Document:

exv10w1

 

Third Amendment 

dated as of May 17, 2007

to

FIRST AMENDED AND RESTATED

MEMORANDUM OF AGREEMENT

REGARDING

GAMING DEVELOPMENT

AND

MANAGEMENT

AGREEMENT

between

SHINGLE SPRINGS BAND OF MIWOK INDIANS

a federally recognized tribe

and

LAKES KAR-SHINGLE SPRINGS, LLC

a Delaware limited liability company

Dated: October 13, 2003

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

- 1 -

 

     THIS THIRD AMENDMENT (“Third Amendment”) to the October 13, 2003 FIRST AMENDED AND RESTATED
MEMORANDUM OF AGREEMENT, as amended by the parties’ June 16, 2004 Amendment and January 23, 2007
Amendment, is made by and between the Shingle Springs Tribal Gaming Authority (hereinafter referred
to as “Authority”), an instrumentality of the Shingle Springs Band of Miwok Indians, a
federally-recognized Indian tribe (hereinafter referred to as “Tribe”), authorized by tribal
Resolution 2004-18 and its related Ordinance, as amended, to exercise the Tribe’s proprietary
rights and powers in connection with a gaming facility to be developed on behalf of the Tribe by
the Authority, whose offices are located at P.O. Box 1340, Shingle Springs, California 95682, and
Lakes KAR-Shingle Springs, LLC, a Delaware limited liability company (hereinafter referred to as
“LKAR”), whose business office is located at 130 Cheshire Lane, Minnetonka, MN 55305, and entered
into as of the 17th day of May, 2007.

RECITALS

     A. The Tribe is a federally recognized Indian tribe eligible for the special programs and
services provided by the United States to Indians because of their status as Indians and is
recognized as possessing powers of self-government.

     B. In compliance with the Indian Gaming Regulatory Act of 1988, P.L. 100-497, 25 U.S.C. 2701
et seq. as it may from time to time be amended, the Tribal Council of the Tribe has
enacted a tribal ordinance regulating the operation of gaming activities on Tribal Lands
(hereinafter referred to as the “Tribal Gaming Ordinance”), creating the Shingle Springs Tribal
Gaming Commission, and authorizing Class II Gaming and Class III Gaming on its Indian lands subject
to the provisions of the Tribal Gaming Ordinance and a Tribal-State Compact.

     C. The Tribe is committed to the use of gaming activities to provide employment and address
the social, economic, education, and health needs of its members; to increase the revenues of the
Tribe; and to enhance the Tribe’s economic self-sufficiency and self-determination.

     D. Because the Tribe lacks the resources to develop and operate a gaming facility and
enterprise on its own, it desired to retain the services of a developer and manager with knowledge
and experience in the gaming industry to secure financing, develop, manage and operate a Class II
Gaming and Class III Gaming facility and related resort facilities located on its Indian lands in
accordance with the Indian Gaming Regulatory Act of 1988, as amended.

     E. To assist with the financing, development, management and operations of its planned gaming
facility and enterprise to be known as the Foothill Oaks Casino (the “Project”), the Tribe and LKAR
entered into the First Amended and Restated Memorandum of Agreement Regarding Gaming Development
and Management Agreement (as amended by an Amendment dated June 16, 2004 and approved by the
Chairman of the National Indian Gaming Commission (“NIGC”) on July 19, 2004 and as further amended
by a Second Amendment dated January 23, 2007 approved by the NIGC on March 20, 2007, hereinafter
collectively referred to as the “October 13, 2003 Amended Memorandum

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

2

 

Agreement”) and other Transaction Documents dated October 13, 2003 in connection with the
Project; capitalized terms used but not otherwise defined herein shall have the meanings set forth
in the October 13, 2003 Amended Memorandum Agreement.

     F. On April 21, 2007, the Tribal Council of the Tribe activated the Shingle Springs Tribal
Gaming Authority (the “Authority”), previously established by tribal Resolution 2004-18 as an
instrumentality of the Tribe, by appointing the Management Board of the Authority; and the
governmental and proprietary powers and rights of the Tribe over the development, construction,
operation, promotion and financing of the Foothill Oaks Casino and the Enterprise, as described in
Section 1 of Ordinance 2004-18, thereby became the delegated responsibility of the Authority (such
activation and delegation being referred to as the “Authority Activation”).

     G. The Tribe, the Authority and LKAR have contemporaneously herewith executed an Assignment
and Assumption Agreement dated as of April 20, 2007 by which, in connection with the Authority
Activation, the Tribe assigned to the Authority, and the Authority assumed, the Tribe’s rights and
responsibilities under the October 13, 2003 Amended Memorandum Agreement and other Transaction
Documents.

     H. Pursuant to the terms of the January 23, 2007 Second Amendment, the Tribe agreed that upon
the Authority becoming activated the Tribe would cause the Authority (i) to approve and execute
this Third Amendment, (ii) enter into an agreement reflecting the assignment to and assumption by
the Authority of the Tribe’s rights and responsibilities under the October 13, 2003 Amended
Memorandum Agreement and other Transaction Documents, in accordance with Section 1 of Ordinance
2004-18; and (iii) adopt a resolution of limited waiver related to approval of this Third
Amendment.

     I. Financing and construction of the Project and the dedicated interchange from US 50
providing direct access to the Shingle Springs Rancheria was delayed because of litigation
commenced by El Dorado County. The Tribe has entered into an agreement with El Dorado County and
received judicial decisions in connection with the litigation, and has also received a permit from
the California Department of Transportation (“CALTRANS”), which will now allow construction of the
US 50 dedicated interchange to begin.

     J. Consistent with the January 23, 2002 FONSI issued by the NIGC in connection with its
approval of the October 13, 2003 Amended Memorandum Agreement, including the requirement that the
Tribe obtain approval of the US 50 dedicated interchange by CALTRANS and the BIA “prior to
construction and operation” of the Project, and also the Tribe’s July 7, 2004 assurance that “it
will not open and operate its gaming facility . . . until the US 50 dedicated interchange is
completed and open to traffic,” construction of the US 50 dedicated interchange and the Project is
scheduled to commence in May 2007, and the Tribe expects to close on the Facility Loan financing in
June 2007.

     K. In connection with the financing and construction of the Project and the US 50

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

3

 

dedicated interchange, the Authority and LKAR desired to further amend the October 13, 2003
Amended Memorandum Agreement as deemed necessary by the Authority and LKAR; accordingly, the
Authority and LKAR entered into a Third Amendment to the October 13, 2003 Amended Memorandum
Agreement dated as of April 20, 2007; since signing the Third Amendment dated as of April 20,
2007, the Authority and LKAR desire to make certain technical revisions to that agreement before
approval by the NIGC and such necessary modifications are incorporated herein; and, accordingly,
the Authority and LKAR agree to enter into this Third Amendment in connection with the Project.
Therefore, the parties hereto intend that this Third Amendment is to supersede and replace in all
respects the Third Amendment dated as of April 20, 2007.

     L. This Third Amendment shall become effective when approved and executed by the Chairman of
the NIGC.

     M. Any dispute regarding this Third Amendment is to be subject to the dispute resolution and
governing law provisions contained in the October 13, 2003 Amended Memorandum Agreement, as well as
the Authority’s resolution of limited waiver to be attached as Exhibit E thereto.

     NOW, THEREFORE, in consideration of the above circumstances and the hereinafter mutual
promises and covenants, and for other good and valuable consideration as set forth herein, the
receipt and sufficiency of which are expressly acknowledged, the Authority and LKAR agree as
follows:

     1. This Third Amendment shall become effective when approved and executed by the Chairman of
the NIGC.

     2. The Authority acknowledges and agrees that, through and subject to the Assignment and
Assumption Agreement dated as of April 20, 2007, the Tribe has duly assigned and delegated to the
Authority all of its right, title, interest and obligations in and to the Project, the Enterprise,
the October 13, 2003 Amended Memorandum Agreement, and the Authority has accepted the assignment
and assumption of each of the same. Without limiting the generality of the foregoing, and for
avoidance of doubt, the Authority and LKAR agree that any and all Minimum Guaranteed Monthly
Payments and other disbursements or advances which were to be made to the Tribe under Sections 2.3,
2.5, 6.3, 6.5, or 6.7 of the October 13, 2003 Amended Memorandum Agreement shall hereafter be made
by LKAR to the Authority rather than the Tribe.

     3. New definitions shall be added to Article 1 of the October 13, 2003 Amended Memorandum
Agreement is amended to read as follows:

     “Affiliate” means, with respect to any specified Person, any other Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by, or is under
common control with the specified Person. For the purposes of this definition, “control”
(including the terms controlling, controlled by, or under common control with) means the
possession, direct or indirect, of the power to direct or cause the direction of the
management

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

4

 

and policies of a person, whether through the ownership of voting securities,
partnership or member interests, by contract or otherwise.

     “Assignment and Assumption Agreement” means the Assignment and Assumption Agreement
dated as of April 20, 2007 between the Tribe, LKAR and the Authority, as amended from time
to time, whereby the Tribe has duly assigned and delegated to the Authority effective April
20, 2007, all of its right, title, interest and obligations in and to this Amended
Memorandum Agreement and other Transaction Documents, the Authority has accepted the
assignment and assumption of each of the same, and LKAR has consented to such assignment and
assumption.

     “Authority” means the Shingle Springs Tribal Gaming Authority, the tribal agency
established pursuant to tribal Resolution 2004-18, as amended from time to time, as an
instrumentality of the Tribe to own and operate the Project and Enterprise.

     “Person” means any person or entity, whether an individual, trustee, corporation,
general partnership, limited partnership, limited liability company, limited liability
partnership, joint stock company, trust, estate, unincorporated organization, business
association, Indian tribe, commission, instrumentality, firm, joint venture, Governmental
Authority, or otherwise.

     “Tribal Agreement” means that certain Tribal Agreement dated as of April 20, 2007,
executed by and between the Tribe and LKAR, as amended from time to time.

     4. Section 1.12 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     1.12 “Costs of Construction” means all costs incurred by the Tribe or LKAR pursuant to
this Amended Memorandum Agreement in the aggregate to develop, construct and complete the
Facility (and the commercial access road/interchange providing access to the Gaming Site),
including, without limitation, labor, materials, all furniture, fixtures and equipment
(including gaming equipment) necessary for the opening of the Facility to the public,
builder’s risk insurance, surveys, permits, interest on the Facility Loan, Land Acquisition
Loan or Transition Loan incurred prior to the opening of the Facility to the public, payment
and performance bonds, architectural plans and services, and a resort feasibility study, but
excluding Initial Costs of Operation. The final amount of costs to be included in the Costs
of Construction shall be determined by mutual agreement of the parties and shall be
documented in the Approved Construction Budget.

     5. Section 1.13 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

5

 

     1.13 “Costs of Gaming Operations” means all expenses for the operation of the
Enterprise’s Class II Gaming and III Gaming activities pursuant to Generally Accepted
Accounting Principles (“GAAP”), including but not limited to the following: (1) all fees
imposed by the Tribal Gaming Commission, including but not limited to fees based upon the
Enterprise’s gross receipts from operation of Class II Gaming and Class III Gaming at the
Facility, (2) fees imposed upon the Enterprise by the National Indian Gaming Commission
based upon its gross receipts from Class II Gaming and Class III Gaming, (3) all funds
required by the Tribal-State Compact to be paid by the Tribe, including but not limited to
any contributions and license/regulatory fee reimbursements payable to the State pursuant to
the Tribal-State Compact, (4) the amount required by the Tribal-State Compact to fund or
support programs for the treatment and assistance of compulsive gamblers and for the
prevention of compulsive gambling, (5) license or other fees for background investigations
upon “key employees” and “primary management officials”, (6) depreciation applicable to the
portion of the Facility in which the Enterprise operates Class II Gaming and Class III
Gaming and depreciable items located therein, (7) costs of administration, hiring, firing
and training employees working in or for the Enterprise’s Class II Gaming and Class III
Gaming activities, (8) compensation and benefits to such employees, (9) management
compensation to be paid Manager under Section 6.5(b) hereof, (10) interest incurred after
the Commencement Date pursuant to the Interim Promissory Note, the Facility Note (excluding
any interest incurred (i) on amounts of the Facility Loan (or any refinancing or replacement
thereof) used to fund any account or escrow arrangement associated with any litigation
expenses pertaining to the Project, which account amounts shall include any capitalized
interest thereon and finance fee costs associated therewith, and (ii) on amounts of the
Facility Loan (or any refinancing or replacements thereof) used to fund payment in
settlement of the “Queen Stipulated Judgment” between the Tribe and certain parties
effective as of March 6, 2006), the Operating Note or Section 6.5(a)(vi) hereof attributable
to Class II Gaming and Class III Gaming activities, and (11) total gaming-related costs,
fees and expenses, including, without limitation, materials, supplies, inventory, utilities,
repairs, maintenance, insurance, bonding, marketing, advertising, annual audits, accounting,
legal or other professional and consulting services, security or guard services, and such
other costs, expenses or fees necessarily, customarily and reasonably incurred in the
operation of the Enterprise’s Class II Gaming and Class III Gaming, and necessary travel
expenses incurred subsequent to the Commencement Date for officers and employees of Manager
and authorized representatives of the Tribe in connection with the Project; provided,
however, that “Costs of Gaming Operations” shall specifically not include any costs of
background investigation of Manager or its employees in connection with the NIGC or any
license fees or costs of background investigations with licensing with the Tribal Gaming
Commission.

     6. Section 1.14 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

6

 

     1.14 “Costs of Incidental Operations” means all expenses pursuant to Generally Accepted
Accounting Principles incurred in operating the hotel, restaurants, food and beverage
service, office space, swimming pool, fitness center, childcare, kids arcade, golf course
and other commercial business areas comprising the Facility in which the Enterprise conducts
neither Class II Gaming nor Class III Gaming, including, without limitation: (1)
depreciation and amortization applicable to such non-gaming facilities based upon an
assumed life consistent with GAAP, and depreciation and amortization of all other assets
(including without limitation all capital replacements and improvements, and fixtures,
furnishings and equipment) located therein in accordance with GAAP; (2) all employment costs
relating to non-gaming employees working in or for such commercial business facilities; (3)
management compensation to be paid Manager under Section 6.5(b) hereof; (4) non-gaming
supplies and materials, insurance, (5) interest incurred after the Commencement Date
pursuant to the Interim Promissory Note, the Facility Note (excluding any interest incurred
(i) on amounts of the Facility Loan (or any refinancing or replacement thereof) used to fund
any account or escrow arrangement associated with any litigation expenses pertaining to the
Project, which account amounts shall include any capitalized interest thereon and finance
fee costs associated therewith, and (ii) on amounts of the Facility Loan (or any refinancing
or replacements thereof) used to fund payment in settlement of the “Queen Stipulated
Judgment” between the Tribe and certain parties effective as of March 6, 2006), the
Operating Note or Section 6.5(a)(vi) hereof attributable to non-Class II Gaming and Class
III Gaming activities, (6) sales, hotel, use or other pass-through taxes collected on
Project patrons which are to be consistent with those collected from patrons of other
similar businesses in El Dorado County, (7) payments made to El Dorado County pursuant to
the Memorandum of Understanding and Intergovernmental Agreement between the County of El
Dorado and the Shingle Springs Band of Miwok Indians dated September 28, 2006, (8) any
commercial access road/interchange maintenance expense incurred pursuant to the Amended
Highway Development Encroachment Agreement entered into in 2003 between the federal
government through the BIA and the California Department of Transportation and acknowledged
by the Tribe, and (9) other non-gaming costs reasonably and customarily incurred in
operation of such portion of the Enterprise in which neither Class II Gaming nor Class III
Gaming may be conducted; provided, however, that no non-commercial operations of the Tribe
(including, without limitation, any school, hospital or library) shall be directly or
indirectly included within the computation of the “Costs of Incidental Operations”.

     7. Section 1.17 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     1.17 “Development Agreement” shall mean those provisions of this Amended Memorandum Agreement
that deal with the development and construction of the Facility, as the same

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

7

 

may be amended or modified. The Development Agreement shall continue until the earlier of
either the Commencement Date or June 11, 2009; provided however, that the Notes and Security
Provisions shall continue until all amounts owing to LKAR with respect thereto have been paid in
full.

     8. Section 1.19 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     1.19 “Dominion Account Agreement” shall mean any agreement granting and governing the
security interest in favor of LKAR in the Dominion Account, together with all amendments,
substitutions and renewals thereof.

     9. Section 1.21 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     1.21 “Enterprise” means the business of the Authority to be commonly known as the
Foothills Oak Casino which will conduct Class II Gaming and Class III Gaming at the
Facility, and which shall include any other lawful commercial activity allowed in or near
the Facility including, but not limited to, operating and managing office space, kids
arcade, child care facility, hotel with swimming pool and golf course, restaurant, RV park,
retail stores, entertainment facilities, or the sale of fuel, food, beverages, alcohol,
tobacco, gifts, and souvenirs.

     10. Section 1.24 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     1.24 “Facility Loan” means, collectively, the loans, notes, bonds, equipment leases
and/or other debt obligations arranged by Developer for the Authority, as borrower
(excluding the loans, advances or other indebtedness evidenced by the Interim Promissory
Note, the Operating Note or the Land Acquisition Note), in an aggregate principal amount not
to exceed six hundred seventy five million dollars ($675,000,000) for financing Initial
Costs of Operation and Costs of Construction (including without limitation the Furnishings
and Equipment), which Facility Loan shall be further evidenced by the Facility Note and
other loan documentation as further defined herein.

     11. Section 1.25 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     1.25 “Facility Note” means the promissory notes, bonds and other documentation evidencing the
Facility Loan in a form or forms to be agreed to by the parties to the Facility Loan, together with
all amendments, substitutions and renewals thereof.

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

8

 

     12. Section 1.33 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     1.33 “Gross Incidental Revenues” means the Enterprise’s total receipts from operating
the hotel, restaurants, food and beverage service, office space, swimming pool, fitness
center, childcare, kids arcade, golf course and other commercial business areas comprising
the Facility in which the Enterprise conducts neither Class II Gaming nor Class III Gaming,
including without limitation any sales, hotel, use or other pass-through taxes collected on
Project patrons which are to be consistent with those collected from patrons of other
similar businesses in El Dorado County (but excluding any insurance proceeds received other
than business interruption insurance proceeds and insurance proceeds received to reimburse
the Enterprise for any claims included, or to be included, as Costs of Incidental
Operations).

     13. Section 1.42 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     1.42 “Limited Recourse” means that repayment of any advances made under the Facility
Loan, if made directly by LKAR, Land Acquisition Loan and Transition Loan advances, and all
liabilities and obligations of the Authority related to this Amended Memorandum Agreement,
the Facility Loan or Facility Note, if the Facility Loan is made directly by LKAR, the Land
Acquisition Note, the Interim Promissory Note, the Operating Note, any UCC Financing
Statements, any other Transaction Documents and their applicable documentation, the
Facility, or the Enterprise contemplated by this Amended Memorandum Agreement, and any
related awards, judgments or decrees, shall be payable solely out of undistributed and
future Net Total Revenues of the Enterprise or any other Tribal Gaming Enterprise, and shall
be a limited recourse obligation of the Authority, with no recourse to tribal assets other
than such undistributed and future Net Total Revenues (except as to: (i) a security interest
in the Furnishings and Equipment purchased with Facility Loan or Transition Loan proceeds or
other purchase money agreements; (ii) the security interest in the undistributed and future
Gross Total Revenues pursuant to the Dominion Account Agreement; and as to any mortgages or
deeds of trust on the Acquired Tribal Lands prior to their transfer in trust). In no event
shall LKAR or its Affiliates have recourse to: (a) the physical property of the Facility
(other than Furnishings and Equipment subject to the security interest securing the Facility
Loan, if made directly by LKAR, or Transition Loan or other purchase money agreements), (b)
Net Total Revenue distributions already made to the Authority or the Tribe pursuant to this
Amended Memorandum Agreement and/or the Dominion Account Agreement, (c) assets of the
Authority or the Tribe purchased with its Net Total Revenue distributions, or (d) any other
asset of the Authority (other than such undistributed and future Net Total Revenues of the
Enterprise or any other Tribal Gaming Enterprise).

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

9

 

     14. Section 1.48 of the October 13, 2003 Amended Memorandum Agreement, is amended to state as
follows:

     1.48 “Net Incidental Revenues” means Gross Incidental Revenues less Costs of Incidental
Operations (excluding management compensation as set forth in Section 6.5 herein).

     15. Section 1.59 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     1.59 “Resolution of Limited Waiver” refers to the limited waivers of sovereign immunity
adopted by the Tribe and the Authority as Exhibit B, Exhibit C, Exhibit
D and Exhibit E, evidencing all approvals required pursuant to the Tribe’s or
the Authority’s governing documents and applicable law.

     16. Section 2.3(b)(i) of the October 13, 2003 Amended Memorandum Agreement is amended to read
as follows:

     (b)(i) The total amount of funds advanced directly from LKAR pursuant to Section
2.3(a)(i) shall equal the total amount of the Transition Loan. The total amount of the
Transition Loan shall be in an amount not exceeding Sixty Million Dollars ($60,000,000) in
principal amount. The parties agree that as of April 20, 2007, LKAR has advanced
$46,624,205.92 in aggregate principal amount under the Transition Loan. The Transition Loan
shall accrue interest at the prime interest rate of Chase Manhattan Bank (or any successor
bank by acquisition or merger) plus two percent (2%), which shall adjust as provided in the
Interim Promissory Note. Principal and accrued interest due under the Transition Loan shall
be paid as provided under Section 2.3(c) below.

     17. Section 2.3(a)(i) of the October 13, 2003 Amended Memorandum Agreement is amended to state
as follows:

     (a)(i) LKAR agrees to make the following pre-construction advances to the Tribe: (1)
two hundred fifty thousand dollars ($250,000) upon execution of the June 11, 1999
Development and Management Agreements; (2) seventy thousand dollars ($70,000) each month
thereafter through March 2005; (3) one hundred thousand dollars (100,000) each month
commencing April 2005 through February 2006; (4) one hundred twenty five thousand dollars
($125,000) each month commencing March 2006 through June 2007; (5) up to one hundred seventy
five thousand dollars ($175,000) each month thereafter until the earlier of either the
Commencement Date or through October 2010; (6) a one time payment of three hundred thousand
dollars ($300,000) to be made on or before April 29, 2005; (7) advances for costs incurred
in connection with the activities described in Section 2.2; (8) advances for the

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

10

 

establishment and operation of the Tribal Gaming Commission pursuant to Section 4.6.6
of the Management Agreement between the Tribe and KARSS entered on June 11, 1999; (9)
expenses relating to the Tribe’s CNIGA activities, subject to the written approval of LKAR,
which approval shall not be unreasonably withheld; and (10) legal expenses incurred by the
Tribe in connection with eliminating obstacles to the implementation of this Amended
Memorandum Agreement, subject to the written approval of LKAR, which approval shall not be
unreasonably withheld. The Tribe and LKAR agree that all sums previously advanced to the
Tribe by KARSS under the superseded Development and Management Agreements, and by LKAR under
the superseded May 5, 2000 Memorandum of Agreement (excluding advances for acquisition of
the Acquired Tribal Lands), shall constitute advances by LKAR to the Tribe hereunder, be
credited to LKAR’s obligations hereunder, and shall be subject to the terms of the
Transition Loan herein.

     18. Section 2.3(b)(ii) of the October 13, 2003 Amended Memorandum Agreement is amended to read
as follows:

     (b)(ii) The total amount of funds advanced directly from LKAR pursuant to Section
2.3(a)(ii) shall equal the total amount of the Land Acquisition Loan. The total amount of
the Land Acquisition Loan shall be in an amount not exceeding Fifteen Million dollars
($15,000,000) in principal amount. The parties agree that as of April 20, 2007, LKAR has
advanced $7,442,411.02 in aggregate principal amount under the Land Acquisition Loan. The
Land Acquisition Loan shall accrue interest at the prime interest rate of Chase Manhattan
Bank (or any successor bank by acquisition or merger) plus two percent (2%), which shall
adjust as provided in the Land Acquisition Note. Principal and accrued interest due under
the Land Acquisition Loan shall be paid as provided under Section 2.3(c) below.

     19. The first sentence of Section 2.3(c) of the October 13, 2003 Amended Memorandum Agreement
is amended to read as follows:

     (c) The Land Acquisition Loan and the Transition Loan shall each (i) be subject to all
the terms and conditions of this Amended Memorandum Agreement; (ii) be repaid solely as
Limited Recourse obligations of the Authority without any cross collateralization from other
projects of Authority and without any other liability or guarantee on the part of the
Authority except for the security interests described herein; and (iii) be repaid as
follows: (A) Land Acquisition Loan principal and accrued interest shall be paid
contemporaneously with and from the proceeds of any initial financing comprising the
Facility Loan; and (B) Transition Loan principal (including without limitation interest
accruing thereon prior to the Commencement Date, which shall be capitalized as of the
Commencement Date) shall be paid in eighty-four consecutive monthly installments of
approximately equal amount, commencing on the thirtieth (30th) day after the
Commencement Date and continuing on the same day of each calendar month thereafter until all
amounts owing under the Transition Loan are paid in

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

11

 

full (payments to be adjusted from time to time as necessary to fully repay all
principal, plus accrued interest from and after the Commencement Date thereon, by the date
of the final such monthly installment). Each payment under the Transition Loan shall be
applied first to the payment of accrued interest on the principal balance thereunder, and
the remainder shall be applied to principal.

     20. The first Sentence of Section 2.4(c) of the October 13, 2003 Amended Memorandum Agreement
is amended to read as follows:

     (c) The Construction Contract shall contain such provisions for the protection of the
Authority and LKAR as the parties deem appropriate, and shall provide that construction of
the Facility shall commence within such time as the parties agree after receiving NIGC
Approval, and any necessary Tribal Gaming Commission approvals (not to be unreasonably
withheld), following and subject to the granting of all approvals necessary to commence
construction and obtaining the Facility Loan; and shall also provide that the General
Contractor, and all its subcontractors, shall exert its best efforts to complete
construction within such time as the Authority and LKAR agree.

     21. Section 2.4(c) of the October 13, 2003 Amended Memorandum Agreement is amended by adding
the following sentence to the section:

Notwithstanding the foregoing, the terms of the Construction Contract may be modified as
mutually agreed by the Authority and LKAR.

     22. Section 2.4(g) of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     (g) LKAR, with the assistance of the Architect, shall submit to the Authority, for its
review and approval, the specifications for Furnishings and Equipment. Thereafter, LKAR
shall select and procure vendors for purchase by the Authority of Furnishings and Equipment
required to operate the Enterprise in conformity with such specifications. The cost of
Furnishings and Equipment shall be financed through the Facility Loan. Alternatively, in the
sole discretion of the Authority, LKAR may arrange for the procurement of Furnishings and
Equipment on lease terms consistent with the terms provided as to the Facility Loan.

     23. The first sentence of Section 2.5(c) of the October 13, 2003 Amended Memorandum Agreement
is amended to read as follows:

     (c) The Costs of Construction (including Furnishings and Equipment) and Initial Costs
of Operation shall equal the total cost of the Facility Loan. The total amount of the

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

12

 

Facility Loan shall be in an amount up to but not exceeding six hundred seventy five
million dollars ($675,000,000).

     24. Section 2.5(d) of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     (d) The Facility Loan, if made directly by LKAR, shall (i) be subject to all the terms
and conditions of this Amended Memorandum Agreement; (ii) be evidenced by the Facility Note
(in a form consistent with the terms of this Development Agreement if LKAR makes the
advances); and (iii) be repaid solely as a Limited Recourse obligation of the Authority
without any cross collateralization from other projects of Authority and without any other
liability or guarantee on the part of the Authority except the security interests described
herein. Except for the Minimum Guaranteed Monthly Payment to the Authority and repayment of
the Operating Note, repayment of the Facility Loan, if made directly by LKAR, shall have
first priority on any Net Gaming Revenues and Net Incidental Revenues generated by the
Enterprise or any other Tribal Gaming Enterprise. Subject to the foregoing, the Authority
agrees to grant to LKAR to the extent LKAR directly makes the Facility Loan, a first
priority and perfected security interest, including a Dominion Account arrangement pursuant
to the Dominion Account Agreement (in a form consistent with the terms of this Development
Agreement), on any Gross Gaming Revenues and Gross Incidental Revenues of the Enterprise or
any other Tribal Gaming Enterprise in order to secure repayment of the Facility Note, and
such Facility Loan, if made directly by LKAR, may also be secured on a first priority and
perfected basis by any Furnishings and Equipment financed by proceeds of the Facility Loan
or Transition Loan or other purchase money agreements pursuant to the Security Agreement. If
LKAR directly makes the Facility Loan, the Authority agrees not to encumber any of the
assets of the Facility or the Enterprise without the written consent of LKAR, which consent
will not be unreasonably withheld; except that the Authority shall have the right without
the consent of LKAR to grant security interests in the Enterprise’s revenues which are
subordinate to LKAR’s interests under this Amended Memorandum Agreement and all related
documents and agreements pursuant to a subordination agreement in form and substance
acceptable to LKAR. The Authority agrees to enter into a limited, transactional waiver of
sovereign immunity and consent to jurisdiction and arbitration with respect to the Facility
Loan as to LKAR, if LKAR directly makes the Facility Loan, as provided in the Resolution of
Limited Waiver.

     25. Section 2.5(e) of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     (e) The Authority shall retain the right to prepay the Facility Loan, if made directly
by LKAR, in whole or in part, without imposition of any prepayment penalty.

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

13

 

     26. Section 2.5(f) of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     (f) It is the understanding of the parties that the Facility Loan will be the sole
responsibility of the Authority and, if made directly by LKAR, will be a Limited Recourse
obligation of the Authority and will not be subject to any other guarantee or obligation on
the part of the Authority except the security interests and liens described herein.

     27. Section 2.11 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     2.11 Limited Waiver of Sovereign Immunity. By this Amended Memorandum
Agreement, neither the Tribe nor the Authority waives, limits, or modifies its sovereign
immunity from unconsented suit except as provided in the Resolution of Limited Waiver. The
Authority understands that the agreement of the Tribe and the Authority to adopt an
enforceable Resolution of Limited Waiver is a material inducement to the LKAR’s execution of
this Amended Memorandum Agreement and is a condition precedent to any of the respective
obligations of the parties under this Amended Memorandum Agreement. The Authority further
agrees that it will not amend or alter or in any way lessen the rights of the LKAR as set
forth in the Resolution of Limited Waiver, which is attached hereto and incorporated here by
reference. This Section 2.11 shall survive the termination of this Amended Memorandum
Agreement, regardless of the reason for the termination.

     28. Section 2.14 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     2.14 Term of Development Agreement. Unless sooner terminated as provided in
this Amended Memorandum Agreement, the term of the Development Agreement shall run until the
earlier of either (i) the Commencement Date; or (ii) June 11, 2009; provided however, that
the Notes and Security Provisions shall continue until all amounts owing to LKAR with
respect thereto have been paid in full.

     29. Section 5.6 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     5.6 Property Insurance. LKAR, acting as agent for the Authority, shall
procure replacement value all-risk casualty and extended hazard insurance in appropriate
coverage amounts which shall insure the Facility and any fixtures, improvements and contents
located therein against lost or damage by fire, theft and vandalism. Such casualty
insurance policy or policies shall name the Authority and LKAR, and the Facility Loan
lenders as insureds. Unless otherwise required by the terms of the Facility Loan, all such
casualty insurance

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

14

 

proceeds shall be applied to the immediate replacement of the applicable Facility part
or fixture, improvements or contents therein unless the parties agree otherwise. Subject to
the terms of Sections 7.4 and 7.6 hereof, unless otherwise required by the terms of the
Facility Loan, any excess insurance proceeds that are not used to repair, replace or
reconstruct the applicable damaged Enterprise assets shall be deposited into the Dominion
Account and disbursed in accordance with the same terms and provisions applicable to Gross
Total Revenues, provided however that such excess proceeds (except business interruption
insurance proceeds) shall be excluded from Net Total Revenues for purposes of calculating
the management compensation of LKAR under Section 6.5(b) hereof.

     30. Section 5.10 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     5.10 Insurance Proceeds. Subject to the terms of Sections 7.4 and 7.6 hereof,
and unless otherwise required by the terms of the Facility Loan, any insurance proceeds
received with respect to the Enterprise, except as provided in Section 5.6 hereof, shall be
deposited into the Dominion Account and disbursed in accordance with the same terms and
provisions applicable to Gross Total Revenues, provided, however, that if there is any
insurance recovery for a claim related to the operation of the Enterprise for which either
the Authority or LKAR has previously paid from its own separate funds, then, to the extent
of amounts paid by either of such parties, the insurance proceeds will be paid over to them
and the balance shall be deposited into the Dominion Account as above.

     31. Section 7.1(a) of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     (a) Subject to the provisions of Section 9.2, either party may terminate this Amended
Memorandum Agreement if the other party (or its Affiliates identified below) commits or
allows to be committed a Material Breach (as hereinafter defined) of this Amended Memorandum
Agreement and fails to cure or to take steps to substantially cure such breach within thirty
(30) calendar days after receipt of a written notice from the non-breaching party
identifying the nature of the Material Breach in specific detail and its intention to
terminate this Amended Memorandum Agreement. Termination is not an exclusive remedy for
breach, and the non-breaching party shall be entitled to other rights and remedies as may be
available. For purposes of this Amended Memorandum Agreement, a “Material Breach” is any of
the following circumstances: (i) failure of LKAR to provide the Authority with the Minimum
Guaranteed Monthly Payments pursuant to Section 6.3, (ii) material failure of either party
to perform in accordance with this Amended Memorandum Agreement for reasons not excused
under Section 10.6 (Force Majeure), (iii) if any of LKAR’s employees commits theft,
embezzlement or crime of moral turpitude and if, after knowledge of such act or, if
disputed, after determination by arbitration under Article 11, LKAR does not remove such
employee from connection with Class II Gaming or Class III Gaming operations of the
Enterprise within

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

15

 

thirty (30) days after receipt of written notice, (iv) default under the Facility Note,
the Land Acquisition Note, the Interim Promissory Note, the Operating Note, any other
Transaction Document or any document or agreement related thereto by the Authority, and any
default or misrepresentation by the Tribe under the Tribal Agreement or any other document
or agreement executed by the Tribe in favor of LKAR or its Affiliates; or (v) any
representation or warranty made pursuant to Section 10.11 or 10.12 proves to be knowingly
false or erroneous in any material way when made. Any final notice of termination hereunder
shall be in writing detailing the reason the party considers the Material Breach not to be
cured and must be delivered to the other party before such termination becomes effective

     32. Section 6.8 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     6.8 Development and Construction Cost Repayment. The maximum dollar amount
for repayment of development and construction costs for the Facility and Enterprise shall be
six hundred seventy five million dollars ($675,000,000). Subject to any applicable Legal
Requirements, the parties may increase the maximum repayment amount by mutual written
agreement.

     33. Section 10.3 of the October 13, 2003 Amended Memorandum Agreement is amended to substitute
certain of the notice address, as follows:

	 	(a)	 	In place of the Notice to the Tribe, the following notice:
	 
	 	 	 	Shingle Springs Tribal Gaming Authority

P.O. Box 1660

El Dorado, CA 95623-1660

Attn: Chairman

	 	(b)	 	In place of the notice to Anthony Cohen, Esq., the following
notice:
	 
	 	 	 	Barbara E. Karshmer

Karshmer & Associates

2150 Shattuck Avenue, Suite 725.

Berkeley, CA 94704

Fax: 510-841-6167

	 	(c)	 	Adding the following notice after notice to Lakes
LKAR-Shingle-Springs, LLC:

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

16

 

	 	 	 	With a Copy to: Damon E. Schramm

General Counsel

Lakes Entertainment, Inc.

130 Cheshire Lane, Suite 101

Minnetonka, Minnesota 55305

Fax: (952) 449-7068

	 	(d)	 	In place of the notice to Brian Klein, Esq., the following
notice:
	 
	 	 	 	Daniel R. Tenenbaum, Esq.

Gray Plant Mooty

500 IDS Center

80 South Eighth Street

Minneapolis, MN 55402-3796

(612) 632-3050

Fax: (612) 632-4050

     34. Section 10.10 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     10.10 Sovereign Immunity. Except as described in the Resolution of Limited
Waiver, each attached hereto as exhibits which are incorporated herein by reference, nothing
in this Amended Memorandum Agreement, as amended, shall be deemed or construed to constitute
a waiver of sovereign immunity of the Authority and the only applicable waivers of
sovereign immunity shall be those expressly provided and executed by the Authority’s duly
authorized representative and substantially conforming to the form as approved by the
parties. The parties agree that they will not amend or alter the Resolution of Limited
Waiver in any way which will lessen the rights of any party as set forth in the Resolution
of Limited Waiver. This Section 10.10 shall survive termination of this Amended Memorandum
Agreement, regardless of the reason for the termination.

     35. Section 10.12 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     10.12 Representations and Warranties of the Authority. The Authority hereby
represents and warrants as follows:

     (a) The Tribe is a duly organized Indian tribe under the laws of the Tribe and the
United States, and the Authority is duly organized under the laws of the Tribe.

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

17

 

     (b) The Authority has full legal right, power and authority under the laws for the
Tribe and has taken all official Management Board actions necessary (i) to assume and enter
into this Amended Memorandum Agreement and related Transaction Documents (as defined below)
and authorize the Authority to assume, execute and deliver this Amended Memorandum
Agreement, including any amendment thereto, the Operating Note, Dominion Account Agreement,
Security Agreement, the Facility Note and other Facility Loan documentation (if the Facility
Loan is made directly by LKAR), Land Acquisition Note and Interim Promissory Note, and any
and all other documents and agreements executed by the Authority or the Tribe related
thereto (collectively and as amended, renewed, or extended from time to time, the
“Transaction Documents”), (ii) to perform its obligations hereunder and thereunder, and
(iii) to consummate all other transactions contemplated by this Amended Memorandum Agreement
and other Transaction Documents.

     (c) This Amended Memorandum Agreement (and the other Transaction Documents), as
amended, constitute valid and binding obligations, enforceable against the Authority in
accordance with their terms, executed by the Authority or the Tribe in connection therewith,
and when approved by the NIGC, will constitute, together with the other Transaction
Documents, valid and binding obligations, enforceable against the Authority in accordance
with their terms.

     (d) Subject to the provisions of Section 10.11(d), the execution and delivery of this
Amended Memorandum Agreement (and other Transaction Documents), as amended, the performance
by the Authority of its obligations hereunder and thereunder, and the consummation by the
Authority of the transactions contemplated hereby will not violate any contract or agreement
to which the Tribe or the Authority is a party, law, regulation, rule or ordinance, or any
order, judgment or decree of any federal, state, tribal or local court, or require any
approval by Governmental Authorities beyond those contemplated herein.

     (e) Neither LKAR, the Project, the Facility, the Enterprise nor the transaction(s)
between the parties contemplated by this Amended Memorandum Agreement, the Operating Note,
and any related security documents and instruments described herein as amended, are now, or
at any time during the term of this Amended Memorandum Agreement will be, subject to any
tribal tax of any sort that will put the Facility or the Enterprise, or any portion thereof,
nor the transaction(s) between the parties contemplated by the Transaction Documents, at a
competitive disadvantage with businesses in the same or like industries.

     (f) The Tribe (and the Authority under delegated powers from the Tribe) is legally
permitted to conduct Class II Gaming and Class III Gaming (pursuant to the Tribal-State
Compact) activities in the State under all Legal Requirements, and the Gaming Site for the
Project constitutes “Indian lands” upon which the Tribe may legally conduct gaming under
IGRA.

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

18

 

     (g) Neither the Tribe nor any of its Affiliates has enacted any law, ordinance,
resolution, rule or regulation impairing the rights or obligations of the Authority or LKAR
under this Amended Memorandum Agreement or under any Transaction Documents, as amended,
contemplated hereby.

     (h) The Tribal Agreement constitutes a valid and binding obligation, enforceable
against the Tribe in accordance with its terms.

     36. Section 10.13 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     10.13 Governing Law.

     (a) This Amended Memorandum Agreement and (except as the law of another State may be
specifically chosen as the governing law therein) the other Transaction Documents have been
negotiated, made and executed at the Authority’s office located in the State of California
and shall be construed in accordance with the applicable laws of the State of California,
without regard to its conflict of laws provisions, and applicable Tribe and federal laws.

     (b) Use of the laws of the State of California for the foregoing limited purpose of
interpretation and construction is not intended to and shall not otherwise (i) incorporate
substantive laws or regulations of the State of California, including usury laws or any
present or future provisions of the State of California that would restrict the rate of
interest upon any loan, advance or other financial accommodation contemplated by any
Transaction Document, or (ii) grant any jurisdiction to the State of California or any
political subdivision thereof over the Gaming Site or the Property.

     (c) Any other provision of this Amended Memorandum Agreement or any other Transaction
Document to the contrary notwithstanding, (i) in no event shall the rate of interest payable
in connection with the indebtedness incurred pursuant to any Transaction Document or in
connection with the transactions contemplated by any Transaction Document exceed the maximum
nonusurious interest rate, if any, at any time or from time to time permitted to be
contracted for, taken, reserved, charged or received under applicable law (“Maximum Rate”),
and (ii) if at any time the rate of interest that would otherwise be payable on any such
indebtedness would exceed any such Maximum Rate, then the rate of interest that would
otherwise be contracted for, taken, reserved, charged or received under such indebtedness
shall be reduced to such Maximum Rate.

     37. Section 10.14 of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

19

 

     10.14 Entire Agreement. This Amended Memorandum Agreement (including all its
exhibits and related Transaction Documents, along with tribal Resolution 2004-18 approving
the establishment of the Shingle Springs Tribal Gaming Authority and its related
Ordinance(and any amendments thereto as of April 20, 2007), the June 16, 2004 Amendment to
this Amended Memorandum Agreement, the June 16, 2004 Consent Agreement entered into by the
parties, tribal Resolution 2004-23 concerning the June 16, 2004 Amendment and Consent
Agreement, the January 23, 2007 Second Amendment to this Amended Memorandum Agreement,
tribal Resolution 2007-04 concerning the January 23, 2007 Second Amendment, the April 20,
2007 Assignment and Assumption Agreement, the April 20, 2007 Tribal Agreement and tribal
Resolution 2007-18 concerning the Tribal Agreement and the April 20, 2007 Assignment and
Assumption Agreement , the May 17, 2007 Third Amendment to this Amended Memorandum
Agreement, and Authority Resolution 2007-05 concerning the May 17, 2007 Third Amendment),
represents the entire agreement between the parties and supersedes all prior agreements
relating to the subject matter of Class II Gaming and Class III Gaming to be developed and
conducted by the Authority at the Facility and operations of the Enterprise. The parties
hereto intend that this Amended Memorandum Agreement (and related Transaction Documents) is
to supersede and replace the May 5, 2000 Memorandum of Agreement and any other prior
agreements between the Tribe and LKAR in connection with the Project.

     38. Section 11.3(b) of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     (b) If the dispute is not resolved to the satisfaction of the parties within thirty
(30) calendar days after the first meeting in Section 11.3(a) above, then any claim,
controversy or dispute arising out of or relating to this Amended Memorandum Agreement,
Facility Note, Land Acquisition Note, the Interim Promissory Note, the Operating Note, or
any other Transaction Document, or any alleged default hereunder or breach of any provisions
thereof, shall be submitted to binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect at the time of
submission; except that: (a) the question whether or not a dispute is arbitrable under this
Amended Memorandum Agreement or any other Transaction Document shall be a matter for binding
arbitration by the arbitrators, such question shall not be determined by any court and, in
determining any such question, all doubts shall be resolved in favor of arbitrability; and
(b) discovery shall be permitted in accordance with the Federal Rules of Civil Procedure,
subject to supervision as to scope and appropriateness by the arbitrators. Judgment on any
arbitration award may be entered in any court having jurisdiction over the parties pursuant
to the Resolution of Limited Waiver. The Authority, on behalf of itself and each of its
Affiliates, agrees that any arbitration proceeding hereunder may be consolidated with any
other arbitration proceeding that any of LKAR or its respective Affiliates may bring against
the Authority, the Tribe or any of their respective Affiliates.

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

20

 

     39. Section 11.3(f) of the October 13, 2003 Amended Memorandum Agreement is amended to read as
follows:

     (f) The arbitration award shall be in writing signed by each of the arbitrators, and
shall state the basis for the award. The arbitration award shall be set forth in reasonable
detail as to its findings of fact and law, and basis of determination of award form and
amount. In connection with any arbitration award, the arbitrators shall be empowered to take
the actions and enforce the judicial remedies described in Paragraph 5 of the Resolution of
Limited Waiver; provided however, that although the arbitrators may award damages in the
event the Tribe, the Authority or the Tribal Gaming Commission do not comply with the award,
the arbitrators may not require the Tribe, the Authority or the Tribal Gaming Commission to
take or modify any governmental legislative decision or action which the arbitrators have
determined has resulted in the dispute between the parties and is contrary to the parties’
rights, liabilities or obligations under this Amended Memorandum Agreement, the Facility
Note, if the Facility Loan is made directly by LKAR, the Land Acquisition Note, the Interim
Promissory Note, the Operating Note, or any other Transaction Document, as amended,
(“Specific Performance Restriction”). Provided further, that: (a) should the arbitrators
determine that there has been an intentional bad faith violation of a party’s rights under
this Amended Memorandum Agreement or any other Transaction Document by the Tribe, the
Authority or Tribal Gaming Commission, and if the Tribe, the Authority or the Tribal Gaming
Commission do not reverse such intentional bad faith violation through governmental
legislative decision or action within thirty (30) days after being notified by the
arbitrators of such determination, then the arbitrators shall award one-and-half (11/2 ) times
damages to LKAR, or its Affiliates, as applicable, for damages suffered as a consequence of
the Tribe’s, the Authority’s or Tribal Gaming Commission’s intentional bad faith violation;
and (b) such Specific Performance Restriction shall not prevent LKAR, or its Affiliates, as
applicable, from enforcing the Facility Note, if the Facility Loan is made directly by LKAR,
the Land Acquisition Note, the Interim Promissory Note, the Operating Note, the Security
Agreement, the Dominion Account Agreement, or the liens and security interests granted
thereunder, nor from realizing on collateral encumbered thereby.

     40. The reference to “Depository” in Section 11.3(j) of the October 13, 2003 Amended
Memorandum Agreement is amended to read “depository holding the Dominion Account”.

     41. The List of Exhibits page of the October 13, 2003 Amended Memorandum Agreement is amended
to read as follows:

LIST OF EXHIBITS

     Exhibit A       Legal Description of Gaming Site

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

21

 

     Exhibit B       Resolution 2003-12 concerning Limited Waiver of Immunity from Suit

     Exhibit C       Resolution 2004-23 concerning Limited Waiver of Immunity from Suit

     Exhibit D       Resolution 2007-04 concerning Limited Waiver of Immunity from Suit

     Exhibit E       Authority Resolution 2007-05 concerning Limited Waiver of Immunity from Suit

     42. The Authority and LKAR agree that any dispute between them in connection with this Third
Amendment shall be subject to the dispute resolution procedures and limited waiver of sovereign
immunity contained in the October 13, 2003 Amended Memorandum Agreement (as heretofore and
hereafter amended) and Authority Resolution 2007-05 concerning this Third Amendment, attached to
the October 13, 2003 Amended Memorandum Agreement as Exhibit E.

     43. The Authority and LKAR agree that capitalized terms used herein and not defined shall have
the meanings given them in the October 13, 2003Amended Memorandum Agreement.

     44. The Authority and LKAR agree that this Third Amendment shall be construed in accordance
with and governed by the internal laws and decisions of the State of California, without giving
effect to its choice of law principles; and may be executed in any number of counterparts and by
facsimile, each of which shall be considered an original but together shall constitute one and the
same instrument.

     45. The Authority and LKAR agree that no modification, amendment or change to this Third
Amendment shall be valid unless the same is in writing and signed by the party against which the
enforcement of such modification, amendment or change is sought. The parties hereto specifically
intend and agree that this Third Amendment is to supersede and replace in all respects the Third
Amendment dated as of April 20, 2007.

     46. Except as amended above, all other provisions of the October 13, 2003 Amended Memorandum
Agreement shall remain in full force and effect as originally stated and are equally applicable
hereto.

[Signature Page Follows]

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

22

 

     IN WITNESS WHEREOF, the parties hereto have executed this May 17, 2007 Third Amendment to the
October 13, 2003 Amended Memorandum Agreement.

	 	 	 
	Shingle Springs Tribal

Gaming Authority	 	
Lakes KAR-Shingle Springs, LLC
	By: /s/ Richard Lawson	 	
By:  /s/ Timothy Cope
	
 

Its: Management Board Chairman	 	
 

Its: President/CFO
	 
	By: /s/ Beth Bodi	 	 
	
 

Its: Secretary	 	 

	 	 	 	 	 
	 	Approved pursuant to 25 U.S.C. §2711

National Indian Gaming Commission

 	 
	 	By: 	/s/
Philip Hogen	 
	 	 	
 

Its: Chairman 	 	 
	 

Third Amendment to

October 13, 2003 Amended Memorandum Agreement

05/17/07 execution version

23exv10w117

Table of Contents

 

 

LEASE AGREEMENT

BETWEEN

FMBP INDUSTRIAL I LP,

AS LANDLORD

AND

FUNIMATION PRODUCTIONS, LTD

AS TENANT

May 29, 2007

Corporate Ridge

Flower Mound, Texas

 

 

 

Table of Contents

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page No.	 
	SECTION 1 —DEFINITIONS
	 	 	1	 
	1.1 Definitions
	 	 	1	 
	SECTION 2 — PREMISES
	 	 	3	 
	2.1 Lease Grant
	 	 	3	 
	2.2 Improvements
	 	 	4	 
	2.3 WAIVER OF WARRANTIES; ACCEPTANCE OF CONDITION.
	 	 	4	 
	2.4 Option to Lease Additional Space
	 	 	4	 
	SECTION 3 —LEASE TERM
	 	 	4	 
	3.1 Lease Term
	 	 	4	 
	3.2 Confirmation of Commencement Date
	 	 	4	 
	3.3 Delay in Commencement Date
	 	 	5	 
	3.4 Holding Over
	 	 	5	 
	SECTION 4 —RENT
	 	 	5	 
	4.1 Payment of Rent.
	 	 	5	 
	4.2 Basic Operating Costs.
	 	 	5	 
	4.3 Other Amounts Owing to Landlord
	 	 	8	 
	4.4 Late Payments; Dishonored Checks
	 	 	8	 
	4.5 Net Lease
	 	 	8	 
	SECTION 5 —CREDIT ENHANCEMENT
	 	 	8	 
	5.1 Security Deposit
	 	 	8	 
	5.2 Guaranty
	 	 	8	 
	SECTION 6 —LEGAL AND CONTRACTUAL LIMITATIONS ON USE OF PREMISES
	 	 	9	 
	6.1 Use
	 	 	9	 
	6.2 Compliance with Laws
	 	 	9	 
	6.3 Building Rules and Regulations; No Nuisance
	 	 	10	 
	6.4 Quiet Enjoyment
	 	 	10	 
	SECTION 7 —OPERATIONAL MATTERS
	 	 	10	 
	7.1 Services to be Furnished by Landlord
	 	 	10	 
	7.2 Parking
	 	 	11	 
	7.3 Signage
	 	 	11	 
	7.4 Repairs and Maintenance by Landlord
	 	 	11	 
	7.5 Maintenance by Tenant
	 	 	11	 
	7.6 Repairs by Tenant
	 	 	12	 
	7.7 Alterations, Improvements
	 	 	12	 
	7.8 Telecommunications
	 	 	13	 
	7.9 Change of Name or Common Areas
	 	 	13	 
	7.10 Entry by Landlord
	 	 	13	 
	SECTION 8 —TRANSFER OF LEASEHOLD RIGHTS
	 	 	13	 
	8.1 Transfers by Tenant
	 	 	13	 
	8.2 Affiliate Transfers
	 	 	14	 
	8.3 Transfer Requirements
	 	 	14	 
	8.4 Transfers by Landlord
	 	 	15	 
	8.5 Sublease of Offer Space
	 	 	15	 
	SECTION 9 —INSURANCE; CASUALTY; ALLOCATION OF LIABILITY
	 	 	15	 
	9.1 Property Insurance
	 	 	15	 
	9.2 Liability and Other Insurance
	 	 	15	 
	9.3 Casualty Damage
	 	 	16	 

-i-

Table of Contents

	 	 	 	 	 
	 	 	Page No.	 
	9.4 INDEMNITY BY TENANT
	 	 	16	 
	9.5 INDEMNITY BY LANDLORD
	 	 	17	 
	9.6 Waiver of Claims and Subrogation Rights
	 	 	17	 
	9.7 Damages from Certain Causes
	 	 	17	 
	SECTION 10 — CONDEMNATION
	 	 	18	 
	10.1 Condemnation
	 	 	18	 
	10.2 Condemnation Award
	 	 	18	 
	SECTION 11 —TITLE ENCUMBRANCES
	 	 	18	 
	11.1 Subordination to Mortgage; Lender Rights
	 	 	18	 
	11.2 Landlord’s Lien; Security Interest
	 	 	19	 
	11.3 Mechanic’s Liens
	 	 	19	 
	SECTION 12 —DEFAULT; DISPUTES; REMEDIES
	 	 	19	 
	12.1 Default by Tenant
	 	 	19	 
	12.2 Landlord’s Remedies
	 	 	19	 
	12.3 Default by Landlord
	 	 	20	 
	12.4 Limitation on Landlord’s Liability
	 	 	21	 
	12.5 Attorney’s Fees
	 	 	21	 
	SECTION 13 — MISCELLANEOUS
	 	 	21	 
	13.1 Notices
	 	 	21	 
	13.2 Estoppel Agreements
	 	 	21	 
	13.3 No Implied Waiver
	 	 	21	 
	13.4 Independent Obligations
	 	 	21	 
	13.5 Severability
	 	 	21	 
	13.6 Recording
	 	 	21	 
	13.7 Governing Law
	 	 	21	 
	13.8 Force Majeure
	 	 	21	 
	13.9 Time of Performance
	 	 	22	 
	13.10 Commissions
	 	 	22	 
	13.11 Merger of Estates
	 	 	22	 
	13.12 Survival of Indemnities and Covenants
	 	 	22	 
	13.13 Headings
	 	 	22	 
	13.14 Entire Agreement
	 	 	22	 
	13.15 Amendment
	 	 	22	 
	13.16 Joint and Several Liability
	 	 	22	 
	13.17 Multiple Counterparts
	 	 	22	 
	13.18 Effect of Delivery of this Lease
	 	 	22	 
	13.19 Property Code
	 	 	22	 

-ii-

Table of Contents

LEASE AGREEMENT

     THIS LEASE AGREEMENT (“Lease”) is executed effective as of May ___, 2007 (the
“Effective Date”), between FMBP INDUSTRIAL I LP, a Delaware limited partnership
(“Landlord”), and FUNIMATION PRODUCTIONS, LTD, a Texas limited partnership
(“Tenant”).

SECTION 1 — DEFINITIONS

     1.1 Definitions. As used in this Lease, the following terms are defined below:

          “Base Rent” means the following:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Base Rent per	 	 	 	 
	 	 	Square Foot of	 	 	 	 
	 	 	Floor Space (per	 	 	 	 
	Lease Year	 	year)	 	Annual Base Rent	 	Monthly Base Rent
	1-2
	 	$	12.12	*	 	$	587,820.00	*	 	$	48,985.00	*
	3-6
	 	$	12.78	 	 	$	619,830.00	 	 	$	51,652.50	 
	7-10
	 	$	13.10	 	 	$	635,350.00	 	 	$	52,945.83	 

 

			
	*	 	Base Rent for the first 7 months of the Lease Term will be abated pursuant to Section
4.1(c).

          “Basic Operating Costs” has the meaning given to such term in Section 4.2.

          “Broker” means, collectively, Robert Lynn Company representing Landlord, and Capstone
Commercial representing Tenant.

          “Building” means Building 1.

          “Building 1” means that certain building identified as Building 1 on the Site Plan
attached hereto as Exhibit “B”. The address of Building 1 is 1200 Lakeside Parkway,
Building 1, Flower Mound, Texas 75028. Building 1 contains 48,500 square feet of floor space.

          “Building 2” means that certain building identified as Building 2 on the Site Plan
attached hereto as Exhibit “B”. The address of Building 2 is 1200 Lakeside Parkway,
Building 2, Flower Mound, Texas 75028. Building 2 contains 35,000 square feet of floor space.

          “Building 3” means that certain building identified as Building 3 on the Site Plan
attached hereto as Exhibit “B”. The address of Building 3 is 1200 Lakeside Parkway,
Building 3, Flower Mound, Texas 75028. Building 3 contains 254,000 square feet of floor space.

          “Building 4” means that certain building identified as Building 4 on the Site Plan
attached hereto as Exhibit “B”. The address of Building 4 is 1200 Lakeside Parkway,
Building 4, Flower Mound, Texas 75028. Building 4 contains 140,000 square feet of floor space.

          “Buildings” means, collectively, Building 1, Building 2, Building 3 and Building 4.

          “Building Standard” means the level of service or type of equipment standard in the
Building or the type, brand or quality of materials Landlord designates from time to time to be the
minimum or exclusive type, brand or quality to be used in the Building.

          “Commencement Date” means the earlier of (i) the date that Tenant takes occupancy of
the Premises to conduct its business or to install its leasehold improvements, furniture, fixtures,
or equipment (as applicable), or (ii) October 1, 2007.

          “Common Areas” means all areas, spaces, facilities and equipment (whether or not
located within the Building) made available by Landlord for the common and joint use of Landlord,
Tenant and others designated by Landlord. “Common Areas” includes, without limitation,
tunnels, loading docks, walkways, sidewalks and driveways necessary for access to Parking Areas,
lobbies, atriums, landscaped areas, public corridors, public restrooms, stairs, elevators open to
the public, service elevators, drinking fountains and any such other areas and facilities, if any,
as are designated by Landlord from time to time as Common Areas. “Common Areas” also
includes areas so designated by Landlord on a floor of the Buildings occupied by a single tenant.

 

Table of Contents

          “Complex” means the project located on the Property and commonly known as “Corporate
Ridge”, which includes the Building, Building 2, Building 3, Building 4 and the Common Areas. The
Complex contains 477,500 square feet of floor space.

          “Default Rate” means the lesser of (i) the rate of 18% per year, and (ii) the maximum
rate of interest then permissible for a commercial loan to Tenant in the State.

          “Improvements” means those improvements to the Premises that Landlord has agreed to
construct pursuant to the Tenant Improvements Agreement.

          “Landlord-Related Party” means any officer, director, owner, partner, employee, agent,
contractor, property manager, or broker of Landlord.

          “Lease Term” means the period that begins on the Commencement Date and ends on the
last day of the 120th full calendar month after the Commencement Date. By way of example, if the
Commencement Date is March 15, the Lease Term would expire on March 31 of the appropriate year.

          “Lease Year” means a period of 12 consecutive calendar months. If the Commencement
Date does not occur on the first day of a month, the first Lease Year will begin on the first day
of the month following the Commencement Date.

          “Market Area” means the North Dallas-Fort Worth industrial market area.

          “Notice Address” means:

	 	 	 	 	 
	     

	 	With respect to Landlord:
	 	c/o Champion Partners Group, Ltd.
	 

	 	 	 	8401 N. Central Expressway
	 

	 	 	 	Suite 410
	 

	 	 	 	Dallas, Texas 75225
	 

	 	 	 	Attn: Barney Sinclair
	 

	 	 	 	Tel.: 214.365.8523
	 

	 	 	 	Fax: 972.490.5599
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Winstead Sechrest & Minick P.C.
	 

	 	 	 	1201 Elm Street, Suite 5400
	 

	 	 	 	Dallas, Texas 75270
	 

	 	 	 	Attn: T. Andrew Dow, Esq.
	 

	 	 	 	Tel.: 214.745.5387
	 

	 	 	 	Fax: 214.745.5390
	 
	 	 	 	 
	 

	 	With respect to Tenant:
	 	FUNimation Productions, LTD
	 

	 	(Prior to the Commencement Date)
	 	6851 N.E. Loop 820, Ste. 400
	 

	 	 	 	Fort Worth, TX 76180
	 

	 	 	 	Attn: Ward Thomas
	 

	 	 	 	Tel.: 817-788-0627 ext 300
	 

	 	 	 	Fax: 817-788-0628
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Navarre Corporation
	 

	 	 	 	7400 49th Avenue North
	 

	 	 	 	New Hope, MN 55428
	 

	 	 	 	Attn: General Counsel
	 

	 	 	 	Tel.: 763-535-8333
	 

	 	 	 	Fax: 763-504-1107
	 
	 	 	 	 
	 

	 	With respect to Tenant:
	 	FUNimation Productions, LTD
	 

	 	(After the Commencement Date)
	 	1200 Lakeside Parkway, Building 1
	 

	 	 	 	Flower Mound, Texas 75028
	 

	 	 	 	Attn: Ward Thomas
	 

	 	 	 	Tel.:                                              
	 

	 	 	 	Fax:                                              
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Navarre Corporation
	 

	 	 	 	7400 49th Avenue North
	 

	 	 	 	New Hope, MN 55428
	 

	 	 	 	Attn: General Counsel
	 

	 	 	 	Tel.: 763-535-8333
	 

	 	 	 	Fax: 763-504-1107

 

Table of Contents

          “Parking Areas” means those areas located upon the Property designated by Landlord,
from time to time, to be parking areas.

          “Parking Spaces” means 3.6 parking spaces per 1,000 square feet of floor space in the
Premises, within the portion of the Parking Areas identified on Exhibit “B”.

          “Premises” means all of the Building outlined on the site plan attached to this Lease
as Exhibit “B”. The Premises contains 48,500 square feet of floor space.

          “Property” means the land described in Exhibit “A” attached hereto.

          “Punchlist Items” means touch-up, minor finish, mechanical adjustment, or decoration
work to be performed as a part of completing the Improvements.

          “Ready for Occupancy” means that the Improvements are Substantially Complete (as
defined below) and a temporary or permanent certificate of occupancy (or its equivalent) has been
issued for the Premises.

          “Rent” means, collectively, the Base Rent, the Tenant’s Share of Basic Operating Costs
(as provided in Section 4), the amounts to be paid by Tenant pursuant to the Tenant
Improvements Agreement (if any), and all other sums of money becoming due and payable to Landlord
under this Lease.

          “Rules and Regulations” means the rules and regulations for the Complex set forth on
Exhibit “C” attached hereto, and any other reasonable rules and regulations that may be
adopted or altered by Landlord in accordance with this Lease.

          “Security Deposit” means the sum of $48,985.00.

          “Service Areas” means those areas, spaces, facilities and equipment serving the
Buildings (whether or not located within the Buildings), including, but not limited to, service
elevators, mechanical, telephone, electrical, janitorial and similar rooms and air and water
refrigeration equipment, but to which Tenant and other occupants of the Buildings will have limited
or no access.

          “State” means the State of Texas.

          “Substantially Complete” means that the Improvements have been completed substantially
in accordance with the Tenant’s Final Plans (as defined in the Tenant Improvements Agreement),
excluding Punchlist Items, and that the Premises is capable of being occupied for the purposes
described in Section 6.1.

          “Taxes” means all taxes, assessments and governmental charges, whether federal, state,
county or municipal, and whether they be by taxing districts or authorities presently taxing the
Complex or by others, subsequently created or otherwise and any other taxes, association dues and
assessments attributable to the Complex or its operation. The term “Taxes” does not include
federal and state income taxes, franchise taxes, inheritance, estate, gift, corporation, net
profits or any similar tax for which Landlord becomes liable or which may be imposed upon or
assessed against Landlord. If, at any time during the Lease Term, the present method of taxation
is changed so that in lieu of the whole or any part of any taxes, assessments or governmental
charges levied, assessed or imposed on the Complex, there is levied, assessed or imposed on
Landlord a capital levy or other tax directly on the Rent, or a franchise tax, assessment, levy or
charge measured by or based, in whole or in part, upon the Rent, then all such taxes, assessments,
levies or charges, or the part thereof so measured or based, will be included within the term
“Taxes”.

          “Tenant Improvements Agreement” means the Tenant Improvements Agreement attached to
this Lease as Exhibit “D”.

          “Tenant-Related Party” means any officer, director, owner, partner, employee, agent,
contractor, vendor or broker of Tenant.

          “Tenant’s Share” means (i) as it relates to the Building, 100%, which is the
proportion that the floor space of the Premises bears to the entire floor space of the Building or
(ii) as it relates to the Complex, 10.16%, which is the proportion that the floor space of the
Premises bears to the entire floor space of the Complex.

SECTION 2 — PREMISES

     2.1 Lease Grant. Landlord leases to Tenant, and Tenant leases from Landlord, the Premises and the non-exclusive
right to use the Common Areas and Parking Areas, subject to all of the terms and conditions of this
Lease. Landlord retains the right to grant easements and similar rights over, upon,
and

 

Table of Contents

through
the Premises without the consent or joinder of Tenant, so long as Landlord’s exercise of such right
does not adversely affect Tenant’s rights hereunder in any material respect.

     2.2 Improvements. Landlord will construct the Improvements in accordance with the terms of
the Tenant Improvements Agreement. If no Tenant Improvements Agreement is attached to this Lease,
no Improvements are being provided by Landlord and Tenant is taking the Premises “as is” and “with
all faults”.

     2.3 WAIVER OF WARRANTIES; ACCEPTANCE OF CONDITION.

          (a) TENANT ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE
(INCLUDING THE CONSTRUCTION AGREEMENT), NEITHER LANDLORD NOR ANY LANDLORD-RELATED PARTY HAS MADE
ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE HABITABILITY, MERCHANTABILITY,
SUITABILITY, QUALITY, CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE (COLLECTIVELY, THE
“DISCLAIMED WARRANTIES”) WITH REGARD TO THE PREMISES OR THE COMPLEX. TENANT HEREBY WAIVES,
TO THE EXTENT PERMITTED BY LAW, THE DISCLAIMED WARRANTIES WITH REGARD TO THE PREMISES AND THE
COMPLEX.

          (b) Tenant’s taking possession of the Premises will be conclusive evidence that (i) Tenant has
inspected (or has caused to be inspected) the Premises and the Complex, (ii) Tenant accepts the
Premises and the Complex as being in good and satisfactory condition and suitable for Tenant’s
purposes, and (iii) the Premises and the Complex fully comply with Landlord’s covenants and
obligations hereunder.

          (c) Notwithstanding the foregoing, Tenant does not waive the right to cause Landlord to (i)
correct any defective work covered by any warranty in the Tenant Improvements Agreement, (ii)
complete any Punchlist Items in accordance with the terms of the Tenant Improvements Agreement or
(iii) correct any “latent defects” (i.e., defects not reasonably discoverable during a thorough
investigation of the Premises) in or affecting the Premises. If Tenant does not give Landlord
written notice within 6 months following the Commencement Date, regarding alleged defects in the
performance of the work under the Tenant Improvements Agreement (if any) or latent defects in or
affecting the Premises, such failure will constitute a waiver of any further claims of Tenant
regarding such defects. However, nothing contained in this Section 2.3(c) limits the right
of Tenant to enforce the repair and maintenance obligations of Landlord under this Lease.

          2.4 Option to Lease Additional Space. So long as the Lease is in full force and
effect and there is no uncured Event of Default under the Lease, Tenant will have a one-time right
of first offer (“Right of First Offer”) to lease all (but not part) of the last 10,000
square feet of contiguous floor space within Building 2 (“Offer Space”), at any time prior
to April 30, 2008. Prior to Landlord initially leasing the Offer Space to third parties, Landlord
will first offer to lease the Offer Space to Tenant by giving a written notice (the
“Offer”) to Tenant, containing all of the material terms and conditions upon which Landlord
would be willing to lease the Offer Space, including, without limitation, rental rate, allowances
and concessions, term, and date of occupancy. Tenant will have 5 days from receipt of the Offer to
accept the Offer in writing. If Tenant fails to accept the Offer within such 5-day period, such
failure will constitute rejection of the Offer. If Tenant accepts the Offer, Landlord and Tenant
will promptly enter into an amendment to the Lease adding the Offer Space to the Premises and
otherwise incorporating the terms and conditions of the Offer. If Tenant rejects (or is deemed to
have rejected) the Offer, Landlord will be free to lease the Offer Space to a third party upon the
same basic terms and conditions as were stated in the Offer and the Right of First Offer granted
herein will automatically terminate and be of no further force or effect. This Right of First
Offer is personal to Tenant and is not assignable to any third parties, including, but not limited
to, any assignee or sublessee of Tenant. Notwithstanding anything to the contrary set forth
herein, the Right of First Offer granted pursuant to this Section 2.4 will terminate and
Tenant will have no further preferential rights with respect to the Offer Space on April 30, 2008.

SECTION 3 — LEASE TERM

     3.1 Lease Term. This Lease will continue in force during a period beginning on the
Effective Date of this Lease and ending on the expiration of the Lease Term, unless this Lease is
terminated early or extended to a later date pursuant to the terms of this Lease. The Lease Term
will commence and Rent will accrue beginning on the Commencement Date.

     3.2 Confirmation of Commencement Date. On or about the Commencement Date, Landlord and
Tenant agree to execute a Memorandum Regarding Acceptance of Premises in the form of Exhibit
“E” attached hereto confirming the Commencement Date and the acceptance of the Premises by
Tenant (subject to the completion of any Punchlist Items).

 

Table of Contents

     3.3 Delay in Commencement Date. If the Commencement Date is delayed due to a Tenant Delay
(as defined in the Tenant Improvements Agreement), the obligations of Tenant under this Lease
(including, without limitation, the obligation to pay Rent) will commence as of the date that the
Commencement Date would have occurred but for the Tenant Delay. If, however, the Commencement Date
is delayed due to any reason other than a Tenant Delay (subject to Section 13.8 hereof),
then, as Tenant’s sole remedy for the delay in Tenant’s occupancy of the Premises, the Commencement
Date will be delayed and the obligation to pay Rent will not commence until the earlier to occur of
(i) the date of actual occupancy by Tenant of the Premises for the conduct of its business, or (ii)
the date which is 5 business days following the date on which the Premises is Ready for Occupancy.

     3.4 Holding Over. If Tenant continues to occupy the Premises after the expiration of the
Lease Term without the prior written consent of Landlord, such occupancy will be a tenancy at
sufferance under all of the terms, covenants and conditions of this Lease, but the Base Rent will
increase to a daily Base Rent equal to the number determined by multiplying the Base Rent for the
final month of the Lease Term by 150%, and then dividing by 30. Tenant will also pay any and all
costs, expenses or damages sustained by Landlord as a result of such holdover.

SECTION 4 — RENT

     4.1 Payment of Rent.

          (a) Except as otherwise expressly provided in this Lease, Tenant must pay Rent to Landlord in
advance in monthly installments on the first day of each calendar month during the Lease Term, at
Landlord’s Notice Address or to such other person or at such other address as Landlord may from
time to time designate in writing.

          (b) Rent must be paid without notice, demand, abatement, deduction or offset, except as
otherwise expressly provided in this Lease.

          (c) If the Lease Term commences on a day other than the first day of a calendar month, then
the Base Rent for such partial month will be prorated and paid at the rental rate applicable during
the first full month of the Lease Term, and shall be payable on the first day of the calendar month
following the Commencement Date. Notwithstanding anything to the contrary set forth herein,
Tenant’s monthly installments of Base Rent shall be conditionally abated during the first 7 full
months of the Lease Term (provided, that notwithstanding such abatement of Base Rent, all other
sums due under the Lease shall be payable as provided for in this Lease). The abatement of Base
Rent is conditioned upon the full performance by Tenant of all its obligations under this Lease,
and if, at any time during the first 7 months of the Lease Term, an Event of Default by Tenant
occurs and has not been cured within any applicable notice and cure period, then the abatement of
Base Rent provided by this Section 4.1(c) shall immediately become void and Tenant shall
thereupon be obligated to promptly pay to Landlord the full amount of all Base Rent abated pursuant
hereto. Tenant must pay the Base Rent due for the eighth (8th) full month of the Lease
Term when Tenant delivers to Landlord an executed copy of this Lease.

          (d) Together with its payment of Rent, Tenant also must pay to Landlord any applicable
municipal, city, county, state, or federal excise, sales, use or transaction privilege taxes levied
or imposed against or on account of the amounts payable by Tenant hereunder or the receipt thereof
by Landlord (excluding state or federal income taxes imposed or levied against Landlord).

     4.2 Basic Operating Costs.

          (a) Prior to the commencement of this Lease and prior to the commencement of each additional
calendar year during the Lease Term, Landlord may, at its option, provide Tenant with a
then-current estimate of Basic Operating Costs for the upcoming calendar year. Thereafter, Tenant
must pay, as additional rental, in monthly installments in accordance with Section 4.1, the
estimated Tenant’s Share
of Basic Operating Costs for the calendar year in question. The failure of Landlord to
estimate Basic Operating Costs and bill Tenant on a monthly basis will not relieve Tenant of its
obligation to pay Tenant’s Share of Basic Operating Costs. Tenant acknowledges that Landlord’s
current estimate of Basic Operating Costs for 2007 is $1.75 per square foot, which will be payable
by Tenant in accordance with the terms of this Lease. Notwithstanding anything to the contrary set
forth herein, Tenant’s obligation to pay the Controllable Costs (hereinafter defined) component of
Tenant’s Share of Basic Operating Costs for any given calendar year shall be limited to the extent
that the percentage increase in Controllable Costs, on an overall cumulative basis, exceeds 7% per
annum; that is to say, increases in Controllable Costs may not exceed 7% per year on a cumulative
basis for the period in question. For example, if the percentage increase in Controllable Costs is
4% in Lease Year 2, the Controllable Costs may not increase in Lease Year 3 by more than 10%. The
term “Controllable Costs” shall mean all Basic Operating Costs except utility costs, Taxes,
security costs, and insurance premiums.

 

Table of Contents

          (b) If the Building or the Complex, as applicable, is not at least 95% occupied during any
year of the Lease Term (including the calendar year in which the Lease Term commences), the Basic
Operating Costs will be “grossed up” by increasing the variable components of Basic Operating Costs
to the amount which Landlord projects would have been incurred had the Building or the Complex, as
applicable, been 95% occupied during such year, such amount to be annualized for any partial year.

          (c) By April 1 of each calendar year during Tenant’s occupancy (including the calendar year
following the year in which the Lease Term is terminated), or as soon thereafter as possible,
Landlord will furnish to Tenant a statement of Tenant’s Share of Basic Operating Costs (the
“Statement”). The Statement will include a breakdown of Basic Operating Costs that are
attributable to the Building and Basic Operating Costs that relate to the Complex. For Basic
Operating Costs that are identified on the Statement as attributable to the Building, Tenant’s
Share will be the percentage in Section 1.1 relating to the proportion that the floor space
of the Premises bears to the entire floor space of the Building. For all other Basic Operating
Costs on the Statement, Tenant’s Share will be the percentage in Section 1.1 relating to
the proportion that the floor space of the Premises bears to the entire floor space of the Complex.
Landlord and Tenant will determine whether there is any difference between the amount, if any,
collected by Landlord from Tenant for the estimated Tenant’s Share of Basic Operating Costs and the
actual amount of Tenant’s Share of Basic Operating Costs. If there is an underpayment by Tenant,
Tenant must pay the amount of such underpayment to Landlord within 30 days following delivery of
the Statement. If there has been an overpayment by Tenant, Landlord will credit such overpayment
against Rent next coming due under the Lease. At the end of the Lease Term, if no Event of Default
exists, Landlord will refund any overpayment to Tenant in cash. If the Lease Term commences or
ends at any time other than the first day of a calendar year, Tenant’s Share of Basic Operating
Costs will be prorated for such calendar year according to the number of days of the Lease Term in
such calendar year

          (d) If there exists any dispute as to the calculation of Tenant’s Share of Basic Operating
Costs (a “Dispute”), the events, errors, acts or omissions giving rise to the Dispute will
not constitute a breach or default by Landlord nor shall Landlord be liable to Tenant, except as
specifically provided below. If there is a Dispute, Tenant must notify Landlord in writing
(specifying the items in dispute) within 90 days after receipt of the Statement. Notwithstanding
the existence of a Dispute, Tenant must timely pay the amount in dispute as and when required under
this Lease, but payment will be without prejudice to Tenant’s position. Upon receipt of the
payment, Landlord will give Tenant such supplementary information regarding the items in Dispute as
may be reasonably requested by Tenant in an effort to resolve such Dispute. If Landlord and Tenant
are unable to resolve the Dispute, the Dispute will be referred to a mutually satisfactory third
party certified public accountant for final resolution, although Tenant will retain the audit
rights contained in Section 4.2(e). The cost of the certified public accountant will be
paid by the party found to be least accurate (in terms of dollars in dispute). The decision of the
certified public accountant will be final and binding. Final settlement must be made within 30
days after receipt of such accountant’s decision. If Tenant does not dispute the calculation of
Tenant’s Share of Basic Operating Costs in accordance with the procedures and within the time
periods specified in this Section 4.2(d), or if Tenant does not request an audit of the
Basic Operating Costs in accordance with the procedures and within the time periods specified in
Section 4.2(e), the Statement will be considered final and binding for the calendar year in
question.

          (e) Tenant, at Tenant’s expense, will have the right, no more frequently than once per
calendar year, following 30 days’ prior written notice (such written notice to be given within 30
days following Tenant’s receipt of the Statement) to Landlord, to audit Landlord’s books and
records relating to Basic Operating Costs for the immediately preceding calendar year only.
Tenant’s right to audit Landlord’s books and records is subject to the following conditions:

          (i) Basic Operating Costs for the calendar year in question must have increased by more
than 5% over Basic Operating Costs for the immediately preceding calendar year.

          (ii) Tenant must conduct the audit in a manner that will not unreasonably interfere
with the conduct of Landlord’s business.

          (iii) Tenant must conduct the audit during normal business hours and at the location
where Landlord maintains its books and records.

          (iv) Tenant must deliver to Landlord a copy of the results of such audit within 5 days
after its receipt by Tenant.

          (v) No audit will be permitted if an Event of Default by Tenant (including any failure
by Tenant to pay an amount in Dispute) has occurred and is continuing.

          (vi) Tenant must reimburse Landlord for the cost of all copies requested by Tenant or
Tenant’s auditor.

 

Table of Contents

          (vii) The audit must be conducted by an independent, nationally-recognized accounting
firm or a local accounting firm reasonably acceptable to Landlord that is not being
compensated by Tenant on a contingency fee basis. The auditor and Tenant must agree with
Landlord in writing to keep the results of the audit confidential by executing and
delivering to Landlord a confidentiality agreement in a form acceptable to Landlord, in
Landlord’s reasonable discretion.

          (viii) No subtenant will have the right to audit Landlord.

          (ix) Tenant and its permitted assignees will be permitted only a total of 1 audit per
calendar year.

          (x) Tenant must conclude the audit within 60 days after Tenant’s receipt of the
Statement.

          (xi) Any assignee’s audit right will be limited to the period after the effective date
of the assignment.

Unless Landlord in good faith disputes the results of the audit, an appropriate adjustment will be
made between Landlord and Tenant to reflect any overpayment or underpayment of Tenant’s Share of
Basic Operating Cost Increases within 30 days after delivery of such audit to Landlord, in the
manner described in Section 4.2(c). If Landlord in good faith disputes the results of any
such audit, the parties will in good faith attempt to resolve any disputed items. If Landlord and
Tenant are able to resolve such dispute, final settlement will be made within 30 days after
resolution of the dispute. If the parties are unable to resolve any such dispute, either Landlord
or Tenant may trigger the Dispute mechanism described in Section 4.2(d).

          (f) “Basic Operating Costs” means all costs and expenses incurred by Landlord in each
calendar year for operating, maintaining, repairing, managing and, except as otherwise specifically
provided in Section 4.2(g) below, owning the Complex. “Basic Operating Costs”
includes, without limitation, utilities attributable to the Common Areas, insurance, Taxes, general
landscaping, mowing of grass, care of shrubs (including replacement of plants), operation and
maintenance of lawn sprinkler system, operation and maintenance of exterior security lighting,
water service and sewer charges, repainting of exterior surfaces of truck doors, handrails, down
spouts and other parts of the Buildings that require periodic preventative maintenance, roof
repairs and maintenance (to the extent not directly paid by Tenant), parking lot maintenance
(including paving repairs and maintenance), common area maintenance, security service, pest control
service for the Common Areas and Service Areas, property management fees, property owners’
association dues and assessments, costs of insurance relating to the Complex, legal expenses
incurred with respect to the Complex which relate directly to the operation of the complex and
which benefit all of the tenants of the Complex generally, and any and all sales, use or other
taxes with respect to the foregoing charged by 1 or more applicable authorities. Landlord may, at
its option, amortize over a period of time reasonably determined by Landlord in accordance with
generally accepted accounting principles using the straight-line method of depreciation, and
collect through Basic Operating Costs, the amortized costs and expenses associated with the
replacement of capital investment items which (i) Landlord reasonably believes will reduce (or
avoid increases in) Basic Operating Costs, to the extent the replacement actually reduces or avoids
increases in Basic Operating Costs, (ii) Landlord reasonably believes is required for the safety of
tenants and occupants of the Complex, or (iii) may be required in order to comply with any federal,
state or municipal law, code or ordinance, or regulation which was not promulgated, or which was
promulgated but was not in effect or applicable to the Complex as of the Effective Date.

          (g) “Basic Operating Costs” will not include any expenses or costs for the following
items:

          (i) Except as provided in Section 4.2(f), costs that, under generally accepted
accounting principles, are required to be classified as capital expenditures;

          (ii) Except as provided in Section 4.2(f), depreciation or amortization of the
Building or its contents or components;

          (iii) Expenses for the preparation of space (including tenant finish out costs) or
other similar type work that Landlord performs for any tenant or prospective tenant of the
Building;

          (iv) Expenses incurred in leasing or obtaining new tenants or retaining existing
tenants, such as marketing costs and leasing commissions;

          (v) Except as provided in Section 4.2(f), legal expenses;

 

Table of Contents

          (vi) Interest, amortization or other costs associated with any mortgage, loan or
refinancing of the Complex; or

          (vii) Any ground rent incurred for the Complex.

     4.3 Other Amounts Owing to Landlord. If Landlord incurs any expenses on behalf of Tenant
or is otherwise due reimbursement from Tenant under this Lease, such amounts will be additional
Rent. Tenant must pay the amounts owing within 10 days after its receipt of an invoice from
Landlord.

     4.4 Late Payments; Dishonored Checks.

          (a) If Landlord does not receive any installment of Rent within 5 days after the date due,
Tenant, to the extent permitted by law, must pay, in addition to the installment of Rent, a late
payment charge equal to 5% of the installment of Rent due. The late payment charge will increase
to 10% of the installment of Rent due if Tenant becomes responsible for a late payment charge more
than twice during any consecutive 12-month period. The late payment charge will revert to 5% after
Tenant has paid Rent for 12 consecutive months without incurring a late payment charge. Because
the additional costs and expenses resulting to Landlord from late payments are difficult to
ascertain precisely, this late payment charge constitutes a reasonable and good faith estimate by
the parties of the extent of such additional costs and expenses.

          (b) In addition to the late payment charge contained in Section 4.4(a), all Rent, if
not paid within 30 days after the date due, will, at the option of Landlord, and to the extent
permitted by law, bear interest from the date due until paid at the Default Rate.

          (c) If any check is tendered by Tenant and not duly honored with good funds, the check will
not constitute payment of Rent. Tenant will, in addition to any other remedies available to
Landlord under this Lease (including late payment charges), pay Landlord a “NSF” fee of $25.00.

          (d) Acceptance of a late payment charge by Landlord does not constitute a waiver of Tenant’s
default with respect to the overdue amount, nor will it be construed as a waiver by Landlord of the
requirement for timely payment nor create a course of dealing permitting such late payments. Any
payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Rent
due under this Lease will be deemed to be on account of the earliest Rent due hereunder. No
endorsement or statement on any check or any letter accompanying any check or payment as Rent will
be deemed an accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy
provided in this Lease.

     4.5 Net Lease. This Lease is intended to be a fully net lease, so that this Lease will
yield, net to Landlord, the Rent specified in this Lease. In that regard, all Basic Operating
Costs (including, without limitation, all Taxes, insurance premiums, and utility charges),
maintenance (except as otherwise provided in this Lease), repair and replacement expenses (except
as otherwise provided in this Lease), expenses relating to compliance with all applicable laws and
all other costs, fees, charges, expenses, reimbursements and obligations of every kind and nature
whatsoever relating to the Premises which may arise or become due during the Lease Term must be
paid and discharged by Tenant.

SECTION 5 — CREDIT ENHANCEMENT

     5.1 Security Deposit. Tenant must deliver to Landlord the Security Deposit when Tenant
delivers to Landlord a signed counterpart of this Lease. Landlord will hold the Security Deposit,
without liability for interest, as security for the performance by Tenant of Tenant’s covenants and
obligations under this Lease. The Security Deposit is not to be considered an advance payment of
Rent or a measure of Tenant’s liability for damages in case of default by Tenant. Landlord may,
from time to time, without prejudice to any other remedy, use the Security Deposit to the extent
necessary to make good any arrearages of Rent or to satisfy any other covenant or obligation of
Tenant hereunder. After Landlord makes such application of the Security Deposit to Rent or other
costs, Tenant will pay to Landlord on demand the amount so applied in order to restore the Security
Deposit to its original amount. If Tenant is not in default at the termination of this Lease,
Landlord will return to Tenant the balance of the Security Deposit within 30 days following the
termination of this Lease. If Landlord transfers its interest in the Complex during the Lease
Term, Landlord may assign the Security Deposit to the transferee. Upon assumption by such
transferee of liability for the Security Deposit, Landlord shall have no further liability for the
return of such Security Deposit.

     5.2 Guaranty. The obligations of Tenant under this Lease, financial and otherwise,
will be guaranteed by Navarre Corporation, a Minnesota corporation (“Guarantor”) pursuant
to the terms of that

 

Table of Contents

certain Guaranty Agreement (the “Guaranty”) in the form attached
hereto as Exhibit “G”. The Guaranty must be signed by Guarantor concurrently with the
execution of this Lease.

SECTION 6 — LEGAL AND CONTRACTUAL LIMITATIONS ON USE OF PREMISES

     6.1 Use. The Premises must be used solely for light industrial and office purposes. The
Premises may not be used for any other purpose. Tenant, at Tenant’s sole cost and expense, must
obtain any and all licenses necessary for its use of the Premises.

     6.2 Compliance with Laws.

          (a) Tenant, at Tenant’s sole cost and expense, must comply with all current and future
federal, state, municipal and other laws and ordinances and all covenants, conditions, restrictions
and other matters of record applicable to the use of the Premises, the employees, agents, visitors
and invitees of Tenant, and the business conducted in the Premises by Tenant.

          (b) Without limiting the requirements in Section 6.2(a), Tenant must, at Tenant’s own
expense, comply with all laws regulating the use, generation, storage, transportation, or disposal
of Hazardous Substances (“Environmental Laws”). Landlord and Tenant agree upon the
following additional terms with regard to Environmental Laws:

          (i) The term “Hazardous Substances”, as used in this Lease, includes, without
limitation, flammable, explosives, radioactive materials, asbestos, polychlorinated biphenyl
(PCB’s), chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants,
irritants, hazardous wastes, toxic substances or related materials, petroleum and petroleum
products, and substances declared to be hazardous or toxic under any law or regulation now
or hereafter enacted or promulgated by any applicable governmental authority, including
under federal, state, and local laws, rules, regulations, and ordinances.

          (ii) Tenant must, at Tenant’s own expense, make all submissions to, provide all
information required by, and comply with all requirements of all governmental authorities
(the “Authorities”) under the Environmental Laws.

          (iii) If any Authority or any third party demands that a clean-up plan be prepared and
that a clean-up be undertaken because of any deposit, spill, discharge, or other release of
Hazardous Substances that occurs during the Lease Term or in connection with this Lease or
Tenant’s use of the Premises, whether during the Lease Term or not, at or from the Premises,
or which arises at any time from Tenant’s use or occupancy of the Premises, then Tenant
must, at Tenant’s own expense, prepare and submit the required plans and all related bonds
and other financial assurances to the applicable Authorities. In such case Tenant must
provide copies of all of such to Landlord at the same time provided to the Authorities.
Tenant shall carry out all such clean-up plans.

          (iv) Tenant must promptly provide all information regarding the use, generation,
storage, transportation, or disposal of Hazardous Substances that is requested by Landlord.
If Tenant fails to fulfill any duty imposed under this Section 6.2(b) within a
reasonable time, Landlord may do so. In such case, Tenant must cooperate with Landlord in
order to prepare all documents Landlord deems necessary or appropriate to determine the
applicability of the Environmental Laws to the Premises and Tenant’s use thereof, and for
compliance therewith, and Tenant must execute all documents promptly upon Landlord’s
request. No such action by Landlord and no attempt made by Landlord to mitigate damages
under any Law will constitute a waiver of any of Tenant’s obligations under this Section
6.2(b).

          (v) Notwithstanding anything contained in this Section 6.2(b) to the contrary,
Tenant may not take any remedial action in or about the Premises, nor enter into any
settlement agreement, consent decree or other compromise with respect to any claims relating
to any Hazardous Substances in any way connected with the Premises without first notifying
Landlord of Tenant’s intention to do so and affording the Landlord the opportunity to
appear, intervene or otherwise assert and protect Landlord’s interest with respect thereto.

          (vi) Tenant must indemnity, defend at its cost, and hold harmless Landlord and the
Landlord-Related Parties from all fines, suits, procedures, claims and actions of every
kind, and all costs associated therewith (including attorneys’ and consultants’ fees)
arising out of or in any way connected with (A) any deposit, spill, discharge or other
release of Hazardous Substances that occurs during the Lease Term, at or from the Premises,
or that arises at any time from Tenant’s use or occupancy of the Premises (whether or not
during the Lease Term), (B) Tenant’s failure to provide all information, make all
submissions, and take all steps required

 

Table of Contents

by all Authorities under the Environmental Laws and
all other environmental laws, or (C) Tenant’s failure to otherwise fulfill each and every
obligation to be performed by it in this Section 6.2(b).

          (vii) Tenant must promptly notify Landlord and provide Landlord with copies of any
notice or other correspondence given or received by Tenant regarding (A) Hazardous
Substances affecting the Premises or the Complex, (B) Tenant’s knowledge as to the violation
of any law relating to Hazardous Substances on the Premises or in the Complex or (C) the
breach by Tenant of any provisions of this Section 6.2(b).

          (viii) Tenant’s obligations and liabilities under this Section 6.2(b) will
survive the expiration or earlier termination of this Lease.

          (c) Accessibility Laws. Tenant, at its sole cost, is responsible for compliance with
the Americans With Disabilities Act and comparable federal, state and local statutes or regulations
relating to accessibility of facilities (the “Accessibility Laws”) with respect to the
Premises (including the Improvements and all Alterations made to the Premises or any other acts of
Tenant after the Commencement Date) and all requirements of Accessibility Laws that relate to the
employer-employee relationship or that are necessitated by the special needs of any employee,
agent, visitor or invitee of Tenant, including, without limitation, requirements related to
auxiliary aids and graphics. Landlord, at its sole cost, is responsible for compliance with
Accessibility Laws with respect to the Common Areas and the Service Areas, except for any
improvements required to the Common Areas or Service Areas that are attributable to Tenant’s
specific use of the Premises. Neither party will be in default under this Section 6.2(c)
for its failure to comply with Accessibility Laws so long as the responsible party is either
contesting in good faith, and by legal means, the enforcement of Accessibility Laws, or is
undertaking diligent efforts to comply with Accessibility Laws.

     6.3 Building Rules and Regulations; No Nuisance.

          (a) Landlord has the right to adopt and modify Rules and Regulations governing the use and
occupancy of the Complex, including the Parking Areas. Tenant must comply with the Rules and
Regulations and must cause all of its Tenant-Related Parties, contractors, invitees and visitors to
do so as well. Landlord may change the Rules and Regulations from time to time, as Landlord deems
necessary. Any changes to the Rules and Regulations will be effective when sent by Landlord to
Tenant in writing. Landlord will have no liability to Tenant or any other person for its failure
to enforce the Rules and Regulations.

          (b) Tenant may not commit any act which is a nuisance or annoyance to Landlord or to other
tenants in the Building or Complex or which might, in the reasonable judgment of Landlord,
appreciably damage Landlord’s goodwill or reputation, or tend to injure or depreciate the value of
the Building or Complex.

     6.4 Quiet Enjoyment. Tenant, on paying all sums required under this Lease and performing
and observing all of its covenants and agreements, may peaceably and quietly occupy and use the
Premises during the Lease Term. Such occupancy and use is subject to the provisions of this Lease,
all matters of record affecting the Complex and applicable governmental laws, rules, and
regulations. Landlord warrants and forever defends Tenant’s right to such occupancy against the
claims of any and all persons lawfully claiming the same or any part thereof by, through or under
Landlord, subject only to the provisions of this Lease, all matters of record now or hereafter
affecting the Complex and all applicable governmental laws, rules, and regulations.

SECTION 7 — OPERATIONAL MATTERS

     7.1 Services to be Furnished by Landlord.

          (a) So long as no Event of Default exists under this Lease, Landlord agrees to furnish to
Tenant the following services:

          (i) Water, sewer, electricity, and telecommunications connections. Tenant must pay the
appropriate utility provider directly for all such services that are separately metered to
Tenant. If any such services are not separately metered to Tenant, Tenant must pay Tenant’s
Share, as determined by Landlord, of all charges jointly metered with other premises. If
Landlord elects to supply any of the foregoing utilities to the Premises or select a utility
supplier for the Premises, Tenant agrees to purchase and pay for the utilities provided
within 10 days after receipt by Tenant of the bills therefor. If any such amount is not
paid within 10 days after the date of Landlord’s invoice to Tenant, the unpaid amount will
bear interest from the date due until the date paid at the Default Rate.

 

Table of Contents

          (ii) Building Standard maintenance, management and operation of all Common Areas
and Service Areas.

          (b) If Landlord agrees to provide any additional services at the specific request of Tenant
(without implying any obligation on the part of Landlord to do so), Tenant will reimburse Landlord
for the cost of providing such service (plus an administrative charge equal to 10% of such cost,
plus applicable sales tax). Landlord may discontinue the provision of such additional service at
any time upon 30 days’ advance written notice (or immediately upon the occurrence of an Event of
Default).

          (c) If any of the services Landlord is required to furnish hereunder are interrupted, Landlord
will use reasonable diligence to restore the services promptly, but Tenant will have no claim for
rebate of Rent, damages (including damages for business interruption) or eviction on account
thereof. In no event will Landlord be liable for any interruption or failure of utility services
on the Premises.

     7.2 Parking.

          (a) Landlord is providing the Parking Areas for the non-exclusive and common use of Landlord,
all tenants of the Complex, and their respective employees, agents, subtenants, licensees,
visitors, guests and invitees. If any parking spaces become unavailable to Tenant due to casualty
damage, flooding, condemnation or repairs, Landlord will use reasonable efforts to provide Tenant
with reasonably satisfactory alternative parking arrangements until the use of the parking spaces
is restored. If Tenant delivers written notice to Landlord that the Parking Spaces are not
available for Tenant’s use due to use by other tenants of the Complex, and such unavailability
persists for five (5) consecutive business days, then Landlord will use commercially reasonable
efforts to address such parking issue in order to make the Parking Spaces available for Tenant’s
use. Tenant will have no right, however, to terminate this Lease by reason of the loss of any
parking spaces.

          (b) Tenant, the Tenant-Related Parties, and Tenant’s contractors, licensees and invitees must
comply with the Rules and Regulations regarding the Parking Areas.

     7.3 Signage. As part of Landlord’s construction of the Improvements, Landlord will install
a sign on the exterior of the building identifying Tenant’s business in the Premises. The
specifications of the sign will be subject to the approval of Landlord and Tenant pursuant to
Paragraph 2 of Exhibit “D” attached hereto; however, the size and location of the sign will be
determined by Landlord in its sole discretion. The cost of such sign will be paid out of the
Allowance. If the cost of such sign causes the Cost of the Work (as defined in Exhibit “D”
attached hereto) to exceed the amount of the Allowance, Landlord will pay up to $5,000.00 of such
excess amount attributable to the sign, and the amount in excess of $5,000.00 will be deemed part
of the “Excess Amount” (as defined in Exhibit “D” attached hereto) and will be paid by
Tenant in accordance with Exhibit “D”. Tenant is required to obtain Landlord’s prior
written approval for any additional exterior Building signage and any signage to be located in the
Premises that is visible from the exterior of the Building. All such signage is subject to any
applicable governmental laws, ordinances, regulations, Landlord’s standard sign criteria,
subdivision codes, covenants and restrictions and must be in the standard graphics for the
Building. Tenant, at its sole cost and expense, must remove all non-Building Standard signage upon
the termination of this Lease and repair any damage caused by such removal, all to the reasonable
satisfaction of Landlord.

     7.4 Repairs and Maintenance by Landlord. Landlord will maintain and keep in good repair,
reasonable wear and tear excepted, only the following: roof structure of the Building, the
structural soundness of the exterior walls of the Building (including windows, glass or plate
glass, and doors), exterior painting of the Building, the foundation of the Building, the Common
Areas, the Service Areas, and the Parking Areas. All requests for repairs must be submitted to
Landlord in writing, except in the case of an emergency. The cost of repairs and maintenance by
Landlord pursuant to this Section 7.4 will be included in Basic Operating Costs, except to
the extent excluded by Section 4.2(g).

     7.5 Maintenance by Tenant.

          (a) Tenant must, at Tenant’s sole cost and expense, maintain in good condition, reasonable
wear and tear excepted, all parts of the Premises, except those for which Landlord is expressly
responsible as described in Section 7.4 above, including, but not limited to, interior
windows, interior
glass and plate glass, interior doors, special store fronts, office entries, interior walls
(including demising walls of the Premises if they are not exterior walls of the Building), finish
work, floor and floor coverings, ceilings, heating, air conditioning and ventilation systems within
the Premises, truck doors, dock bumpers, plumbing lines and fixtures within the Premises and other
utility lines, equipment and facilities within the Premises, and termite and pest extermination.
Tenant must also pay for, and at the election of Landlord, perform, repairs, maintenance or
replacements to the items described in Section 7.4 above if the damage thereto is caused by
negligence of Tenant, its employees, agents, licensees or invitees.

 

Table of Contents

          (b) Tenant must maintain the Premises in a clean, orderly and sanitary condition and must not
commit or allow any waste to be committed on any portion of the Premises. Tenant must provide
regular janitorial service for the Premises.

          (c) At the expiration or early termination of this Lease, Tenant will deliver up the Premises
to Landlord in as good condition as at the Commencement Date, ordinary wear and tear and damage by
fire or casualty loss excepted.

          (d) Tenant must, at its sole cost and expense, enter into regularly scheduled preventive
maintenance/service contracts with reputable maintenance contractors for servicing all hot water,
heating, ventilating and air conditioning and other mechanical systems and equipment within the
Premises. Each such contract must include all services suggested by the equipment manufacturer in
the operation/maintenance manual and must become effective (and a copy thereof delivered to
Landlord) within 30 days after the date Tenant takes possession of the Premises. Tenant agrees to
make copies of all maintenance and service records available to Landlord upon request.

     7.6 Repairs by Tenant.

          (a) Tenant will repair or replace, at Tenant’s cost, any damage to the Premises (including
doors and door frames, interior windows and any kitchen equipment, such as dishwashers, sinks,
refrigerators, trash compactors and plumbing and other mechanical systems related thereto) that is
not caused by Landlord and any damage to the Complex, or any part thereof, caused by Tenant, any
Tenant-Related Party or any subtenant, guest, licensee or invitee of Tenant.

          (b) If any damage described in Section 7.6(a) is located outside of the Premises or
below floor coverings, above ceilings or behind walls or columns or if Tenant fails to make any
other repairs or replacements within 30 days after receipt of written notice from Landlord,
Landlord may, at Landlord’s option, make such repairs or replacements on Tenant’s behalf, Tenant
will reimburse Landlord for the cost of such repairs or replacements, plus an administrative charge
equal to 10% of the cost of such repairs or replacements. If any such damage is covered by
Landlord’s insurance, in whole or in part, Tenant’s liability under this Section 7.6 will
be limited to the deductible payable by Landlord and any portion of the cost of repairing such
damage not covered by Landlord’s insurance.

          (c) In connection with repairs or replacements made by Tenant, Tenant will provide to Landlord
with a copy of the contractor agreement regarding such repairs, copies of certificates of insurance
evidencing contractor coverage satisfactory to Landlord, copies of “as-built” plans and
specifications and other information or documentation reasonably required by Landlord, including
evidence of the lien-free completion of the repairs or replacements.

     7.7 Alterations, Improvements.

          (a) Tenant may make no alteration, change, improvement, replacement or addition to the
Premises (including, but not limited to, roof and wall penetrations) (collectively,
“Alterations”) without the prior written consent of Landlord. Landlord will not
unreasonably withhold consent with respect to interior Alterations that do not affect, in any way,
the mechanical, electrical, plumbing, HVAC, structural and/or fire and life safety components of
the Building (“Non-Structural Alterations”). Landlord may, at its option, require Tenant to
submit plans and specifications to Landlord for approval prior to commencing any Alterations. All
Alterations must be done in a good and workmanlike manner and in compliance with all applicable
laws and ordinances. All Alterations (other than Non-Structural Alterations) must be performed by
a contractor on Landlord’s approved list (a copy of which may be obtained from the Building
manager). Any contractors used by Tenant must carry a comprehensive liability (including builder’s
risk) insurance policy in such amounts as Landlord may reasonably require and must provide proof of
such insurance to Landlord prior to the commencement of any Alterations. Landlord reserves the
right to require payment and performance bonds to be procured by Tenant or its contractors in
connection with such work. Upon completion of any Alterations, Tenant must provide Landlord with a
copy of its building permit, final inspection tag and, if plans and specifications were
required by Landlord, final “as built” plans and specifications, together with evidence of the
lien-free completion of such Alterations. Except for the Improvements (which shall be governed by
the Tenant Improvements Agreement, if any), all Alterations now or hereafter placed or constructed
on the Premises at the request of Tenant will be at Tenant’s cost. If Landlord performs
Alterations on Tenant’s behalf, Tenant must pay the cost of such Alterations (plus a construction
management fee equal to 10% of hard costs).

          (b) Upon the expiration or early termination of this Lease, Tenant must surrender the Premises
to Landlord in the same condition as the Premises were delivered to Tenant on the date the Premises
were Ready for Occupancy, reasonable wear and tear excepted. Accordingly, Tenant may remove its
trade fixtures, supplies and movable furniture and equipment provided (i) such removal is made
prior to the termination or expiration of the Lease Term; (ii) Tenant is not then in default in the

 

Table of Contents

timely performance of any obligation or covenant under this Lease; and (iii) Tenant promptly
repairs all damage caused by such removal to the reasonable satisfaction of the Landlord. Tenant
must repair any damage caused by such removal.

     7.8 Telecommunications. If Tenant desires to utilize the services of a telephone or
telecommunications provider whose equipment is not servicing the Building as of the Effective Date
(the “Telecommunications Provider”), Tenant must notify Landlord. The Telecommunications
Provider must obtain the written consent of Landlord, which consent will not be unreasonably
withheld or delayed, before installing its lines or equipment or otherwise providing service within
the Complex. Landlord’s consent under this section will not be deemed any kind of warranty or
representation by Landlord as to the suitability, competence, or financial strength of the
Telecommunications Provider. All telephone and telecommunications services desired by Tenant will
be ordered and utilized at the sole risk and expense of Tenant. Tenant agrees that if service by
the Telecommunications Provider is interrupted, curtailed, or discontinued, Landlord will have no
obligation or liability with respect thereto and that Tenant will have the sole obligation to
obtain substitute service at its expense.

     7.9 Change of Name or Common Areas.

          (a) Landlord reserves the right at any time to change the name of the Building or Complex.
Landlord will use reasonable efforts to give Tenant 30 days’ advance written notice of such change.

          (b) Landlord hereby reserves the right to repair, change, redecorate, alter, improve, or
renovate any part of the Common Areas (including the Common Areas located on any full floor leased
by Tenant) and to close the Common Areas temporarily for maintenance and other reasonable purposes.
In exercising such right, Landlord will use reasonable efforts to minimize any interruption of
Tenant’s business conducted in the Premises.

     7.10 Entry by Landlord. Tenant agrees that Landlord and the Landlord-Related Parties may
enter into and upon any part of the Premises upon prior notice to Tenant (except in the event of an
emergency) at all reasonable hours to inspect the same, to make repairs, replacements, or
improvements, to clean or maintain the Premises, or to show the Premises to prospective purchasers,
mortgagees, insurers or, within the last 12 months of the Lease Term, to prospective tenants.
Tenant will not be entitled to any abatement or reduction of Rent by reason of any such entry.
Landlord will use reasonable efforts to minimize any disruption to the conduct of Tenant’s business
by reason of any such entry.

SECTION 8 — TRANSFER OF LEASEHOLD RIGHTS

     8.1 Transfers by Tenant.

          (a) Tenant may not assign this Lease or sublease the Premises or any part thereof or mortgage,
pledge or hypothecate its leasehold interest or grant any concession or license within the Premises
(any such assignment, sublease, mortgage, pledge, hypothecation, or grant of a concession or
license by Tenant is referred to in this Section 8 as a “Transfer”) without the
prior written consent of Landlord, which consent will not be unreasonably withheld or delayed.
Without limiting the foregoing,
Landlord and Tenant acknowledge that it would be reasonable for Landlord to withhold its
consent in any of the following instances: (i) the tangible net worth of the proposed assignee or
sublessee is not sufficient to perform the obligations of Tenant under this Lease as they become
due; (ii) the proposed assignee or sublessee is a governmental agency; (iii) in Landlord’s
reasonable judgment, the use of the Premises by the proposed assignee or sublessee would entail
alterations which would reduce the value of the leasehold improvements in the Premises, or would
require materially increased services by Landlord; (iv) Landlord has experienced previous defaults
by or is in litigation with the proposed assignee or sublessee; (v) the proposed assignee or
sublessee’s anticipated use of the Premises involves the generation, storage, use, treatment or
disposal of Hazardous Substances in a manner that would violate the terms of the Lease; (vi) the
proposed assignee or sublessee is an entity with whom Landlord is under negotiation to lease space
in the Complex; (vii) the proposed assignment or sublease would cause a violation of another lease
for space in the Complex or would give an occupant of the Complex a right to terminate or cancel
its lease; (viii) the Landlord’s mortgagee does not consent to the Transfer for any reason; or (ix)
either an “Event of Default” exists under this Lease or there exists an event or circumstance which
with the passage of time or the giving of notice would constitute an “Event of Default” under this
Lease. Any attempt to effect a Transfer without the consent of Landlord will be void and of no
effect.

          (b) To make a Transfer, Tenant must request in writing Landlord’s consent at least 30 days in
advance of the date on which Tenant desires to make a Transfer and pay Landlord a $250.00 fee for
reviewing the request, plus any charges that may be assessed for such transfer by Landlord’s
mortgagee (the “Review Fee”) provided that the Review Fee does not exceed $750.00. The
request must include the name of the proposed transferee, current financial information on the
proposed transferee, the

 

Table of Contents

terms of the proposed Transfer, and, if the Transfer pertains to only a
portion of the Premises, information regarding access or construction issues that must be addressed
to facilitate the Transfer. Landlord will, within 30 days following receipt of such request,
notify Tenant in writing that Landlord elects (i) to terminate this Lease as to the space so
affected as of the date so specified by Tenant, in which event Tenant will be relieved of all
further obligations hereunder as to such space, (ii) to permit Tenant to assign or sublet such
space in accordance with the terms provided to Landlord, or (iii) to refuse consent to Tenant’s
requested Transfer and to continue this Lease in full force and effect as to the entire Premises.
If Landlord fails to notify Tenant in writing of such election within the 30-day period, Landlord
will be deemed to have elected option (iii) above. If Landlord elects option (i)
above, Tenant will have the right to withdraw the request for consent by delivering written notice
to Landlord within 5 days after Tenant’s receipt of Landlord’s notice exercising option
(i), in which case the termination of the Lease will be negated. If Tenant does not elect to
negate the termination, the Lease will terminate effective as of the 6th day after
Landlord’s notice and Landlord will return the Review Fee to Tenant.

          (c) The consent by Landlord to a particular Transfer will not be deemed a consent to any other
subsequent Transfer. If this Lease, the Premises or the Tenant’s leasehold interest, or any
portion of the foregoing, is transferred, or if the Premises is occupied in whole or in part by
anyone other than Tenant without the prior written consent of Landlord as provided herein, Landlord
may collect rent from the transferee or other occupant and apply the net amount collected to the
Rent payable hereunder. Such collection or application of rent by Landlord, however, will not be
deemed a waiver of the provisions hereof or a release of Tenant from the further performance by
Tenant of its covenants, duties and obligations hereunder.

          (d) As used herein, the term “Transfer” includes any merger, consolidation,
reorganization, sale of assets, sale of a controlling interest in stock, or other transfer by like
manner or operation of law. Notwithstanding anything to the contrary, Tenant has the right,
subject to Section 8.3, without Landlord’s consent, to assign this Lease to (i) any
corporation or other entity resulting from a merger or consolidation with Tenant, so long as such
surviving corporation or entity acquires all or substantially all of Tenant’s assets and on-going
concern, and has a tangible net worth at least equal to Tenant’s tangible net worth either as of
the Effective Date or the date immediately preceding the proposed Transfer, whichever is greater,
or (ii) any person or entity which acquires all or substantially all of Tenant’s assets and
on-going concern, so long as such person or entity has a tangible net worth at least equal to
Tenant’s tangible net worth either as of the Effective Date or the date immediately preceding the
proposed Transfer, whichever is greater, or (iii) any person or entity which acquires a controlling
interest in Tenant’s stock, so long as such person or entity has a tangible net worth at least
equal to Guarantor’s tangible net worth either as of the Effective Date or the date immediately
preceding the proposed Transfer, whichever is greater.

     8.2 Affiliate Transfers. Tenant has the right, subject to Section 8.3, without
Landlord’s consent, to assign this Lease or sublet all or any portion of the Premises to any person
or entity that controls, is controlled by, or is under common control with the original Tenant
named in this Lease (an “Affiliate Transfer”). The term “control” means, with
respect to a corporation, the right to exercise, directly or indirectly, more than 50% of the
voting rights attributable to the shares of the controlled corporation, and, with respect to a
person or entity that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or policies of the
controlled person or entity. Tenant must provide Landlord with written notice of any Affiliate
Transfer within 10 days after the effective date of such the Affiliate Transfer.

     8.3 Transfer Requirements. The following requirements apply to all Transfers (including
Affiliate Transfers):

          (a) Tenant must, in the case of an assignment, cause the assignee to expressly assume and
agree to perform, all of the covenants, duties and obligations of Tenant under this Lease. The
assignee will be jointly and severally liable under the Lease along with Tenant.

          (b) Except in the case of an Affiliate Transfer, if the rent or other consideration payable
by a sublessee or assignee under any such permitted sublease or assignment exceeds the Rent for the
portion of the Premises so transferred, Tenant must pay to Landlord, as additional Rent, all such
excess rental and other consideration, immediately upon receipt thereof by Tenant.

          (c) The use of the Premises by the assignee or transferee must be consistent with the terms of
this Lease. All of the terms and provisions of this Lease will continue to apply after a Transfer,
unless otherwise expressly provided herein.

          (d) Tenant will remain directly and primarily liable for the performance of all the covenants,
duties and obligations of Tenant under this Lease (including, without limitation, the obligation to
pay Rent). Landlord will be permitted to enforce the provisions of this Lease against the
undersigned

 

Table of Contents

Tenant or any transferee, or both, without demand upon or proceeding in any way against
any other persons.

     8.4 Transfers by Landlord. Landlord will have the right to transfer and assign, in whole
or in part, all of its rights and obligations hereunder and in the Complex. Upon the assumption by
the transferee of the obligations of Landlord hereunder, Landlord will be released from any further
obligations accruing after the date of transfer, and Tenant will look solely to such
successor-in-interest of Landlord for the performance of such obligations.

     8.5 Sublease of Offer Space. In the event Landlord and Tenant enter into an amendment
to this Lease to incorporate the Offer Space pursuant to Section 2.4 above, Landlord hereby
consents to Tenant’s sublease of the Offer Space to an entity known as Gong Anime, Inc., a joint
venture of which Guarantor is a 50% owner, so long as the sublease of the Offer Space satisfies the
conditions and requirements of this Lease (other than obtaining Landlord’s prior written consent),
including, without limitation, Section 8.3, and Tenant deliverers to Landlord a copy of the
sublessee whereby the sublessee agrees to be bound by all provisions of this Lease.

SECTION 9 — INSURANCE; CASUALTY; ALLOCATION OF LIABILITY

     9.1 Property Insurance.

          (a) Landlord must maintain insurance policy or policies of “risks of direct physical loss” in
a “special form” basis (or comparable coverage by whatever name denominated) on the portion of the
Complex that is the property of Landlord (including Alterations by Tenant that have become the
property of Landlord), in an amount equal to not less than 90% of the replacement cost (or such
greater amount as may be necessary to comply with the provisions of any co-insurance clauses of the
policy). The premium for such policy will be included as a part of the Basic Operating Costs.
Payments for losses thereunder will be made solely to Landlord or to the mortgagees of Landlord as
their interests may appear. If insurance premiums for the Complex increase due to: (i) the
Improvements to the Premises in excess of Building Standard or any subsequent improvements made by
Tenant to the Premises or made by Landlord at Tenant’s request, or (ii) as a result of Tenant’s use
of the Premises, Landlord may elect to require Tenant to pay directly for the increased premiums
rather than including such increased premiums in Basic Operating Costs.

          (b) Tenant must maintain an insurance policy or policies of “risks of direct physical loss” in
a “special form” basis (or comparable coverage by whatever name denominated) on all of its personal
property, including removable trade fixtures, supplies and movable furniture and equipment located
on the Premises, in an amount equal to full replacement cost and endorsed to provide that Tenant’s
insurance is primary in the event of any overlapping coverage with the insurance carried by
Landlord.
Such insurance will be maintained at the expense of Tenant and payment for losses thereunder
will be made solely to Tenant or to the mortgagees of Tenant (if permitted hereunder) as their
interests may appear. Tenant must, prior to occupancy of the Premises and at Landlord’s request
from time to time, provide to Landlord a current certificate of insurance evidencing Tenant’s
compliance with this Section 9.1. Tenant must obtain the agreement of Tenant’s insurers to
notify Landlord at least 30 days prior to any cancellation, modification or expiration of a
property insurance policy.

     9.2 Liability and Other Insurance.

          (a) Landlord must maintain a policy or policies of commercial general liability insurance
covering the Complex (but excluding the Premises) on ISO Form CG 0001 or its equivalent, insuring
against claims for personal or bodily injury or death or property damage (including contractual
indemnity and liability coverage without contractual exclusion) occurring upon, in or about the
Complex (but excluding the Premises), affording protection to the limit of not less than $1,000,000
per occurrence for bodily injury and property damage, $1,000,000 per occurrence for personal or
advertising injury, $1,000,000 for general aggregate liability, and such other coverage as Landlord
may reasonably deem appropriate. Such insurance will be maintained at the expense of Landlord (as
a part of the Basic Operating Costs), and payments for losses thereunder will be made solely to
Landlord or any other additional insured, as appropriate. Landlord’s insurance will contain an
endorsement that Landlord’s insurance is primary for claims arising out of an incident or event
occurring within the Common Areas.

          (b) Tenant must maintain a policy or policies of (i) commercial general liability insurance
covering the Premises and Tenant’s use thereof on ISO Form CG 0001 or its equivalent, insuring
against claims for personal or bodily injury or death or property damage (including contractual
indemnity and liability coverage without contractual exclusion) occurring upon, in or about the
Premises, (ii) worker’s compensation insurance coverage in accordance with applicable law with a
waiver of subrogation in favor of Landlord, and (iii) motor vehicle liability insurance with
coverage for all owned and hired vehicles with combined limits of not less than $1,000,000 each
accident for bodily injury or property damage. The policy or policies must be issued by and
binding upon an insurance company

 

Table of Contents

licensed to do business in the State having an A.M. Best Rating
of “AVII” or better. Tenant’s liability insurance must provide minimum protection of not less than
$1,000,000 per occurrence for bodily injury and property damage, $1,000,000 per occurrence for
personal or advertising injury, $1,000,000 for general aggregate liability, and such other coverage
as Landlord may reasonably deem appropriate. Tenant’s insurance must contain an endorsement that
Tenant’s insurance is primary and non-contributory for claims arising out of an incident or event
occurring within the Premises. Tenant’s insurance must contain a provision naming Landlord (and
any mortgagee designated by Landlord) as an additional insured. Tenant must, prior to and during
all times of occupancy of the Premises, provide Landlord with a current certificate of insurance
evidencing Tenant’s compliance with this Section 9.2. Tenant must obtain the agreement of
Tenant’s insurers to notify Landlord at least 30 days prior to any cancellation, modification or
expiration of a liability insurance policy.

          (c) From time to time during the Lease Term (but not more often than once every 3 years),
Landlord may increase the minimum coverage amount specified in this Section 9.2 in order to
reflect inflation and other relevant factors. Within 30 days after Landlord notifies Tenant of
such an increase, both Landlord and Tenant must deliver to the other a certificate of insurance
reflecting such increases in coverage.

     9.3 Casualty Damage.

          (a) If the Premises or the Building is damaged by fire or other casualty, Tenant must give
prompt written notice to Landlord.

          (b) Landlord may terminate the Lease due to a casualty to the Premises or any portion of the
Building if:

          (i) The Building is so damaged by fire or other casualty that substantial alteration or
reconstruction of the Building will, in the judgment of an independent architect selected by
Landlord, be required (whether or not the Premises has been damaged by the casualty) or, in
Landlord’s reasonable opinion, repair or reconstruction cannot be made within 180 days after
the fire or casualty;

          (ii) Any mortgagee under a first mortgage or first deed of trust covering the Building
requires that the insurance proceeds payable as a result of the casualty be used to retire
the mortgage debt;

          (iii) The casualty is not insured under the property insurance required to be carried
by Landlord pursuant to the terms of Section 9.1; or

          (iv) Landlord determines that insurance proceeds will be insufficient to restore the
Building.

          (c) If Landlord does not terminate this Lease, Landlord will, as soon as practicable, but no
more than 90 days after the date of the casualty, commence to repair and restore the Building and
will proceed with reasonable diligence to restore the Building to substantially its condition prior
to the occurrence of the casualty. However, Landlord will not be required to rebuild, repair, or
replace any part of Tenant’s removable furniture, fixtures and equipment or any Alterations to the
Premises made by Tenant following the Commencement Date which were not approved by Landlord in
writing. Furthermore, Landlord will not be required to spend for the restoration work an amount in
excess of the insurance proceeds actually received by Landlord as a result of the casualty, plus
any deductible amounts thereunder (but the Landlord may choose, at its option, to provide the extra
funds necessary to complete the restoration).

          (d) If Landlord does not either commence the repairs to the Building within the time required
herein or complete the repairs to the Building within 180 days after the date of the casualty,
Tenant may terminate the Lease by written notice to Landlord given no later than 30 days following
the date on which Landlord was to commence or complete such repairs, as the case may be.

          (e) Except as provided in Section 6.4 herein, Landlord will not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from
the casualty or its repair. However, Landlord may allow Tenant an equitable abatement of Rent
during the time and to the extent the Premises is unfit for occupancy and vacated by Tenant. If
the Premises or any other portion of the Complex is damaged by a casualty resulting from the
intentional acts of Tenant or any Tenant-Related Party, subtenant, or licensee of Tenant, Rent
will not be abated during the repair of such damage.

     9.4 INDEMNITY BY TENANT. TENANT HEREBY INDEMNIFIES, DEFENDS AND HOLDS HARMLESS LANDLORD
AND THE LANDLORD-RELATED PARTIES FROM AND

 

Table of Contents

AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, DAMAGES,
CLAIMS, SUITS, LOSSES, CAUSES OF ACTION, LIENS, JUDGMENTS AND EXPENSES (INCLUDING COURT COSTS,
ATTORNEY’S FEES AND COSTS OF INVESTIGATION) OF ANY KIND, NATURE OR DESCRIPTION RESULTING FROM ANY
INJURIES TO OR DEATH OF ANY PERSON OR ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE
FROM THE FOLLOWING (COLLECTIVELY, THE “TENANT-RELATED CLAIMS”): (i) AN INCIDENT OR EVENT
WHICH OCCURRED WITHIN OR ON THE PREMISES; (ii) AN INCIDENT OR EVENT WHICH OCCURRED DURING THE
PERFORMANCE OF ANY ALTERATIONS MADE BY OR ON BEHALF OF TENANT UNDER SECTION 7.7; (iii) AN
INCIDENT OR EVENT WHICH OCCURRED DURING THE CONSTRUCTION OF ANY TENANT IMPROVEMENTS OR ALTERATIONS
BY TENANT OR A PARTY ON BEHALF OF TENANT; (iv) THE OPERATION OR CONDUCT OF TENANT’S BUSINESS
WITHIN THE PREMISES; OR (v) THE BREACH OF THIS LEASE BY TENANT. SUCH INDEMNIFICATION WILL BE IN
EFFECT EVEN IF THE TENANT-RELATED CLAIM IS THE RESULT OF OR CAUSED BY THE NEGLIGENT ACTS OR
OMISSIONS OF LANDLORD OR ANY LANDLORD-RELATED PARTY. THE INDEMNITY OBLIGATIONS OF TENANT UNDER
THIS SECTION 9.4 WILL NOT APPLY TO A TENANT-RELATED CLAIM ARISING OUT OF THE GROSS
NEGLIGENCE OR INTENTIONAL MISCONDUCT OF LANDLORD OR ANY LANDLORD-RELATED PARTY.

     9.5 INDEMNITY BY LANDLORD. LANDLORD HEREBY INDEMNIFIES, DEFENDS AND HOLDS HARMLESS TENANT
AND THE TENANT-RELATED PARTIES FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, DAMAGES,
CLAIMS, SUITS, LOSSES, CAUSES OF ACTION, LIENS, JUDGMENTS AND EXPENSES (INCLUDING COURT COSTS,
ATTORNEYS’ FEES AND COSTS OF INVESTIGATION) OF ANY KIND, NATURE OR DESCRIPTION RESULTING FROM ANY
INJURIES TO OR DEATH OF ANY PERSON OR ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE
FROM THE FOLLOWING (COLLECTIVELY, THE “LANDLORD-RELATED CLAIMS”): (i) AN INCIDENT OR EVENT
WHICH OCCURRED WITHIN OR ON THE COMMON AREAS; (ii) THE OPERATION OR CONDUCT OF LANDLORD’S BUSINESS
WITHIN THE COMMON AREAS; OR (iii) THE BREACH OF THIS LEASE BY LANDLORD. SUCH INDEMNIFICATION WILL
BE IN EFFECT EVEN IF THE LANDLORD-RELATED CLAIM IS THE RESULT OF OR CAUSED BY THE NEGLIGENT ACTS OR
OMISSIONS OF TENANT OR ANY TENANT-RELATED PARTY. THE INDEMNITY
OBLIGATIONS OF LANDLORD UNDER THIS SECTION 9.5 WILL NOT APPLY TO A LANDLORD-RELATED CLAIM
ARISING OUT OF THE GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT OF TENANT OR ANY TENANT-RELATED
PARTY. FURTHERMORE, ALL CLAIMS AGAINST LANDLORD ARE LIMITED BY SECTION 12.4.

     9.6 Waiver of Claims and Subrogation Rights. So long as it is permissible to do so under
the laws and regulations governing the writing of insurance within the State, all insurance carried
by either Landlord or Tenant will provide for a waiver of rights of subrogation against Landlord
and Tenant on the part of the insurance carrier. Unless the waivers contemplated by this sentence
are not obtainable for the reasons described in this Section 9.6, Landlord waives any and
all rights of recovery, claims, actions or causes of action against Tenant and the Tenant-Related
Parties, and Tenant waives any and all rights of recovery, claims, actions or causes or action
against Landlord and the Landlord-Related Parties, for any loss or damage to property or any
injuries to or death of any person which is covered or would have been covered under the insurance
policies required under this Lease. The foregoing release will not apply to losses or damages in
excess of actual or required policy limits (whichever is greater) nor to any deductible (up to a
maximum of $10,000) applicable under any policy obtained by the waiving party. The failure of
either party (the “Defaulting Party”) to take out or maintain any insurance policy required
under this Lease will be a defense to any claim asserted by the Defaulting Party against the other
party hereto by reason of any loss sustained by the Defaulting Party that would have been covered
by any such required policy. The waivers set forth in the immediately preceding sentence will be
in addition to, and not in substitution for, any other waivers, indemnities, or exclusions of
liabilities set forth in this Lease.

     9.7 Damages from Certain Causes. Notwithstanding anything contained in this Lease to the
contrary, and subject to the terms of Section 9.6, neither Landlord nor any
Landlord-Related Party will be liable for damages to Tenant or any party claiming through Tenant
for any injury to or death of any person or damage to property or for interruption or damage to
business resulting from (and Tenant, for itself and the Tenant-Related Parties, specifically waives
and releases any claims it may have with respect to) any of the following:

          (a) any act, omission or negligence of Tenant, any Tenant-Related Party or Tenant’s
contractors, subtenants, assignees, licensees, invitees or customers;

          (b) any act, omission or negligence of any other tenant within the Building, or any of their
respective employees, agents, contractors, tenants, assignees, licensees, invitees or customers;

 

Table of Contents

          (c) the repair, alteration, maintenance, damage or destruction of the Premises or any other
portion of the Building (including the construction of tenant improvements for other tenants of the
Building), except to the extent caused by the negligence or willful misconduct of Landlord or any
Landlord-Related Party;

          (d) vandalism, theft, burglary and other criminal acts (other than those committed by
Landlord’s employees) in or about the Complex (including the Parking Areas);

          (e) any defect in or failure of equipment, pipes, wiring, heating or air conditioning
equipment, stairs, elevators, or sidewalks, the bursting of any pipes or the leaking, escaping or
flowing of gas, water, steam, electricity, or oil, broken glass, or the backing up of any drains,
except to the extent caused by the negligence or willful misconduct of Landlord or any
Landlord-Related Party;

          (f) injury done or occasioned by wind, snow, rain or ice, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, requisition, order of any governmental
body or authority; or

          (g) any other cause beyond the reasonable control of Landlord.

Under no circumstances will Landlord be liable for damages related to business interruption or loss
of profits. The provisions of this Section 9.7 will not limit the obligations of Landlord
under this Lease or the rights of Tenant to seek enforcement of the terms of this Lease, so long as
such enforcement by Tenant does not involve a claim for damages.

SECTION 10 — CONDEMNATION

     10.1 Condemnation. Landlord may terminate this Lease if the whole or substantially the whole of the Complex, or the
whole or such portion of the Premises as will render the remainder unfit for Tenant’s use, is taken
for any public or quasi-public use, by right of eminent domain or otherwise, or sold in lieu of
condemnation. The effective date of the termination will be the date when physical possession of
the Building or the Premises is taken by the condemning authority. If this Lease is not terminated
upon any such taking or sale, the Base Rent payable hereunder will be reduced by an amount
representing that portion of Base Rent applicable to the portion of the Premises subject to such
taking or sale. Landlord will to the extent Landlord deems feasible, restore the Building and the
Premises to substantially their former condition. However, Landlord will not be required to
rebuild, repair, or replace any Alterations to the Premises made by Tenant following the
Commencement Date that were not approved by Landlord in writing. Furthermore, Landlord will not be
required to spend for such work an amount in excess of the amount received by Landlord as
compensation for such taking.

     10.2 Condemnation Award. All amounts awarded upon a taking of any part or all of the
Property, Building or the Premises will belong to Landlord, and Tenant will not be entitled to and
expressly waives all claims to any such compensation. Tenant may, however, make a separate claim
upon the condemning authority for expenses related to relocation and for the unamortized cost of
leasehold improvements paid for by Tenant.

SECTION 11 — TITLE ENCUMBRANCES

     11.1 Subordination to Mortgage; Lender Rights.

          (a) This Lease will be subordinate to any mortgage, deed of trust or other lien now existing
or hereafter placed upon the Premises or upon the Complex, and to any renewals, modifications,
consolidations, refinancings, and extensions thereof, but Tenant agrees that any such mortgagee or
deed of trust beneficiary will have the right at any time to subordinate such mortgage, deed of
trust or other lien to this Lease on such terms and subject to such conditions as such mortgagee or
deed of trust beneficiary may deem appropriate, in its discretion. If any proceedings are brought
for the foreclosure of, or in the event of the exercise of the power of sale under, any such
mortgage, deed of trust or other lien, Tenant agrees, without further action hereunder, to attorn
to the purchaser upon such foreclosure (or any deed in lieu of foreclosure) and recognize such
purchaser as the Landlord under this Lease. Landlord is hereby irrevocably vested with full power
and authority to subordinate this Lease to any mortgage, deed of trust or other lien now existing
or hereafter placed upon the Premises or the Complex and Tenant agrees upon demand to execute such
further instruments subordinating this Lease or attorning to the holder of any such liens as
Landlord may reasonably request.

          (b) Upon Tenant’s written request, Landlord will use reasonable efforts to obtain from
Landlord’s lender, a subordination, non-disturbance and attornment agreement on such lender’s form
and otherwise reasonably satisfactory to Landlord, Tenant and such lender. Tenant must pay all
fees, costs and expenses incurred by Landlord in connection therewith (but no more than $1,500 per
request).

 

Table of Contents

          (c) If the Premises is subject to the lien of a mortgage or deed of trust or similar
instrument in favor of a lender, Tenant must give written notice to any such lender whose name and
address have been given to Tenant before taking any action on account of any default by Landlord
hereunder. Any such notice given by Tenant must (i) be given in the manner described in
Section 13.1 of this Lease, (ii) specify the default by Landlord in reasonable detail, and
(iii) afford the lender a reasonable period of time to perform the obligation on behalf of
Landlord.

     11.2 Landlord’s Lien; Security Interest. Tenant hereby grants to Landlord a lien and
security interest in all property of Tenant now or hereafter placed in or upon the Premises for
payment of all Rent and other sums agreed to be paid by Tenant under this Lease. The provisions of
this section relating to such lien and security interest will constitute a security agreement under
and subject to the “Uniform Commercial Code,” as enacted in the State, so that Landlord may enforce
a security interest in all property of Tenant now or hereafter placed in or on the Premises, in
addition and cumulative of the landlord’s liens and rights provided by law or by the other terms
and provisions of this Lease. Landlord may enforce this landlord’s lien and security interest
immediately upon a breach of this Lease by Tenant (whether an Event of Default will exist or not)
if Tenant is vacating or is threatening to vacate the Premises. Tenant agrees to execute, as
debtor, such financing statement or statements as Landlord may now or hereafter request. Landlord
may at its election at any time file a copy of this page of this Lease and the signature page of
this Lease as a financing statement, with Tenant as the “debtor” and Landlord as the “secured
party.”

     11.3 Mechanic’s Liens. Tenant may not permit any mechanic’s liens, materialmen’s liens or
other liens to be placed upon the Premises or the Complex for any work performed by or at the
request of Tenant, or any assignee, sublessee or licensee of Tenant. If any such lien is attached
to the Premises or the Complex and not discharged by payment, bonding or otherwise within 20 days
after notice from Landlord to Tenant, then, in addition to any other right or remedy of Landlord,
Landlord may, but is not be obligated to, discharge the same. Any amount paid by Landlord for the
aforesaid purpose will be paid by Tenant to Landlord on demand as additional Rent and will bear
interest at the Default Rate from the date paid by Landlord until reimbursed by Tenant.

SECTION 12 — DEFAULT; DISPUTES; REMEDIES

     12.1 Default by Tenant. The following events will be deemed to be events of default by
Tenant under this Lease (each an “Event of Default”):

          (a) Tenant fails to timely pay any Rent and such failure continues for a period of 5 days
after written notice of such default has been delivered to Tenant (but if Landlord has given Tenant
2 such notices during any 12-month period, Landlord will not be required to give further notice;
thereafter, the failure by Tenant to make any payment of Rent when due hereunder will be an Event
of Default without notice or grace period);

          (b) Tenant fails to comply with any terms, provisions or covenants of this Lease or any other
agreement between Landlord and Tenant (other than a failure related to the non-payment of Rent),
all of which terms, provisions and covenants will be deemed material, and such failure continues
for a period of 30 days after written notice of such failure has been delivered to Tenant, or if
such failure cannot reasonably be cured within such 30-day period, Tenant fails to commence to cure
such failure within such 30-day period or thereafter fails to prosecute the cure diligently and
continuously or fails to complete the cure within 60 days after the date of Landlord’s notice of
default;

          (c) Tenant or any Guarantor takes any action to, or notifies Landlord that Tenant or any
Guarantor intends to, file a petition under any section or chapter of the United States Bankruptcy
Code, as amended from time to time, or under any similar law or statute of the United States or any
state thereof; or a petition is filed against Tenant or any Guarantor under any such statute and is
not dismissed within 60 days thereafter;

          (d) A receiver or trustee is appointed for Tenant’s leasehold interest in the Premises or for
all or a substantial part of the assets of Tenant or any Guarantor; or

          (e) Tenant abandons all or any substantial portion of the Premises or Tenant refuses to take
occupancy of the Premises.

     12.2 Landlord’s Remedies.

          (a) Upon the occurrence of any Event of Default, Landlord may, at its option and without
further notice to Tenant and without judicial process, in addition to all other remedies given
hereunder or by law or equity, do any one or more of the following: (i) terminate this Lease, in
which event Tenant will immediately surrender possession of the Premises to Landlord; (ii) enter
upon and take possession of the Premises and expel or remove Tenant therefrom, with or without
having terminated this

 

Table of Contents

Lease; (iii) apply all or any portion of the Security Deposit to cure such
Event of Default; (iv) change or re-key all locks to entrances to the Premises, and Landlord will
have no obligation to give Tenant a new key to the Premises until such Event of Default is cured;
and (v) remove from the Premises any furniture, fixtures, equipment or other personal property of
Tenant, without liability for trespass or conversion, and store such items either in the Complex or
elsewhere at the sole cost of Tenant and without liability to Tenant. Landlord may retain control
over all such property for the purpose of foreclosing the security interest created by Section
11.2. Any of such furniture, fixtures, equipment or personal property not claimed within 30
days from the date of removal will be deemed abandoned.

          (b) Exercise by Landlord of any one or more remedies hereunder will not constitute forfeiture
or an acceptance of surrender of the Premises by Tenant. Such surrender can be effected only by
the written agreement of Landlord and Tenant.

          (c) If Landlord terminates this Lease by reason of an Event of Default, Tenant must pay to
Landlord the sum of (i) the cost of recovering the Premises (including attorney’s fees and costs),
(ii) the unpaid Rent and all other indebtedness accrued hereunder to the date of such
termination, (iii) the amounts stated in Section 12.2(e), (iv) the total Rent which
Landlord would have received under this Lease for the remainder of the Lease Term minus the Fair
Market Rental Value (hereinafter defined) of the Premises for the same period, both discounted to
present value at the Prime Rate (hereinafter defined) in effect upon the date of determination, and
(v) any other damages or relief which Landlord may be entitled to at law or in equity. For the
purposes of this section, “Fair Market Rental Value” will be the rental rate that would be
received from a comparable tenant for a comparable lease for premises and other properties of
equivalent quality, size, condition and location as the Premises, taking into account any free rent
or other concessions that are generally prevailing in the marketplace at the time of Tenant’s
default, market conditions and the period of time the Premises may reasonably be expected to remain
vacant before Landlord is able to re-let the Premises to a suitable new tenant. For purposes of
this section, “Prime Rate” will mean the per annum rate of interest announced or published
from time to time by Bank of America, N.A., Dallas, Texas (or its successors or assigns) as its
prime commercial lending rate.

          (d) If Landlord repossesses the Premises without terminating this Lease, then Tenant must pay
to Landlord the sum of (i) the cost of recovering the Premises (including attorney’s fees and
costs), (ii) the unpaid Rent and other indebtedness accrued to the date of such repossession, and
(iii) the total Rent that Landlord would have received under this Lease for the remainder of the
Lease Term minus any net sums thereafter received by Landlord through reletting the Premises during
said period after deducting expenses incurred by Landlord in connection with such reletting for
advertising costs, brokerage commissions, architectural fees, tenant improvement costs and
allowances and any other allowances or concessions provided by Landlord (amortized pro rata over
the term of such new lease). Re-entry by Landlord will not affect the obligations of Tenant for
the unexpired Lease Term. Tenant will not be entitled to any excess of rent obtained by reletting
over the Rent required to be paid by Tenant hereunder. Actions to collect amounts due by Tenant
may be brought 1 or more times, without the necessity of Landlord’s waiting until the expiration of
the Lease Term. In addition, Landlord may, at any time following repossession of the Premises
without termination of the Lease, elect to terminate the Lease and pursue the remedies available to
Landlord pursuant to Section 12.2(c) above in lieu of the remedies available to Landlord
pursuant to this Section 12.2(d).

          (e) If Landlord has terminated this Lease pursuant to Section 12.2(c), Tenant must
also pay to Landlord the unamortized portion (assuming level amortization at 12% interest over the
Lease Term), calculated as of the date of termination, of all leasing commissions, tenant
improvement costs and allowances, architectural costs and allowances, any other allowances actually
provided by Landlord and all other out-of-pocket costs actually incurred by Landlord related to
this Lease.

          (f) Upon termination of this Lease or repossession of the Premises due to the occurrence of an
Event of Default, Landlord will not be obligated to relet or attempt to relet the Premises.

          (g) If Tenant fails to make any payment, perform any obligation, or cure any default hereunder
within 10 days after receipt of written notice thereof, Landlord, without obligation to do so and
without thereby waiving such failure or default, may make such payment, perform such obligation,
and/or remedy such other default for the account of Tenant (and enter the Premises for such
purpose). Tenant must pay all costs, expenses and disbursements (including attorneys’ fees)
incurred by Landlord in taking such remedial action, plus, at the option of Landlord, interest
thereon at the Default Rate.

     12.3 Default by Landlord. Landlord will be in default under this Lease if Landlord fails
to perform any of its obligations hereunder and such failure continues for a period of 30 days
after Tenant delivers written notice of such failure to Landlord. Tenant must also deliver written
notice of such failure to the holder(s) of any indebtedness or other obligations secured by any
mortgage or deed of trust affecting the Premises, of which Tenant has received actual notice. If
such failure cannot reasonably be cured within the 30-day period, Landlord will not be in default
hereunder as long as Landlord or such holder(s) commences the remedying of such failure within the
30-day period and diligently prosecutes the

 

Table of Contents

same to completion. Landlord will not be liable to
Tenant for consequential, special or punitive damages by reason of a failure to perform (or a
default) by Landlord under this Lease.

     12.4 Limitation on Landlord’s Liability. Tenant will be entitled to look solely to
Landlord’s equity in the Complex for the recovery of any judgment against Landlord, and Landlord
will not be personally liable for any deficiency with respect to the recovery of such judgment.
This recourse limitation will not limit any right that Tenant might otherwise have to obtain
specific performance of Landlord’s obligations under this Lease.

     12.5 Attorney’s Fees. If Landlord or Tenant employs an attorney to assert or defend any action arising out of the
breach of any term, covenant or provision of this Lease, or to bring legal action for the unlawful
detainer of the Premises, the prevailing party will be entitled to recover from the non-prevailing
party attorney’s fees and costs of suit incurred in connection therewith. For purposes of this
Section 12.5, a party will be considered to be the “prevailing party” if (i) such party
initiated the litigation and substantially obtained the relief which it sought (whether by
judgment, voluntary agreement or action of the other party, trial, or alternative dispute
resolution process), (ii) such party did not initiate the litigation and either (A) received a
judgment in its favor, or (B) did not receive judgment in its favor, but the party receiving the
judgment did not substantially obtain the relief which it sought, or (iii) the other party to the
litigation withdrew its claim or action without having substantially received the relief which it
was seeking.

SECTION 13 — MISCELLANEOUS

     13.1 Notices. Any notice under this Lease must be in writing and must be sent to the
appropriate Notice Address by (i) personal delivery, (ii) a recognized overnight courier, (iii)
United States mail, postage prepaid, certified mail, return receipt requested, or (iv) facsimile
with either electronic or telephonic verification of receipt, so long as the original of the
facsimile notice is deposited in the United States mail within 3 days after the fax notice is sent.
Notice by personal delivery or overnight courier will be effective upon receipt, notice by mail
will be effective upon deposit in the United States mail in the manner above described and notice
by facsimile will be effective upon electronic or telephonic verification of receipt. Any party
may change its Notice Address by delivering appropriate written notice to the other party in the
manner described above. The change in Notice Address will be effective 10 days after the effective
date of the notice.

     13.2 Estoppel Agreements. Tenant will, from time to time, within 10 days after written
request by Landlord, execute and deliver to such persons as Landlord may designate, an estoppel
agreement in recordable form certifying that this Lease is unmodified and in full force and effect
(or if there have been modifications, that this Lease is in full force and effect as so modified),
stating the dates to which Rent and other charges payable under this Lease have been paid, stating
that the Landlord is not in default hereunder (or if Tenant alleges a default, stating the nature
of such alleged default) and further stating such other matters as Landlord may reasonably require.

     13.3 No Implied Waiver. The failure of either party to insist at any time upon the strict
performance of any covenant or agreement in this Lease or to exercise any right, power or remedy
contained in this Lease will not be construed as a waiver or a relinquishment thereof for the
future.

     13.4 Independent Obligations. The obligation of Tenant to pay Rent hereunder and the
obligation of Tenant to perform Tenant’s other covenants and duties hereunder constitute
independent, unconditional obligations to be performed at all times provided for hereunder and are
independent of the Landlord’s performance of Landlord’s duties and obligations hereunder.

     13.5 Severability. If any term or provision of this Lease, or the application thereof to
any person or circumstance will, to any extent, be invalid or unenforceable, the remainder of this
Lease, or the application of such term or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, will not be affected thereby, and each term and
provision of this Lease will be valid and enforced to the fullest extent permitted by law.

     13.6 Recording. Tenant agrees not to record this Lease. Upon written request from Tenant,
Landlord will deliver to Tenant a memorandum of lease executed by Landlord in a form acceptable for
recording in the real property records of the county in which the Premises is located, which Tenant
may cause to be recorded at Tenant’s sole cost and expense.

     13.7 Governing Law. This Lease will be governed by the laws of the State in which the Premises is located. This
Lease is performable in, and the exclusive venue for any action brought with respect hereto, will
be in Dallas County in the State.

     13.8 Force Majeure. Whenever a period of time is herein prescribed for the taking of any
action by Landlord or Tenant, the party responsible for taking such action will not be liable or
responsible

 

Table of Contents

for any delays due to strikes, riots, acts of God, shortages of labor or materials,
war, governmental laws, regulations or restrictions, or any other cause whatsoever (other than
financial inability) beyond the control of the party responsible for taking such action (a
“Force Majeure Event”). The period of time for taking action will be extended by the
number of days of delay. However, the provisions of this Section 13.8 will never be
construed as allowing an extension of time with respect to Tenant’s obligation to pay Rent when and
as due under this Lease, except in those circumstances in which a Force Majeure Event actually
prevents Tenant from accessing funds to pay Rent when and as due under this Lease, in which event
Rent will be due and payable immediately on the day upon which the funds first become accessible.

     13.9 Time of Performance. Except as otherwise expressly provided herein, time is of the
essence under this Lease.

     13.10 Commissions. Landlord and Tenant agree that the Broker is the only broker involved
in the procurement, negotiation or execution of this Lease, and that the Broker’s commission will
be paid by Landlord pursuant to a separate commission agreement. Landlord and Tenant hereby agree
to defend, indemnify and hold each other harmless against any loss, claim, expense or liability
with respect to any commissions, brokerage or similar fees claimed on account of the execution or
renewal of this Lease, the expansion of the Premises, or the exercise of any other rights set forth
in this Lease due to any action or statement of the indemnifying party.

     13.11 Merger of Estates. The voluntary or involuntary surrender of this Lease by Tenant,
or a mutual cancellation thereof, will not constitute a merger of the Landlord’s fee estate in the
Property and the leasehold interest created hereby. In that event, Landlord will have the option,
in Landlord’s sole discretion, to either terminate or assume all or any existing subleases or
subtenancies.

     13.12 Survival of Indemnities and Covenants. All indemnities of Landlord or Tenant and all
covenants of Landlord or Tenant not fully performed on the date of the expiration or termination of
this Lease will survive such expiration or termination.

     13.13 Headings. Descriptive headings are for convenience only and will not control or
affect the meaning or construction of any provision of this Lease.

     13.14 Entire Agreement. This Lease, including the exhibits listed in this Section
13.14, embodies the entire agreement between the parties hereto with relation to the Premises.
There are no covenants, agreements, representations, warranties or restrictions between the parties
hereto, other than those specifically set forth in this Lease. The following exhibits are attached
hereto and incorporated herein and made a part of this Lease for all purposes:

	 	 	 	 	 	 	 
	     
	 	Exhibit “A”	 	—	 	Property Description
	 
	 	Exhibit “B”	 	—	 	Site Plan
	 
	 	Exhibit “C”	 	—	 	Rules and Regulations
	 
	 	Exhibit “D”	 	—	 	Tenant Improvements Agreement
	 
	 	Exhibit “E”	 	—	 	Acceptance of Premises Memorandum
	 
	 	Exhibit “F”	 	—	 	Moving Allowance
	 
	 	Exhibit “G”	 	—	 	Guaranty

     13.15 Amendment. To be effective, any amendment or modification of this Lease must be in writing and signed by
Landlord and Tenant.

     13.16 Joint and Several Liability. If Tenant consists of more than 1 person or entity, the
obligations of such parties under this Lease will be joint and several.

     13.17 Multiple Counterparts. This Lease may be executed in multiple counterparts, each of
which will constitute an original instrument, but all of which will constitute one and the same
agreement.

     13.18 Effect of Delivery of this Lease. Landlord has delivered a copy of this Lease to
Tenant for Tenant’s review only, and the delivery hereof does not constitute an offer to Tenant or
an option to be exercised by Tenant. This Lease will not be effective until a copy of this Lease
executed by both Landlord and Tenant is delivered by Landlord to Tenant.

     13.19 Property Code. Tenant hereby waives any statutory rights otherwise applicable under
Section 91.004 and Section 93.002 of the Texas Property Code. Landlord and Tenant hereby each
acknowledge and agree that they are knowledgeable and experienced in commercial transactions and
further hereby acknowledge and agree that the provisions of this Lease for determining charges,
amounts and additional Rent payable by Tenant are commercially reasonable and valid even though
such methods may not state precise mathematical formulae for determining such charges.
ACCORDINGLY, TENANT

 

Table of Contents

HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ALL RIGHTS AND BENEFITS TO WHICH TENANT
MAY BE ENTITLED UNDER SECTION 93.012 OF THE TEXAS PROPERTY CODE, AS SUCH SECTION NOW EXISTS OR AS
SAME MAY BE HEREAFTER AMENDED OR SUCCEEDED.

[Signature page follows.]

 

Table of Contents

     IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the Effective Date.

	 	 	 	 	 	 
	 	LANDLORD:

FMBP INDUSTRIAL I LP,

a Delaware limited partnership

 	 
	 	By:  	FMBP Industrial I GP LLC,
 a Delaware limited liability
company, 
its General Partner
 	 
	 	 	 
	 	 	By:  	
 	 
	 	 	 	Name:  	 	 
	 	 	 	Title:  	 	 
	 
	 	TENANT:

FUNIMATION PRODUCTIONS, LTD,

a Texas limited partnership

 	 
	 	By:  	Navarre CP, LLC, 
a Minnesota
limited liability company,
 its General Partner
 	 
	 
	 	 	By:  	
 	 
	 	 	 	Name:  	 	 
	 	 	 	Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}]]