold up construction of any portion of the Tenant Improvements because of a
possible Change Order by Tenant or for any other reason directed by Tenant; (b) delays
because portions of Tenant Improvements cannot be performed until work to be
performed by or on behalf of Tenant is performed; (c) delays due to the
failure of Tenant to pay when due any amount payable pursuant to this
Agreement; (d) delays which result directly or indirectly from Tenant’s
changes in the Plans and Specifications; or (e) any other action or
inaction of Tenant that directly or indirectly delays Landlord in completing
the Tenant Improvements. Tenant shall pay any actual and documented costs or
expenses incurred by Landlord as a result of any Tenant Delays, including
without limitation, any increases in costs or expenses for labor or materials.

 

As
used in this Lease and this Agreement, the term “Substantial Completion of the
Tenant Improvements” shall mean that (i) all of the Base Building Systems
are operational to the extent necessary to service the Premises, (ii) Landlord
has procured an Authorization to Occupy/Certificate of Occupancy (or an
equivalent from the City for such work), either temporary or final, and (iii) Landlord
has completed the Tenant Improvements substantially in accordance with this
Agreement except for finishing details of construction, decoration, mechanical,
and other adjustments and other items of the type commonly found on an
architectural “punch list”, none of which materially interfere with Tenant’s
use or occupancy of the Premises for normal business operations.

 

6. Tenant’s Punch List. Prior to Landlord’s delivery of the Premises to
Tenant, Landlord shall give Tenant three (3) business days prior
notification of a meeting for Tenant to inspect the Tenant Improvements. Tenant’s
Representative shall completely examine the Premises and prepare with Landlord’s
Representative and Contractor a list of all visible items to be completed by
Contractor to finish the Tenant Improvements. The list shall be signed by both
Landlord and Tenant and all items shall be completed as soon as reasonably
possible. Any items damaged during Tenant’s move in or occupancy shall be
repaired or replaced by Contractor at Tenant’s sole cost and expense and not as
part of the Tenant Improvement Allowance.

 

7. Tenant Improvement Allowance. Landlord agrees to provide Tenant an
allowance in an amount not to exceed $28.00 per Usable Square Foot (“Tenant
Improvement Allowance”). The Tenant Improvement Allowance shall include without
limitation any and

 

2

 

all costs of
construction, city permits, space planning, engineering and the cost of
Landlord’s overhead. The amount by which the costs to construct the Tenant
Improvements exceed the Tenant Improvement Allowance shall be defined as the “Tenant
Extra Cost” and shall be the sole responsibility of Tenant. Tenant shall pay to
Landlord, within five (5) business days of Landlord’s written request
therefor, the total amount payable by Tenant for the Tenant Extra Cost.

 

8. Conflicts. In the event of any conflict between the
terms of this Agreement and the Lease, the terms of this Agreement shall
control.

 

 

	
  DATE: 

  	
  4/23/98

  	
   

  
	
   

  	
   

  
	
  LANDLORD:

  	
   

  	
  TENANT

  
	
   

  	
   

  
	
  Pacific Torrey Reserve
  Holdings, L.P.,

  	
   

  	
  Avalon Entertainment
  Group, Inc.,

  
	
  a California limited
  partnership

  	
   

  	
  a
  Tennessee corporation

  
	
   

  	
   

  
	
  By: 

  	
  American
  Assets, Inc.,

  	
   

  
	
   

  	
  a
  California corporation

  	
   

  	
  By: 

  	
  /s/

  	
  Thomas Miserendind

  
	
   

  	
  Agent
  for Owner

  	
   

  	
  Its: 

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ John W.
  Chamberlain

  	
   

  
	
  John
  W. Chamberlain

  	
   

  
	
  Chief
  Executive Officer

  	
   

  
									

 

3

 

EXHIBIT D

NOTICE OF BASIC LEASE INFORMATION

 

	
  To:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

	
  RE:
       Office Lease, dated

  	
   

  	
   

  
	
   

  
	
  LANDLORD:

  	
   

  
	
   

  
	
  TENANT:

  	
   

  
	
   

  
	
  PREMISES:

  	
   

  
	
   

  
	
  BUILDING:
  The Building located at

  	
   

  
	
   

  
	
  RESPONSE
  DEADLINE:

  	
   

  
								

 

Dear
Sir or Madam:

 

In
accordance with the office lease referred to above (Lease), we wish to advise
you and confirm the following:

 

1. Construction of the Tenant Improvements is
Substantially Complete, and the Lease Term shall commence as of                  ,
for a term of                         
months, ending on                        .

 

2. The exact Rentable Area of the Premises is                                 
Rentable Square Feet.

 

3. In accordance with the Lease, Base Rent began to accrue on      , in the amount of

 

4. If the Lease Commencement
Date is other than the first day of the month, the first billing shall contain
a pro rata adjustment based on the actual number of days in the first calendar
month. Each subsequent billing, with the exception of the final billing, shall
be for the full amount of the monthly installment as provided for in the Lease.

 

5. Base Rent and any
estimated Operating Expense and Tax payments are due and payable in advance on
the first day of each month during the Lease Term. Your rent checks should be
made payable to                                    at                                                   

                                                             

 

6. Tenant’s Share, as of the Commencement Date,
and as adjusted based on the exact number of Rentable Square Feet in the
Premises, is                              
.

 

 

	
  LANDLORD

  	
  TENANT

  	 

	
   

  	
   

  	 

	
  Pacific
  Torrey Reserve Holdings, L.P.,

  	
   

  	 

	
  a
  California limited partnership

  	
  a

  	
   

  
	
   

  	
   

  	 

	
  By:

  	
  American
  Assets, Inc.,

  	
   

  	 

	
   

  	
  a
  California corporation

  	
  By:

  	
  /s/ Thomas Miserendind

  	 

	
   

  	
  Agent
  for Owner

  	
  Its:

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  John
  W. Chamberlain

  Chief Executive Officer

  	
   

  	 

	
   

  	
   

  	 

										

 

 

EXHIBIT E

RULES AND REGULATIONS

 

Tenant shall comply with the
following Rules and Regulations. Landlord shall not be responsible to
Tenant for the nonperformance of any of these Rules and Regulations.

 

1.               Locks; Keys. Tenant shall not alter
any lock or install any new or additional locks or bolts on any doors or
windows of the Premises without obtaining Landlord’s prior written consent.
Tenant shall bear the cost of any lock changes or repairs required by Tenant.
Landlord for the Premises shall furnish two keys, and any additional keys
required by Tenant must be obtained from Landlord at a reasonable cost to be
established by Landlord.

 

2.               Doors Opening to Public Corridors.
All doors opening to public corridors must be kept closed at all times except
for normal ingress to and egress from the Premises.

 

3.               Securing Doors; Admission to Building.
Landlord reserves the right to close and keep locked all entrance and exit
doors of the Building during the hours when Comparable Buildings are
customarily closed and locked. When departing after the Building’s normal
business hours, Tenant and Tenant’s employees and agents must be sure that the
doors to the Building are securely closed and locked. Any person, including
Tenant and Tenant’s employees and agents, who enters or leaves the Building at
any time when it is locked or at any time considered to be after the Building’s
normal business hours, may be required to sign the Building register. Access to
the Building may be refused unless the person seeking access  has proper identification or has previously arranged a pass for access
to the Building. Landlord and its agents shall not be liable for damages for
any error concerning the admission to, or exclusion from, the Building of any
person. Landlord reserves the right, in the event of invasion, mob, riot,
public excitement, or other commotion, to prevent access to the Building or
Project during the continuance of that event by any means it considers
appropriate for the safety and protection of life and property.

 

4.               Furniture, Freight, and Equipment; Service
Deliveries. No furniture, freight, or equipment of any
kind may be brought into the Building without prior notice to Landlord. All
moving activity into or out of the Building must be scheduled with Landlord and
done only at the time and in the manner designated by Landlord. No service
deliveries (other than messenger services) shall be allowed between the hours
of 4 p.m. and 6 p.m., Monday through Friday. Landlord may at any time
restrict the elevators and areas of the Building into which messengers may
enter and may require that Tenant leave deliveries at the lobby security desk
for pickup. Landlord may prescribe the weight, size, and position of all safes
and other heavy property brought into the Building and the times and manner of
moving those items within and out of the Building. Tenant shall not overload
the floor of the Premises. If considered necessary by Landlord, safes and other
heavy objects must stand on supports that are adequate to distribute the weight
properly. Landlord shall not be responsible for loss of or damage to any safe
or property. Any damage to any part of the Building or to its contents,
occupants, or visitors caused by moving or maintaining any safe or other
property referred to in this clause shall be the sole responsibility and
expense of Tenant.

 

5.               Receipt of Deliveries; Use of Elevators.
No furniture, packages, supplies, equipment, or merchandise may be received in
the Building or carried up or down in the elevators, except between those hours
and in that specific elevator that Landlord shall designate.

 

6.               No Disturbance of Other Occupants.
Tenant shall not disturb, solicit, or canvass any occupant of the Project and
shall cooperate with Landlord and Landlord’s agents to prevent those actions.

 

7.               Use of Restrooms; Responsibility for Damage. The restrooms, urinals, wash bowls, and other apparatus shall not be used for any
purpose other than that for which they were constructed, and no foreign
substance of any kind shall be thrown into them. The expense of

 

1

 

any
breakage, stoppage, or damage resulting from violation of this rule shall
be borne by the tenant who caused, or whose employees or agents caused, the
breakage, stoppage, or damage.

 

8.               Heating and Air-Conditioning. Tenant shall not use any method of heating
or air-conditioning, other than that supplied by Landlord, without Landlord’s
prior written consent.

 

9.               Foul or Noxious Gases or Substances:
Noninterference With Others.
Tenant shall not use or keep, or allow to be used or kept, any foul or noxious
gas or substance in or on the Premises. Tenant shall not allow the Premises to be occupied or used in a manner causing noise, odors, or
vibrations that are offensive or objectionable to Landlord or other occupants
of the Project.

 

10.         Animals, Birds, and Vehicles. Tenant shall not bring into, or keep within, the Premises or the Building any animals, birds, or
vehicles (e.g., bicycles).

 

11.         Cooking; No Use of Premises for Improper
Purposes. Unless included in
Tenant’s Permitted Use, no cooking shall be done or permitted on the Premises,
except that Underwriters’ Laboratory (UL)-approved equipment and microwave
ovens may be used in the Premises for heating food and brewing coffee, tea, hot
chocolate, and similar beverages for employees and visitors. This use must be
in accordance with all applicable federal, state, and city laws, codes, ordinances, rules, and regulation

 

12.         Telephone and Other Wires. Tenant may not introduce telephone wires or
other wires into the Premises without first obtaining Landlord’s approval of
the method and location of such introduction. No boring or cutting for telephone wires or
other wires shall be allowed without Landlord’s consent. The location of
telephones, call boxes, and other office equipment affixed to the Premises
shall be subject to Landlord’s prior approval.

 

13.         Exclusion or Expulsion. Landlord reserves the right to exclude or expel
from the Project any person who, in Landlord’s judgment, is under the influence
of alcohol or drugs or commits any act in violation of any of these Rules and
Regulations.

 

14.         Loitering Prohibited. Tenant and Tenant’s employees and agents shall not loiter in or on the entrances, corridors, sidewalks,
lobbies, halls, stairways, elevators, or common areas for the purpose of
smoking tobacco products or for any other purpose. Tenant and Tenant’s
employees and agents shall not obstruct those areas but use them only as a
means of ingress to and egress from the Premises.

 

15.         Operation of Electricity, Water, and
Air-Conditioning. Tenant shall not waste electricity, water, or air-conditioning and shall
cooperate fully with Landlord to ensure the most effective operation of the
Building’s heating and air-conditioning system. Tenant shall not adjust any
controls of that heating and air-conditioning system.

 

16.         Disposal of Trash and Garbage. Tenant shall store all trash and garbage within the interior of the Premises. Tenant shall not
place or have placed in the trash boxes or receptacles any material that may
not or cannot be disposed of in the ordinary and customary manner of removing
and disposing of trash in the vicinity of the Building. In disposing of trash and
garbage, Tenant shall comply fully with any law or ordinance governing that
disposal. All trash, garbage, and refuse disposal shall be made only through
entryways and elevators provided for that purpose and shall be made only at
times designated by Landlord.

 

17.         Compliance With Safety Regulations. Tenant shall comply with all safety, fire
protection, and evacuation procedures and regulations established by Landlord
or by any government agency.

 

18.         Protection of Premises. Tenant shall assume all responsibility,
including keeping doors locked and other means of entry to the Premises closed,
for protecting the Premises from theft, robbery, and pilferage.

 

2

 

19.         Awnings, Curtains, and Electrical Ceiling
Fixtures. No awnings or other projection shall be
attached to the outside walls of the Building without Landlord’s prior written
consent. No curtains, blinds, shades, or screens shall be attached to, hung in,
or used in connection with any window or door of the Premises without Landlord’s
prior written consent. All electrical ceiling fixtures hung in offices or
spaces along the perimeter of the Building must be fluorescent or of a quality, type, design, and bulb color approved by Landlord.
Tenant shall abide by Landlord’s regulations concerning the opening and closing
of window coverings attached to those windows, if any, in the Premises that
have a view of any interior portion of the Building or Building Common Areas.

 

20.         Non-Obstruction of Light.
Tenant shall not cover or obstruct the sashes, sash doors, skylights, windows,
and doors that reflect or admit light and air into the halls, passageways, or
other public places in the Building. Tenant shall not place any bottles,
parcels, or other articles on the windowsills.

 

21.         Provision of Information to Tenant’s
Employees. Tenant shall comply with requests by Landlord
that Tenant inform Tenant’s employees of items of importance to Landlord.

 

22.         Hand Trucks and Similar Equipment.
Without Landlord’s prior consent, Tenant shall not use, in any
space or in the public halls of the Building, any hand trucks unless they are
equipped with rubber tires and side guards or similar equipment. Tenant shall
not bring any other vehicles of any kind into the Building.

 

23.         Parking Rules and Regulations.
Without Landlord’s prior written consent, no automobile detailing or washing
shall be permitted in the parking areas of the Building or Project.

 

24.         Rules Changes; Waivers.
Landlord reserves the right at any time to change or rescind any one or more of
these Rules and Regulations or to make any additional reasonable Rules and
Regulations that, in Landlord’s judgment, may be
necessary for: (a) The management, safety, care, and cleanliness of the
Premises, Building, and Project; (b) The preservation of good order; and (c) The
convenience of other occupants and tenants in the Premises, the Building, and
the Project.

 

Landlord
may waive any one or more of these Rules and Regulations for the benefit
of any particular tenants. No waiver by Landlord shall be construed as a waiver
of those Rules and Regulations in favor of any other tenant, and no waiver
shall prevent Landlord from enforcing those Rules or Regulations against
any other tenant of the Project. Tenant shall be considered to have read these Rules and
Regulations and to have agreed to abide by them as a condition of
Tenant’s occupancy of the Premises.

 

3

 

EXHIBIT F

ESTOPPEL CERTIFICATE

 

The
undersigned certifies as follows:

 

1.       The undersigned (Tenant) and                                          ,
a                       
(Landlord) entered into a written office lease dated                                       ,
in which Landlord leased to Tenant and Tenant leased from Landlord premises in
the office building located at                                       
(Building). The Building is described in Lease Article 1 (Project,
Building and Premises). The Lease has been amended, modified, and supplemented as
follows:                                                                          .
The lease, as amended, modified, and supplemented, is referred to in this
Certificate as the “Lease.”

 

2.       Under the Lease, Tenant has leased
approximately                  
rentable square feet of space (Premises) in the Building and has paid to
Landlord a security deposit of                  .
The term of the Lease began on                  ,
and expires on                  ,
subject to any options to extend identified in Section 4 of this Exhibit.
Tenant has paid Base Rent through                  .
The next payment of Base Rent in the amount of                  
is due on                           .
Tenant is required to pay                  
percent of the Direct Expenses (as defined in Lease Article 5) for the
Building and Project, in excess of Direct Expenses for base year                  .

 

3.       Tenant is
entitled to                  
unreserved parking spaces free of charge and                  
parking spaces at a charge of                  
per month per space.

 

4.       The Lease provides for                     
option(s) to extend the term of the Lease for                     
 years each. The rental rate for each
extension term is as follows:                                                           .

 

5.               There are no oral or written amendments,
modifications, or supplements to the Lease except as stated in Section 1
of this Certificate. A true, correct, and complete copy of the Lease, including
all amendments, modifications, and supplements, is attached to this
Certificate. The Lease, as amended, modified and supplemented, is in full force
and effect and represents the entire agreement between Landlord and Tenant
pertaining to the Premises, the Building, and the Project.

 

6.               All space and improvements leased by Tenant
have been completed and furnished in accordance with the provisions of the lease,  and Tenant has accepted and taken possession of the Premises. All
contributions required to be paid by Landlord to date for improvements to the
Premises have been paid in full.

 

7.               To the best of Tenant’s knowledge, Landlord is
not in default in the performance of any of the terms or provisions of the
Lease. Tenant is not in default in the performance of any of the terms or
provisions of the Lease and has not assigned, transferred, or hypothecated the
Lease or any interest in the Lease or subleased all or part of the Premises.

 

8.               There are no setoffs or credits against Rent
payable under the Lease. No free periods or rental abatements, rebates, or
concessions have been granted to Tenant, except as follows:                                                 .

 

9.                 Tenant has no actual knowledge of any
processing, use, storage, disposal, release, or treatment of any hazardous or
toxic material or substance on the Premises or the Project except                                                        
as                                                 
follows:                                                                                                                                                                                                  .

 

1

 

10.         There are no pending actions, voluntary or involuntary, under any
bankruptcy or insolvency laws of the United States or any state against Tenant
or any guarantor of Tenant’s obligations under the Lease.

 

This Certificate is given to                                       
as [lender or purchaser] with the understanding that he/she/it or his/her/its
assignee shall rely on it in connection with the [acquisition of the Building
and/or Project/making a loan secured by the Building, the land upon which the
Building is located and the Project]. Following that [acquisition/loan], Tenant
agrees that the Lease shall remain in full force and effect and shall bind and
inure to the benefit of the [purchaser/lender] and its successor in interest.

 

 

TENANT

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Thomas Miserendind

  	
   

  
	
   

  	
  Name:

  	
  Thomas
  Miserendind

  	
   

  
	
   

  	
  Title:

  	
  Secretary

  	
   

  
					

 

2

 

GUARANTY OF LEASE

 

This Guaranty of Lease (“Guaranty”)
is executed effective 4/23/98, 1998, by TBA Entertainment Corporation, Inc.,
a Delaware corporation (“Guarantor”), whose address for notices is 402 Heritage
Plantation Way, Hickory Valley, TN 38042, in favor of Pacific Torrey Reserve
Holdings, LP., a California limited partnership (“Landlord”), whose address for
notices is 11455 El
Camino Real, Suite 200, San Diego, California 92130-2045. Guarantor
covenants and agrees as follows:

 

1.               Recitals. This
Guaranty is made with reference to the following recitals of facts which
constitute a material part of this Guaranty:

 

 

1.1. Landlord, as landlord,
and Avalon Entertainment Group, Inc., a Tennessee corporation (“Tenant”),
as tenant, are concurrently herewith entering into a Lease (the “Lease”) with
respect to certain premises located within a building designated by Landlord as
Building 1 - North Court, 11682 El Camino Real, which is located in that
certain mixed-use project commonly referred to as Torrey Reserve Unit No. 2
(the “Property”).

 

1.2. Guarantor maintains a
financial interest in Tenant but is an individual separate and distinct from
Tenant. In addition, Guarantor is receiving consideration from Tenant for
executing this Guaranty.

 

1.3. Landlord would not have
entered into the Lease with Tenant without having received this Guaranty
executed by Guarantor as an inducement.

 

1.4. By this Guaranty, Guarantor intends to
unconditionally guarantee the full, timely, and complete performance of all of
Tenant’s covenants and obligations set forth in or arising out of the Lease
(collectively, the “Guaranteed Obligations”).

 

2.               Guaranty. For valuable consideration, Guarantor absolutely and unconditionally
guarantees, upon demand, to and for the benefit of Landlord, the full, timely,
and complete payment and performance of all of the Guaranteed Obligations. This
Guaranty constitutes an absolute, direct, immediate, and unconditional
guarantee of timely payment and performance, and not merely of collectibility, and
shall include, without limitation, all primary, secondary, direct, indirect,
fixed, and contingent obligations of Tenant to pay rent, additional rent, late
charges, common area charges, insurance, taxes, indemnifications, and other
fees, charges, sums, costs, and expenses which may be owing by Tenant at any
time in connection with the Guaranteed Obligations, as such may be modified,
amended, extended, or renewed from time to time. If a specific amount
outstanding and owing by Tenant under the Lease or the Guaranteed Obligations
is determined by a Court of competent jurisdiction, that determination shall be
conclusive and binding on Guarantor, regardless of whether or not Guarantor
was a party to the proceeding in which
such determination was  made. If Tenant defaults in the payment of
any amount when due under the Lease, Guarantor shall, in lawful money of the
United States, pay to Landlord or order, on demand, all sums due and owing
under the Lease. Additionally, Guarantor shall assume responsibility for and
shall fully perform all of the
other Guaranteed Obligations
promptly upon receiving written notice from

 

1

 

Landlord
that Tenant has failed to perform any of such obligations in accordance with
the Lease. No delay by Landlord in providing notice of a default by Tenant or
making demand hereunder will affect Guarantor’s obligations under this
Guaranty. The obligations of Guarantor under this Guaranty are independent of
the obligations of Tenant or any other guarantor. The obligations of Guarantor
under this Guaranty shall be continuing and irrevocable until all of the
Guaranteed Obligations have been fully satisfied (or waived by Landlord in a writing specifically for the
benefit of Guarantor, at which time this Guaranty shall terminate and be of no
further force or effect, except as otherwise set forth herein). If at any time
all or any part of any payment received by Landlord from Tenant, Guarantor, or
any other person under or with respect to the Lease or this Guaranty is
refunded or rescinded pursuant to any court order (including without limitation
any court order arising out of the insolvency, bankruptcy, or reorganization of
Tenant, Guarantor or any other guarantor), then the Guarantor’s obligations under
this Guaranty shall, to the extent of the payment refunded or rescinded, be
deemed to have continued in existence, notwithstanding previous receipt of
payment by Landlord, regardless of any contrary action by Landlord, as though
such previous payment to Landlord had never occurred (and such contrary action
had not been taken). This Guaranty shall not be affected or limited in any
manner if recovery against Tenant upon the Guaranteed Obligations (or any
portion of the Guaranteed Obligations) may be (or becomes) barred by any
statute of limitations or may be (or becomes) otherwise unenforceable (unless
the Lease is unenforceable due to the Landlord’s fraud, misrepresentation, or
breach of the Lease), or if the Guaranteed Obligations (or any portion of the Guaranteed
Obligations) arise(s) from transactions which may be voidable as the
result of bankruptcy, insolvency, fraudulent conveyance, receivership, or
offsets not arising out of the Lease. This Guaranty shall not be affected or
limited in any manner by whether the Guaranteed Obligations are (i) now or
hereafter made, incurred, or created, (ii) voluntary or involuntary, (iii) absolute
or contingent, (iv) liquidated or unliquidated, and/or (v) determined
or undetermined. This Guaranty shall not be affected or limited in any manner
by whether Tenant may be liable, with respect to the Guaranteed Obligations
individually, jointly with others, primarily, or secondarily.

 

3.               Amendment or Assignment. This Guaranty shall not be affected or
limited in any manner by (a) any assignment of, or any modification or
amendment (by agreement, course of conduct, or otherwise) to, all or any
portion of any lease,  agreement, instrument, and/or document with
respect to or that evidences the Guaranteed Obligations, or (b) the renewal,
extension, and/or modification, at any time, of any of the Guaranteed
Obligations. By this Guaranty, Guarantor hereby guarantees Tenant’s performance
of the Guaranteed Obligations as so amended, assigned, renewed, extended, or
modified whether or not such amendment, assignment, renewal, extension, or
modification is with the consent of or notice to Guarantor; provided, however,
Guarantor’s obligations under this Guaranty may not be increased as a result of
any such amendment, renewal, extension, or modification which increases the
obligations of the Tenant beyond those which were in existence prior to such
amendment, renewal, extension, or modification, unless such amendment, renewal,
extension, or modification is done with Guarantor’s consent.

 

4.               Remedies. If Tenant defaults with
respect to any of the Guaranteed Obligations, and if Guarantor does not satisfy
Tenant’s obligations immediately upon his receipt of written notice of such
default from Landlord, Landlord may, at its election, proceed immediately

 

2

 

against
the Guarantor (as if such default arose from the direct and primary obligation
of Guarantor), any other guarantor, or Tenant, or any combination of Tenant,
Guarantor, and/or any other guarantor. Guarantor’s obligations hereunder are
joint and several. If any portion of the Guaranteed Obligations
terminates and Landlord continues to have any rights it may enforce against
Tenant under the Guaranteed Obligations after such termination, then Landlord
may, at its election, enforce such rights against the Guarantor. In the event
of any default under this Guaranty, an action or actions may be brought and
prosecuted against the Guarantor, whether or not Tenant or any other guarantor
is joined in such action(s) or a separate action or actions are brought
against Tenant or any other guarantor. Landlord may maintain successive actions
for separate defaults. Unless and until the Guaranteed Obligations have been
fully satisfied or waived in writing by Landlord, the Guarantor shall not be
released from his obligations under this Guaranty irrespective of (i) the
exercise by Landlord of any of Landlord’s rights or remedies (including,
without limitation, compromise or adjustment of the Guaranteed Obligations or
any part thereof), (ii) any release by Landlord of Tenant or any other
guarantor, (iii) any such action or any number of successive actions, or (iv) the
satisfaction by Guarantor of any liability under this Guaranty incident to a
particular default. Landlord may, at its sole discretion, perform any or all of
Guarantor’s obligations hereunder, in which case, Guarantor shall reimburse
Landlord immediately upon demand for all costs and expenses, including all
reasonable attorneys’ fees, that Landlord incurs in performing such
obligations, together with interest on those sums from and after the date(s) they
are incurred at the rate of fifteen percent (15%) per annum; provided, however,
such interest factor will supersede any Default Rate interest concurrently
accruing under the Lease.

 

5. Waivers. Guarantor hereby represents and warrants
(which representation and warranty is being relied upon by Landlord in entering
into the Lease and accepting this Guaranty) that each of the waivers set forth
in this Guaranty is made with Guarantor’s full knowledge of its significance
and consequences after discussion with Guarantor’s own competent legal counsel,
which counsel has made Guarantor aware of the relevant circumstances and likely
consequences of each such waiver and has explained to Guarantor the true legal
effect of each such waiver including Guarantor’s rights which Guarantor would
have if he were not making such waivers. Based on the foregoing, Guarantor
acknowledges that, under the circumstances, such waivers are reasonable and not
contrary to public policy or law, and Guarantor hereby waives the following:

 

5.1. Guarantor waives all
rights he would otherwise have to require Landlord, as a condition to Landlord’s
exercise of any of its rights under this Guaranty, to (i) proceed against
Tenant or any other guarantor, (ii) perfect, retain, protect, proceed
against, or exhaust any security
that Landlord holds or may hold from Tenant, or (iii) pursue any other
remedy in Landlord’s power. The foregoing waiver includes, without limitation,
a waiver of all of Guarantor’s rights under California Civil Code Sections 2845
and 2849 or similar laws;

 

5.2. Guarantor waives the
benefit of all statutes of limitations affecting Guarantor’s liability under
this Guaranty to the extent permitted by law;

 

5.3. Guarantor waives all
defenses which Guarantor might otherwise have to his obligations under this
Guaranty by reason of any disability of Tenant or any other person(s),
including, without limitation, the incapacity, lack of authority, death, or
disability

 

3

 

of
Tenant or any other person(s) or the failure of Landlord to file or
enforce a claim against the estate (in administration, bankruptcy or any other
proceeding) of Tenant or any other person(s). The foregoing waiver includes,
without limitation, a waiver of all of Guarantor’s rights under California
Civil Code Section 2810 and similar laws;

 

5.4. Guarantor waives all
defenses and rights which Guarantor might otherwise have to exoneration under
this Guaranty, including, without limitation, all rights under California Civil
Code Section 2819 and similar laws, based upon any alteration,
modification, compromise, renewal, extension, or assignment of the Lease or any
of the Guaranteed Obligations, whether done with or without the knowledge
and/or consent of Guarantor and Guarantor hereby grants Landlord the right to
take any such action relative to the Guaranteed Obligations without the
knowledge or consent of Guarantor without in any manner affecting the liability
of Guarantor under this Guaranty.

 

5.5. Guarantor waives the
right to claim or assert any defense of Tenant to the Guaranteed Obligations
including, without limitation, any defense based upon failure of consideration,
accord and satisfaction, impossibility of performance, or mistake (but
excluding any defenses based on Landlord’s fraud, misrepresentation, or breach
of the Lease);

 

5.6. Guarantor waives all other defenses based on
the termination of Tenant’s liability from any cause or the impairment of any
other collateral or security for the Guaranteed Obligations (other than arising
out of Landlord’s fraud, misrepresentation, or breach of the Lease);

 

5.7. Guarantor waives all
defenses he may otherwise have against Landlord based upon an election of
remedies by Landlord;

 

5.8. Regardless of whether
or not Guarantor makes payments to Landlord, until the Lease has terminated and
Landlord has been paid in full thereunder for a period of one year and one day,
Guarantor waives all of his rights of subrogation, contribution, and
reimbursement which he would otherwise have against Tenant in the event
Guarantor suffers any liability under this Guaranty, including, without
limitation, any rights under California Civil Code Sections 2847, 2848, and 2849 or similar laws;

 

5.9. Guarantor waives all his rights to determine how, when,
and what application of payments and credits shall be made on the Guaranteed
Obligations; however, Guarantor shall be entitled to notice of how such
payments and credits are applied;

 

5.10. Guarantor subordinates to Landlord all of
Guarantor’s rights to participate in any security now or later held by
Landlord;

 

5.11. Guarantor waives all
his rights to receive notice of any default by Tenant;

 

5.12. Guarantor waives all rights of recourse against
Landlord by reason of any action Landlord may take or omit to take under the
provisions of this Guaranty;

 

4

 

5.13.  Guarantor
waives all presentments, demands for performance, notices of non-performance,
protests, notices of protest, notices of dishonor, notices of non-payment, and
all other notices of any kind, including without limitation all notices of the
existence, creation, or incurring of new or additional obligations (subject to
Paragraph 3, above) and any notice of acceptance of this Guaranty, which, upon
execution by Guarantor, shall immediately be binding upon Guarantor;

 

5.14.  Guarantor
waives all duties Landlord may have to investigate the authority of any
representative, or purported representative, of Tenant to incur any obligation
or enter into any agreement on behalf of Tenant;

 

5.15.  Guarantor
waives all rights he may otherwise attain by reason of Landlord’s failure to
enforce, or delay in enforcing, any of Landlord’s rights with respect to the
Guaranteed Obligations; and

 

5.16.  Guarantor
waives all duties Landlord may have to disclose to the Guarantor any facts
Landlord may now or in the future know about Tenant, regardless of whether
Landlord has reason to believe that any such facts materially increase the risk
beyond that which the Guarantor intends to assume or has reason to believe that
such facts are unknown to the Guarantor or has a reasonable opportunity to
communicate such facts to the Guarantor.

 

Without limiting the
foregoing, Guarantor hereby expressly waives any and all benefits Guarantor may
otherwise maintain under California Civil Code Sections 2809, 2810, 2814, 2819,
2845, 2847, 2848, 2849, and 2950 and similar laws. Guarantor acknowledges that
the waiver of the benefits of the above cited statutory provisions has the
effect of eliminating certain rights and protections which Guarantor would
otherwise have including, without limitation, certain rights to require
Landlord to act in a particular manner as a condition to enforcing its rights
against Guarantor under this Guaranty, certain rights to exoneration upon a
modification of the Guaranteed Obligations, and certain rights to require the
Landlord to pursue other remedies available to it prior to pursuing Guarantor.

 

6.   Rights Cumulative. All rights, powers and remedies of
Landlord under this Guaranty shall be cumulative and not alternative and such
rights, powers and remedies shall be in addition to all rights, powers and
remedies given to Landlord by law. This Guaranty is in addition to and
exclusive of the guaranty of any other guarantor of the Guaranteed Obligations.

 

7.          Representations and
Warranties. Guarantor hereby represents and warrants that the
following are true and accurate as of the date of this Guaranty and shall be
true at all times in the future while this Guaranty is outstanding: (i) this
Guaranty is executed at Tenant’s request and not at the request of Landlord; (ii) Guarantor
has sufficient net worth and sufficient liquidity of assets to enable Guarantor
to promptly perform all of the Guaranteed Obligations as and when they are due;
(iii) Landlord has made no representation to Guarantor as to the
creditworthiness or financial condition of Tenant; and (iv) Guarantor has
carefully read and negotiated all provisions of this Guaranty and has consulted
with competent legal counsel in connection therewith.

 

5

 

8.  Covenant of
Diligence. Guarantor covenants that he is intimately aware of Tenant’s
business and financial condition and that he has conducted a thorough
investigation of all material factors regarding the making of the Lease and
this Guaranty. Furthermore, Guarantor represents that he has the resources,
access, and opportunity to remain informed at all times of the financial status
of Tenant and of all other material information relative to the Lease and
Guarantor’s obligations under this Guaranty; and Guarantor covenants to remain
informed relative to all such matters as long as this Guaranty remains in
effect. On the basis of the foregoing, Guarantor hereby waives any obligation
which Landlord might otherwise have as a condition to enforcing Guarantor’s
obligations under this Guaranty, to keep Guarantor informed relative to any
information regarding the Lease, the Tenant, any security for the Lease, or any
other factors affecting the obligations of Tenant or Guarantor.

 

9.  Subordination.
In the event of Tenant’s insolvency or the disposition of the  assets of
Tenant, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Tenant applicable to the
payment of all claims of Landlord and/or the Guarantor shall be paid to
Landlord and shall be first applied by Landlord to the Guaranteed Obligations.
The Guarantor hereby assigns  to Landlord all claims which
the Guarantor may have or acquire against Tenant or any assignee or trustee in
bankruptcy of Tenant; provided, that such assignment shall be effective only
for the purpose of assuring to Landlord full payment and performance of all of
the Guaranteed Obligations. All promissory notes now or hereafter evidencing
any indebtedness of Tenant to Guarantor shall be marked with a legend that such
indebtedness shall be subordinate to the Guaranteed Obligations and, if
Landlord so requests, shall be delivered to Landlord. Guarantor hereby
authorizes Landlord to, from time to time, execute and file, on Guarantor’s behalf,
financing statements and continuation statements and to execute such other
documents and to take such other action as Landlord deems necessary or
appropriate to perfect, preserve and enforce Landlord’s rights under this
Guaranty. Guarantor shall not cause or permit any person with funds invested in
Tenant or any affiliate of Tenant or Guarantor with funds loaned to Tenant to
withdraw, demand or accept any repayment of such funds from Tenant without the
prior written approval of Landlord which approval shall not unreasonably be
withheld. Each such payment by Tenant in violation of this Guaranty shall be
received by the person to whom paid in trust for Landlord, and the Guarantor
shall cause such funds to be paid to Landlord immediately to be applied toward
the Guaranteed Obligations. No such payment shall reduce or affect in any
manner the liability of the Guarantor under this Guaranty; however, any such
payment shall reduce the amount of the Guaranteed Obligations.

 

10.  Governing Law
and Venue. This Guaranty shall be governed by and construed in
accordance with the laws of the State of California. For purposes of venue and
jurisdiction, this Guaranty shall be deemed made and to be performed in the
City of San Diego, California. Each party authorizes and accepts service of
process sufficient for personal jurisdiction in any action against it as
contemplated by this Guaranty by registered or certified mail, return receipt
requested, postage prepaid, to its address for the giving of notices set forth
in this Guaranty.

 

11.  Further
Assurances. Each party to this Guaranty shall execute all instruments and
documents and take all actions as may be reasonably required to effectuate this
Guaranty.

 

6

 

12.  Mandatory Arbitration.
Guarantor and Landlord agree that binding arbitration will constitute the sole
and exclusive remedy for the resolution of any dispute or controversy arising
from, based upon, or relating to this Guaranty or the rights of the parties
hereunder. Before submitting any such dispute or controversy to arbitration,
the parties agree to use their reasonable good faith efforts to resolve any
such dispute or controversy through good faith negotiations and, if (but only
if) deemed appropriate by both parties, by submitting such matter to
non-binding mediation. If any such matter is to be resolved by arbitration
pursuant to this Paragraph 12, such arbitration proceeding
will be accomplished in accordance with the following provisions:

 

12.1. The arbitration
proceeding will be conducted under the Commercial Arbitration Rules of the
American Arbitration Association in effect at the time a demand for arbitration
is made. To the extent that there is any conflict between the rules of the
American Arbitration Association and this arbitration clause, this clause will
govern and determine the rights of the parties.

 

12.2. The arbitration
will take place in San Diego, California, before a single arbitrator, who shall
apply California law.

 

12.3. The decision of
the arbitrator, including the determination of the amount of any damages
suffered, will be exclusive, final, and binding on all parties, their heirs,
executors, administrators, successors, and assigns, as applicable, and judgment
thereon may be entered in any court of competent jurisdiction.

 

12.4. The costs of
arbitration, including administrative fees and the arbitrator’s fees, as well
as reasonable attorney’s fees, will be awarded to the party determined by the
arbitrator to be the prevailing party.

 

12.5. The parties
incorporate the provisions of California Code of Civil
Procedure Section 1283.05 into this Guaranty and make
those provisions part of and applicable to any proceedings arising under the
terms of this Guaranty.

 

13.  Further
Assurances. Each party to this Guaranty shall execute and deliver all
instruments and documents and take all actions as may be reasonably required or
appropriate to carry out the purposes of this Guaranty.

 

14.  Attorney’s
Fees. The prevailing party in any arbitration, mediation, bankruptcy,
insolvency or other proceeding (“Proceeding”) relating to the enforcement or
interpretation of this Guaranty may recover from the unsuccessful party all
costs, expenses, and actual attorney’s fees (including expert witness and other
consultants’ fees and costs) relating to or arising out of (a) the
Proceeding (whether or not the Proceeding proceeds to judgment), and (b) any
post-judgment or post-award proceeding including, without limitation, one to
enforce or collect any judgment or award resulting from the Proceeding. All
such judgments and awards shall contain a specific provision for the recovery
of all such subsequently incurred costs, expenses, and actual attorney’s fees.

 

7

 

15.  Modification.
This Guaranty may be modified only by a contract in writing executed by both
Landlord and Guarantor.

 

16.  Headings.
The paragraph headings in this Guaranty: (a) are included only for
convenience, (b) do not in any manner modify or limit any of the provisions
of this Guaranty, and (c) may not be used in the interpretation of this
Guaranty.

 

17.  Prior
Understandings. This Guaranty and all documents specifically referred to
and executed in connection with this Guaranty: (a) contain the entire and
final Guaranty of the parties to this Guaranty with respect to the subject
matter of this Guaranty, and (b) supersede all negotiations, stipulations,
understandings, agreements, representations and warranties, if any, with
respect to such subject matter, which precede or accompany the execution of
this Guaranty.

 

18.  Interpretation. Whenever the
context so requires in this Guaranty, all words used in the singular may
include the plural (and vice versa) and the word “person” includes a natural
person, a corporation, a firm, a partnership, a joint venture, a trust, an
estate or any other entity. The terms “includes” and “including” do not imply
any limitation. For purposes of this Guaranty, the term “day” means any
calendar day and the term “business day” means any calendar day other than a
Saturday, Sunday or any other day designated as a holiday under California
Government Code Sections 6700-6701. Any act permitted or required to be
performed under this Guaranty upon a particular day which is not a business day
may be performed on the next business day with the same effect as if it had
been performed upon the day appointed. No remedy or election under this
Guaranty is exclusive, but rather, to the extent permitted by applicable law,
each such remedy and election is cumulative with all other remedies at law or
in equity.

 

19.  Partial
Invalidity. Each provision of this Guaranty is valid and enforceable to the
fullest extent permitted by law. If any provision of this Guaranty (or the
application of such provision to any person or circumstance) is or becomes
invalid or unenforceable, the remainder of this Guaranty, and the application
of such provision to persons or circumstances other than those as to which it
is held invalid or unenforceable, are not affected by such invalidity or
unenforceability (unless such provision or the application of such provision is
essential to this Guaranty).

 

19.  Binding
Effect. This Guaranty shall inure to the benefit of and be binding on the
successors and assigns of Landlord and Guarantor, and their heirs, personal
representatives, grantees, tenants, successors, and assigns.

 

20.  Notices.
Each notice and other communication required or permitted to be given under
this Guaranty (“Notice”) must be in writing. Notice is duly given to another
party upon: (i) hand delivery to the other party, (ii) receipt by the
other party when sent by facsimile to the address and number for such party set
forth on the first page of this Guaranty (provided, however, that the
Notice is not effective unless a duplicate copy of the facsimile Notice is
promptly given by one of the other methods permitted under this Paragraph), (iii)
three business days after the Notice has been deposited with the United States
postal service as first class certified mail, return receipt requested, postage
prepaid, and addressed to the party

 

8

 

as set forth on the first page of this
Guaranty, or (iv) the next business day after the Notice has been
deposited with a reputable overnight delivery service, postage prepaid,
addressed to the party as set forth above, with next-business-day delivery
guaranteed, provided that the sending party receives a  confirmation of
delivery from the delivery-service-provider. Each party shall make a reasonable,
good faith effort to ensure that it will accept or receive Notices to it that
are given in accordance with this Paragraph. A party may change its address for
purposes of this Paragraph by giving the other party(ies) written notice of a
new address in the manner set forth above.

 

21.  Waiver.
Any waiver of a default or provision under this Guaranty must be in writing. No
such waiver constitutes a waiver of any other default or provision concerning
the same or any other provision of this Guaranty. No delay or omission by a
party in the exercise of any of its rights or remedies constitutes a waiver of
(or otherwise impairs) such right or remedy. A consent to or approval of an act
does not waive or render unnecessary the consent to or approval of any other or
subsequent act.

 

22.  Time is of
the Essence. Time is of the essence with respect to each
provision of this Guaranty.

 

23.   Drafting
Ambiguities. Each party to this Guaranty and its legal counsel have
reviewed and revised this Guaranty. The rule of construction that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Guaranty or of any amendments or exhibits to this
Guaranty.

 

 

	
  GUARANTOR:

  	
  TBA
  Entertainment Corporation, Inc.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Bryan Cusworth

  
	
   

  	
  Its:

  	
  Chief
  Financial Officer

  

 

9

 

EXHIBIT “B”

 

Furniture Inventory

 

Suite 320

Inventory - February 28, 2007

Furniture Purchase: May, 2005

 

Reception Area

Reception Desk

Couch

Armless Chair

Coffee Table

2 brown chairs

3 tiered wood side table

6 pillows (couch & chairs)

1 reception/workstation chair

 

 

Conference Room

Conference Table

12 conference room chairs

Plasma TV

Viewing Screen

Audio Conferencing Componets

Sound System

Video Equipment

Control System

Rack equipment

Laptop Interfaces

 

 

Weurding Office 

Desk - U shape with hutch

1 wood credenza

2 guest chairs

1 executive chair

 

Bullock Office 

Desk - U shape with shelf

Small conference table

Hutch w/ 2 drawer file cabinet

4 guest chairs

1 executive chair

 

 

Reed Office

Desk - L  shape

Hutch unit with drawers

1 guest chair

1 executive chair

1 black wire stand

1 black leather couch

1 coffee table

1 glass sofa back table

 

 

	
   

  	
  

  	
   

  

 

 

Kreider Office

Desk - U shape with hutch

2 guest chairs

1 executive chair

 

 

Garcia Office 

Desk - U shape with hutch

2 guest chairs

1 black steel file cabinet

1 executive chair

 

 

Hori Office 

Desk - L shape with hutch

2 guest chairs

1 black credenza

1 executive chair

 

 

Parrish Office

Desk - L shape with hutch

2 guest chairs

1 executive chair

 

 

Workstations

4 workstations

4 workstation chairs

 

 

Book Shelf 

1 attached book shelf (video wall)

 

 

Kitchen

2 brown wooden dining tables

8 wood/chrome kitchen chairs

6 barstools

 

Storage Room

 

 

	
   

  	
  

  	
   

  

 

 

EXHIBIT “C”

 

 

 

	
   

  	
  

  	
   

  

 

 

CONSENT TO SUBLEASE AGREEMENT

 

This CONSENT TO SUBLEASE
AGREEMENT (this ‘Consent”) is made by and between Pacific North Court Holdings,
L.P. (“Master Landlord”), TBA Entertainment Corporation, a Delaware corporation
(“Sublandlord”), and Zogenix, Inc., a Delaware corporation (“Subtenant”),
as of March 20, 2007 (“Effective Date”), with reference to the
facts set forth in the Recitals below.

 

RECITALS

 

A.                          Master Landlord,
as Landlord, and Sublandlord, as Tenant, entered into a Standard Full Service
Gross Office Lease dated April 23, 1998 (“Master Lease”), as modified by a
First Amendment to Lease dated June 22, 2003 and Second Amendment to Lease
dated September 24, 2004 for the leasing of certain premises within a
building (“Building) located at 11682 El Camino Real, San Diego, CA 92130 (“Master
Premises”) as more particularly described in the master Lease, on all of the
terms and conditions contained therein.

 

B.                            Pursuant to the
Master Lease, Sublandlord has requested Master Landlord’s consent to that
certain Sublease, dated as of March 20,  2007 (the “Sublease”),
between Sublandlord and Subtenant, by which Sublandlord would sublease 4,193
rentable square feet (“RSF”)/3,646 usable square feet (“USF”) at 11682 El
Camino Real, San Diego, CA 92130 (the “Sublease Premises”) as more specifically
described in Section 1(n) of the Sublease. A copy of the Sublease,
together with copies of all exhibits, attachments and amendments thereto, is
attached to this Consent as Exhibit A.

 

C.                            Master Landlord
is willing to consent to the proposed subletting, but only on the terms and
conditions set forth below.

 

NOW, THEREFORE, in
consideration of the mutual covenants contained in this Consent, and for
valuable consideration, the receipt and sufficiency of which are acknowledged
by the parties, the parties agree as follows:

 

AGREEMENT:

 

1.                         Master Landlord’s
Consent. Master Landlord consents to the subletting of the Sublease Premises by
Sublandlord to Subtenant as set forth in the Sublease, subject to each of the
terms, conditions and mutual agreements between Master Landlord, Sublandlord,
and Subtenant set forth herein.

 

2.                         Non-Release of
Sublandlord. Neither the Sublease nor this Consent will: (a) as
between Master Landlord and Sublandlord, (i) release or discharge Sublandlord
from any liability, whether past, present or future, under the Master Lease, or
(ii) alter the primary liability of Sublandlord to pay the rent and
perform and comply with all of Sublandlord’s obligations under the Master
Lease; or (b) be construed as a waiver of Master Landlord’s right to
consent to any future amendment of the Sublease or to any further sublease or
assignment either by Sublandlord or by Subtenant under the Master Lease or the
Sublease, or (c) be construed as a consent to any portion of the Sublease
Premises being used or occupied by any other party. Any breach or violation of
any provision of the Master Lease by Sublandlord or Subtenant, or both, shall
constitute a default by Sublandlord under the Master Lease.

 

3.        Scope
of Consent. In granting its consent, it is understood and agreed that (a) except
as otherwise specifically set forth herein, Master Landlord does not agree to,
and will not be bound by, any term or condition of the Sublease; (b) no
rights granted to Subtenant under the Sublease will be greater than those
granted to Sublandlord under the Master Lease; and (c) the Sublease will
under all circumstances be subordinate to the Master Lease and this Consent. As
between Master Landlord and Sublandlord or Subtenant, in the event there is any
conflict between the terms and conditions of the Master Lease or this Consent and
the terms and conditions of the Sublease, the terms and conditions of the
Master Lease or this Consent, as applicable, will prevail. Master Landlord will
not be liable for any cost or obligation of any kind arising in connection with
the Sublease, including, without limitation, brokerage commissions,
improvements to the Sublease Premises, or the security deposit required to be
made by Subtenant under the Sublease. Master Landlord’s acceptance of any rent
from Subtenant will not be deemed a waiver by Master Landlord of any provisions
of the Master Lease.

 

4.        Continuation/Termination of Sublease. If, for any
reason, the Master Lease expires or terminates during the term of the Sublease,
or if the Sublandlord lawfully surrenders the Master Lease to Master Landlord
during the term of the Sublease, then on the effective date of such expiration,
termination or surrender, the Sublease and its term will immediately terminate,
and Subtenant must vacate the Sublease Premises on or before the effective date
of such expiration, termination or surrender. If Subtenant fails to vacate the
Sublease Premises, Master Landlord will be entitled to all of the rights and
remedies available to a landlord against a tenant wrongfully holding over after
expiration of the term of a lease without the landlord’s consent, including,
without limitation, the rights and remedies available to Master Landlord under
the Master Lease. In the event of such termination: (i) Master Landlord
will net be liable to Sublandlord or Subtenant for any claim or damage because
of the termination; (ii) Master Landlord shall have no obligation to
recognize Subtenant or any rights of Subtenant to the Sublease Premises or to
honor any agreement between Sublandlord and Subtenant; (iii) Master
Landlord shall not be liable for any prepaid rents or any security deposit paid
by Subtenant to Sublandlord (unless the same

 

 

	
   

  	
  Master
  Landlord

  	
  JC

  	
   

  	
  Sublandlord

  	
  RG

  	
   

  	
  Subtenant

  	
  RH

  

 

 

have been delivered to Master Landlord), and (iv) Master
Landlord shall not be liable to Subtenant for any defaults of Sublandlord under
the Sublease or any other agreement between Sublandlord and Subtenant.
Notwithstanding the foregoing, if the Master Lease expires or terminates for
any reason during the term of the Sublease, or if the Sublandlord surrenders
the Master Lease to Master Landlord during the term of the Sublease, Master
Landlord has the option, by written notice delivered to Subtenant not more than
ten (10) business days after the effective date of the expiration,
termination, or surrender, and without any additional or further agreement of
any kind by Subtenant, to elect to continue the Sublease with the same effect
as if Master Landlord and Subtenant had entered into a lease for that date and
for a term equal to the then unexpired term of the Sublease, and on the same
terms and conditions in the Sublease. In that event, Subtenant will attorn to
Master Landlord, and Master Landlord and Subtenant will have the same rights,
obligations, and remedies under the Sublease as were had by Sublandlord and
Subtenant. However, in no event will Master Landlord (a) be liable for any
act or omission of Sublandlord, (b) be subject to any offsets or defenses
that Subtenant had or might have against Sublandlord, (c) be obligated to
cure any default of Sublandlord that occurred prior to the time that Master
Landlord succeeded to the interest of Sublandlord under the Sublease, (d) be
bound by any payment of rent or other payment paid by Subtenant to Sublandlord
in advance of any periods reserved for that in the Sublease, (a) be bound
by any modification or amendment of the Sublease made without the written
consent of Master Landlord, or (f) be liable for the return of any
security deposit paid by Subtenant but not actually received by Master
Landlord. Neither Master Landlord’s election under this section nor its
acceptance of any rent from Subtenant will be deemed a waiver by Master
Landlord of any provisions of the Master Lease and this Master Landlord’s
Consent.

 

5.                         Absolute
Assignment of Rents. Sublandlord unconditionally assigns to Master
Landlord all rents now due, or which may later become due, under the Sublease
(collectively, “Rents”). Sublandlord acknowledges that the assignment is
present, absolute, and unconditional. Accordingly, Master Landlord shall
collect the Rents and apply them in payment of any sums payable by Sublandlord
under the Master Lease, and Subtenant agrees to pay such Rents to Master Landlord
directly. Master Landlord’s acceptance of any payment on account of Rent from
Subtenant does not release Sublandlord from any liability under the terms,
covenants, conditions, provisions, or agreement under the Master Lease.
However, Sublandlord will have a license to collect the Rents until the
occurrence of an act of default by Sublandlord under the Master Lease. If the
act of default occurs, Sublandlord’s right to collect the Rent will be
suspended until the default is cured. During the period in which Sublandlord’s
right to collect the Rents is suspended, Master Landlord, as assignee and
attorney-in-fact for Sublandbrd under the Master Lease, or a receiver for
Sublandlord appointed pursuant to Master Landlord’s application, will have the
right to collect the Rents and apply them toward Sublandlord’s obligations
under the Master Lease. Master Landlord’s acceptance of any payment on account
of Rent from Subtenant as a result of any act of default does not release
Sublandlord from any liability under the terms, covenants, conditions,
provisions, or agreement under the Master Lease.

 

6.                         Insurance. Subtenant will
carry the insurance policies required to be carried by Sublandlord pursuant to Article 13
of the Master Lease and will deliver evidence of such insurance to Master
Landlord prior to occupancy. The insurance will (a) name Master Landlord,
Sublandlord and Lender as additional named insureds; and (b) provide that
the policy will not be subject to cancellation or change except after thirty
(30) days’ prior written notice to Master Landlord and Sublandlord.

 

7.                         Excess Rents. Pursuant to Article 16
of the Master Lease, Sublandlord will pay to Master Landlord fifty percent
(50%) of the difference, if any, between (a) rents and other
consideration, of whatever nature, payable by Subtenant (or receivable by
Sublandlord) pursuant to the Sublease; and (b) the Rental (as defined in
the Master Lease) payable by Sublandlord to Master Landlord with respect to the
Sublease Premises under the Master Lease. Master Landlord and Sublandlord
acknowledge that no Excess Rent shall be payable based on the  Sublease rental
structure outlined in the Sublease Addendum.

 

8.                         No Consent to
Alterations. Sublandlord and Subtenant acknowledge: (a) that
Master Landlord’s Consent is not a consent to any improvement or alteration
work being performed in the Sublease Premises; (b) that Master Landlord’s
Consent must be separately sought and will not necessarily be given with regard
to alteration work being performed in the Sublease Premises; and (c) and
that if consent is given it will be subject to Sublandlord’s signing Master
Landlord’s standard form of Agreement with respect to work being performed by
persons other than Master Landlord, unless otherwise agreed to in writing by
Master Landlord.

 

Subject
to providing the items required by Landlord to obtain approval for alterations,
Landlord approves the lterations/improvements described in Section 3
(Delivery of Premises) of the Addendum to the Sublease.

 

9.                         Notices. All notices,
demands and requests shall be in writing and shall be sent either by personal
delivery, certified U.S. Mail (return receipt requested) or by reputable
overnight courier service (e.g., Federal Express), to the address of the
appropriate party. Notices, demands and requests so sent shall be deemed given
when the same are received.

 

 

	
   

  	
  Master
  Landlord

  	
  JC

  	
   

  	
  Sublandlord

  	
  RG

  	
   

  	
  Subtenant

  	
  RH

  

 

2

 

Notices
to Master Landlord shall be sent to the attention of:

 

 

Pacific
North Court Holdings, L.P.

c/o American Assets, Inc.

11455
El Camino Real, Suite 200

San Diego, CA 92130

Attn:
James Durfey

Telecopier:
(858) 350-2620

 

Notices
to Sublandlord shall be sent to the attention of:

 

TBA
Entertainment Corporation

Attn: Robert E. Geddes

11682
El Camino Real, Suite 310

San Diego, CA 92130

 

Notices
to Subtenant shall be sent to the attention of:

 

Zogenix, Inc.

Attn:
Chief Financial Officer

11682 El Camino Real, Suite 320

San Diego, CA 92130

 

10.                        Master Landlord’s
Expenses. Promptly upon written request by Master Landlord,
Sublandlord shall reimburse Master Landlord for Master Landlord’s reasonable
cost of reviewing, consenting to, and consummating this Consent, in an amount
equal to $750.00, including without limitation reasonable attorney’s fees and
costs. Master Landlord shall have no obligation to pay any brokers in
connection with this Consent, Sublease or any related transaction. In such
regard, Subtenant and Sublandlord agrees to indemnify, defend and hold harmless
Master Landlord from and against any and all claims by any real estate broker
or salesman whom the Subtenant and/or Sublandlord authorized or employed, or
acted by implication to authorize or employ, to act for Subtenant and/or
Sublandlord in connection with the Sublease, or with any broker or sales person
with whom Subtenant and/or Sublandlord dealt in connection with the Sublease.

 

11.                        Governing Law. The terms and
provision of this Consent shall be construed in accordance with and governed by
the laws of the state of California.

 

12.                        Entire Agreement. This Consent
sets forth the entire agreement between the parties with respect to the subject
matter hereof and shall be amended only by a writing signed by the parties.

 

13.                        Binding Effect. This Consent
shall be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.

 

14.                        Counterparts. This Consent
may be executed in any number of counterparts, each of which when so executed
and delivered, shall be deemed an original, but all such counterparts taken
together shall constitute only one instrument.

 

 

[signature page attached]

 

 

	
   

  	
  Master
  Landlord

  	
  JC

  	
   

  	
  Sublandlord

  	
  RG

  	
   

  	
  Subtenant

  	
  RH

  

 

3

 

IN
WITNESS WHEREOF, the parties have executed this Consent as of the dates set
forth below, to be effective as of the Effective Date.

 

	
   

  	
  MASTER
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  Pacific
  North Court Holdings, L.P.

  
	
   

  
	
   

  	
  By:
  American Assets, Inc.,

  
	
   

  	
  Its
  authorized agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ John W. Chamberlain 

  
	
   

  	
  John
  W. Chamberlain - CEO

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ James Durley

  
	
   

  	
  James
  Durley, Vice President, Office Leasing

  
	
   

  	
  and
  Management

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  3/20/07

  
	
   

  	
   

  
	
   

  	
  SUBLANDLORD:

  
	
   

  	
   

  
	
   

  	
  TBA
  Entertainment Corporation, a Delaware corporation

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/
  R.E. Geddes

  
	
   

  	
  Print
  Name:

  	
  R.E.
  Geddes

  
	
   

  	
  Its:

  	
  CEO

  
	
   

  	
   

  
	
   

  	
  Date:
  

  	
  3/20/07

  
	
   

  
	
   

  	
   

  
	
   

  	
  SUBTENANT:

  
	
   

  	
   

  
	
   

  	
  Zogenix,
  Inc., a Delaware corporation

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/
  Roger L. Hawley

  
	
   

  	
  Print
  Name:

  	
  Roger
  L. Hawley

  
	
   

  	
  Its:

  	
  Chief
  Executive Officer

  
						

 

4QuickLinks
 -- Click here to rapidly navigate through this document

 

 
 

Exhibit 10.11    
    

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 

 
 

MASTER LOAN AND SECURITY AGREEMENT    
    

        THIS MASTER LOAN AND SECURITY AGREEMENT, dated as of March 5, 2007, (this
"Agreement"), between General Electric Capital Corporation (together with its successors and assigns, if any, "Secured
Party") and ZOGENIX, INC. ("Debtor"). Secured Party has an office at 83 Wooster Heights Road, Danbury, CT 06810. Debtor
is a corporation organized and existing under the laws of the State of Delaware (the "State"). Debtor's mailing address and chief place of business is
12760 High Bluff Drive, Suite 130, San Diego, CA 92130. 

1.     LOANS, TERMS OF PAYMENT AND CONDITIONS PRECEDENT.  

 (a)   The Loan and Terms of Payment  

        (i)    The Loan.    Subject to the terms and conditions of this Agreement, Secured Party hereby agrees to make one or
more term loans (each, a "Credit Extension") to Debtor in the aggregate principal amount not to exceed TEN MILLION DOLLARS and NO/100 ($10,000,000.00)
(the "Term Loan Commitment"), which Term Loan Commitment shall terminate on December 21, 2007 (the "Term Loan Commitment
Termination Date"), after which the Secured Party shall have no further obligation to make any additional Credit Extensions;  provided, however, (x) on or after a date that is 30 days prior to the Term Loan
Commitment Termination Date, Debtor may request that the Term Loan Commitment Termination Date be extended for an additional six (6) month period, in which case, if such extension is granted,
the Term Loan Commitment shall terminate on June 21, 2008 (the "Extended Commitment Termination Date"), and (y) on or after a date that is
30 days prior to the Extended Commitment Termination Date, Debtor may request that the Extended Commitment Termination Date be extended for an additional six (6) month period, in which
case, if granted, the Term Loan Commitment shall terminate on December 21, 2008. In the case of clauses (x) and (y) above, such extensions shall be granted by the Secured Party in
its reasonable discretion. Each Credit Extension hereunder shall be evidenced by a Note (as defined below), which Notes are deemed incorporated into and made a part of this Agreement by this
reference. 

        (ii)   Borrowing Mechanics.    When Debtor desires a Credit Extension, Debtor will notify Secured Party by facsimile
or electronic mail (or by telephone, provided that such telephonic notice shall be promptly confirmed in writing). Each Credit Extension shall be in an amount greater than or equal to $250,000 or such
lesser amount as may be agreed to by Secured Party in its sole discretion. Secured Party shall make Credit Extensions for costs associated with the purchase of the equipment listed on  Schedule 1
attached hereto and incorporated herein or other equipment identified by Debtor from time to time by wire transfer to such account as
specified by Debtor at such time as Debtor has complied to the satisfaction of the Secured Party with the conditions precedent set forth in  Section 1(b) below. 

        (iii)  Repayment.    Debtor unconditionally promises to pay Secured Party the aggregate unpaid principal amount of
each Credit Extension, together with interest on the unpaid principal amount of such Credit Extensions from the date of such Credit Extension until repaid at a rate per annum (on the basis of the
actual number of days elapsed over a year of 360 days) at a fixed rate equal to the Treasury Rate (as defined below) and as set forth in the respective promissory note, the form of which is
attached hereto as Exhibit A (as each may be amended, modified, increased, restated or replaced from time to time, collectively, the
"Notes" and each a "Note"); provided,  however, after the
occurrence and during the continuance of an Event of Default (as defined below), at the option of the Secured Party, such rate shall
be equal to the default rate set forth in each Note. For each Credit Extension, Debtor shall make monthly payments of principal and accrued interest in 

 

the
amounts provided by Secured Party and set forth in the respective Note. Once a Credit Extension is prepaid, it cannot be reborrowed. Each Note shall have a term of forty-eight (48) months. 

        "Treasury Rate" means a rate per annum equal to the Treasury Index plus five and 43/100 percent (5.43%). 

        "Treasury Index" means the greater of (i) four and 48/100 percent (4.48%) and (ii) the Treasury Constant Maturities
Rate, as published by the United States Federal Reserve in Statistical Release H.15(519) entitled "Selected Interest Rates" for a term equal to the term of the Note evidencing such Credit
Extension (and if there is no Treasury Constant Maturities Rate published for such term, the rate resulting from the interpolation between the Treasury Constant Maturities Rate published for the next
shorter term and the next longer term), two (2) days prior to the funding of such Credit Extension, including the initial Credit Extension. If any such date is not a business day, then the
quote shall be obtained on the business day immediately preceding such date. If the United States Treasury (a) quotes more than one such rate, then the highest of such quotes shall apply, or
(b) ceases to quote such rate, then the Treasury Index shall be determined from such substitute financial reporting service or source as the Secured Party in its reasonable discretion shall
determine. 

        (iv)  Prepayment.    Debtor may voluntarily prepay, in full, the outstanding amount of any Credit Extension subject
to the prepayment premium set forth in the respective Note. 

 (b)   Conditions of Credit Extensions  

        (i)    Conditions Precedent to Initial Credit Extension.    On or before the initial Credit Extension Debtor shall
deliver, or ensure delivery of, the following to Secured Party: 

        (A)  a
counterpart of this Agreement; 

        (B)  a
Note evidencing the initial Credit Extension; 

        (C)  the
Security Transfer Agreement, dated as of even date herewith, between Debtor and Secured Party (as it may be amended, restated, supplemented or otherwise modified
from time to time, the "German Security Agreement"); 

        (D)  the
Chattel Mortgage, dated as of even date herewith, between Debtor and Secured Party (as it may be amended, restated, supplemented or otherwise modified from time to
time, the "UK Security Agreement"); 

        (E)  the
Warrant to Purchase 200,000 Shares of Series A Preferred Stock, dated March 5, 2007, made by Debtor in favor of Secured Party (as it may be amended,
restated, supplemented or otherwise modified from time to time, the "Warrant"); 

        (F)  a
certificate of the Secretary of Debtor, the form of which is attached hereto as Exhibit B (the
"Secretary's Certificate"), providing verification of incumbency and attaching Debtor's board resolutions approving the transactions contemplated by
this Agreement and the other Debt Documents and Debtor's governing documents; 

        (G)  collateral
assignments, as Secured Party shall request in its reasonable discretion; 

        (H)  certificates
of insurance evidencing the insurance coverage required pursuant to Section 5 below; 

        (I)   current
UCC lien, judgment, bankruptcy and tax lien search results demonstrating that there are no other security interests or liens on the Collateral, other than
Permitted Liens (as defined below), as Secured Party shall request in its reasonable discretion; 

2

 

        (J)   a
certificate of good standing of Debtor as of a date acceptable to Secured Party from the jurisdiction of Debtor's organization; 

        (K)  the
Subordination and Waiver Agreement among MGlas AG, Debtor and Secured Party, the Deed of Subordination and Waiver among Patheon UK Limited, the Debtor and the
Secured Party, the Deed of Subordination and Waiver among Bespak Europe Limited, the Debtor and the Secured Party, and the Deed of Subordination and Waiver among Dawson Shanahan Limited, the Debtor
and the Secured Party, each dated on or about the date hereof (as each may be amended, restated, supplemented or otherwise modified from time to time, collectively, the
"Initial Landlord Consents"); 

        (L)  legal
opinions of counsel for Debtor located in the United States, England and Germany, each in form and substance reasonably satisfactory to Secured Party; 

        (M) one
or more schedules of equipment and personal property related thereto listing in detail sufficient to specifically identify the Collateral and its location (as each
may be amended, restated, supplemented or otherwise modified from time to time the "Collateral Schedules"), which Collateral Schedules shall be annexed
to and made a part hereof, the UK Security Agreement and/or the German Security Agreement and the respective Initial Landlord Consents, as applicable; 

        (N)  UCC
financing statements (and to the extent any such Collateral is to be located in a country other than the United States, such other documents, forms and schedules
necessary to perfect Secured Party's interest in such other jurisdiction in the Collateral) in the correct form for filing in the necessary filing office; and 

        (O)  all
other documents, agreements, opinions, filings and instruments as Secured Party may reasonably deem necessary or appropriate to effectuate the intent and purpose of
this Agreement (together with this Agreement, Note, the German Security Agreement, the UK Security Agreement, the Warrant, the Initial Landlord Consents, Landlord Consents, the Collateral Schedules
and the Secretary's Certificate, as each may be amended, restated, supplemented or otherwise modified from time to time, collectively, the "Debt
Documents"). 

        (ii)   Conditions Precedent to Subsequent Credit Extensions.    Upon each subsequent Credit Extension, Debtor shall
deliver, or ensure delivery of, the following to Secured Party: 

        (A)  a
certificate by an officer of Debtor confirming that (1) all representations and warranties in Section 3
below shall be true as of the date of such Credit Extension, (2) no Event of Default or any other event, which with the giving of notice or the passage of time, or both, would constitute an
Event of Default (such event, a "Default") has occurred and is continuing or will result from the making of any Credit Extension and (3) there
shall not have occurred one or more events, acts, conditions or occurrences of whatever nature, whether singly or in conjunction with any other event or events, act or acts, condition or conditions,
occurrence or occurrences, whether or not related, which gives rise to a material adverse change in, or a material adverse effect upon, any of (I) the condition (financial or otherwise),
operations, business, prospects or properties of Debtor, (II) the rights and remedies of Secured Party under any Debt Document, or the ability of Debtor to perform any of its obligations under
any Debt Document, (III) the legality, validity or enforceability of any Debt Document, or (IV) the existence, perfection or priority of any security interest granted in any Debt
Document or the value of any Collateral (a "Material Adverse Change"); 

        (B)  amendment,
restatement or other modification to, or redelivery or supplemental delivery of, the items set forth in the following sections to the extent circumstances
have changed since the initial Credit Extension: Sections 1(b)(i)(C), (D), (E), (F), (G), (H), (I), (J), (M), (N) and (O); 

3

 

        (C)  a
Note evidencing such Credit Extension; 

        (D)  a
landlord consent and waiver or similar document in favor of Secured Party executed by Debtor, the Secured Party and landlord or contract manufacturer, as the case may
be, for each third party location where Collateral is located, that is not covered by the Initial Landlord Consents, or amendments, restatements, supplements or other modifications to any Initial
Landlord Consent to identify such new equipment if not already identified therein, as the case may be, each satisfactory to Secured Party in its sole discretion (as each may be amended, restated,
supplemented or otherwise modified from time to time, collectively, the "Landlord Consents"); 

        (E)  if
Collateral is located in a jurisdiction other than England, Germany or the United States, a security agreement or similar document pursuant to which the Debtor grants
in favor of the Secured Party a security interest in and to, and a lien upon, the Collateral located in such jurisdiction, which document shall be governed and construed by the laws of such
jurisdiction; 

        (F)  evidence
satisfactory to Secured Party in its sole discretion of payment in full of the purchase price of new equipment that is to become Collateral and the related soft
expenses directly related to the purchase of such equipment including leasehold improvements, software, taxes and freight costs (collectively, "Soft
Costs") and evidence that at least 80% of such purchase price is attributable to the actual hard cost of such equipment and the remaining 20% or less is attributable to the
related Soft Costs; and 

        (G)  a
responsible officer of the Debtor certifies in writing to the Secured Party that such new equipment is to be used in the ordinary course of the Debtor's business and
has been delivered and installed and is fully operable, all to the satisfaction of the Debtor. 

 (c)   Fees and Deposits  

        As an inducement to Secured Party to make the Credit Extensions hereunder, Debtor has paid to Secured Party a good faith deposit equal to one percent (1%) of the
amount of the Term Loan Commitment (the "Commitment Fee"). Debtor and Secured Party agree that the one-half of the Commitment Fee (an amount
equal to $50,000.00) has been credited to the account of the Secured Party as a fully earned, non-refundable
up-front fee and that the remaining portion of the Commitment Fee shall be applied to the initial payment of each such Credit Extension (including the initial advance) as follows:
(i) an amount equal to (A) the amount of such Credit Extension (B) divided by the Term Loan Commitment and (C) multiplied by $50,000, shall be applied to Debtor's first
scheduled payment of such Credit Extension and (ii) any amount of the Commitment Fee not applied on or before the Term Loan Commitment Termination Date shall be retained by Secured Party as a
non-utilization fee. 

2.     CREATION OF SECURITY INTEREST.  

        Debtor grants to Secured Party, its successors and assigns, a security interest in and against all of the right, title and interest of Debtor in and to property
listed on any Collateral Schedule now or in the future signed by Debtor and in and against all additions, attachments, accessories and accessions to such property, all substitutions, replacements or
exchanges therefor, and all insurance and/or other proceeds thereof (all such property is individually and collectively called the "Collateral"). This
security interest is given to secure the prompt payment and performance, whether at the stated maturity, by acceleration or otherwise, of all and any debts, monies, obligations and liabilities, of any
kind whatsoever, now or in the future due or owing by Debtor to Secured Party in whatever currency denominated, whether actually or contingently, alone or jointly with any other person, as principal
or surety, and whether on any current or other account or otherwise including, without limitation, any such debts, monies, obligations and liabilities of Debtor to Secured Party under or in respect of
the 

4

 

Debt
Documents any other document executed in connection with or pursuant to the foregoing, and together with all interest, commissions, fees and legal and other costs charges and expenses which
Secured Party may charge Debtor or incur in relation to Debtor or this Agreement or the Collateral on a full indemnity basis, and any renewals, extensions and modifications of such debts, monies,
obligations and liabilities (collectively, the "Obligations"). 

3.     REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.  

        Debtor represents and warrants, as of the date of this Agreement and as of the date of each Collateral Schedule, and covenants for the duration of this Agreement
that: 

        (a)   Debtor's
exact legal name is as set forth in the preamble of this Agreement and Debtor is, and will remain, duly organized, existing and in good standing under the laws
of the State set forth in the preamble of this Agreement, has its chief executive offices at the location specified in the preamble, and is, and will remain, duly qualified and licensed in every
jurisdiction wherever necessary to carry on its business and operations; 

        (b)   Debtor
has adequate power and capacity to enter into, and to perform its obligations under each and every Debt Document; 

        (c)   This
Agreement and the other Debt Documents have been duly authorized, executed and delivered by Debtor and constitute legal, valid and binding agreements enforceable in
accordance with their terms, except to the extent that the enforcement of remedies may be limited under applicable bankruptcy and insolvency laws; 

        (d)   No
approval, consent or withholding of objections is required from any governmental authority or instrumentality with respect to the entry into, or performance by Debtor
of, any of the Debt Documents, except any already obtained; 

        (e)   The
entry into, and performance by, Debtor of the Debt Documents will not (i) violate any of the organizational documents of Debtor or any judgment, order, law or
regulation applicable to Debtor, or (ii) result in any breach of or constitute a default under any contract to which Debtor is a party, or result in the creation of any lien, claim or
encumbrance on any of Debtor's property (except for liens in favor of Secured Party) pursuant to any indenture, mortgage, deed of trust, bank loan, credit agreement, or other agreement or instrument
to which Debtor is a party; 

        (f)    There
are no suits or proceedings pending in court or before any commission, board or other administrative agency against or affecting Debtor which could reasonably be
expected to, in the aggregate, have a material adverse effect on Debtor, its business or operations, or its ability to perform its obligations under the Debt Documents, nor does Debtor have reason to
believe that any such suits or proceedings are threatened; 

        (g)   All
financial statements delivered to Secured Party in connection with the Obligations have been prepared in accordance with generally accepted accounting principles,
and since the date of the most recent financial statement, there has been no material adverse change in Debtor's financial condition; 

        (h)   The
Collateral is not, and will not be, used by Debtor for personal, family or household purposes; 

        (i)    The
Collateral is, and will remain, in good condition and repair, ordinary wear and tear and damage by casualty excepted, and Debtor will not be negligent in its care
and use; 

        (j)    Debtor
is, and will remain, the sole and lawful owner of the Collateral, and has the sole right and lawful authority to grant the security interest described in this
Agreement, the German Security Agreement and the UK Security Agreement; 

5

 

        (k)   The
Collateral is, and will remain, free and clear of all mortgages, charges, liens, claims and encumbrances of any kind whatsoever, except for (i) liens in favor
of Secured Party, (ii) liens for taxes not yet due or for taxes being contested in good faith and which do not involve, in the judgment of Secured Party, any risk of the sale, forfeiture or
loss of any of the Collateral and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP, and (iii) inchoate materialmen's, mechanic's,
repairmen's and similar liens arising by operation of law in the normal course of business for amounts which are not delinquent (all of such liens are called "Permitted
Liens"); and 

        (l)    Debtor
is and will remain in full compliance with all laws and regulations applicable to it including, without limitation, (i) ensuring that no person who owns a
controlling interest in or otherwise controls Debtor is or shall be (Y) listed on the Specially Designated Nationals and Blocked Person List maintained by the Office of Foreign Assets Control
("OFAC"), Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or
regulation or (Z) a person designated under Section 1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation or
any other similar Executive Orders, and (ii) compliance with all applicable Bank Secrecy Act ("BSA") laws, regulations and government guidance on
BSA compliance and on the prevention and detection of money laundering violations. 

4.     COLLATERAL.  

        (a)   Debtor
shall not move the Collateral from its current location, except that Secured Party shall have the right to possess (i) any chattel paper or instrument that
constitutes a part of the Collateral, and (ii) any other Collateral in which Secured Party's security interest may be perfected only by possession. Secured Party may inspect any of the
Collateral during normal business hours after giving Debtor reasonable prior notice and otherwise complying with the provisions of any estoppel, consent or similar agreement between Secured Party and
any third parties pertaining to the applicable Collateral to be inspected. If Secured Party asks, Debtor will promptly notify Secured Party in writing of the location of any Collateral. 

        (b)   Debtor
shall, or shall cause other parties to, (i) use the Collateral only in its trade or business, (ii) maintain all of the Collateral in good operating
order and repair, normal wear and tear excepted, (iii) use and maintain the Collateral only in compliance with manufacturers recommendations and all applicable laws, and (iv) keep all of
the Collateral free and clear of all liens, claims and encumbrances (except for Permitted Liens). 

        (c)   Secured
Party does not authorize and Debtor agrees it shall not (i) part with possession of any of the Collateral (except to Secured Party or for maintenance and
repair), (ii) remove any of the Collateral from the country in which it is located, or (iii) sell, rent, lease, mortgage, license, grant a security interest in or otherwise transfer or
encumber (except for Permitted Liens) any of the Collateral. 

        (d)   Debtor
shall pay promptly, or cause to be promptly paid, when due all taxes, license fees, assessments and public and private charges levied or assessed on any of the
Collateral, on its use, or on this Agreement or any of the other Debt Documents. At its option, Secured Party may discharge taxes, liens, security interests or other encumbrances at any time levied or
placed on the Collateral and may pay for the maintenance, insurance and preservation of the Collateral and effect compliance with the terms of this Agreement or any of the other Debt Documents. Debtor
agrees to reimburse Secured Party, on demand, all costs and expenses incurred by Secured Party in connection with such payment or performance and agrees that such reimbursement obligation shall be
part of the Obligations. 

6

 

        (e)   Debtor
shall, at all times, keep accurate and complete records of the Collateral, and Secured Party shall have the right to inspect and make copies of all of Debtor's
books and records relating to the Collateral during normal business hours, after giving Debtor reasonable prior notice. 

        (f)    Debtor
agrees and acknowledges that any third person who may at any time possess all or any portion of the Collateral shall be deemed to hold, and shall hold, the
Collateral as the agent of, and as pledge holder for, Secured Party. Secured Party may at any time give notice to any third person described in the preceding sentence that such third person is holding
the Collateral as the agent of, and as pledge holder for, Secured Party. 

5.     INSURANCE.  

        (a)   Debtor
shall at all times bear the entire risk of any loss, theft, damage to, or destruction of, any of the Collateral from any cause whatsoever. 

        (b)   Debtor
agrees to keep the Collateral insured against loss or damage by fire and extended coverage perils, theft, burglary, and for any or all Collateral which are
vehicles, for risk of loss by collision, and if requested by Secured Party, against such other risks as Secured Party may reasonably require. The insurance coverage shall be in an amount no less than
the full replacement value of the Collateral, and deductible amounts, insurers and policies shall be acceptable to Secured Party. Debtor shall deliver to Secured Party policies or certificates of
insurance evidencing such coverage. Each policy shall name Secured Party as additional insured and Secured Party's loss payee, shall provide for coverage to Secured Party regardless of the breach by
Debtor of any warranty or representation made therein, shall not be subject to co-insurance, and shall provide that coverage may not be canceled or altered by the insurer except upon
thirty (30) days prior written notice to Secured Party. Debtor hereby irrevocably authorizes and instructs any insurer (to whom this authority and instruction may be disclosed) to disclose all
relevant information to Secured Party and appoints Secured Party as its attorney-in-fact to make proof of loss, claim for insurance and adjustments with insurers, and to
receive payment of and execute or endorse all documents, checks or drafts in connection with insurance payments. Secured Party shall not act as Debtor's attorney-in-fact unless
an Event of Default shall have occurred and is continuing. Proceeds of insurance shall be applied, at the option of Secured Party, to repair or replace the Collateral or to reduce any of the
Obligations. To the extent such proceeds of insurance are applied to reduce any of the Obligations, such payment shall not be subject to the prepayment premium set forth in the Notes. 

6.     REPORTS.  

        (a)   Debtor
shall promptly notify Secured Party of (i) any change in the name of Debtor, (ii) any change in the state of its incorporation, organization or
registration, (iii) any relocation of its chief executive offices, (iv) any relocation of any of the Collateral, (v) any of the Collateral being lost, stolen, missing, destroyed,
materially damaged or worn out, or (vi) any lien, claim or encumbrance other than Permitted Liens attaching to or being made against any of the Collateral. 

        (b)   Debtor
will deliver to Secured Party financial statements as follows. If Debtor is a privately held company, then Debtor agrees to provide monthly financial statements,
certified by Debtor's president or chief financial officer including a balance sheet, statement of operations and cash flow statement within 30 days of each month end and its complete audited
annual financial statements, certified by a recognized firm of certified public accountants, within 120 days of fiscal year end or at such time as Debtor's Board of Directors receives the
audit. If Debtor is a publicly held company, then Debtor agrees to provide quarterly unaudited statements and annual audited statements, certified by a recognized firm of certified public accountants,
within 10 days after the statements are provided to the Securities and Exchange Commission ("SEC"). All such statements are to be prepared using
generally 

7

 

accepted
accounting principles ("GAAP") and, if Debtor is a publicly held company, are to be in compliance with SEC requirements. 

7.     FURTHER ASSURANCES.  

        (a)   Debtor
shall, upon request of Secured Party, furnish to Secured Party such further information, execute and deliver to Secured Party such documents and instruments
(including, without limitation, Uniform Commercial Code financing statements) and shall do such other acts and things as Secured Party may at any time reasonably request relating to the perfection or
protection of the security interest created by this Agreement or for the purpose of carrying out the intent of this Agreement. Without limiting the foregoing, Debtor shall cooperate and do all acts
deemed necessary or advisable by Secured Party to continue in Secured Party a perfected first security interest in the Collateral, and shall use its best efforts to obtain and furnish to Secured Party
any subordinations, releases, landlord waivers, lessor waivers, mortgagee waivers, or control agreements, and similar documents as may be from time to time reasonably requested by, and in form and
substance reasonably satisfactory to, Secured Party; provided, however, in the event of any sale of the
premises in which any Collateral is located by the contract manufacturer or landlord party to the Initial Landlord Consent, Debtor shall obtain and furnish to Secured Party any subordinations,
releases, landlord waivers, lessor waivers, mortgagee waivers, or control agreements, or similar documents as may be reasonably requested by, and in form and substance reasonably satisfactory to,
Secured Party; provided, further, that the foregoing shall not apply, and Debtor shall not be required
to obtain any such subordinations, releases, landlord waivers, lessor waivers, mortgagee waivers, control agreements or similar documents, if following such sale (i) the party to the Initial
Landlord Consent pertaining to such premises remains in possession and control of that portion of the premises where the respective Collateral is located, and (ii) each provision of the Initial
Landlord Consent remains enforceable against such party to the same extent that such Initial Landlord Consent was enforceable immediately prior to such sale. 

        (b)   Debtor
authorizes Secured Party to file a financing statement and amendments thereto describing the Collateral and containing any other information required by
the applicable Uniform Commercial Code. Debtor irrevocably grants to Secured Party the power, exercisable by Secured Party only while an Event of Default has occurred and is continuing, to sign
Debtor's name and generally to act on behalf of Debtor to execute and file applications for title, transfers of title, financing statements, notices of lien and other documents pertaining to any or
all of the Collateral; this power is coupled with Secured Party's interest in the Collateral. Debtor shall, if any certificate of title be required or permitted by law for any of the Collateral,
obtain and promptly deliver to Secured Party such certificate showing the lien of this Agreement with respect to the Collateral. Debtor ratifies its prior authorization for Secured Party to file
financing statements and amendments thereto describing the Collateral and containing any other information required by the Uniform Commercial Code if filed prior to the date hereof. 

        (c)   Debtor
shall indemnify and defend Secured Party, its successors and assigns, and their respective directors, officers and employees, from and against all claims, actions
and suits (including, without limitation, related attorneys' fees) of any kind whatsoever arising, directly or indirectly, in connection with any of the Collateral, this Agreement, any other Debt
Document, and the transactions contemplated hereby or thereby, except for claims, actions or suits arising from the gross negligence or willful misconduct of Secured Party or its successors or assigns
and their respective directors, officers and employees as determined by final judgment of a court of competent jurisdiction. 

8

 

8.     DEFAULT AND REMEDIES.  

        (a)   The
occurrence of any one or more of the following events shall constitute an "Event of Default" under this Agreement and each of the other Debt Documents: 

        (i)    Debtor
breaches its obligation to pay when due any installment or other amount due or coming due under any of the Debt Documents and fails to cure the breach within ten
(10) days; 

        (ii)   Debtor,
without the prior written consent of Secured Party, attempts to or does relocate, move, sell, rent, lease, license, mortgage, grant a security interest in, or
otherwise transfer or encumber (except for Permitted Liens) any of the Collateral; 

        (iii)  Debtor
breaches any of its insurance obligations under Section 5; 

        (iv)  Debtor
breaches any of its other obligations under any of the Debt Documents and fails to cure that breach within thirty (30) days after written notice from
Secured Party; 

        (v)   Any
warranty, representation or statement made by Debtor in any of the Debt Documents or otherwise in connection with any of the Obligations shall be false or misleading
in any material respect as of the date made; 

        (vi)  Any
of the Collateral is subjected to attachment, execution, levy, seizure or confiscation in any legal proceeding or otherwise, or if any legal or administrative
proceeding is commenced against Debtor or any of the Collateral, which in the good faith judgment of Secured Party subjects any of the Collateral to a material risk of attachment, execution, levy,
seizure or confiscation and no bond is posted or protective order obtained to negate such risk; 

        (vii) Debtor
breaches or is in default under any other agreement between Debtor and Secured Party; 

        (viii)  Debtor
or any guarantor or other obligor for any of the Obligations (collectively "Guarantor") dissolves, terminates
its existence, becomes insolvent or ceases to do business as a going concern; 

        (ix)  If
Debtor or any Guarantor is a natural person, Debtor or any such Guarantor dies or becomes incompetent; 

        (x)   A
receiver is appointed for all or of any part of the property of Debtor or any Guarantor, or Debtor or any Guarantor makes any assignment for the benefit of creditors; 

        (xi)  Debtor
or any Guarantor files a petition under any bankruptcy, insolvency or similar law, or any such petition is filed against Debtor or any Guarantor and is
not dismissed within forty-five (45) days; 

        (xii) Debtor's
improper filing of an amendment or termination statement relating to a filed financing statement describing the Collateral; 

        (xiii)  Any
Material Adverse Change has occurred, as determined solely by Secured Party; 

        (xiv) Any
Guarantor revokes or attempts to revoke its guaranty of any of the Obligations or fails to observe or perform any covenant, condition or agreement to be performed
under any guaranty or other related document to which it is a party; 

        (xv) Debtor
defaults under any other material obligation for (A) borrowed money, (B) the deferred purchase price of property or (C) payments due under
any lease agreement; or 

        (xvi) At
any time during the term of this Agreement Debtor experiences a change of control such that any person or entity acquires either more than 50% of the voting stock
of Debtor or all or substantially all of Debtor's assets, in either case, without Secured Party's prior written consent. 

9

 

        (b)   Upon
the occurrence and during the continuance of an Event of Default, Secured Party, at its option, may declare any or all of the Obligations to be immediately due and
payable, without demand or notice to Debtor or any Guarantor. The accelerated obligations and liabilities shall bear interest (both before and after any judgment) until paid in full at the lower of
eighteen percent (18%) per annum or the maximum rate not prohibited by applicable law. 

        (c)   Upon
the occurrence and during the continuance of an Event of Default, Secured Party shall have all of the rights and remedies of a Secured Party under the Uniform
Commercial Code, and under any other applicable law. Without limiting the foregoing, Secured Party shall have the right to (i) notify any account debtor of Debtor or any obligor on any
instrument which constitutes part of the Collateral to make payment to Secured Party, (ii) with or without legal process, enter any premises where the Collateral may be and take possession of
and remove the Collateral from the premises or store it on the premises (provided, however, that any
such action by Secured Party shall be carried out in a manner that complies with the provisions of any estoppel, consent or similar agreement between Secured Party and any third parties pertaining to
the Collateral), (iii) sell the Collateral at public or private sale, in whole or in part, and have the right to bid and purchase at said sale, or (iv) lease or otherwise dispose of all
or part of the Collateral, applying proceeds from such disposition to the Obligations. If requested by Secured Party, Debtor shall promptly assemble the Collateral and make it available to Secured
Party at a place to be designated by Secured Party which is reasonably convenient to both parties. Secured Party may also render any or all of the Collateral unusable at Debtor's premises and may
dispose of such Collateral on such premises without liability for rent or costs. Any notice that Secured Party is required to give to Debtor under the Uniform Commercial Code of the time and place of
any public sale or the time after which any private sale or other intended disposition of the Collateral is to be made shall be deemed to constitute reasonable notice if such notice is given to the
last known address of Debtor at least five (5) days prior to such action. 

        (d)   Proceeds
from any sale or lease or other disposition shall be applied: first, to all costs of repossession, storage, and disposition including without limitation
attorneys', appraisers', and auctioneers' fees; second, to discharge the Obligations; third, to discharge any other obligation or indebtedness of Debtor to Secured Party, whether as obligor, endorser,
guarantor, surety or indemnitor; fourth, to expenses incurred in paying or settling liens and claims against the Collateral; and lastly, to Debtor, if there exists any surplus. Debtor shall remain
fully liable for any deficiency. 

        (e)   Debtor
agrees to pay all reasonable attorneys' fees and other fees, costs and expenses incurred by Secured Party (including, without limitation, the allocated cost of
in-house legal counsel) in connection with the enforcement, assertion, defense or preservation of Secured Party's rights and remedies under this Agreement, or if prohibited by law, such
lesser sum as may be permitted. Debtor further agrees that such fees and costs shall be part of the Obligations. 

        (f)    Secured
Party's rights and remedies under this Agreement or otherwise arising are cumulative and may be exercised singularly or concurrently. Neither the failure nor any
delay on the part of Secured Party to exercise any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege
preclude any other or further exercise of that or any other right, power or privilege. SECURED PARTY SHALL NOT BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OTHER
AGREEMENT, INSTRUMENT OR PAPER SIGNED BY DEBTOR UNLESS SUCH WAIVER IS EXPRESSED IN WRITING AND SIGNED BY SECURED PARTY. A waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion. 

        (g)   DEBTOR
AND SECURED PARTY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER
DEBT DOCUMENTS, ANY OF THE 

10

 

OBLIGATIONS
SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING
ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS
WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 

        FOR
THE PURPOSE OF ANY ENFORCEMENT BY SECURED PARTY OF ANY OR ALL OF ITS RIGHTS UNDER THIS AGREEMENT IN THE UNITED STATES, ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO ANY DEBT
DOCUMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, DEBTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
(AND, TO THE EXTENT SET FORTH IN ANY OTHER DEBT DOCUMENT, EACH OTHER PARTY) HEREBY IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, THAT ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH JURISDICTIONS. 

        EACH
DEBTOR (AND, TO THE EXTENT SET FORTH IN ANY OTHER DEBT DOCUMENT, EACH OTHER PARTY) HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND
OTHER DOCUMENTS AND OTHER SERVICE OF PROCESS OF ANY KIND AND CONSENTS TO SUCH SERVICE IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN THE UNITED STATES OF AMERICA WITH RESPECT TO OR OTHERWISE ARISING OUT
OF OR IN CONNECTION WITH ANY DEBT DOCUMENT BY ANY MEANS PERMITTED BY APPLICABLE REQUIREMENTS OF LAW, INCLUDING BY THE MAILING THEREOF (BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID) TO THE ADDRESS
OF THE DEBTOR SPECIFIED IN PREAMBLE HERETO (AND SHALL BE EFFECTIVE WHEN SUCH MAILING SHALL BE EFFECTIVE, AS PROVIDED THEREIN). EACH DEBTOR (AND, TO THE EXTENT SET FORTH IN ANY OTHER DEBT DOCUMENT,
EACH OTHER PARTY) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED
BY LAW. 

        FOR
THE PURPOSE OF ANY ENFORCEMENT BY SECURED PARTY OF ANY OR ALL OF ITS RIGHTS UNDER THIS AGREEMENT, (i) IN THE UNITED KINGDOM DEBTOR HEREBY UNCONDITIONALLY AND IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE ENGLISH COURTS AND HEREBY APPOINTS LAW DEBENTURE CORPORATE SERVICES LIMITED WHOSE ADDRESS IS FIFTH FLOOR, 100 WOOD STREET, LONDON,
EC2V 7EX AS ITS AGENT FOR SERVICE OF ANY LEGAL PROCEEDINGS IN THE ENGLISH COURTS AND (ii) IN GERMANY, DEBTOR HEREBY UNCONDITIONALLY AND IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE GERMAN COURTS AND HEREBY APPOINTS MR. TIM SCHWARZBURG, NEUHAUS MASSENKEIL 

11

 

ZELLER &
PARTNER, SCHLOßSTRAßE 1, 56068 KOBLENZS ITS AGENT FOR SERVICE OF ANY LEGAL PROCEEDINGS IN THE GERMAN COURTS. DEBTOR WILL MAINTAIN AN AGENT FOR SERVICE OF
PROCESS IN EACH OF ENGLAND AND GERMANY. 

9.     MISCELLANEOUS.  

        (a)   This
Agreement, any Note and/or any of the other Debt Documents may be assigned, in whole or in part, by Secured Party without notice to Debtor, and Debtor agrees not to
assert against any such assignee, or assignee's assigns, any defense, set-off, recoupment claim or counterclaim which Debtor has or may at any time have against Secured Party for any
reason whatsoever. Debtor agrees that if Debtor receives written notice of an assignment from Secured Party, Debtor will pay all amounts payable under any assigned Debt Documents to such assignee or
as instructed by Secured Party. Debtor also agrees to confirm in writing receipt of the notice of assignment as may be reasonably requested by Secured Party or assignee. 

        (b)   All
notices to be given in connection with this Agreement shall be in writing, shall be addressed to the parties at their respective addresses set forth in this
Agreement (unless and until a different address may be specified in a written notice to the other party and, with respect to any notice given to Secured Party, with a copy to Hogan &
Hartson LLP, 555 Thirteenth Street, N.W. Washington, D.C. 20004, attention Deborah K. Staudinger), and shall be deemed given (i) on the date of receipt if delivered in hand or by
facsimile transmission, (ii) on the next business day after being sent by express mail, and (iii) on the fourth business day after being sent by regular, registered or certified mail. As
used herein, the term "business day" shall mean and include any day other than Saturdays, Sundays, or other days on which commercial banks in New York, New York are required or authorized to be
closed. 

        (c)   Debtor
agrees to pay all reasonable attorneys' fees and all other fees, costs and expenses incurred by Secured Party (including, without limitation, the allocated cost
of in-house legal counsel) in connection with the preparation, negotiation and closing of the transactions contemplated in this Agreement and all related documents and schedules and in
connection with the continued administration thereof, including, without limitation, any amendments, modifications, consents or waivers thereof and in connection with the protection, monitoring or
preservation of the Collateral. Debtor further agrees that such fees and costs shall part of the Obligations. 

        (d)   Secured
Party may correct patent errors and fill in all blanks in this Agreement or in any Collateral Schedule consistent with the agreement of the parties. 

        (e)   Time
is of the essence of this Agreement. This Agreement shall be binding, jointly and severally, upon all parties described as the "Debtor" and their respective heirs,
executors, representatives, successors and assigns, and shall inure to the benefit of Secured Party, its successors and assigns. 

        (f)    This
Agreement, its Collateral Schedules and any additional security interest given by Debtor to Secured Party under security agreements and other documents and
agreements related thereto with respect to the Collateral located abroad, and its Collateral Schedules constitute the entire agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior understandings (whether written, verbal or implied) with respect to such subject matter. THIS AGREEMENT AND ITS COLLATERAL SCHEDULES SHALL NOT BE CHANGED OR
TERMINATED ORALLY OR BY COURSE OF CONDUCT, BUT ONLY BY A WRITING SIGNED BY BOTH PARTIES. Section headings contained in this Agreement have been included for convenience only, and shall not affect the
construction or interpretation of this Agreement. 

        (g)   This
Agreement shall continue in full force and effect until all of the Obligations has been indefeasibly paid in full to Secured Party or its assignee. The surrender,
upon payment or otherwise, of 

12

 

any
Note or any of the other documents evidencing any of the Obligations shall not affect the right of Secured Party to retain the Collateral for such other Obligations as may then exist or as it may
be reasonably contemplated will exist in the future. This Agreement shall automatically be reinstated if Secured Party is ever required to return or restore the payment of all or any portion of the
Obligations (all as though such payment had never been made). 

        (h)   Debtor
authorizes Secured Party to use its name, logo and/or trademark without notice to or consent by Debtor, in connection with certain promotional materials that
Secured Party may disseminate to the public. The promotional materials may include, but are not limited to, brochures, video tape, internet website, press releases, advertising in newspaper and/or
other periodicals, lucites, and any other materials relating the fact that Secured Party has a financing relationship with Debtor and such materials may be developed, disseminated and used without
Debtor's review. Nothing herein obligates Secured Party to use Debtor's name, logo and/or trademark, in any promotional materials of Secured Party. 

        (i)    THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE COLLATERAL. 

        (j)    Secured
Party shall have no obligation to marshal any assets in favor of Debtor, or against or in payment of any obligations owed to Secured Party by Debtor. 

13

 

  
        IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally bound hereby, have duly executed this Agreement in one or more
counterparts, each of which shall be deemed to be an original, as of the day and year first aforesaid. 

	SECURED PARTY:	 	DEBTOR:
	
General Electric Capital Corporation	
 	

Zogenix, Inc.
	

By:	

Diane Earle
	
 	

By:	

Roger L. Hawley

	

Name:	

Diane Earle
	
 	

Name:	

Roger L. Hawley

	

Title:	

Duly Authorized Signatory
	
 	

Title:	

CEO

S-1

 

 
 

Exhibit A    
    

Form of Note  

	$                                    	 	[DATE]

        FOR
VALUE RECEIVED, Zogenix, Inc., a Delaware corporation located at the address stated below
("Maker") promises to pay to the order of General Electric Capital Corporation or any subsequent holder
hereof (each, a "Payee") at its office located at 83 Wooster Heights Road, Danbury, CT 06810 or at such
other place as Payee may designate by written notice to Maker, the principal sum of                        DOLLARS ($            ), with interest on the
unpaid principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate
of                         percent (            %) per annum (the
"Contract Rate") in installments consisting of [(i) FORTY SEVEN (47) consecutive monthly installments of principal and interest
(each, a "Periodic Installment") and (ii) a final installment which shall be in the amount of the total outstanding and unpaid principal, accrued
interest and any and all amounts due hereunder and under the other Debt Documents (as defined below)], all as set forth on  Schedule 1, attached hereto. The first Periodic Installment shall be due
and payable on                        , and the subsequent Periodic Installments
and the final installment shall be due and payable on the same day of each succeeding period (each, a "Payment Date"). Such installments have been
calculated on the basis of a 360 day year of twelve 30-day months. Each payment may, at the option of Payee, be calculated and applied on an assumption that such payment would be
made on its due date. 

        All
payments shall be applied: first, to interest due and unpaid hereunder and under the other Debt Documents;  second, to all other amounts due and unpaid
hereunder and under the other Debt Documents, and then to principal due hereunder and under the other Debt
Documents. The acceptance by Payee of any payment which is less than payment in full of all amounts due and owing at such time shall not constitute a waiver of Payee's right to receive payment in full
at such time or at any prior or subsequent time. The payment of any Periodic Installment prior to its due date shall result in a corresponding increase in the portion of the Periodic Installment
credited to the remaining unpaid principal balance. 

        All
amounts due hereunder and under the other Debt Documents are payable in the lawful currency of the United States of America. Maker hereby expressly authorizes Payee to insert the
date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto. 

        This
Note is one of the "Notes" as defined in that certain Master Loan and Security Agreement, dated as of March 5, 2007, between Maker and Payee (as it may be amended, restated,
supplemented or otherwise modified from time to time, the "Loan Agreement") and may be further secured by security agreements, chattel mortgages, pledge
agreements or like instruments. Capitalized terms used, but not otherwise defined herein shall have the meaning given such terms in the Loan Agreement. 

        Time
is of the essence hereof, If Payee does not receive from Maker payment in full of any Periodic Installment or any other sum due under this Note or any other Debt Document is not
received within ten (10) days after its due date, Maker agrees to pay a late fee equal to five percent (5%) on such late Periodic Installment or other sum, but not exceeding any lawful maximum.
Such late fee will be immediately due and payable, and is in addition to any other costs, fees and expenses that Maker may owe as a result of such late payment. Additionally, if (i) Maker fails
to make payment of any amount due hereunder within ten (10) days after the same becomes due and payable; or (ii) Maker is in default under, or fails to perform under any term or
condition contained in any Debt Document, in each case beyond all applicable notice and cure periods, then (x) the entire principal sum remaining unpaid, together with all accrued interest
thereon and any other sum payable under this Note or any other Debt Document, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen
percent (18%) per annum or the highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any 

judgment)
and/or (y) Payee may enforce its rights under any or all Debt Documents. The application of such 18% interest rate shall not be interpreted or deemed to extend any cure period set
forth in this Note or any other Debt Document, cure any default or otherwise limit Payee's right or remedies hereunder or under any Debt Document. 

        The
Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the entire indebtedness, interest costs and fees due and owing hereunder plus an
additional sum as a
premium equal to the following percentages of the outstanding principal balance for the indicated period: 

	Period
 
	 	Prepayment Premium
	 
	On or before the first annual anniversary of this Note	 	4	%
	After the first anniversary but prior to the second annual anniversary	 	3	%
	After the second anniversary but prior to the third annual anniversary	 	2	%
	After the third anniversary but prior to the fourth annual anniversary	 	1	%
	 	Thereafter	 	0	%

        It
is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that, notwithstanding any provision to the contrary in this Note or any
other Debt Document, in no event shall this Note or any other Debt Document require the payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. If any
such excess interest is contracted for, charged or received under this Note or any other Debt Document, or if all of the principal balance shall be prepaid, so that under any of such circumstances the
amount of interest contracted for, charged or received under this Note or any other Debt Document on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then
in such event: (a) the provisions of this paragraph shall govern and control, (b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be
obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by applicable law, (c) any such excess which may have been collected
shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of Payee, and (d) the effective rate of interest shall be automatically reduced
to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing,
all calculations of the rate of interest contracted for, charged or received under this Note or any Debt Document which are made for the purpose of determining whether such rate exceeds the maximum
lawful contract rate, shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the
indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by Payee in connection with such indebtedness; provided, however, that if any
applicable state law is amended or the law of the United States of
America preempts any applicable state law, so that it becomes lawful for Payee to receive a greater interest per annum rate than is presently allowed, Maker agrees that, on the effective date of such
amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by the amended state law or the law of the United States of
America. 

        Maker
hereby consents to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of, security or of any party primarily or secondarily
liable on this Note or any other Debt Document or any term and provision of either, which may be made, granted or consented to by Payee, and agrees that suit may be brought and maintained against
Maker and/or any and all sureties, endorsers, guarantors or any others who may at any time become liable for payments and performance under this Note and any other Debt Documents (each such person,
other than Maker, an "Obligor"), at the election of Payee without joinder of any other as a party thereto, and that 

Payee
shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. Maker hereby waives presentment, demand for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting this Note or
enforcing any of the security hereof, and agrees to pay (if permitted by law) all expenses incurred in collection, including Payee's actual attorneys' fees. 

        THIS
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 

        MAKER
AND PAYEE UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THE
OBLIGATIONS SECURED HEREBY, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED
BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR NOTES
RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY TILE COURT. 

        FOR
THE PURPOSE OF ANY ENFORCEMENT BY PAYEE OF ANY OR ALL OF ITS RIGHTS UNDER THIS NOTE IN THE UNITED STATES, ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO ANY DEBT DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY OF NEW YORK, BOROUGH OF
MANHATTAN, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS NOTE, MAKER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO (AND, TO THE EXTENT SET FORTH IN ANY OTHER DEBT DOCUMENT, EACH OTHER PARTY) HEREBY
IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH JURISDICTIONS. 

        EACH
MAKER (AND, TO THE EXTENT SET FORTH IN ANY OTHER DEBT DOCUMENT, EACH OTHER PARTY) HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND OTHER
DOCUMENTS AND OTHER SERVICE OF PROCESS OF ANY KIND AND CONSENTS TO SUCH SERVICE IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN THE UNITED STATES OF AMERICA WITH RESPECT TO OR OTHERWISE ARISING OUT OF OR
IN CONNECTION WITH ANY DEBT DOCUMENT BY ANY MEANS PERMITTED BY APPLICABLE REQUIREMENTS OF LAW, INCLUDING BY THE MAILING THEREOF (BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID) TO THE ADDRESS OF THE
MAKER SPECIFIED IN PREAMBLE HERETO (AND SHALL BE EFFECTIVE WHEN SUCH MAILING SHALL BE EFFECTIVE, AS PROVIDED THEREIN). EACH MAKER (AND, TO THE EXTENT SET FORTH IN ANY OTHER DEBT DOCUMENT, EACH OTHER
PARTY) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON TILE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. 

        This
Note and the other Debt Documents constitute the entire agreement of Maker and Payee with respect to the subject matter hereof and supersede all prior understandings, agreements and
representations, express or implied. 

        No
variation or modification of this Note, or any waiver of any of its provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and
Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given. 

        Any
provision in this Note or any of the other Debt Documents which is in conflict with any statute, law or applicable rule shall be deemed omitted, modified or altered to conform
thereto. 

Payment Authorization  

        Payee is hereby directed and authorized by Maker to advance and/or apply the proceeds of the loan as evidenced by this Note to the following parties in the
stipulated amounts as set forth below: 

	Comp any Name
 
	 	Amount

	Maker	 	$	 
	Legal Fees	 	$	 
	Total	 	$	 

	*
	Funds
from your Commitment Fee have been applied as follows: $                        towards balance of interim interest
due                        . 

        Any
provision in this Note or any of the other Debt Documents which is in conflict with any statute, law or applicable rule shall be deemed omitted, modified or altered to conform
thereto. 

  Exhibit B  

 Form of Secretary's Certificate  

        Reference is made to the Master Loan and Security Agreement, dated as of the date hereof, between [Customer Name] (the
"Agreement"), a [corporation/limited liability company/limited liability partnership/limited partnership] organized and existing
under the laws of the State of [                        ] (the "Debtor") and
General Electric Capital Corporation (the
"Secured Party"). Capitalized terms used but not defined herein are used with the meanings assigned to such terms in the Agreement. 

        I,
                                    ,
do hereby certify that: 

          (i)  I
am the duly elected, qualified and acting [Assistant] Secretary of Debtor; 

         (ii)  attached
hereto as Exhibit A is a true, complete and correct copies of Debtor's [Certificate/Articles
of Incorporation or Articles of Organization/Certificate of Formation] and the [Bylaws/LLC Agreement/Partnership Agreement] (collectively, the
"Governing Documents"), each of which is in full force and effect on and as of the date hereof; 

        (iii)  each
of the following named individuals is a duly elected or appointed, qualified and acting officer of Debtor who holds the offices set opposite such individual's
name, and the signature written opposite the name and title of such officer is such officer's genuine signature: 

	Name
 
	 	Title
	 	Signature

	    	 	 	 	 
	    	 	 	 	 

        (iv)  attached
hereto as Exhibit B are true, complete and correct copies of resolutions adopted by the Board of
Directors/Members of Debtor (the "Board") authorizing the execution, delivery and performance of the Debt Documents to which Debtor is a party, which
resolutions were duly adopted by the Board on [DATE] and all such resolutions are in full force and effect on the date hereof in the form in which adopted without amendment,
modification, rescission or revocation; 

        (iv)  the
execution and delivery of the Debt Documents is not prohibited by or in any manner restricted by the terms of (i) Debtor's Governing Documents,
(ii) any loan agreement, indenture or contract to which Debtor is a party or under which it is bound or (iii) federal or state statute, rule, regulation or court order applicable to
Debtor; 

         (v)  the
foregoing authority shall remain in full force and effect, and Secured Party shall be entitled to rely upon same, until written notice of the modification,
rescission or revocation of same, in whole or in part, has been delivered to Secured Party, but no such modification, rescission or revocation shall, in any event, be effective with respect to any
documents executed or actions taken in reliance upon the foregoing authority before said written notice is delivered to Secured Party; and 

        (vi)  there
are no actions, suits, proceedings or investigations pending or threatened against or affecting Debtor before any court, federal, state, provincial, municipal or
other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any basis therefor, which involves the possibility of any judgment or liability not covered
in full by insurance which could result in any material adverse effect, or materially impair the right or ability of Debtor to carry on its operations substantially as now conducted or anticipated to
be conducted in the future, or which questions the validity of the Debt Documents, or the other documents required thereby or any action to be taken to be taken pursuant to any of the foregoing. 

        IN WITNESS WHEREOF, I have hereunto set my hand as of the first date written above 

	 	 	
	 	 	 	 
	 	 	Name:	 	 	 	 	 	Title: [Assistant] Secretary
	 	 	 	 	
	 	 

[Following signature block required if signatory above will be signing Debt Documents]

        The
undersigned does hereby certify on behalf of Debtor that he is the duly elected or appointed, qualified and acting [TITLE] of Debtor and that
[NAME FROM ABOVE] is the duly elected or appointed, qualified and acting [Assistant] Secretary of Debtor, and that the signature set forth immediately
above is his genuine signature. 

	 	 	
	 	 	 	 
	 	 	Name:	 	 	 	 	 	Title:
	 	 	 	 	
	 	 
	 	 	 	 	
	 	 	 	 

Schedule 1

Equipment  

[***]

          

          

	***
	Certain
information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 

QuickLinks

Exhibit 10.11

MASTER LOAN AND SECURITY AGREEMENT

Exhibit A

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]