Document:

Exhibit 10.12

 

OFFICE LEASE

 

BETWEEN

 

LUI2 LA PLAYA, L.P.

 

(“LANDLORD”)

 

AND

 

GAMEFLY, INC.

 

(“TENANT”)

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Basic
  Lease Information

  	
  1

  
	
  2.

  	
  Lease
  Grant

  	
  3

  
	
  3.

  	
  Term;
  Adjustment of Commencement Date; Early Access

  	
  3

  
	
  4.

  	
  Rent

  	
  5

  
	
  5.

  	
  Tenant’s
  Use of Premises

  	
  11

  
	
  6.

  	
  Security
  Deposit

  	
  12

  
	
  7.

  	
  Services
  Furnished by Landlord

  	
  13

  
	
  8.

  	
  Use
  of Electrical Services by Tenant

  	
  14

  
	
  9.

  	
  Repairs
  and Alterations

  	
  15

  
	
  10.

  	
  Entry
  by Landlord

  	
  18

  
	
  11.

  	
  Assignment
  and Subletting

  	
  18

  
	
  12.

  	
  Liens

  	
  21

  
	
  13.

  	
  Indemnity

  	
  22

  
	
  14.

  	
  Insurance

  	
  22

  
	
  15.

  	
  Mutual
  Waiver of Subrogation

  	
  23

  
	
  16.

  	
  Casualty
  Damage

  	
  24

  
	
  17.

  	
  Condemnation

  	
  25

  
	
  18.

  	
  Events
  of Default

  	
  25

  
	
  19.

  	
  Remedies

  	
  26

  
	
  20.

  	
  Limitation
  of Liability

  	
  29

  
	
  21.

  	
  No
  Waiver

  	
  30

  
	
  22.

  	
  Tenant’s
  Right to Possession

  	
  30

  
	
  23.

  	
  Intentionally
  deleted

  	
  30

  
	
  24.

  	
  Holding
  Over

  	
  30

  
	
  25.

  	
  Subordination
  to Mortgages; Estoppel Certificate

  	
  31

  
	
  26.

  	
  Attorneys’
  Fees

  	
  31

  
	
  27.

  	
  Notice

  	
  31

  
	
  28.

  	
  Reserved
  Rights

  	
  32

  
	
  29.

  	
  Surrender
  of Premises

  	
  32

  
	
  30.

  	
  Hazardous
  Materials

  	
  33

  
	
  31.

  	
  Miscellaneous

  	
  35

  

 

EXHIBITS AND RIDERS:

 

	
  EXHIBIT
  A

  	
  OUTLINE
  AND LOCATION OF PREMISES

  
	
  EXHIBIT
  B

  	
  LEGAL
  DESCRIPTION OF PROPERTY

  
	
  EXHIBIT
  C

  	
  RULES
  AND REGULATIONS

  
	
  EXHIBIT
  D

  	
  COMMENCEMENT
  LETTER

  
	
  EXHIBIT
  E

  	
  WORK
  LETTER

  
	
  EXHIBIT
  F

  	
  PARKING
  AGREEMENT

  
	
   

  	
   

  
	
  RIDER
  NO. 1

  	
  OPTION
  TO EXTEND

  
	
  RIDER
  NO. 2

  	
  MUST
  TAKE SPACE

  

 

i

 

OFFICE LEASE

 

This
Office Lease (this “Lease”)
is entered into by and between LUI2 LA PLAYA, L.P., a Delaware
limited partnership (“Landlord”),
and GAMEFLY, INC., a Delaware corporation (“Tenant”), and shall
be effective as of the date set forth below Landlord’s signature (the “Effective Date”)

 

1.                                       Basic Lease Information. The key
business terms used in this Lease are defined as follows:

 

A.                                    “Building”:  The building
located at 5340 Alla Road, Los Angeles, California, in the project commonly
known as Playa Vista Business Park.

 

B.                                    “Rentable Square Footage of the Building” is 113,210
square feet.

 

C.                                    “Premises”:  The area shown
by the crosshatched lines on Exhibit A to this Lease.
The Premises are located on floor 1 of
the Building and known as suite number 110. The “Rentable Square Footage of the Premises” is
approximately 11,572 square feet. If the Premises include, now or hereafter,
one or more floors in their entirety, all corridors and restroom facilities
located on such full floor(s) shall be considered part of the Premises.

 

D.                                    “Base Rent”:

 

	
  Period

  	
   

  	
  Monthly Rate

  Per Rentable Square Foot

  	
   

  	
  Monthly

  Base Rent

  	
   

  
	
  CD*

  	
   

  	
  to

  	
   

  	
  Month
  12

  	
   

  	
  $

  	
  2.25

  	
   

  	
  $

  	
  26,037.00

  	
   

  
	
  Month 13

  	
   

  	
  to

  	
   

  	
  Month
  24

  	
   

  	
  $

  	
  2.33

  	
   

  	
  $

  	
  26,962.76

  	
   

  
	
  Month 25

  	
   

  	
  to

  	
   

  	
  Month
  36

  	
   

  	
  $

  	
  2.41

  	
   

  	
  $

  	
  27,888.52

  	
   

  
	
  Month 37

  	
   

  	
  to

  	
   

  	
  Month
  48

  	
   

  	
  $

  	
  2.49

  	
   

  	
  $

  	
  28,814.28

  	
   

  

 

*CD = Commencement Date

 

E.                                      “Tenant’s Pro Rata Share”:  The percentage
equal to the Rentable Square Footage of the Premises divided by the Rentable
Square Footage of the Building.

 

F.                                      “Term”:  The period of
approximately 48 months starting on the Commencement Date, subject to the
provisions of Section 3.

 

G.                                    “Outside Commencement Date”:  November 15,
2008, subject to adjustment, if any, in Section 3.C
below.

 

H.                                    “Security Deposit”:  $28,814.28.

 

I.                                         “Guarantor(s)”:  None.

 

J.                                      “Business Day(s)”:  Monday through
Friday of each week, exclusive of New Year’s Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, the day after

 

1

 

Thanksgiving
and Christmas Day (“Holidays”).
Landlord may designate additional Holidays, provided that the
additional Holidays are commonly recognized by other comparable office
buildings in the area where the Building is located.

 

K.                               “Law(s)”:  All applicable
statutes, codes, ordinances, orders, rules and regulations of any
municipal or governmental entity, now or hereafter adopted, including the
Americans with Disabilities Act and any other law pertaining to disabilities
and architectural barriers (collectively, “ADA”), and all laws pertaining to the
environment, including the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, 42 U.S.C. §9601 et seq. (“CERCLA”), and all
restrictive covenants existing of record and all rules and requirements of
any existing association or improvement district affecting the Property.

 

L.                                “Normal Business Hours”:  8:00 A.M.
to 6:00 P.M. on Business Days, and 9:00 A.M. to 3:00 P.M. on
Saturdays, exclusive of Holidays.

 

M.                             “Notice Addresses”:

 

Tenant: On or after the Commencement
Date, notices shall be sent to Tenant at the Premises. Prior to the
Commencement Date, notices shall be sent to Tenant at the following address:

 

GameFly, Inc.

5870 W. Jefferson
Boulevard, Suite J

Los Angeles, California
90016-3109

Attn: Mr. Dave
Hodess

Phone #: (310) 237-7032

Fax #: (310) 664-6788

 

	
  Landlord:

  	
  With
  a copy to:

  	
  And
  to:

  
	
   

  	
   

  	
   

  
	
  LUI2 LA Playa, L.P.  

  100 Waugh Street,
  Suite 600 

  Houston, Texas 77007  

  Attn: Investment
  Manager 

  Phone #: (713) 533-5860
  

  Fax #: (713) 533-5897

  	
  Transwestern Property
  Company West, L.L.C.  

  20920 Warner Center
  Lane, Suite C 

  Woodland Hills,
  California 91367 

  Attn: Kevin Malone  

  Phone #: (818) 737-2956  

  Fax #: (818) 737-3001

  	
  Jackson Walker L.L.P.  

  1401 McKinney,
  Suite 1900 

  Houston, Texas 77010  

  Attn: Kurt D. Nondorf 

  Phone #: (713) 752-4200
  

  Fax #: (713) 752-4221

  

 

Rent
(defined in Section 4.A) is
payable to the order of LUI2 LA Playa, L.P., at the following address: LUI2 LA
Playa, L.P. Depository Account, P.O. Box 201939, Dept. 93936, Dallas, TX
75320-1939.

 

N.                                    “Other Defined Terms”:  In addition to
the terms defined above, an index of the other defined terms used in the text
of this Lease is set forth below, with a cross-reference to the page in
this Lease in which the definition of such term can be found:

 

	
  Abated Rent

  	
  28

  
	
  Affiliate

  	
  21

  
	
  Affiliated Sublessee

  	
  21

  
	
  Alterations

  	
  17

  
	
  Audit
  Election Period

  	
  10

  
	
  Cable

  	
  15

  
	
  Claim

  	
  22

  
	
  Claims

  	
  22

  

 

2

 

	
  Commencement Date

  	
  3

  
	
  Common
  Areas

  	
  3

  
	
  Comparable
  Landlord

  	
  6

  
	
  Comparable
  Portfolio

  	
  7

  
	
  Completion
  Estimate

  	
  24

  
	
  Contamination

  	
  34

  
	
  Costs
  of Reletting

  	
  28

  
	
  EO
  13224

  	
  37

  
	
  Expiration Date

  	
  3

  
	
  Force
  Majeure

  	
  35

  
	
  Force Majeure Delay

  	
  4

  
	
  GAAP

  	
  6

  
	
  Hazardous
  Material

  	
  34

  
	
  Landlord Delay

  	
  4

  
	
  Landlord
  Parties

  	
  22

  
	
  Landlord
  Termination Date

  	
  19

  
	
  Leasehold
  Improvements

  	
  32

  
	
  Minor
  Alteration

  	
  17

  
	
  Monetary
  Default

  	
  25

  
	
  Monument
  Sign

  	
  38

  
	
  Mortgage

  	
  31

  
	
  Mortgagee

  	
  31

  
	
  notice

  	
  31

  
	
  OFAC

  	
  37

  
	
  Operating
  Expenses

  	
  6

  
	
  Permitted
  Transfer

  	
  21

  
	
  Permitted
  Use

  	
  11

  
	
  Prime
  Rate

  	
  28

  
	
  Property

  	
  3

  
	
  Provider

  	
  14

  
	
  Rent

  	
  5

  
	
  Service
  Failure

  	
  14

  
	
  Special
  Installations

  	
  33

  
	
  Taking

  	
  25

  
	
  Telecommunications
  Equipment

  	
  38

  
	
  Tenant
  Parties

  	
  22

  
	
  Tenant’s Financial Information

  	
  39

  
	
  Tenant’s
  Insurance

  	
  22

  
	
  Tenant’s
  Property

  	
  22

  
	
  Tenant’s
  Removable Property

  	
  32

  
	
  Time
  Sensitive Default

  	
  26

  
	
  Transfer

  	
  18

  
	
  Work Letter

  	
  4

  
	
  Worth
  at the Time of Award

  	
  27

  

 

2.                                       Lease
Grant. Landlord leases the Premises to Tenant and
Tenant leases the Premises from Landlord, together with the right in common
with others to use any portions of the Property (defined below) that are
designated by Landlord for the common use of tenants and others, such as
sidewalks, common corridors, vending areas, lobby areas and, with respect to
multi-tenant floors, restrooms and elevator foyers (the “Common Areas”). Tenant
and its employees shall have access to the Premises at all times, 24 hours per
day, every day of the year, subject to access procedures required by Landlord,
the Building Rules and Regulations and other limitations set forth in this
Lease. “Property” means
the Building and the parcel(s) of land on which it is located as more
fully described on Exhibit B,
together with all other buildings and improvements located thereon; all
appurtenances including all appurtenant parking facilities; and the Building
garage(s) and other improvements serving the Building, if any, and the
parcel(s) of land on which they are located. The Rentable Square Footage
of the Building and/or the Rentable Square Footage of the Premises shall be
subject to measurement from time to time by Landlord’s architect at Landlord’s
option; provided, however, during the initial Term of this Lease, neither Base
Rent nor Tenant’s Pro Rata Share will be modified as a result of Landlord’s
remeasurement of the Premises or the Building.

 

3.                                      Term; Adjustment of Commencement Date; Early Access.

 

A.                                    Term. This Lease shall govern the
relationship between Landlord and Tenant with respect to the Premises from the
Effective Date through the last day of the Term specified in Section 1.F (the “Expiration Date”), unless
terminated early in accordance with this Lease. The Term of this Lease shall
commence on the “Commencement
Date”, which shall be the earlier of

 

3

 

(1) the
date Tenant takes possession of any part of the Premises for purposes of
conducting business therefrom, or (2) the Outside Commencement Date;
provided, however, in no event shall the Commencement Date occur prior to
October 1, 2008. Landlord agrees to deliver possession of the Premises to
Tenant on the first Business Day following the full execution of this Lease,
provided, however, that if Landlord is delayed in delivering possession of the
Premises or any other space due to any reason, including without limitation the
holdover or unlawful possession of such space by any third party, such delay
shall not be a default by Landlord, render this Lease void or voidable, or
otherwise render Landlord liable for damages, and Tenant’s sole and exclusive
remedy for any such delay shall be a resulting day for day postponement of the
Outside Commencement Date. Promptly after the determination of the Commencement
Date, the Expiration Date, the Rent schedule and any other variable matters,
Landlord shall prepare and deliver to Tenant a factually correct commencement
letter agreement substantially in the form attached as Exhibit D. If such commencement
letter is not executed by Tenant within 30 days after delivery of same by
Landlord, then Tenant shall be deemed to have agreed with the matters set forth
therein. Notwithstanding any other provision of this Lease to the contrary, if
the Expiration Date would otherwise occur on a date other than the last day of
a calendar month, then the Term shall be automatically extended to include the
last day of such calendar month, which shall become the Expiration Date.

 

B.                                    Acceptance of Premises. The Premises
are accepted by Tenant in “as is” condition and configuration subject to any
latent defects in the Premises (including any defects in the electrical,
plumbing or HVAC systems serving the Premises) of which Tenant notifies
Landlord within 180 days after the Commencement Date other than work performed
by Tenant Parties (defined below) pursuant to a separate work letter agreement
(the “Work Letter”), if
any, attached as Exhibit E,
or otherwise. TENANT HEREBY AGREES THAT, SUBJECT
TO THE PREVIOUS SENTENCE, THE PREMISES ARE IN GOOD ORDER AND SATISFACTORY
CONDITION AND THAT, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS LEASE,
THERE ARE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, BY
LANDLORD REGARDING THE PREMISES, THE BUILDING OR THE PROPERTY.

 

C.                                    Outside Commencement Date. The Outside
Commencement Date shall be postponed on a day for day basis for each day of
delay in the event of an actual delay in the construction of the Tenant Work
resulting from a Force Majeure Delay and/or a Landlord Delay (as those terms
are defined below). As used herein, (1) the term “Force Majeure Delay” shall
mean an actual delay in the Tenant Work resulting from fire, wind, damage or
destruction, explosion, casualty, flood, hurricane, tornado, the elements, acts
of God or the public enemy, strikes, sabotage, war, invasion, insurrection,
rebellion, civil unrest, riots or earthquakes and failure of utilities to the
extent not caused by Landlord, Tenant or their respective employees, agents or
contractors, and (2) the term “Landlord Delay” shall mean an actual delay
in the construction of the Tenant Work resulting from (a) Landlord’s
failure to comply with or timely meet its obligations and deadlines specifically
set forth in the Work Letter, and such purported failure to comply is not cured
within 2 Business Days following delivery to Landlord of written notice from
Tenant describing such failure, (b) changes to the Approved Construction
Documents requested by Landlord after approval thereof (unless such changes are
required by applicable Law), (c) Landlord’s or any other Landlord Party’s
material interference with the construction of the Tenant Work and (d) any
delay in the funding of the Reimbursement Allowance (as defined in the Work
Letter) by Landlord.

 

4

 

4.                                       Rent.

 

A.                                    Payments. As
consideration for this Lease, commencing on the Commencement Date, Tenant shall
pay Landlord, without any demand, setoff or deduction, the total amount of Base
Rent, Tenant’s Pro Rata Share of Operating Expenses (defined in Section 4.D) and any and all other
sums payable by Tenant under this Lease (all of which are sometimes
collectively referred to as “Rent”). Tenant shall pay and be liable for all
rental, sales and use taxes (but excluding income taxes), if any, imposed upon
or measured by Rent under applicable Law. The monthly Base Rent and Tenant’s
Pro Rata Share of Operating Expenses shall be due and payable in advance on the
first day of each calendar month without notice or demand, provided that the
installment of Base Rent for the first full calendar month of the Term shall be
payable upon the execution of this Lease by Tenant. All other items of Rent
shall be due and payable by Tenant on or before 30 days after billing by
Landlord. All payments of Rent shall be by good and sufficient check or by
other means (such as automatic debit or electronic transfer) acceptable to
Landlord. If the Term commences on a day other than the first day of a calendar
month, the monthly Base Rent and Tenant’s Pro Rata Share of any Operating
Expenses for the month shall be prorated on a daily basis based on a 360 day
calendar year. Landlord’s acceptance of less than the correct amount of Rent
shall be considered a payment on account of the earliest Rent due. No
endorsement or statement on a check or letter accompanying a check or payment
shall be considered an accord and satisfaction, and either party may accept
such check or payment without such acceptance being considered a waiver of any
rights such party may have under this Lease or applicable Law. Tenant’s
covenant to pay Rent is independent of every other covenant in this Lease.

 

B.                                    Operating Expenses. Tenant shall
pay Tenant’s Pro Rata Share of Operating Expenses (defined in Section 4.D) for each calendar year
during the Term. On or about January 1 of each calendar year, Landlord
shall provide Tenant with a good faith estimate of the Operating Expenses for
such calendar year during the Term. On or before the first day of each month,
Tenant shall pay to Landlord a monthly installment equal to one-twelfth of
Tenant’s Pro Rata Share of Landlord’s estimate of the Operating Expenses. If
Landlord determines that its good faith estimate of the Operating Expenses was
incorrect, Landlord may provide Tenant with a revised estimate. After its
receipt of the revised estimate, Tenant’s monthly payments shall be based upon
the revised estimate. If Landlord does not provide Tenant with an estimate of
the Operating Expenses by January 1 of a calendar year, Tenant shall
continue to pay monthly installments based on the most recent
estimate(s) until Landlord provides Tenant with the new estimate. Upon
delivery of the new estimate, an adjustment shall be made for any month for
which Tenant paid monthly installments based on the same year’s prior incorrect
estimate(s). Tenant shall pay Landlord the amount of any underpayment within 30
days after receipt of the new estimate. Any overpayment shall be credited
against the next sums due and owing by Tenant or, if no further Rent is due,
refunded directly to Tenant within 30 days of determination. The obligation of
Tenant to pay for Operating Expenses as provided herein shall survive the
expiration or earlier termination of this Lease.

 

C.                                    Reconciliation of Operating Expenses. Within 120 days after the end of each calendar year or as soon
thereafter as is practicable, Landlord shall furnish Tenant with a reasonably
detailed statement of the actual Operating Expenses for such calendar year. If
the most recent estimated Operating Expenses paid by Tenant for such calendar
year are more than

 

5

 

the
actual Operating Expenses for such calendar year, Landlord shall apply any
overpayment by Tenant against Rent due or next becoming due; provided, if the
Term expires before the determination of the overpayment, Landlord shall,
within 30 days of determination, refund any overpayment to Tenant after first
deducting the amount of Rent due. If the most recent estimated Operating
Expenses paid by Tenant for the prior calendar year are less than the actual
Operating Expenses for such year, Tenant shall pay Landlord, within 30 days
after its receipt of the statement of Operating Expenses, any underpayment for
the prior calendar year.

 

D.                                    Operating Expenses Defined. “Operating Expenses” means all costs
and expenses incurred or accrued in each calendar year in connection with the
ownership, operation, maintenance, management, repair and protection of the
Property which are directly attributable or reasonably allocable to the
Building, including Landlord’s personal property used in connection with the
Property and including all costs and expenditures relating to the following:

 

(1)                                  Operation,
maintenance, repair and replacements of any part of the Property, including the
mechanical, electrical, plumbing, HVAC, vertical transportation, fire
prevention and warning and access control systems, except that if such
replacements are properly classified as capital in nature under sound real
estate accounting principles consistently applied, the cost of such
replacements shall be included in Operating Expenses and amortized pursuant to Section 4.D(9) below; materials and
supplies (such as building standard light bulbs and ballasts); equipment and
tools; floor, wall and window coverings; personal property; required or
beneficial easements; related service agreements and rental expenses; and third
party energy management consulting services. As used in this Lease, the “sound
real estate accounting principles” used by Landlord in calculating Operating
Expenses will, to the extent applicable and except as otherwise provided in
this Lease, be consistent with “generally accepted accounting principles” or “GAAP”.

 

(2)                                  Administrative
costs and management fees, including accounting, information and professional
services (except for negotiations and disputes with specific tenants not
affecting other parties); management office(s) (not to exceed the fair
market rental for such space); and wages, salaries, benefits, reimbursable
expenses and taxes (or allocations thereof) for full and part time personnel
involved in operation, maintenance and management.

 

(3)                                  Janitorial
service; window cleaning; waste disposal; gas, water and sewer and other
utility charges (including add-ons); and landscaping, including all applicable
tools and supplies.

 

(4)                                  Property,
liability, earthquake (where applicable) and other insurance coverages carried
by Landlord, including deductibles and risk retention programs and a
proportionate allocation of the cost of blanket insurance policies maintained
by Landlord and/or its Affiliates (defined below); however, to the extent all
or a portion of the deductible for earthquake insurance is used by Landlord, such
amount shall be amortized over 3 years. Landlord agrees to maintain deductibles
which are consistent with those maintained by Comparable Landlords (hereinafter
defined) owning Comparable Portfolios (hereinafter defined) using sound
business judgment. A “Comparable
Landlord” shall mean a reasonably prudent commercial office
building landlord comparable to Landlord and its Affiliates owning a

 

6

 

commercial
office building portfolio comparable to that owned by Landlord and its
Affiliates in quantity, size, type and quality (a “Comparable Portfolio”).

 

(5)                                  Real estate
taxes, assessments, business taxes, excises, association dues, fees, levies,
charges and other taxes of every kind and nature whatsoever, general and
special, extraordinary and ordinary, foreseen and unforeseen, including
interest on installment payments, which may be levied or assessed against or
arise in connection with ownership, use, occupancy, rental, operation or
possession of the Property (including personal property taxes for property that
is owned by Landlord and used in connection with the operation, maintenance and
repair of the Property), or substituted, in whole or in part, for a tax
previously in existence by any taxing authority, or assessed in lieu of a tax
increase, or paid as rent under any ground lease, and third party property tax
consulting services. Real estate taxes do not include (except to the extent
such excluded taxes are assessed in lieu of taxes included above) Landlord’s income,
franchise or estate taxes. The amount of any special taxes or special
assessments included in Operating Expenses shall be limited to the amount of
the installment (plus any interest payable thereon) of such special tax or
special assessment required to be paid during the year that such taxes are
being determined.

 

(6)                                  Compliance with
Laws, including license, permit and inspection fees (but not in duplication of
capital expenditures amortized as provided in Section 4.D(9) and
not including any costs to remedy a violation of applicable Law cited by a
governmental authority or court of competent jurisdiction of a condition which
existed prior to the Effective Date); and all actual, out-of-pocket expenses
and fees, including attorneys’ fees and court or other venue of dispute
resolution costs, incurred in negotiating or contesting real estate taxes or
the validity and/or applicability of any governmental enactments which may
affect Operating Expenses; provided Landlord shall credit against Operating
Expenses any refunds received from such negotiations or contests to the extent
originally included in Operating Expenses (less Landlord’s reasonable costs).

 

(7)                                  Building safety
services, to the extent provided or contracted for by Landlord.

 

(8)                                  Goods and services
purchased from Landlord’s subsidiaries and Affiliates to the extent the cost of
same is generally consistent with rates charged by unaffiliated third parties
for similar goods and services.

 

(9)                                  Amortization of
capital expenditures incurred: (a) to conform with Laws which are amended,
become effective, or are interpreted or enforced differently, after the date of
this Lease; provided, however, all capital expenditures made in order to
conform to or comply with ADA shall be included in Operating Expenses, except
to the extent Landlord had received written notice from any applicable
governmental authority of the need to conform or comply with ADA prior to the
Effective Date of this Lease; or (b) with the intention of promoting
safety or reducing or controlling increases in Operating Expenses, such as
installation of energy management systems. Such expenditures shall be amortized
uniformly over the useful life of the applicable improvement using sound real
estate accounting principles consistently applied (together with interest on
the unamortized balance at the Prime Rate [defined in Section 19.B] as of the date incurred
plus 2%). Notwithstanding the foregoing, Landlord may elect to amortize

 

7

 

capital
expenditures under this subsection over a longer period of time based upon
(i) the purpose and nature of the expenditure, (ii) the relative
capital burden on the Property, (iii) for cost savings projects, the
anticipated payback period, and (iv) otherwise in accordance with sound
real estate accounting principles consistently applied.

 

(10) Electrical
services used in the operation, maintenance and use of the Property; sales,
use, excise and other taxes assessed by governmental authorities on electrical
services supplied to the Property, and other costs of providing electrical
services to the Property.

 

E.                                      Exclusions from Operating Expenses. Operating
Expenses exclude the following expenditures:

 

(1)                                  Leasing
commissions, attorneys’ fees and other expenses related to leasing tenant space
and constructing or performing improvements for the sole benefit of an
individual tenant.

 

(2)                                  Goods and
services furnished to an individual tenant of the Building which are above
building standard and which are separately reimbursable directly to Landlord in
addition to Operating Expenses.

 

(3)                                  Repairs,
replacements and general maintenance paid by insurance proceeds or condemnation
proceeds.

 

(4)                                  Except as
provided in Section 4.D(9), depreciation,
amortization, interest payments on any encumbrances on the Property and the
cost of capital improvements or additions.

 

(5)                                  Costs of
installing any specialty service, such as an observatory, broadcasting
facility, luncheon club, or athletic or recreational club.

 

(6)                                  Expenses for
repairs or maintenance related to the Property which have been reimbursed to
Landlord pursuant to warranties or service contracts.

 

(7)                                  Principal
payments on indebtedness secured by liens against the Property, or costs of
refinancing such indebtedness.

 

(8)                                  Rent paid under
any ground lease, excluding any pass throughs under the ground lease for the
payment of property taxes and insurance premiums.

 

(9)                                  Electrical
service costs paid separately by Tenant pursuant to Section 8.C of this Lease.

 

(10)                            Landlord’s
general overhead and general administrative expenses except as provided in Section 4.D(2).

 

(11)                            Electrical, gas
and other utility service costs provided to other tenant spaces in the Building
to the extent Landlord separately charges such other tenants for the costs of
such services.

 

8

 

(12)                                      Costs incurred
due to a fire or other casualty as a result of the gross negligence or willful
misconduct by Landlord or its agents.

 

(13)                                      Rental of items
which if purchased would constitute a capital expenditure which could not be
included in Operating Expenses pursuant to Section 4.D(9) above.

 

(14)                                      Costs arising
from Landlord’s charitable or political contributions.

 

(15)                                      Transfer,
gains, inheritance, estate, income or franchise taxes or other such taxes
imposed on or measured by the income of Landlord from the operation of the
Property, except to the extent specifically included pursuant to Section 4.D(5).

 

(16)                                      Interest and
penalties due to late payment of any amounts owed by Landlord, except such as
may be incurred as a result of Tenant’s failure to timely pay its portion of
such amounts or as a result of Landlord’s contesting such amounts in good
faith.

 

(17)                                      Costs,
penalties and fines incurred due to the violation by Landlord of Laws, except
such as may be incurred by Landlord in contesting in good faith the alleged
violation.

 

(18)                                      Costs incurred
for the repair of the Property due to a casualty for which Landlord has been
reimbursed through insurance, or which would have been paid for through
insurance proceeds if Landlord had carried the insurance Landlord is required
to carry under this Lease.

 

(19)                                      Rental loss,
bad debt or capital expenditure reserve accounts (other than escrow accounts
for the payment of property taxes and insurance premiums).

 

(20)                                      Costs related
to the existence and maintenance of Landlord as a legal entity, except to the
extent attributable to the operation and management of the Property.

 

(21)                                      Legal,
auditing, consulting and professional fees paid or incurred in connection with
negotiations for financings, refinancings or sales of the Property.

 

(22)                                      Any costs
expressly described in this Lease as being excluded from Operating Expenses.

 

(23)                                      Taxes on tenant
improvements in any space in the Building to the extent such tenant
improvements are above building standard and are separately assessed.

 

(24)                                      Costs arising
from the gross negligence or willful misconduct of Landlord or its agents, or
of any other tenant, or any vendors, contractors or providers of materials or
services hired or engaged by Landlord or its agents.

 

(25)                                      Taxes payable
by Tenant directly to any applicable taxing authority.

 

9

 

(26)                                      Salaries for
employees and executives with a rank higher than senior property manager and
for those employees whose services are not directly performed in connection
with the management, operation, repair or maintenance of the Property.

 

(27)                                      Fees and
reimbursements payable by Landlord (including its parent organization,
subsidiaries and/or Affiliates) to a party related to Landlord (including its
parent organization, subsidiaries and/or Affiliates) for management of the
Property to the extent such fees and reimbursements materially exceed the
amount which would normally be paid to an unrelated, qualified third party in
connection with the management of comparable buildings.

 

(28)                                      Costs to
remediate Hazardous Materials (defined below) at the Building that Landlord is
required by applicable Law to remediate as of the Effective Date, and costs to
remediate Hazardous Materials at the Building that Landlord would have been
required by applicable Law to remediate had the applicable authorities been
aware of the existence of Hazardous Materials in its then existing condition as
of the Effective Date.

 

F.                                      Proration of Operating Expenses; Adjustments. If Landlord incurs Operating Expenses for the Property together with
one or more other buildings or properties, whether pursuant to a reciprocal
easement agreement, common area agreement or otherwise, the shared costs and
expenses shall be equitably and reasonably prorated and apportioned by Landlord
between the Property and the other buildings or properties. If the Building is
not 100% occupied during any calendar year or partial calendar year or if
Landlord is not supplying services to 100% of the total Rentable Square Footage
of the Building at any time during a calendar year or partial calendar year,
Operating Expenses shall be determined as if the Building had been 100%
occupied and Landlord had been supplying services to 100% of the Rentable Square
Footage of the Building during that calendar year. The extrapolation of
Operating Expenses under this Section shall be performed by Landlord by
adjusting the cost of those components of Operating Expenses that are impacted
by changes in the occupancy of the Building. Landlord will not recover in any
one calendar year more than 100% of the actual Operating Expenses for such
year.

 

G.                                    Audit Rights. Within 90 days
after Landlord furnishes its statement of actual Operating Expenses for any
calendar year (the “Audit Election Period”),  Tenant may,
at its expense, elect to audit Landlord’s Operating Expenses for such calendar
year only, subject to the following conditions: (1) there is no uncured
event of default under this Lease (beyond any applicable notice and cure
periods); (2) the audit shall be prepared by an independent certified
public accounting firm of recognized national standing; (3) in no event
shall any audit be performed by a firm retained on a “contingency fee” basis;
(4) the audit shall commence within 30 days after Landlord makes
Landlord’s books and records available to Tenant’s auditor and shall conclude
within 60 days after commencement; (5) the audit shall be conducted during
Landlord’s normal business hours at the location where Landlord maintains its
books and records in the Los Angeles, California metropolitan area and shall
not unreasonably interfere with the conduct of Landlord’s business;
(6) Tenant and its accounting firm shall treat any audit in a confidential
manner and shall each execute Landlord’s commercially reasonable
confidentiality agreement for Landlord’s benefit prior to commencing the audit;
and (7) the accounting firm’s audit report shall, at no charge to
Landlord, be submitted in draft form for Landlord’s review and comment before
the final approved audit report is delivered to Landlord, and any reasonable

 

10

 

comments
by Landlord shall be incorporated into the final audit report. Notwithstanding
the foregoing, Tenant shall have no right to conduct an audit if Landlord
furnishes to Tenant an audit report for the calendar year in question prepared
by an independent certified public accounting firm of recognized national
standing (unless originally prepared for Landlord). This paragraph shall not be
construed to limit, suspend, or abate Tenant’s obligation to pay Rent when due,
including estimated Operating Expenses. Landlord shall credit any overpayment
determined by the final approved audit report against the next Rent due and
owing by Tenant or, if no further Rent is due, refund such overpayment directly
to Tenant within 30 days of determination. Likewise, Tenant shall pay Landlord
any underpayment determined by the final approved audit report within 30 days
of determination. The foregoing obligations shall survive the expiration or
termination of this Lease. If Tenant does not give written notice of its
election to audit Landlord’s Operating Expenses during the Audit Election
Period, Landlord’s Operating Expenses for the applicable calendar year shall be
deemed approved for all purposes, and Tenant shall have no further right to
review or contest the same. The right to audit granted hereunder is personal to
the initial Tenant named in this Lease and to any assignee under a Permitted
Transfer (defined below) and shall not be available to any subtenant under a
sublease of the Premises. If the audit proves that Landlord’s calculation of
Operating Expenses for the calendar year under inspection was overstated by
more than 10%, then, after verification, Landlord shall pay Tenant’s actual
reasonable out-of-pocket audit and inspection fees (but specifically excluding
any travel and lodging expenses) applicable to the review of said calendar year
statement within 30 days after receipt of Tenant’s invoice therefor.

 

5.                                       Tenant’s Use of Premises.

 

A.                                    Permitted Uses. The Premises
shall be used only for general office use and for such other lawful purposes as
are consistent with uses of office space in comparable buildings in the area of
the Property, and which are not expressly prohibited in this Lease (the “Permitted Use”) and for no other use whatsoever.
Tenant shall not use or permit the use of the Premises for any purpose which is
illegal, creates obnoxious odors (including tobacco smoke), noises or
vibrations, is dangerous to persons or property, could increase Landlord’s
insurance costs, or which, in Landlord’s reasonable opinion, unreasonably
disturbs any other tenants of the Building or interferes with the operation or
maintenance of the Property or unreasonably interferes with any work by
Landlord or its contractors in the Premises. Except as provided below, the
following uses are expressly prohibited in the Premises: schools, government
offices or agencies; personnel agencies; collection agencies; credit unions;
data processing, telemarketing or reservation centers; medical treatment and
health care; radio, television or other telecommunications broadcasting;
restaurants and other retail; customer service offices of a public utility company;
or any other purpose which would, in Landlord’s reasonable opinion, impair the
reputation or quality of the Building, overburden any of the Building systems,
Common Areas or parking facilities (including any use which would create a
population density in the Premises which is in excess of the density which is
standard for the Building), impair Landlord’s efforts to lease space or
otherwise interfere with the operation of the Property. Notwithstanding the
foregoing, the following ancillary uses are permitted in the Premises only so
long as they do not, in the aggregate, occupy more than 10% of the Rentable
Square Footage of the Premises or any single floor (whichever is less):
(1) the following services provided by Tenant exclusively to its employees:
schools, training and other educational services; credit unions; and similar
employee services; and (2) the following services directly and exclusively

 

11

 

supporting
Tenant’s business: telemarketing; reservations; storage; data processing; debt
collection; and similar support services.

 

B.                               Compliance with Laws. Tenant shall
comply with all Laws regarding the operation of Tenant’s business and the use,
condition, configuration and occupancy of the Premises and the use of the
Common Areas; provided, however, Tenant shall not be required to make
alterations to any structural elements of the Premises in order to comply with
this Section 5.B. Tenant, within 10 days after
receipt, shall provide Landlord with copies of any notices Tenant receives
regarding a violation or alleged or potential violation of any Laws. Tenant
shall comply with the rules and regulations of the Building attached as Exhibit C and such other
reasonable rules and regulations (or modifications thereto) adopted by
Landlord from time to time. Landlord shall enforce such rules and
regulations for the Property in a reasonably nondiscriminatory manner, taking
prevailing circumstances into account. Tenant shall also cause its agents,
contractors, subcontractors, employees, customers, and subtenants to comply
with all such rules and regulations. Following Landlord’s receipt of
written notice from any applicable governmental authority of a violation of any
applicable Law at the Property for which Landlord is responsible, Landlord
shall promptly correct any such violation. To Landlord’s current actual
knowledge, Landlord has received no written notice from any applicable
governmental authority of any current violation of any Laws with respect to the
Property.

 

C.                               Tenant’s Security Responsibilities. Tenant shall
(1) lock the doors to the Premises and take other reasonable steps to
secure the Premises and the personal property of all Tenant Parties (defined in
Section 13) and any of Tenant’s transferees,
contractors or licensees in the Common Areas and parking facilities of the
Building and Property, from unlawful intrusion, theft, fire and other hazards;
(2) keep and maintain in good working order all security and safety
devices installed in the Premises by or for the benefit of Tenant (such as
locks, smoke detectors and burglar alarms); and (3) reasonably cooperate
with Landlord and other tenants in the Building on Building safety matters.
Tenant acknowledges that any security or safety measures employed by Landlord
are for the protection of Landlord’s own interests; that Landlord is not a
guarantor of the security or safety of the Tenant Parties or their property;
and that such security and safety matters are the responsibility of Tenant and
the local law enforcement authorities.

 

6.                                            Security Deposit.   The Security Deposit shall be delivered to
Landlord upon the execution of this Lease by Tenant and shall be held by
Landlord (without liability for interest, except to the extent required by Law)
as security for the performance of Tenant’s obligations under this Lease. The
Security Deposit is not an advance payment of Rent or a measure of Tenant’s
liability for damages. Landlord may, from time to time while an event of
default remains uncured after the expiration of all applicable notice and cure
periods, if any, without prejudice to any other remedy, use all or a portion of
the Security Deposit to satisfy past due Rent, cure any uncured default by
Tenant after the expiration of all applicable notice and cure periods, if any,
or repay Landlord for damages and charges for which Tenant is legally liable
under this Lease or resulting from Tenant’s breach of this Lease. If Landlord
uses the Security Deposit, Tenant shall, within 5 Business Days of Landlord’s
written demand therefor, restore the Security Deposit to its original amount
and such use by Landlord of the Security Deposit shall not constitute a cure of
the existing event of default until such time as the entire amount owing to
Landlord is paid in full and the Security Deposit is fully restored. Provided
that Tenant has

 

12

 

performed
all of its obligations hereunder, Landlord shall return any unapplied portion
of the Security Deposit to Tenant within 30 days after the later to occur of:
(A) the date Tenant surrenders possession of the Premises to Landlord in
accordance with this Lease; or (B) the Expiration Date. Tenant does hereby
authorize Landlord to withhold from the Security Deposit all amounts allowed by
Law and the amount reasonably anticipated by Landlord to be owed by Tenant as a
result of an underpayment of Tenant’s Pro Rata Share of any Operating Expenses
for the final year of the Term. To the fullest extent permitted by applicable
Law, Tenant agrees that the provisions of this Section 6 shall supersede and replace all statutory
rights of Tenant under applicable Law regarding the retention, application or
return of security deposits, including the provisions of Section 1950.7 of
the California Civil Code, or any similar or successor Laws now or hereinafter
in effect which (i) establish the time frame by which Landlord must refund
collateral or security for performance of a tenant’s obligations under a lease,
and/or (ii) provide that Landlord may claim from collateral or security
for performance of a tenant’s obligations under a lease only those sums
reasonably necessary to remedy defaults in the payment of rent, to repair
damage caused by Tenant or to clean the Premises. If Landlord transfers its
interest in the Premises, Landlord shall assign the Security Deposit to the
transferee and, following the assignment and the delivery to Tenant of an
acknowledgement of the transferee’s responsibility for the Security Deposit if
required by Law, Landlord shall have no further liability for the return of the
Security Deposit. Landlord shall not be required to keep the Security Deposit
separate from its other accounts.

 

7.                                       Services Furnished by Landlord.

 

A.                                    Standard Services.   Subject to the provisions of this Lease, Landlord
agrees to furnish (or cause a third party provider to furnish) the following
services to Tenant during the Term:

 

(1)                                            Hot and cold
water service for use in the lavatories and kitchens on each floor on which the
Premises are located.

 

(2)                                            Heat and air
conditioning in season during Normal Business Hours, at such temperatures and
in such amounts as required by governmental authority or as Landlord reasonably
determines are standard for the Building. Subject to Tenant’s compliance with Section 9.C, Tenant shall have the
right, at Tenant’s sole cost and expense, to install supplemental HVAC systems
to service the Premises.

 

(3)                                            Maintenance and
repair of the Property as described in Section 9.B.

 

(4)                                            Janitorial
service 5 days per week (excluding Holidays), as reasonably determined by
Landlord. If Tenant’s use of the Premises, floor covering or other improvements
require special services in excess of the standard services for the Building,
Tenant shall pay the additional cost attributable to the special services.

 

(5)                                            Elevator
service, subject to proper authorization and Landlord’s policies and procedures
for use of the elevator(s) in the Building.

 

(6)                                            Exterior window
washing at such intervals as reasonably determined by Landlord.

 

13

 

(7)                                            Electricity to
the Premises for general office use, in accordance with and subject to the
terms and conditions in Section 8.

 

B.                               Service Interruptions. For purposes
of this Lease, a “Service Failure”  shall mean any interruption, suspension or
termination of services being provided to Tenant by Landlord or by third-party
providers, whether engaged by Tenant or pursuant to arrangements by such
providers with Landlord, which are due to (1) the application of Laws; (2) the
failure, interruption or malfunctioning of any electrical or mechanical
equipment, utility or other service to the Building or Property; (3) the
performance of repairs, maintenance, improvements or alterations; or
(4) the occurrence of any other event or cause whether or not within the
reasonable control of Landlord. No Service Failure shall render Landlord liable
to Tenant, constitute a constructive eviction of Tenant, give rise to an
abatement of Rent, or relieve Tenant from the obligation to fulfill any covenant
or agreement. In no event shall Landlord be liable to Tenant for any loss or
damage, including the theft of Tenant’s Property (defined in Section 14), arising out of or in connection with any Service Failure or the
failure of any Building safety services, personnel or equipment. Commencing on
the 6th consecutive Business Day of any Service
Failure within Landlord’s control, (unless the Service Failure is caused by a
fire or other casualty, in which event Section 16
controls), Tenant shall, as its sole remedy, be entitled to an
equitable diminution of Base Rent and Tenant’s Pro Rata Share of Operating
Expenses based upon the pro rata portion of the Premises which is rendered
unfit for occupancy for the Permitted Use, except to the extent such Service
Failure is caused by a Tenant Party or a transferee, invitee, contractor or
licensee of Tenant.

 

C.                               Third Party Services. If Tenant
desires any service which Landlord has not specifically agreed to provide in
this Lease, such as private security systems or telecommunications services
serving the Premises, Tenant shall procure such service directly from a
reputable third party service provider (“Provider”)  for Tenant’s
own account. Tenant shall require each Provider to comply with the Building’s
rules and regulations, all Laws, and Landlord’s reasonable policies and
practices for the Building. Tenant acknowledges Landlord’s current policy that
requires all Providers utilizing any area of the Property outside the Premises
to be approved by Landlord and to enter into a written agreement acceptable to
Landlord prior to gaining access to, or making any installations in or through,
such area. Accordingly, Tenant shall give Landlord written notice sufficient
for such purposes, but in no event less than 14 days’ prior written notice.

 

8.                                            Use of Electrical Services by Tenant.

 

A.                               Landlord’s Electrical Service. Subject to the
terms of this Lease, Landlord shall furnish building standard electrical
service to the Premises sufficient to operate customary lighting, office machines
and other equipment of similar low electrical consumption. Landlord may, at any
time and from time to time, calculate Tenant’s actual electrical consumption in
the Premises by a survey conducted by a reputable consultant selected by
Landlord, at Landlord’s expense. The cost of any electrical consumption in
excess of that which Landlord reasonably determines is standard for the
Building shall be paid by Tenant in accordance with Section 8.D.  The furnishing of electrical
services to the Premises shall be subject to the rules, regulations and
practices of the supplier of such electricity and of any municipal or other
governmental authority regulating the business of providing electrical utility
service. Except to the extent set forth in

 

14

 

Section 7.B above, Landlord shall not be
liable or responsible to Tenant for any loss, damage or expense which Tenant
may sustain or incur if either the quantity or character of the electrical
service is changed or is no longer available or no longer suitable for Tenant’s
requirements.

 

B.                               Selection of Electrical Service Provider. Landlord shall have and retain the sole right to select the provider
of electrical services to the Building and/or the Property. To the fullest extent
permitted by Law, Landlord shall have the continuing right to change such
utility provider. All charges and expenses incurred by Landlord due to any such
changes in electrical services, including maintenance, repairs, installation
and related costs, shall be included in the electrical services costs
referenced in Section 4.D(10), unless
paid directly by Tenant.

 

C.                               Submetering. Landlord shall
have the continuing right, upon 30 days written notice, to install a submeter
for the Premises at Landlord’s expense. If submetering is installed for the
Premises, Landlord may charge for Tenant’s actual electrical consumption
monthly in arrears for the kilowatt hours used, a rate per kilowatt hour equal
to that charged to Landlord by the provider of electrical service to the
Building during the same period of time (plus, to the fullest extent permitted
by applicable Laws, any fees charged by the provider of electrical service to
the Property), except as to electricity directly purchased by Tenant from third
party providers after obtaining Landlord’s consent to the same. In the event
Landlord is unable to determine the exact kilowatt hourly charge during the
period of time, Landlord shall use the average kilowatt hourly charge to the
Building for the first billing cycle ending after the period of time in
question. Even if the Premises are submetered, Tenant shall remain obligated to
pay Tenant’s Pro Rata Share of the cost of electrical services as provided in Section 4.B, except that Tenant shall
be entitled to a credit against electrical services costs equal to that portion
of the amounts actually paid by Tenant separately and directly to Landlord
which are attributable to building standard electrical services submetered to
the Premises.

 

D.                               Excess Electrical Service. Tenant’s use
of electrical service shall not exceed, in voltage, rated capacity or overall
load, that which Landlord reasonably deems to be standard for the Building. If
Tenant requests permission to consume excess electrical service, Landlord may
refuse to consent or may condition consent upon conditions that Landlord
reasonably elects (including the installation of utility service upgrades,
meters, submeters, air handlers or cooling units). The costs of any approved
additional consumption (to the extent permitted by Law), installation and
maintenance shall be paid by Tenant.

 

9.                                            Repairs and Alterations.

 

A.                               Tenant’s Repair Obligations. Tenant shall
keep the non-structural elements (unless damage to structural elements is
caused by a Tenant Party, or a transferee, invitee, contractor or licensee of
Tenant) of the Premises in good condition and repair, ordinary wear and tear,
casualty loss, condemnation and repairs that are not Tenant’s obligation
hereunder excepted, and if any portion of the Premises is visible from any
Common Area, such portion of the Premises shall be kept neat and clean.
Tenant’s repair obligations include, without limitation, repairs to:
(1) floor covering and/or raised flooring; (2) interior partitions;
(3) doors; (4) the interior side of demising walls;
(5) electronic, phone, data and other cabling and related equipment
(collectively, “Cable”) that is installed by or for the
benefit of Tenant whether located in the Premises or in other portions of the
Building; (6) supplemental air conditioning units,

 

15

 

private
showers and kitchens, including hot water heaters, plumbing, dishwashers, ice
machines and similar facilities serving Tenant exclusively; (7) phone
rooms used exclusively by Tenant; (8) Alterations (defined below)
performed by contractors retained by Tenant, including related HVAC balancing;
(9) HVAC repair and maintenance related to the HVAC system serving the
Premises; and (10) all of Tenant’s furnishings, trade fixtures, equipment
and inventory, except to the extent that any such Tenant repairs set forth in
items (1) through (10) are necessitated as the result of the gross
negligence or willful misconduct of any Landlord Party. Prior to performing any
such repair obligation, Tenant shall give written notice to Landlord describing
the necessary maintenance or repair. Upon receipt of such notice, Landlord may
elect either to perform any of the maintenance or repair obligations specified
in such notice or require that Tenant perform such obligations by using
contractors reasonably approved by Landlord; provided, however, if regularly
scheduled maintenance is occurring in the Premises pursuant to a written
contract previously provided to Landlord, Landlord agrees that it shall not have
the right to perform such maintenance, except in the event of an emergency. All
work shall be performed at Tenant’s expense in accordance with the
rules and procedures described in Section 9.C
below, provided that if Landlord elects to perform any of Tenant’s
maintenance or repair obligations as permitted by the previous sentence, then
Landlord shall only charge Tenant the actual cost incurred by Landlord (without
any administrative charge by or from Landlord) for the performance of
maintenance or repair obligations. If Tenant, following delivery of notice from
Landlord (although notice shall not be required if there is an emergency),
(a) fails to make any repairs to the Premises within 15 days after
delivery of such notice, or (b) fails to commence such repairs within 15
days after delivery such notice for any such repairs that cannot reasonably be
completed within such 15 day period, or (c) commences to make the repairs
described in (b) within 15 days after delivery of such notice but
thereafter fails to diligently pursue the completion of such repairs, or
(d) if there is an emergency, Landlord may, in addition to any other
remedy available to Landlord, make the repairs, and Tenant shall pay to
Landlord the reasonable cost of the repairs within 30 days after receipt of an
invoice, together with an administrative charge in an amount equal to 15% of
the cost of the repairs.

 

B.                               Landlord’s Repair Obligations. Landlord shall
keep and maintain in good repair and working order and make repairs to and
perform maintenance upon: (1) structural elements of the Building;
(2) standard mechanical (including HVAC), electrical, plumbing and
fire/life safety systems serving the Building generally; (3) Common Areas;
(4) the roof of the Building; (5) exterior windows of the Building;
and (6) elevators serving the Building. Landlord shall promptly make
repairs (taking into account the nature and urgency of the repair) for which
Landlord is responsible. If any of the foregoing maintenance or repair is
necessitated due to the acts or omissions of any Tenant Party (defined in Section 13),  Tenant shall pay
the actual, out-of-pocket costs of such repairs or maintenance to Landlord
within 30 days after receipt of an invoice, together with an administrative
charge in an amount equal to 10% of the cost of the repairs. Landlord shall not
be liable for and there shall be no abatement of rent with respect to, any
injury to or interference with Tenant’s business arising from any performance
or nonperformance of any repair, maintenance, alteration or improvement in and
to any portion of the Property, Building or the Premises (except to the extent
of a material and adverse effect on Tenant’s normal business operations due to
Landlord’s gross negligence or willful misconduct), no actual or constructive
eviction of Tenant shall result from such performance or nonperformance, Tenant
shall not have the right to terminate this Lease, and Tenant shall not be
relieved from the performance of any covenant or agreement in this Lease by
reason thereof.

 

16

 

Tenant
hereby waives and releases its right to make repairs at Landlord’s expense
under Sections 1932(1), 1933(4), 1941 and 1942 of the California Civil Code or
any similar or successor Laws now or hereinafter in effect.

 

C.                               Alterations.

 

(1)                                  When
Consent Is Required. Tenant shall
not make alterations, additions or improvements to the Premises or install any
Cable in the Premises or other portions of the Building (collectively, “Alterations”) without first obtaining the written
consent of Landlord in each instance, which consent shall not be unreasonably
withheld, conditioned or delayed. In no event shall (and it shall be reasonable
for Landlord to withhold its consent if) any Alterations (i) interfere with
construction in progress or other tenants in the Project; (ii) adversely
affect or alter the Project systems, structural integrity or exterior
appearance of the Building; (iii) impair Building standard services or
require above-Building standard services (either during or after such work);
(iv) be visible from the exterior of the Premises or the Building; or
(v) be permitted if any uncured event of default then exists (or any
condition exists which, with the passage of time or giving of notice, would
become an event of default). However, Landlord’s consent shall not be required
for any Alteration that satisfies all of the following criteria (a “Minor Alteration”):  (a) is of a cosmetic nature such
as painting, wallpapering, hanging pictures and installing carpeting;
(b) is not visible from outside the Premises or Building; (c) will
not affect the systems or structure of the Building; (d) does not require
work to be performed inside the walls or above the ceiling of the Premises; and
(e) has a total cost of less than $10,000.

 

(2)                                  Requirements
For All Alterations, Including Minor Alterations. Prior to
starting work on any Alteration, Tenant shall furnish to Landlord for review
and approval (which approval shall not be unreasonably withheld, conditioned or
delayed): plans and specifications; names of proposed contractors (provided
that Landlord may reasonably designate specific contractors with respect to
Building systems); copies of contracts; necessary permits and approvals;
evidence of contractors’ and subcontractors’ insurance; and Tenant’s security
for performance of the Alteration; provided, however, so long as Landlord is
holding a security deposit at least equal to the amount set forth in Section 1.H above, Landlord shall not
require security for the performance of any Minor Alteration. Changes to the
plans and specifications must also be submitted to Landlord for its approval
(which approval shall not be unreasonably withheld, conditioned or delayed).
Some of the foregoing requirements may be waived by Landlord for the
performance of specific Minor Alterations; provided that such waiver is
obtained in writing prior to the commencement of such Minor Alterations.
Landlord’s waiver on one occasion shall not waive Landlord’s right to enforce
such requirements on any other occasion. Alterations shall be constructed in a
good and workmanlike manner using materials of a quality that is at least equal
to the quality designated by Landlord as the minimum standard for the Building.
Landlord may designate reasonable rules, regulations and procedures for the
performance of Alterations in the Building and, to the extent reasonably
necessary to avoid disruption to the occupants of the Building, shall have the
right to designate the time when Alterations may be performed. Tenant shall
reimburse Landlord within 30 days after receipt of an invoice for out-of-pocket
sums paid by Landlord for third party examination of Tenant’s plans for
Alterations. In addition, within 30 days after receipt of an invoice from
Landlord, Tenant shall pay to Landlord a fee equal to 5% of the total cost of
such Alterations for Landlord’s oversight and coordination of any Alterations.
No later than 30 days after completion of the

 

17

 

Alterations,
Tenant shall furnish “as-built” plans (which shall not be required for Minor
Alterations), completion affidavits, full and final waivers of liens, receipts
and bills covering all labor and materials. Tenant shall assure that the
Alterations comply with all insurance requirements and Laws.

 

(3)                                  Landlord’s
Liability For Alterations. Landlord’s
approval of an Alteration shall not be a representation by Landlord that the
Alteration complies with applicable Laws or will be adequate for Tenant’s use.
Tenant acknowledges that Landlord is not an architect or engineer, and that the
Alterations will be designed and/or constructed using independent architects,
engineers and contractors. Accordingly, Landlord does not guarantee or warrant
that the applicable construction documents will comply with Laws or be free
from errors or omissions, or that the Alterations will be free from defects,
and Landlord will have no liability therefor.

 

10.                                      Entry by Landlord. Landlord, its
agents, contractors and representatives may enter the Premises to inspect or
show the Premises, to clean and make repairs, alterations or additions to the
Premises, and to conduct or facilitate repairs, alterations or additions to any
portion of the Building, including other tenants’ premises. However, provided there
is no uncured event of default under this Lease, any exhibition of the Premises
to prospective tenants prior to the last 12 months of the Term shall be subject
to Tenant’s prior consent, which shall not be unreasonably withheld,
conditioned or delayed. If Landlord’s entry into the Premises is for the
purpose of conducting or facilitating repairs, alterations or additions to
other tenants’ premises and does not constitute an emergency, then Landlord
shall use commercially reasonable efforts to perform such repairs after Normal
Business Hours unless Tenant grants permission to Landlord to perform such
repairs during Normal Business Hours. Landlord shall use commercially
reasonable efforts in connection with any such entry (except in the event of an
emergency) to minimize any interference with the operations and normal office
routine of Tenant. Except in emergencies or to provide janitorial and other
Building services after Normal Business Hours, Landlord shall provide Tenant
with 24-hour prior notice of entry into the Premises, which may be given
orally. Landlord shall have the right to temporarily close all or a portion of
the Premises to perform repairs, alterations and additions, if reasonably
necessary for the protection and safety of Tenant and its employees. Except in
emergencies, Landlord will not close the Premises if the work can reasonably be
completed on weekends and after Normal Business Hours; provided, however, that
Landlord is not required to conduct work on weekends or after Normal Business Hours
if such work can be conducted without closing the Premises. Entry by Landlord
for any such purposes shall not constitute a constructive eviction or entitle
Tenant to an abatement or reduction of Rent.

 

11.                                      Assignment and Subletting.

 

A.                               Landlord’s Consent Required. Subject to the
remaining provisions of this Section 11,
but notwithstanding anything to the contrary contained elsewhere in
this Lease, Tenant shall not assign, transfer or encumber any interest in this
Lease (either absolutely or collaterally) or sublease or allow any third party
to use any portion of the Premises (collectively or individually, a “Transfer”)  without the prior written consent of Landlord,
which consent shall not be unreasonably withheld. Without limitation, Tenant
agrees that Landlord’s consent shall not be considered unreasonably withheld
if: (1) the proposed transferee’s financial condition

 

18

 

does
not meet the criteria Landlord uses to select Building tenants having similar
leasehold obligations; (2) the proposed transferee is a governmental
organization or present occupant of the Property (unless Landlord is unable to
accommodate such present occupant’s need for additional space in the Building
of a size comparable to that portion of the Premises covered by the proposed
Transfer), or Landlord is otherwise engaged in lease negotiations with the
proposed transferee for other premises in the Property; (3) any uncured
event of default exists under this Lease (or a condition exists which, with the
passage of time or giving of notice, would become an event of default);
(4) any portion of the Building or Premises would likely become subject to
additional or different Laws as a consequence of the proposed Transfer;
(5) the proposed transferee’s use of the Premises conflicts with the
Permitted Use or any exclusive usage rights granted to any other tenant in the
Building; (6) the use, nature, business, activities or reputation in the
business community of the proposed transferee (or its principals, employees or
invitees) does not meet Landlord’s standards for Building tenants (such
standards being evidenced by the types of tenants included in the tenant mix
for the Building as of the effective date of the proposed Transfer);
(7) either the Transfer or any consideration payable to Landlord in
connection therewith adversely affects pension fund qualification tests
applicable to Landlord or its Affiliates; or (8) the proposed transferee
is or has been involved in litigation with Landlord or any of its Affiliates
relating to commercial leasing matters. Tenant shall be entitled to bring an
action to enforce such provision based upon a claim that Landlord unreasonably
withheld its consent to a proposed Transfer through specific performance or
declaratory judgment. Tenant shall not be entitled to receive monetary damages
for any such claim beyond Tenant’s remaining rental obligations under the Lease
as of the date of Landlord’s rejection of Tenant’s proposed Transfer in
violation of the terms of this Lease, and Tenant shall only be entitled to such
monetary damages, if any, after a final, non-appealable judgment has been
entered determining that Landlord unreasonably withheld its consent to a
proposed Transfer and ordering the award of such damages. Tenant hereby waives
the provisions of Section 1995.310 of the California Civil Code, or any
similar or successor Laws, now or hereinafter in effect, and all other remedies,
including any right at law or equity to terminate this Lease, on its own behalf
and on behalf of the proposed transferee. Any attempted Transfer in violation
of this Section is voidable at Landlord’s option.

 

B.            Consent Parameters/Requirements. As part of
Tenant’s request for, and as a condition to, Landlord’s consent to a Transfer,
Tenant shall provide Landlord with financial statements for the proposed
transferee, a complete copy (unexecuted) of the proposed assignment or sublease
and other contractual documents, and such other information as Landlord may
reasonably request. Landlord agrees to consent to or reject Tenant’s proposed
Transfer within 10 Business Days after receipt of Tenant’s notification and all
of the information required pursuant to this Section 11.B.
If Landlord fails to respond to Tenant within such 10 Business Day
period, and such failure shall continue for an additional five
(5) Business Days following Tenant’s delivery of a second notice which
specifically states that Landlord’s failure to respond shall be deemed
Landlord’s approval of the proposed Transfer, then Landlord shall be deemed to
have consented to such proposed Transfer. If Landlord timely rejects Tenant’s
proposed Transfer, Landlord shall then have the right (but not the obligation)
to terminate this Lease as of the date the Transfer would have been effective (“Landlord
Termination Date”)  with respect to the portion
of the Premises which Tenant desires to Transfer. Notwithstanding anything to
the contrary contained in the foregoing, Landlord shall not have the right to
terminate the Lease if the proposed sublease is for less than all of the
Premises and for less than all of the remaining

 

19

 

Term.
Any subleases to the same person or entity (or group of Affiliated entities)
will be deemed consolidated for purposes of the immediately preceding sentence
and any options to extend the term of the sublease(s) granted to the
sublessee(s) will be added to the term of the sublease(s) for
purposes of the immediately preceding sentence. In such event, Tenant shall
vacate such portion of the Premises by the Landlord Termination Date and upon
Tenant’s vacating such portion of the Premises, the Rent and other charges
payable shall be proportionately reduced. Consent by Landlord to one or more
Transfer(s) shall not operate as a waiver of Landlord’s rights to approve
any subsequent Transfers. In no event shall any Transfer or Permitted Transfer
release or relieve Tenant from any obligation under this Lease, nor shall the
acceptance of Rent from any assignee, subtenant or occupant constitute a waiver
or release of Tenant from any of its obligations or liabilities under this
Lease. Tenant shall pay Landlord a review fee of $1,000.00 for Landlord’s
review of any Permitted Transfer or requested Transfer, provided if Landlord’s
actual reasonable costs and expenses (including reasonable attorney’s fees)
exceed $1,000.00, Tenant shall reimburse Landlord for its actual reasonable
costs and expenses in lieu of a fixed review fee (not to exceed $2,500.00 per
review of a transfer under this Lease).

 

C.            Payment to Landlord. If the
aggregate consideration paid to a Tenant Party (other than in the case of a
Permitted Transfer) for a Transfer exceeds that payable by Tenant under this
Lease (prorated according to the transferred interest), Tenant shall pay
Landlord 50% of such excess (after deducting therefrom reasonable leasing
commissions, review fees paid to Landlord, reasonable attorneys’ fees and costs
and reasonable costs of tenant improvements paid to unaffiliated third parties
in connection with the Transfer, with proof of same provided to Landlord).
Tenant shall pay Landlord for Landlord’s share of any excess within 30 days
after Tenant’s receipt of such excess consideration. If any uncured event of
default exists under this Lease (or a condition exists which, with the passage
of time or giving of notice, would become an event of default), Landlord may
require that all sublease payments be made directly to Landlord, in which case
Tenant shall receive a credit against Rent in the amount of any payments
received, but not to exceed the amount payable by Tenant under this Lease.

 

D.            Change in Control of Tenant. Except for a
Permitted Transfer, if Tenant is a corporation, limited liability company,
partnership, or similar entity, and if the entity which owns or controls a
majority of the voting shares/rights in Tenant at any time sells or disposes of
such majority of voting shares/rights, or changes its identity for any reason
(including a merger, consolidation or reorganization), such change of ownership
or control shall constitute a Transfer; provided, however, the foregoing shall
not apply to any such change of ownership or control: (1) resulting from
(a) a firm commitment underwritten public offering of the voting
shares/rights in Tenant pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended, or any similar successor federal
statute, and the rules and regulations promulgated thereunder, as in
effect from time to time, or (b) the issuance or sale of any such voting
shares/rights in Tenant in connection with any venture capital transaction; or
(2) so long as, both before and after the relevant transaction, Tenant is
an entity whose outstanding stock is listed on a recognized U.S. securities
exchange, or if at least 80% of its voting stock is owned by another entity,
the voting stock of which is so listed; provided, further, that, in each such
case, Tenant shall give Landlord written notice at least 30 days prior to the
effective date of such change in ownership or control.

 

20

 

E.             No Consent Required. Tenant may
assign its entire interest under this Lease to its Affiliate (defined below) or
to a successor to Tenant by purchase, merger, consolidation or reorganization
without the consent of Landlord, provided that all of the following conditions
are satisfied in Landlord’s reasonable discretion (a “Permitted
Transfer”): (1) no uncured event of
default exists under this Lease; (2) Tenant’s successor shall own all or
substantially all of the assets of Tenant; (3) such
Affiliate or successor shall have a net worth which is at least equal to
Tenant’s net worth as of the day prior to the proposed purchase, merger,
consolidation or reorganization; (4) no portion of the Building or
Premises would likely become subject to additional or different Laws as a
consequence of the proposed Transfer; (5) such Affiliate’s or successor’s
use of the Premises shall not conflict with the Permitted Use or any exclusive
usage rights granted to any other tenant in the Building; (6) neither the
Transfer nor any consideration payable to Landlord in connection therewith
adversely affects the pension fund qualification tests applicable to Landlord
or its Affiliates; (7) such Affiliate or successor is not and has not been
involved in litigation with Landlord or any of Landlord’s Affiliates relating
to commercial leasing matters; and (8) Tenant shall give Landlord written
notice at least 30 days prior to the effective date of the proposed Transfer,
along with all applicable documentation and other information reasonably
necessary for Landlord to determine that the requirements of this Section 11.E have been satisfied,
including if applicable, the qualification of such proposed transferee as an
Affiliate of Tenant. In addition, Tenant may sublease a portion of the Premises
to one or more Affiliates (provided that the portion of the Premises subject to
a sublease is at all times less than 50% in the aggregate) without the consent
of Landlord, provided that conditions (1), (4), (5), (6), (7) and
(8) of this Section 11.E are
satisfied in Landlord’s reasonable discretion (each, an “Affiliated Sublessee”). The term “Affiliate”  means
any person or entity controlling, controlled by or under common control with
Tenant or Landlord, as applicable. If requested by Landlord, the Affiliate or
successor shall sign a commercially reasonable form of assumption agreement.

 

F.             Options. Any option granted to
Tenant in this Lease is personal to the original Tenant and may be exercised
only by the original Tenant while occupying the entire Premises, and may not be
exercised or be assigned, voluntarily or involuntarily, by or to any person or
entity other than the original Tenant or an Affiliate by assignment pursuant to
a Permitted Transfer. The options, if any, herein granted to Tenant are not
assignable separate and apart from this Lease, nor may any option be separated
from this Lease in any manner, either by reservation or otherwise.

 

12.           Liens. Tenant shall not permit mechanic’s or other liens to
be placed upon the Property, Premises or Tenant’s leasehold interest in
connection with any work or service done or purportedly done by or for the
benefit of Tenant. If a lien is so placed, Tenant shall, within 10 Business Days of notice from Landlord
of the filing of the lien, fully discharge the lien by settling the claim which
resulted in the lien or by bonding or insuring over the lien in the manner
prescribed by the applicable lien Law. If Tenant fails to discharge the lien,
then, in addition to any other right or remedy of Landlord, Landlord may bond
or insure over the lien or otherwise discharge the lien. Tenant shall, within
30 days after receipt of an invoice from Landlord, reimburse Landlord for any
amount paid by Landlord, including reasonable attorneys’ fees, to bond or
insure over the lien or discharge the lien.

 

21

 

13.           Indemnity. Subject to Section 15 Tenant shall hold Landlord,
its trustees, Affiliates, subsidiaries, members, principals, beneficiaries,
partners, officers, directors, shareholders, employees,
Mortgagee(s) (defined in Section 25) and agents
(including the manager of the Property) (collectively, “Landlord Parties”) harmless from,
and indemnify and defend such parties against, all liabilities, obligations,
damages, penalties, claims, actions, costs, charges and expenses, including
reasonable attorneys’ fees and other professional fees that may be imposed
upon, incurred by or asserted against any of such indemnified parties (each a “Claim”  and
collectively “Claims”) that arise out
of or in connection with any damage or injury occurring in the Premises, except
to the extent caused by the gross negligence or willful misconduct of a
Landlord Party. Provided Landlord Parties are properly named as additional
insureds in the policies required to be carried under this Lease, and except as
otherwise expressly provided in this Lease, the indemnity set forth in the
preceding sentence shall be limited to the greater of (A) $4,000,000, and
(B) the aggregate amount of general/umbrella liability insurance actually
carried by Tenant. Subject to Sections 9.B,
15 and 20, Landlord
shall hold Tenant, its trustees, members, principals, beneficiaries, partners,
officers, directors, shareholders, employees and agents (collectively, “Tenant Parties”) harmless from,
and indemnify and defend such parties against, all Claims that arise out of or
in connection with any damage or injury occurring in or on the Property
(excluding the Premises), except to the extent caused by the gross negligence
or willful misconduct of a Tenant Party, to the same extent the Tenant Parties
would have been covered had they been named as additional insureds on the
commercial general liability insurance policy required to be carried by
Landlord under this Lease. The indemnity set forth in the preceding sentence
shall be limited to the amount of $4,000,000.

 

14.           Insurance.

 

A.            Tenant’s Insurance. Tenant shall maintain the
following insurance (“Tenant’s Insurance”),  at its sole cost and
expense: (1) commercial general liability insurance applicable to the
Premises and its appurtenances providing, on an occurrence basis, a per occurrence
limit of no less than $1,000,000; (2) causes of loss-special form
(formerly “all risk”) property insurance, including flood and earthquake,
covering all above building standard leasehold improvements and Tenant’s trade
fixtures, equipment, furniture and other personal property within the Premises (“Tenant’s
Property”) in the amount of the full replacement cost
thereof; (3) business income (formerly “business interruption”) insurance
written on an actual loss sustained form or with sufficient limits to address
reasonably anticipated business interruption losses; (4) business
automobile liability insurance to cover all owned, hired and nonowned
automobiles owned or operated by Tenant providing a minimum combined single
limit of $1,000,000; (5) workers’ compensation insurance as required by
the state in which the Premises is located and in amounts as may be required by
applicable statute (provided, however, if no workers’ compensation insurance is
statutorily required, Tenant shall carry workers’ compensation insurance in a
minimum amount of $500,000); (6) employer’s liability insurance in an
amount of at least $500,000 per occurrence; and (7) umbrella liability
insurance that follows form in excess of the limits specified in (1),
(4) and (6) above, of no less than $3,000,000 per occurrence and in
the aggregate. Any company underwriting any of Tenant’s Insurance shall have,
according to A.M. Best Insurance Guide,
a Best’s rating of not less than A- and a Financial Size Category of
not less than VIII. All insurance coverage required to be carried by Tenant may
be effected by a policy or policies of blanket insurance. All commercial
general liability, business automobile liability and umbrella liability
insurance policies shall name Landlord (or any successor),

 

22

 

Landlord’s
property manager, Landlord’s Mortgagee (if any), and their respective members,
principals, beneficiaries, partners, officers, directors, employees, and
agents, and other designees of Landlord as the interest of such designees shall
appear, as “additional insureds” and shall be primary with Landlord’s policy
being secondary and noncontributory. If any aggregate limit is reduced because
of losses paid to below 75% of the limit required by this Lease, Tenant will
notify Landlord in writing within 10 days of the date of reduction. All
policies of Tenant’s Insurance shall contain endorsements that the
insurer(s) shall give Landlord and its designees at least 30 days’ advance
written notice of any change to the scope of insurance coverage required
hereunder, or cancellation, termination or lapse of insurance. Tenant shall
provide Landlord with a certificate of insurance and all required endorsements
evidencing Tenant’s Insurance prior to the earlier to occur of the Commencement
Date or the date Tenant is provided access to the Premises for any reason, and
upon renewals at least 10 days prior to the expiration of the insurance
coverage. All of Tenant’s Insurance policies, endorsements and certificates
will be on forms and with deductibles and self-insured retention, if any,
reasonably acceptable to Landlord. The limits of Tenant’s insurance shall not
limit Tenant’s liability under this Lease.

 

B.            Landlord’s Insurance. Landlord shall
maintain: (1) commercial general liability insurance applicable to the
Property which provides, on an occurrence basis, a minimum combined single
limit of no less than $5,000,000 (coverage in excess of $1,000,000 may be
provided by way of an umbrella/excess liability policy); and (2) causes of
loss-special form (formerly “all risk”) property insurance on the Building in
the amount of the replacement cost thereof, as reasonably estimated by
Landlord. The foregoing insurance and any other insurance carried by Landlord may
be effected by a policy or policies of blanket insurance and shall be for the
sole benefit of Landlord and under Landlord’s sole control. Consequently,
Tenant shall have no right or claim to any proceeds thereof or any other rights
thereunder.

 

15.           Mutual Waiver of Subrogation.
Notwithstanding anything in this Lease to the contrary, Tenant waives, and
shall cause its insurance carrier(s) and any other party claiming through
or under such carrier(s), by way of subrogation or otherwise, to waive any and
all rights of recovery, Claim, action or causes of action against all Landlord
Parties for any loss or damage to Tenant’s business, any loss of use of the
Premises, and any loss, theft or damage to Tenant’s Property (including
Tenant’s automobiles or the contents thereof), INCLUDING
ALL RIGHTS (BY WAY OF SUBROGATION OR OTHERWISE) OF RECOVERY, CLAIMS, ACTIONS OR
CAUSES OF ACTION ARISING OUT OF THE NEGLIGENCE OF ANY LANDLORD PARTY,
which loss or damage is (or would have been, had the insurance required by this
Lease been maintained) covered by insurance. In addition, Landlord shall cause
its insurance carrier(s) and any other party claiming through or under
such carrier(s), by way of subrogation or otherwise, to waive any and all
rights of recovery, Claim, action or causes of action against all Tenant
Parties for any loss of or damage to or loss of use of the Building, any
additions or improvements to the Building, or any contents thereof, INCLUDING ALL RIGHTS (BY WAY OF SUBROGATION OR OTHERWISE) OF RECOVERY,
CLAIMS, ACTIONS OR CAUSES OF ACTION ARISING OUT OF THE NEGLIGENCE OF ANY TENANT
PARTY, which loss or damage is (or would have been, had the
insurance required by this Lease been maintained) covered by insurance.

 

23

 

16.           Casualty Damage.

 

A.            Repair or Termination by Landlord. If all or any
part of the Premises are damaged by fire or other casualty, Tenant shall
immediately notify Landlord in writing. Landlord shall have the right to
terminate this Lease if: (1) the Building shall be damaged so that, in
Landlord’s judgment, substantial alteration or reconstruction of the Building
shall be required (whether or not the Premises have been damaged), and Landlord
is terminating the leases of similarly situated tenants in the Building;
(2) Landlord is not permitted by Law to rebuild the Building in
substantially the same form as existed before the fire or casualty;
(3) the Premises have been materially damaged, there is less than 1 year
of the Term remaining on the date of the casualty and Tenant has not exercised
any applicable option to extend the Lease; (4) any Mortgagee requires that
the insurance proceeds be applied to the payment of the mortgage debt; or
(5) an uninsured loss of the Building occurs notwithstanding Landlord’s
compliance with Section 14.B above.
Landlord may exercise its right to terminate this Lease by notifying Tenant in
writing within 90 days after the date of the casualty, which notice shall be
effective as of the date of the casualty. If Landlord does not terminate this
Lease under this Section 16.A, Landlord
shall commence and proceed with reasonable diligence to repair and restore the
Building and/or the Premises to substantially the same condition as existed
immediately prior to the date of damage; provided, however, that Landlord shall
only be required to reconstruct building standard leasehold improvements
existing in the Premises as of the date of damage, and Tenant shall be required
to pay the cost for restoring any other leasehold improvements. However, in no
event shall Landlord be required to spend more than the insurance proceeds
received by Landlord.

 

B.            Timing for Repair; Termination by Either Party. If all or any portion of the Premises is damaged as a result of fire
or other casualty, Landlord shall, with reasonable promptness, cause an
architect or general contractor selected by Landlord to provide Landlord and
Tenant with a written estimate of the amount of time required to substantially
complete the repair and restoration of the Premises, using standard working
methods (“Completion Estimate”). If the
Completion Estimate indicates that the Premises cannot be made tenantable
within 270 days from the date of damage, then regardless of anything in Section 16.A above to the contrary,
either party shall have the right to terminate this Lease by giving written
notice to the other of such election within 10 days after receipt of the
Completion Estimate. In addition, Tenant shall have the right to terminate this
Lease if (i) Landlord estimates that repairs can be substantially
completed within the two hundred seventy (270) day period described in the
immediately previous sentence and Landlord fails to do so, (ii) following
such two hundred seventy (270) day period, Tenant notifies Landlord in writing
that it intends to terminate this Lease if such rebuilding or repairs are not
substantially completed within thirty (30) days after the date of such notice,
and (iii) Landlord fails to substantially complete such rebuilding or
repairs within such thirty (30) day period, then Tenant shall be entitled to
terminate this Lease by giving written notice of such termination to Landlord
thereafter but prior to the substantial completion of such rebuilding or
repairs. Tenant, however, shall not have the right to terminate this Lease if
the fire or casualty was caused by the negligence or intentional misconduct of
any of the Tenant Parties. If neither party terminates this Lease under this Section 16.B, then Landlord shall
repair and restore the Premises in accordance with, and subject to the
limitations of, Section 16.A.

 

C.            Abatement. In the event a
portion of the Premises is damaged as a result of a fire or other casualty, the
Base Rent shall abate for the portion of the Premises that (i) is damaged

 

24

 

and
not usable by Tenant or (ii) has been rendered unfit for the Permitted Use
and is not actually used by Tenant, until substantial completion of the repairs
and restoration required to be made by Landlord pursuant to Section 16.A. In addition, Tenant,
however, shall not be entitled to such abatement if the fire or other casualty
was caused by the negligence or intentional misconduct of any of the Tenant
Parties. Landlord shall not be liable for any loss or damage to Tenant’s
Property or to the business of Tenant resulting in any way from the fire or
other casualty or from the repair and restoration of the damage. Landlord and
Tenant hereby waive the provisions of any Law relating to the matters addressed
in this Section, and agree that their respective rights for damage to or
destruction of the Premises shall be those specifically provided in this Lease,
which shall constitute an express agreement between the parties with respect
thereto, and Landlord and Tenant hereby agree that any Laws, including Sections
1932(2) and 1933(4) of the California Civil Code, with respect to any
rights or obligations concerning damage or destruction of leased or hire
property, shall have no application to this Lease or to any damage or destruction
to all or any part of the Premises.

 

17.           Condemnation. Either party
may terminate this Lease if the whole or any material part (i.e., more than 50%
of the usable square footage) of the Premises are taken or condemned for any
public or quasi-public use under Law, by eminent domain or private purchase in
lieu thereof (a “Taking”). Landlord shall
also have the right to terminate this Lease if there is a Taking of any portion
of the Building or Property which would leave the remainder of the Building unsuitable
for use as an office building in a manner comparable to the Building’s use
prior to the Taking, and Landlord is also terminating the leases of all
similarly situated tenants in the Building (provided that Landlord has the
right to do so). In order to exercise its right to terminate this Lease under
this Section 17, Landlord or
Tenant, as the case may be, must provide written notice of termination to the
other within 45 days after the terminating party first receives notice of the
Taking. Any such termination shall be effective as of the date the physical
taking of the Premises or the portion of the Building or Property occurs. If
this Lease is not terminated, the Rentable Square Footage of the Building, the
Rentable Square Footage of the Premises and Tenant’s Pro Rata Share shall, if
applicable, be appropriately adjusted by Landlord. In addition, Base Rent for
any portion of the Premises taken or condemned shall be abated during the
unexpired Term effective when the physical taking of the portion of the
Premises occurs. All compensation awarded for a Taking, or sale proceeds, shall
be the property of Landlord, any right to receive compensation or proceeds
being expressly waived by Tenant. However, Tenant may file a separate claim at
its sole cost and expense for Tenant’s Property (excluding above building
standard leasehold improvements) and Tenant’s reasonable relocation expenses,
provided the filing of such claim does not diminish the award which would
otherwise be receivable by Landlord.

 

18.           Events of Default. Tenant shall
be considered to be in default under this Lease upon the occurrence of any of
the following events of default:

 

A.            Tenant’s
failure to pay when due all or any portion of the Rent (“Monetary
Default”); provided that the first 2 such
failures during any consecutive 12 month period shall not be a Monetary Default
if Tenant pays the amount due within 5 days after written notice from Landlord.

 

25

 

B.            Tenant’s failure to carry or maintain the
required insurance coverage described in Section 14
or to perform any of the obligations of Tenant in the manner set
forth in Sections 24 or 25 (subject to the applicable notice
provisions set forth in such Sections) (a “Time Sensitive
Default”).

 

C.            Tenant’s
failure (other than a Monetary Default or a Time Sensitive Default) to comply
with any term, provision or covenant of this Lease, if the failure is not cured
within 20 days after written notice to Tenant. However, if Tenant’s failure to
comply cannot reasonably be cured within 20 days, Tenant shall be allowed
additional time (not to exceed an additional 10 days) as is reasonably
necessary to cure the failure so long as: (1) Tenant commences to cure the
failure within the 20 day period following Landlord’s initial written notice,
and (2) Tenant diligently pursues a course of action that will cure the
failure and bring Tenant back into compliance with this Lease. However, if
Tenant’s failure to comply creates a hazardous condition, the failure must be cured
immediately upon notice to Tenant. In addition, if Landlord provides Tenant
with notice of Tenant’s failure to comply with the same specific material term,
provision or covenant of this Lease on more than two (2) occasions during
any 12 month period, Tenant’s subsequent violation of the same term, provision
or covenant shall, at Landlord’s option, be deemed an incurable event of
default by Tenant.

 

D.            Tenant or any
Guarantor becomes insolvent, files a petition for protection under the U.S.
Bankruptcy Code (or similar Law) or a petition is filed against Tenant or any
Guarantor under such Laws and is not dismissed within 45 days after the date of
such filing, makes a transfer in fraud of creditors or makes an assignment for
the benefit of creditors, or admits in writing its inability to pay its debts
when due.

 

E.             The leasehold
estate is taken by process or operation of Law.

 

19.           Remedies.

 

A.            Landlord’s Remedies. Upon any
default, Landlord shall have the right without notice or demand (except as
provided in Section 18) to
pursue any of its rights and remedies at Law or in equity, including any one or
more of the following remedies:

 

(1)           Terminate this
Lease and recover an award of damages as provided in Section 19.B;

 

(2)           Exercise the
remedy provided by Section 1951.4 of the California Civil Code (Landlord
may continue this Lease in effect after Tenant’s breach and abandonment and
recover Rent as it becomes due, if Tenant has the right to sublet or assign,
subject only to reasonable limitations); provided, however, notwithstanding
Landlord’s exercise of the remedy described in California Civil Code §1951.4,
Landlord may at any time thereafter elect in writing to terminate this Lease
and recover an award of damages as provided in Section 19.B;

 

(3)           In accordance with applicable Law, re-enter
the Premises, change locks, alter security devices and lock out Tenant;

 

(4)           In accordance with applicable Law, remove and
store, at Tenant’s expense, all the property in the Premises using such lawful
force as may be necessary;

 

26

 

(5)           Cure such event of default for Tenant at
Tenant’s expense (plus a 15% administrative fee);

 

(6)           Withhold or suspend payment of sums Landlord
would otherwise be obligated to pay to Tenant under this Lease or any other
agreement;

 

(7)           Require all future payments to be made by
cashier’s check, money order or wire transfer after the first time any check is
returned for insufficient funds, or the second time any sum due hereunder is
more than five (5) Business Days late;

 

(8)           Apply any Security Deposit as permitted under
this Lease; and/or

 

(9)           Recover such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by applicable
Law.

 

B.            Measure of Damages.

 

(1)           Calculation. If Landlord
terminates this Lease or terminates Tenant’s right to possession of the
Premises, Tenant shall immediately surrender and vacate the Premises. If
Landlord terminates this Lease, Tenant shall pay to Landlord upon demand
damages equal to the sum of the following:

 

(A)          (i)            The Worth at the Time of Award (defined
below) of the unpaid Rent which had been earned at the time of termination;

 

(B)           (ii)           The Worth at the Time of Award of the amount
by which the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such Rent loss that Tenant
affirmatively proves could have been reasonably avoided;

 

(C)           (iii)          The Worth at the Time of Award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such Rent loss that Tenant affirmatively proves could be
reasonably avoided; and

 

(D)          (iv)          Any other amount necessary to compensate Landlord
for all the detriment either proximately caused by Tenant’s failure to perform
Tenant’s obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including Costs of Reletting (defined
below) and all expenses reasonably incurred by Landlord in enforcing its rights
and remedies under this Lease, including all reasonable legal expenses.

 

(2)           The “Worth at the
Time of Award”  of
the amounts referred to in subparts (i) and (ii) above, shall be
computed by allowing interest at the rate of ten percent (10%) per annum. The
“worth at the time of award” of the amount referred to in subpart
(iii) above shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).

 

27

 

(3)           Definitions. For purposes
hereof, “Costs of Reletting”  shall include commercially
reasonable costs, losses and expenses incurred by Landlord in reletting all or
any portion of the Premises including, without limitation, the cost of removing
and storing Tenant’s furniture, trade fixtures, equipment, inventory or other
property, repairing and/or demolishing the Premises, removing and/or replacing
Tenant’s signage and other fixtures, making the Premises ready for a new
tenant, including the cost of advertising, commissions, architectural fees,
legal fees and leasehold improvements, and any allowances and/or concessions
provided by Landlord. In the event that Landlord relets the Premises for an
amount greater than the Rent due during the term, Tenant shall not receive a
credit for any excess. For purposes hereof, the “Prime Rate”  shall be the per annum
interest rate publicly announced by a federally insured bank selected by
Landlord in the state in which the Building is located as such bank’s prime or
base rate.

 

C.            Tenant Not Relieved from Liabilities. Unless expressly provided in this Lease, the repossession or
re-entering of all or any part of the Premises shall not relieve Tenant of its
liabilities and obligations under this Lease. In addition, Tenant shall not be
relieved of its liabilities under this Lease, nor be entitled to any damages
hereunder, based upon minor or immaterial errors in the exercise of Landlord’s
remedies. No right or remedy of Landlord shall be exclusive of any other right
or remedy. Each right and remedy shall be cumulative and in addition to any
other right and remedy now or subsequently available to Landlord at Law or in
equity. If Tenant fails to pay any amount when due hereunder (after the
expiration of any applicable cure period), Landlord shall be entitled to
receive interest on any unpaid item of Rent from the date initially due
(without regard to any applicable grace period) at a rate equal to the lesser
of 10% per annum. In addition, if Tenant fails to pay any item or installment
of Rent when due (after the expiration of any applicable cure period), Tenant
shall pay Landlord an administrative fee equal to 5% of the past due Rent;
provided, however, Landlord will waive the late charge for the first late payment
in any 12 month period, but no more often than a total of 2 times during the
Term. However, in no event shall the charges permitted under this Section 19.C  or elsewhere in
this Lease, to the extent they are considered interest under applicable Law or
exceed the maximum lawful rate of interest. If any payment by Tenant of an
amount deemed to be interest results in Tenant having paid any interest in
excess of that permitted by Law, then it is the express intent of Landlord and
Tenant that all such excess amounts theretofore collected by Landlord be
credited against the other amounts owing by Tenant under this Lease. Receipt by
Landlord of Tenant’s keys to the Premises shall not constitute an acceptance or
surrender of the Premises. NOTWITHSTANDING
ANY OTHER PROVISION OF THIS LEASE TO THE CONTRARY, TENANT SHALL HOLD LANDLORD
PARTIES HARMLESS FROM AND INDEMNIFY AND DEFEND SUCH PARTIES AGAINST, ALL CLAIMS
THAT ARISE OUT OF OR IN CONNECTION WITH A BREACH OF THIS LEASE, SPECIFICALLY
INCLUDING ANY VIOLATION OF APPLICABLE LAWS OR CONTAMINATION (DEFINED IN
SECTION 30) CAUSED BY A TENANT PARTY.

 

D.            Intentionally
deleted.

 

E.             Abated Rent. If this Lease
provides for a postponement of any Base Rent or Operating Expenses, a period of
“free” Rent, reduced Rent, early occupancy, or other Rent concession, such
postponed Rent, “free” Rent, reduced Rent or other Rent concession shall be
referred to herein as the “Abated Rent”. Tenant shall be credited with
having paid all of the Abated Rent on the expiration of the Term only if Tenant
has fully, faithfully, and punctually performed all of Tenant’s obligations
hereunder, including the payment of all Rent (other than

 

28

 

the Abated Rent) and all other monetary
obligations and the surrender of the Premises in the physical condition
required by this Lease. Tenant acknowledges that its right to receive credit
for the Abated Rent is absolutely conditioned upon Tenant’s full, faithful and
punctual performance of its obligations under this Lease. If a default shall
occur, the Abated Rent shall immediately become due and payable in full and
this Lease shall be enforced as if there were no such Rent abatement or other
Rent concession. In such case Abated Rent shall be calculated based on the full
initial Rent payable under this Lease.

 

F.             Intentionally deleted.

 

G.            Waiver of
Redemption. Tenant hereby waives any
and all rights conferred by section 3275 of the California Civil Code and by
sections 1174 (c) and 1179 of the California Code of Civil Procedure and
any and all other laws and rules of law from time to time in effect
providing that Tenant shall have any right to redeem, reinstate or restore this
Lease following its termination by reason of Tenant’s default.

 

H.            Miscellaneous. No failure on the part of either party at any time to require
performance by the other party of any term hereof shall be taken or held to be
a waiver of such term or in any way affect such party’s right to enforce such
term, and no waiver on the part of either party of any term hereof shall be
taken or held to be a waiver of any other term hereof or the breach thereof.
Further, the subsequent acceptance of Rent hereunder by Landlord shall not be
deemed to be a waiver of any preceding breach by Tenant of any term, covenant
or condition of this Lease, other than the failure of Tenant to pay the
particular Rent so accepted, regardless of Landlord’s knowledge of such
preceding breach at the time of acceptance of Rent. No waiver by Landlord of
any breach hereof shall be effective unless such waiver is in writing and
signed by Landlord. No right or remedy herein conferred upon or reserved to
Landlord is intended to be exclusive of any other right or remedy, and each and
every right and remedy shall be cumulative and in addition to any other right
or remedy given hereunder or now or hereafter existing by agreement, applicable
law or in equity. In addition to other remedies provided in this Lease,
Landlord shall be entitled, to the extent permitted by applicable Law, to
injunctive relief, or to a decree compelling performance of any of the
covenants, agreements, conditions or provisions of this Lease, or to any other
remedy allowed to Landlord at law or in equity. Notwithstanding anything to the
contrary set forth herein, Landlord’s re-entry to perform acts of maintenance
or preservation of or in connection with efforts to relet the Premises or any
portion thereof, or the appointment of a receiver upon Landlord’s initiative to
protect Landlord’s interest under this Lease shall not terminate this Lease
and, until Landlord does elect to terminate this Lease, this Lease shall
continue in full force and effect and Landlord shall enforce all of Landlord’s
rights and remedies hereunder including the right to recover from Tenant as it
becomes due hereunder all Rent and other charges required to be paid by Tenant
under the terms hereof.

 

20.           Limitation of Liability. Notwithstanding anything to the contrary
contained in this Lease, the liability of Landlord (and of any successor
Landlord) to Tenant (or any person or entity claiming by, through or under
Tenant) shall be limited to the interest of Landlord in the Property, which
shall include (a) the unencumbered proceeds of sale received upon
execution of a judgment in favor of Tenant and levy thereon against the right,
title, and interest of Landlord in the Property, (b) the unencumbered
rents or other income from the Property receivable by Landlord, and
(c) the unencumbered consideration received by Landlord from the sale or
other

 

29

 

disposition of all or any part of Landlord’s
right, title, and interest in the Property. Tenant shall look solely to
Landlord’s interest in the Property for the recovery of any judgment or award
against Landlord. No Landlord Party shall be personally liable for any judgment
or deficiency. Before filing suit for an alleged default by Landlord, Tenant
shall give Landlord and the Mortgagee(s) (defined in Section 25) whom Tenant has been
notified hold Mortgages (defined in Section 25)
on the Property, Building or Premises, notice and reasonable time to
cure the alleged default. Tenant hereby waives all claims against all Landlord
Parties for consequential, special or punitive damages allegedly suffered by
any Tenant Parties, including lost profits and business interruption. Except
with respect to (a) any services provided to Tenant by a third party
service provider, (b) any holdover of the Premises, (c) any
Contamination caused by a Tenant Party, or a transferee, invitee, contractor or
licensee of Tenant and (d) Alterations not overseen by Landlord, Landlord
waives all Claims against any Tenant Parties for consequential, special or
punitive damages allegedly suffered by any Landlord Parties, including lost
profits and business interruption.

 

21.             No Waiver. Neither
party’s failure to declare a default immediately upon its occurrence or delay
in taking action for a default shall constitute a waiver of the default, nor
shall it constitute an estoppel. Neither party’s failure to enforce its rights
for a default shall constitute a waiver of that party’s rights regarding any
subsequent default.

 

22.             Tenant’s Right to Possession. Provided
Tenant pays the Rent and fully performs all of its other covenants and
agreements under this Lease, Tenant shall have the right to occupy the Premises
without hindrance from Landlord or any person lawfully claiming through
Landlord, subject to the terms of this Lease, all Mortgages, insurance
requirements and applicable Law. This covenant and all other covenants of
Landlord shall be binding upon Landlord and its successors only during its or
their respective periods of ownership of the Building, and shall not be a
personal covenant of any Landlord Parties.

 

23.             Intentionally deleted.

 

24.             Holding Over. Except for any
permitted occupancy by Tenant under Section 29,
if Tenant or any party claiming by, through or under Tenant fails to
surrender the Premises at the expiration or earlier termination of this Lease,
the continued occupancy of the Premises shall be that of a tenancy at
sufferance. Tenant shall pay Base Rent in an amount (on a per month basis
without reduction for partial months during the holdover) equal to 150% of the
Base Rent due for the period immediately preceding the holdover. Tenant shall
otherwise continue to be subject to all of Tenant’s obligations under this
Lease. No holdover by Tenant or payment by Tenant after the expiration or early
termination of this Lease shall be construed to extend the Term or prevent
Landlord from immediate recovery of possession of the Premises by summary
proceedings or otherwise. In addition to the payment of the amounts provided
above, if Landlord is unable to deliver possession of the Premises to a new
tenant, or to perform improvements for a new tenant, as a result of Tenant’s
holdover and Tenant fails to vacate the Premises within 15 days after Landlord
notifies Tenant of Landlord’s inability to deliver possession, or perform
improvements, such failure shall constitute a Time Sensitive Default hereunder;
and notwithstanding any other provision of this Lease to the contrary, TENANT
SHALL BE LIABLE TO LANDLORD FOR, AND SHALL PROTECT LANDLORD FROM AND INDEMNIFY
AND DEFEND LANDLORD AGAINST, ALL LOSSES AND DAMAGES, INCLUDING ANY CLAIMS MADE
BY ANY SUCCEEDING TENANT

 

30

 

RESULTING FROM SUCH FAILURE TO
VACATE, AND ANY CONSEQUENTIAL DAMAGES THAT LANDLORD SUFFERS FROM THE HOLDOVER.

 

25.             Subordination to Mortgages;
Estoppel Certificate. Tenant accepts this Lease
subject and subordinate to any mortgage(s), deed(s) of trust, ground
lease(s) or other lien(s) now or subsequently affecting the Premises,
the Building or the Property, and to renewals, modifications, refinancings and
extensions thereof, (collectively, a “Mortgage”),  subject to
Tenant’s receipt of a subordination and non-disturbance agreement from any
future Mortgagee on such future Mortgagee’s then current form which may be
revised to incorporate commercially reasonable changes requested by Tenant and
approved by such future Mortgagee; provided however, that if Tenant requires
changes to such future Mortgagee’s then-current form, then Tenant shall bear
all actual, out-of-pocket costs associated with obtaining the revised form from
Mortgagee, if any. The party having the benefit of a Mortgage shall be referred
to as a “Mortgagee.”  This clause
shall be self-operative, but upon request from a Mortgagee, Tenant shall
execute a commercially reasonable subordination agreement in favor of the
Mortgagee. In lieu of having the Mortgage be superior to this Lease, a
Mortgagee shall have the right at any time to subordinate its Mortgage to this
Lease. If requested by a successor-in-interest to all or a part of Landlord’s
interest in this Lease, Tenant shall, without charge, attorn to the
successor-in-interest. Landlord shall use reasonable efforts, at Tenant’s
costs, to obtain Landlord’s Mortgagee’s then-current form of nondisturbance
agreement for the benefit of Tenant within 60 days of the Effective Date.
Tenant shall, within 10 Business Days after receipt of a written request from
Landlord, execute and deliver an estoppel certificate to those parties as are
reasonably requested by Landlord (including a Mortgagee or prospective
purchaser). The estoppel certificate shall include a statement certifying that
this Lease is unmodified (except as identified in the estoppel certificate) and
in full force and effect, describing the dates to which Rent and other charges
have been paid, representing that, to Tenant’s actual knowledge, there is no
default (or stating with specificity the nature of the alleged default) and
certifying other matters with respect to this Lease that may reasonably be
requested. Tenant’s failure to provide any estoppel certificate within the 10
Business Day period specified above, and the continuation of such failure for a
period of 3 days after Landlord delivers a second written notice requesting
same, shall constitute a Time Sensitive Default under this Lease. Within 10
Business Days after request by Tenant, Landlord agrees to execute and deliver
to Tenant an estoppel letter certifying (a) the date of this Lease and any
amendments; (b) whether, to Landlord’s actual knowledge, Tenant is in default
and, if so, the nature of such default;(c) the amount of Security Deposit
(if any) deposited by Tenant pursuant to the terms of this Lease; (d) the
date to which Rent has been paid by Tenant; and (e) if applicable, that
Landlord has previously consented to a sublease of all or a portion of the
Premises or an assignment of Tenant’s interest in the Lease.

 

26.           Attorneys’ Fees. If either
party institutes a suit against the other for violation of or to enforce any
covenant or condition of this Lease, or if either party intervenes in any suit
in which the other is a party to enforce or protect its interest or rights, the
prevailing party shall be entitled to all of its costs and expenses, including
reasonable attorneys’ fees.

 

27.           Notice. If a demand,
request, approval, consent or notice (collectively, a “notice”)  shall or may be given to either party by the other,
the notice shall be in writing and delivered by hand or sent by registered or
certified mail with return receipt requested, or sent by overnight or same day
courier service, or sent by facsimile, at the party’s respective Notice
Address(es) set forth in

 

31

 

Section 1,
except that if Tenant has vacated the Premises (or if the Notice
Address for Tenant is other than the Premises, and Tenant has vacated such
address) without providing Landlord a new Notice Address, Landlord may serve
notice in any manner described in this Section or in any other manner
permitted by Law. Each notice shall be deemed to have been received or given on
the earlier to occur of actual delivery (which, in the case of delivery by
facsimile, shall be deemed to occur at the time of delivery indicated on the
electronic confirmation of the facsimile) or the date on which delivery is first
refused, or, if Tenant has vacated the Premises or the other Notice Address of
Tenant without providing a new Notice Address, three (3) days after notice
is deposited in the U.S. mail or with a courier service in the manner described
above. Either party may, at any time, change its Notice Address by giving the
other party written notice of the new address in the manner described in this
Section.

 

28.             Reserved Rights. This Lease
does not grant any rights to light or air over or about the Building. Landlord
excepts and reserves exclusively to itself the use of: (A) roofs (except
to the extent expressly provided in Section 31.O),
(B) telephone, electrical and janitorial closets,
(C) equipment rooms, Building risers or similar areas that are used by
Landlord for the provision of Building services (except to the extent expressly
provided in Section 31.O), (D) rights to the land and
improvements below the floor of the Premises, (E) the improvements and air
rights above the Premises, (F) the improvements and air rights outside the
demising walls of the Premises, (G) the areas within the Premises used for
the installation of utility lines and other installations serving occupants of
the Building (provided that the same do not unreasonably interfere with Tenant’s
use of or business operations in the Premises), and (H) any other areas
reasonably designated from time to time by Landlord as service areas of the
Building. Except to the extent expressly provided in Section 31.O, Tenant shall not have the right to install or
operate any equipment producing radio frequencies, electrical or
electromagnetic output or other signals, noise or emissions in or from the
Building without the prior written consent of Landlord. To the extent permitted
by applicable Law, and except to the extent expressly provided in Section 31.O, Landlord reserves the
right to restrict and control the use of such equipment. Landlord has the right
to change the Building’s name or address. Landlord also has the right to make
such other changes to the Property and Building as Landlord deems appropriate,
provided the changes do not materially affect Tenant’s ability to use the
Premises for the Permitted Use, and Tenant’s access to the Premises and parking
facilities serving the Property. Landlord shall also have the right (but not
the obligation) to temporarily close the Building if Landlord reasonably
determines that there is an imminent danger of significant damage to the
Building or of personal injury to Landlord’s employees or the occupants of the
Building. The circumstances under which Landlord may temporarily close the
Building shall include, without limitation, electrical interruptions,
hurricanes and civil disturbances. A closure of the Building under such
circumstances shall not constitute a constructive eviction nor entitle Tenant
to an abatement or reduction of Rent.

 

29.             Surrender of Premises. All
improvements to the Premises (collectively, “Leasehold Improvements”)  shall be owned by Landlord
and shall remain upon the Premises without compensation to Tenant. At the
expiration or earlier termination of this Lease or Tenant’s right of
possession, Tenant shall remove Tenant’s Removable Property (defined below)
from the Premises, and quit and surrender the Premises to Landlord, broom
clean, and in good order, condition and repair, ordinary wear and tear,
casualty loss and condemnation excepted. As used herein, the term “Tenant’s Removable Property” shall
mean: (A) Cable installed by or for the

 

32

 

benefit of Tenant and located in the Premises
or other portions of the Building; (B) any Leasehold Improvements that are
installed by or for the benefit of Tenant and, in Landlord’s reasonable
judgment, are of a nature that would require removal and repair costs that are
materially in excess of the removal and repair costs associated with standard
office improvements (“Special Installations”); and
(C) Tenant’s personal property. In connection with Tenant’s submission to
Landlord of Tenant’s plans and specifications (or any changes to the plans and
specifications) for any Leasehold Improvements (including any Alterations),
Tenant may, in writing, inquire of Landlord whether any such Leasehold
Improvements or Alterations, as applicable, described in the plans and specifications
will constitute Special Installations (defined below). Landlord shall, within
10 Business Days after its receipt of a written request therefor from Tenant,
notify Tenant in writing whether any Leasehold Improvements (including the
Tenant Work, as defined below) or Alterations to be constructed in the Premises
constitute Special Installations. Notwithstanding the foregoing, Landlord may,
in Landlord’s sole discretion and at no cost to Landlord, require Tenant to
leave any of its Special Installations in the Premises. If Tenant fails to
remove any of Tenant’s Removable Property (other than Special Installations
which Landlord has designated to remain in the Premises) within 2 days after
the termination of this Lease or of Tenant’s right to possession, Landlord, at
Tenant’s sole cost and expense, shall be entitled (but not obligated) to remove
and store Tenant’s Removable Property. Landlord shall not be responsible for
the value, preservation or safekeeping of Tenant’s Removable Property. Tenant
shall pay Landlord, within 30 days after written notice, the expenses and
storage charges incurred for Tenant’s Removable Property. To the fullest extent
permitted by applicable Law, any unused portion of Tenant’s Security Deposit
may be applied to offset Landlord’s costs set forth in the preceding sentence.
In addition, if Tenant fails to remove Tenant’s Removable Property from the
Premises or storage, as the case may be, within 30 days after written notice,
Landlord may deem all or any part of Tenant’s Removable Property to be
abandoned, and title to Tenant’s Removable Property (except with respect to any
Hazardous Material [defined in Section 30])
shall be deemed to be immediately vested in Landlord. Except for
Special Installations designated by Landlord to remain in the Premises,
Tenant’s Removable Property shall be removed by Tenant before the Expiration
Date; provided that upon Landlord’s prior written consent (which must be
requested by Tenant at least 30 days in advance of the Expiration Date and
which shall not be unreasonably withheld), Tenant may remain in the Premises
for up to 5 days after the Expiration Date for the sole purpose of removing
Tenant’s Removable Property. Tenant’s possession of the Premises for such
purpose shall be subject to all of the terms and conditions of this Lease,
including the obligation to pay Base Rent and Tenant’s Pro Rata Share of
Operating Expenses on a per diem basis at the rate in effect for the last month
of the Term. In the event this Lease is terminated prior to the Expiration
Date, Tenant’s Removable Property (except for Special Installations designated
by Landlord to remain in the Premises) shall be removed by Tenant on or before
such earlier date of termination. Tenant shall repair damage caused by the
installation or removal of Tenant’s Removable Property.

 

30.             Hazardous
Materials.

 

A.          Restrictions. No Hazardous Material (defined below) (except for de
minimis quantities of household cleaning products and office
supplies used in the ordinary course of Tenant’s business at the Premises and
that are used, kept and disposed of in compliance with Laws) shall be brought
upon, used, kept or disposed of in or about the Premises or the Property

 

33

 

by any Tenant Parties or any of Tenant’s
transferees, contractors or licensees without Landlord’s prior written consent,
which consent may be withheld in Landlord’s sole and absolute discretion.
Tenant’s request for such consent shall include a representation and warranty
by Tenant that the Hazardous Material in question (1) is necessary in the
ordinary course of Tenant’s business, and (2) shall be used, kept and
disposed of in compliance with all Laws.

 

B.          Remediation. Tenant shall, at its expense, monitor the Premises for the presence of
Hazardous Materials or conditions which may reasonably give rise to
Contamination (defined below) and promptly notify Landlord if it suspects
Contamination in the Premises. Any remediation of Contamination caused by a
Tenant Party or its contractors or invitees which is required by Law or which
is deemed necessary by Landlord, in Landlord’s reasonable opinion, shall be
performed by Landlord and Tenant shall reimburse Landlord for the actual,
out-of-pocket cost thereof. In the event that Hazardous Materials are
discovered in the Building during the Term of this Lease, and such Hazardous
Materials were not caused or introduced by a Tenant Party or any of Tenant’s
transferees, contractors or licensees, Landlord will cause such Hazardous
Materials to be remediated, encapsulated, or otherwise handled, at no cost to
Tenant, within the time frames and parameters required by Law. Landlord
represents that, to Landlord’s current and actual knowledge, (i) it has
received no written notice of any violation in the Property of any Laws
regulating Hazardous Materials, and (ii) except as may be set forth in the
surveys and reports available for inspection by Tenant in the office of the
Property manager in accordance with Section 30.D
below, Landlord is not aware of any Hazardous Materials in the
Premises in violation of applicable Law; provided that in the event any such
representation is determined to be untrue, Landlord’s compliance with the
preceding sentence shall be Landlord’s sole obligation with respect to any such
violation and Tenant’s sole remedy therefor..

 

C.          Definitions. For purposes of this Section 30,
a “Hazardous
Material” is any substance the presence of which requires, or
may hereafter require, notification, investigation or remediation under any
Laws or which is now or hereafter defined, listed or regulated by any
governmental authority as a “hazardous waste”, “extremely hazardous waste”,
“solid waste”, “toxic substance”, “hazardous substance”, “hazardous material”
or “regulated substance”, or otherwise regulated under any Laws. “Contamination” means
the existence or any release or disposal of a Hazardous Material or biological
or organic contaminant, including any such contaminant which could adversely
impact air quality, such as mold, fungi or other bacterial agents, in, on,
under, at or from the Premises, the Building or the Property which may result
in any liability, fine, use restriction, cost recovery lien, remediation
requirement, or other government or private party action or imposition
affecting any Landlord Party. For purposes of this Lease, claims arising from
Contamination shall include diminution in value, restrictions on use, adverse
impact on leasing space, and all costs of site investigation, remediation,
removal and restoration work, including response costs under CERCLA and similar
statutes.

 

D.          Reports,
Surveys and Acceptance of Premises. All current
surveys or reports prepared for the Property regarding the presence of
Hazardous Materials (if any) in the Building are available for inspection by
Tenant in the office of the Property manager. With respect to Hazardous
Materials, Tenant hereby (1) accepts full responsibility for reviewing any
such surveys and reports and satisfying itself prior to the execution of this
Lease as to the acceptability of the Premises under Section 3.B above, and (2) acknowledges and agrees
that this provision satisfies all notice requirements under applicable Law. In
the event Tenant performs or causes to

 

34

 

be performed any test on or within the
Premises for the purpose of determining the presence of a Hazardous Material,
Tenant shall obtain Landlord’s prior written consent and use a vendor
reasonably approved by Landlord for such testing. In addition, Tenant shall provide
to Landlord a copy of such test within 10 days of Tenant’s receipt.

 

31.             Miscellaneous.

 

A.          Governing
Law; Jurisdiction and Venue; Severability; Paragraph Headings. This Lease and the rights and obligations of the
parties shall be interpreted, construed and enforced in accordance with the
Laws of the state in which the Property is located. All obligations under this
Lease are performable in the county or other jurisdiction where the Property is
located, which shall be venue for all legal actions. If any term or provision
of this Lease shall be invalid or unenforceable, then such term or provision
shall be automatically reformed to the extent necessary to render such term or
provision enforceable, without the necessity of execution of any amendment or
new document. The remainder of this Lease shall not be affected, and each
remaining and reformed provision of this Lease shall be valid and enforced to
the fullest extent permitted by Law. The headings and titles to the Sections of
this Lease are for convenience only and shall have no effect on the
interpretation of any part of this Lease. The words “include”, “including” and
similar words will not be construed restrictively to limit or exclude other
items not listed.

 

B.          Recording. Tenant shall not record this Lease or any memorandum without
Landlord’s prior written consent.

 

C.          Force
Majeure. Whenever a period of time
is prescribed for the taking of an action by Landlord or Tenant, the period of
time for the performance of such action shall be extended by the number of days
that the performance is actually delayed due to strikes, acts of God, shortages
of labor or materials, war, terrorist attacks (including bio-chemical attacks),
civil disturbances and other causes beyond the reasonable control of the performing
party (“Force
Majeure”). However, events
of Force Majeure shall not extend any period of time for the payment of Rent or
other sums payable by either party or any period of time for the written
exercise of an option or right by either party.

 

D.          Transferability;
Release of Landlord. Landlord shall
have the right to transfer and assign, in whole or in part, all of its rights
and obligations under this Lease and in the Building and/or Property, and upon
such transfer Landlord shall be released from any further obligations arising
hereunder after the date of the transfer, and Tenant agrees to look solely to
the successor in interest of Landlord for the performance of such obligations,
provided the successor in interest assumes in writing all obligations of
Landlord hereunder from and after the date of such transfer.

 

E.           Brokers. Tenant represents that it has dealt directly with
and only with Cresa Partners (whose commission shall be paid by Landlord
pursuant to a separate written agreement), as Tenant’s broker, and CB Richard
Ellis, as Landlord’s broker, in connection with this Lease. TENANT AND LANDLORD SHALL EACH INDEMNIFY THE OTHER AGAINST ALL COSTS,
EXPENSES, ATTORNEYS’ FEES, LIENS AND OTHER LIABILITY FOR COMMISSIONS OR OTHER
COMPENSATION

 

35

 

CLAIMED BY
ANY BROKER OR AGENT CLAIMING THE SAME BY, THROUGH OR UNDER THE INDEMNIFYING
PARTY, OTHER THAN THE BROKERS SPECIFICALLY IDENTIFIED ABOVE.

 

F.           Authority;
Joint and Several Liability. Landlord
covenants, warrants and represents that each individual executing, attesting
and/or delivering this Lease on behalf of Landlord is authorized to do so on
behalf of Landlord, this Lease is binding upon and enforceable against
Landlord, and Landlord is duly organized and legally existing in the state of
its organization and is qualified to do business in the state in which the
Premises are located. Similarly, Tenant covenants, warrants and represents that
each individual executing, attesting and/or delivering this Lease on behalf of
Tenant is authorized to do so on behalf of Tenant, this Lease is binding upon
and enforceable against Tenant; and Tenant is duly organized and legally
existing in the state of its organization and is qualified to do business in
the state in which the Premises are located. If there is more than one Tenant,
or if Tenant is comprised of more than one party or entity, the obligations
imposed upon Tenant shall be joint and several obligations of all the parties
and entities. Notices, payments and agreements given or made by, with or to any
one person or entity shall be deemed to have been given or made by, with and to
all of them.

 

G.          Time is of
the Essence; Relationship; Successors and Assigns. Time is of the essence with respect to Tenant’s performance of its
obligations and the exercise of any expansion, renewal or extension rights or
other options granted to Tenant. This Lease shall create only the relationship
of landlord and tenant between the parties, and not a partnership, joint
venture or any other relationship. This Lease and the covenants and conditions
in this Lease shall inure only to the benefit of and be binding only upon
Landlord and Tenant and their permitted successors and assigns.

 

H.          Survival of
Obligations. The expiration of the Term,
whether by lapse of time or otherwise, shall not relieve either party of any
obligations which accrued prior to or which may continue to accrue after the
expiration or early termination of this Lease. Without limiting the scope of
the prior sentence, it is agreed that Tenant’s obligations under Sections 4.A, 4.B, and 4.C,
and under Sections 6, 8, 12, 13, 19, 24, 29 and 30 shall survive the expiration or early termination of this
Lease. It is agreed that Landlord’s obligations under Section 13 shall survive the
expiration or early termination of this Lease.

 

I.            Binding
Effect. Landlord has delivered a
copy of this Lease to Tenant for Tenant’s review only, and the delivery of it
does not constitute an offer to Tenant or an option. This Lease shall not be
effective against any party hereto until an original copy of this Lease has
been signed by such party and delivered to the other party and, if required,
upon approval by Landlord’s Mortgagee.

 

J.           Full
Agreement; Amendments. This Lease
contains the parties’ entire agreement regarding the subject matter hereof. All
understandings, discussions, and agreements previously made between the
parties, written or oral, are superseded by this Lease, and neither party is
relying upon any warranty, statement or representation not contained in this
Lease. This Lease may be modified only by a written agreement signed by
Landlord and Tenant. The exhibits and riders attached hereto are incorporated
herein and made a part of this Lease for all purposes.

 

36

 

K.          Tax Waiver. Tenant waives all rights pursuant to all Laws to contest any taxes or
other levies or protest appraised values or receive notice of reappraisal
regarding the Property (including Landlord’s personalty), irrespective of
whether Landlord contests same.

 

L.           OFAC List
Representation. Tenant hereby
represents and warrants to Landlord that neither Tenant nor any of its
officers, directors, shareholders, partners, members or affiliates is or will
be an entity or person: (i) that is listed in the annex to, or is
otherwise subject to the provisions of, Executive Order 13224 issued on
September 24, 2001 (“EO 13224”);  (ii) whose
name appears on the United States Treasury Department’s Office of Foreign
Assets Control (“OFAC”) most
current list of “Specifically Designated National and Blocked Persons” (which
list may be published from time to time in various mediums including, but not
limited to, the OFAC website, http:www.treas.gov/ofac/t11 sdn.pdf);
(iii) who commits, threatens to commit or supports “terrorism,” as that
term is defined in EO 13224; or (iv) who is otherwise affiliated with any
entity or person listed above.

 

M.          Waiver of
Jury Trial.

 

To the extent permitted by applicable Law,
Landlord and Tenant waive their respective rights to a trial by jury or any
claim or cause of action based upon or arising out of or related to this Lease
in any action, proceeding or other litigation of any type brought by either
party against the other party, whether with respect to contract claims, tort
claims, or otherwise. Landlord and Tenant agree that any such claim or cause of
action will be tried by a court trial without a jury.

 

Without limiting the foregoing, the parties
further agree that their respective right to a trial by jury is waived by
operation of this section as to any action, counterclaim or other proceeding
which seeks, in whole or in part, to challenge the validity or enforceability
of this Lease or any provision hereof.

 

This waiver will apply to any subsequent
amendments, renewals, supplements or modifications to this Lease.

 

Landlord and Tenant hereby agree that this
Lease constitutes a written consent to waiver of trial by jury pursuant to the
provisions of all applicable laws and, to the extent permitted by Law, Tenant
does hereby constitute and appoint Landlord its true and lawful
attorney-in-fact, which appointment is coupled with an interest. To the extent
permitted by Law, Tenant does hereby authorize and empower Landlord, in the
name, place and stead of Tenant, to file this Lease with the clerk or judge of
any court of competent jurisdiction as a statutory written consent to waiver of
trial by jury.

 

N.          Signage.

 

(1)           Subject to the terms of this
Section 31.N, during the
Term, but only so long as (a) Tenant occupies the entire Premises and the
Rentable Square Footage of the Premises is at least 11,572 square feet and
(b) no uncured event of default has occurred under the Lease (beyond all
applicable notice and cure periods, if any), Tenant may have installed and shall
maintain, at Tenant’s sole expense, a panel identifying Tenant’s name on the
multi-tenant

 

37

 

monument sign at the Property currently
located at the northeast corner of Alla Road and Coral Tree Place ( the “Monument Sign”). The
Monument Sign rights granted herein are personal to the specific party
originally identified as the “Tenant” under the Lease or an Affiliate by
assignment pursuant to a Permitted Transfer and may not be transferred, shared
or assigned in whole or in part to any assignee, subtenant or other tenant in
the Building. Further, in the event that the conditions set forth in the first
sentence of this Section 31.N are no longer
satisfied, or following the expiration or termination of this Lease, Landlord
may cause Tenant’s name to be removed from the Monument Sign, at Tenant’s sole
cost and expense.

 

(2)           Subject to the terms of this
Section 31.N, during the Term, but only so
long as (a) Tenant occupies the entire Premises and (b) no uncured default
has occurred under the Lease (beyond all applicable notice and cure periods, if
any), Tenant may have installed, at Tenant’s expense, (i) Building
standard directory signage identifying Tenant’s name on the directories
Landlord maintains for the tenants of the Building and (ii) Building
standard suite identification signage at or near the main doors accessing the
Premises. In the event that the conditions set forth in the first sentence of
this Section 31.N are no longer satisfied, or
following the expiration or termination of this Lease, Landlord may cause the
directory signage and suite identification signage to be removed, at Tenant’s
sole cost and expense.

 

(3)           The location, size,
material, construction, font, color and design of all signage described in this
Section 31.N shall be subject to
(i) the prior written approval of Landlord (which shall not be
unreasonably withheld, conditioned or delayed), (ii) compliance with
Property signage standards, and (iii) compliance with applicable Laws and
any restrictive covenants applicable to the Property. All signage installation
performed pursuant to this Section 31.N
shall be performed by a party reasonably designated by Landlord.

 

O.            Telecommunications
License Agreement. Landlord and
Tenant agree that, subject to availability, Tenant shall have the right to
request no more than 25 square feet of space available for Tenant on the roof
of the Building for the installation of a Direct TV (or comparable) satellite
dish (the “Telecommunications
Equipment”), and Tenant shall be allowed to use existing riser
space available from the Premises to the roof of the Building for a cable to
connect the Premises to Telecommunications Equipment. In the event that such
space is available at the time of Tenant’s request, the following provisions
shall apply with respect to any such Telecommunications Equipment. The
quantity, type, size, electrical and transmission capacity, location and other
variables regarding such Telecommunications Equipment shall be subject to
Landlord’s prior approval. The Telecommunications Equipment shall be installed
in a good and workmanlike manner, in compliance with all Laws, and at Tenant’s
sole cost and expense, and Tenant shall be responsible for all upkeep and
replacement of the same, all at Tenant’s sole cost and expense. Without
limiting the generality of the foregoing, Tenant shall execute Landlord’s then
current form of license agreement concerning use of the area so designated for
installation of the Telecommunications Equipment. Landlord agrees that it shall
not charge Tenant monthly license fees for the use of any such space during the
initial Term; provided, however, Tenant shall be responsible for any other
costs that are incurred in connection with the Telecommunications Equipment.

 

P.            Confidentiality
of Financial Information.   Landlord shall hold in
strict confidence any written financial information about Tenant and provided
to Landlord by Tenant

 

38

 

Or
its agents that is not otherwise publicly available (the “Tenant’s Financial Information”), and
shall not disclose, without Tenant’s prior written consent, which consent shall
not be unreasonably withheld, delayed or conditioned, Tenant’s Financial Information
to any person other than the partners, directors, officers, employees,
attorneys, accountants or any existing financing sources of Landlord, except
(1) as may be required by law or (2) in connection with the sale or
refinancing of the Building; provided, however, in connection with a sale or
refinancing, Landlord shall give Tenant 10 days prior written notice of that it
will disclose Tenant’s Financial Information, and Landlord shall use reasonable
efforts to have any potential purchasers or potential mortgagees execute a
non-disclosure agreement provided to Landlord by Tenant.

 

[Signature pages to follow.]

 

39

 

Landlord
and Tenant have executed this Lease as of the Effective Date specified below Landlord’s
signature.

 

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
  LUI2
  LA PLAYA, L.P.,

  
	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  LUI2
  LA Playa GP, LLC,

  
	
   

  	
   

  	
  a
  Delaware limited liability

  
	
   

  	
   

  	
  company,
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Effective
  Date:                                  ,
  2008

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  GAMEFLY,
  INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
								

 

40

 

Exhibit A

 

Outline and
Location of Premises

 

 

A-i

 

Exhibit B

 

Legal Description
of Property

 

PARCEL 1:

 

PARCEL A, IN THE CITY OF
LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON PARCEL MAP
L.A. NO. 2568, FILED IN BOOK 41 PAGE 90 OF PARCEL MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF LOS ANGELES COUNTY.

 

EXCEPT FROM THAT PORTION
OF SAID PARCEL “A” INCLUDED WITHIN THE LINES OF THE LAND DESCRIBED IN DEED
RECORDED AUGUST 5, 1969 AS INSTRUMENT NO. 1111 IN BOOK D4457 PAGE 208 OFFICIAL
RECORDS, 50 PERCENT OF ALL OIL, ASPHALTUM, NATURAL GAS AND OTHER HYDROCARBONS
AND OTHER MINERALS, TOGETHER WITH THE RIGHT TO EXTRACT SUCH SUBSTANCES PROVIDED
HOWEVER, THAT THE SURFACE OPENING OF ANY WELL, HOLE OR SHAFT OR OTHER MEANS OF
REACHING OR REMOVING SUCH SUBSTANCES SHALL NOT BE LOCATED WITHIN ANY PORTION OF
THE LAND FIRST ABOVE DESCRIBED NOR PENETRATE ANY PART OF PORTION THEREOF,
WITHIN A VERTICAL DEPTH OF 500 FEET BELOW THE PRESENT NATURAL SURFACE OF THE
GROUND THEREOF, AS RESERVED FOR A PERIOD OF 25 YEARS FROM JUNE 13, 1969 BY ELLA
J. KIDSON, A WIDOW, AS AN INDIVIDUAL, AND ELLA J. KIDSON AND BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, AS CO-EXECUTORS OF THE WILL OF HENRY J.
KIDSON, DECEASED, IN SAID DEED.

 

PARCEL 2:

 

PARCEL “B” IN THE CITY OF
LOS ANGELES AS SHOWN ON PARCEL MAP L.A. NO. 2568, FILED IN BOOK 41 PAGE 90 OF
PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF LOS ANGELES COUNTY.

 

EXCEPT FROM PARCELS 1 TO
6 INCLUSIVE, 49 PERCENT OF THE MINERALS AND MINERAL ORES OF EVERY KIND AND
CHARACTER NOW KNOWN TO EXIST OR HEREAFTER DISCOVERED, WITHIN OR UNDERLYING SAID
LAND OR THAT MAY BE PRODUCED THEREFROM INCLUDING, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, ALL PETROLEUM, OIL, NATURAL GAS AND OTHER
HYDROCARBON SUBSTANCES AND PRODUCTS, DERIVED THEREFROM, TOGETHER WITH THE
EXCLUSIVE AND PERPETUAL RIGHT OF INGRESS AND EGRESS BENEATH THE DEPTH OF 500
FEET BELOW THE SURFACE OF SAID LAND TO EXPLORE FOR, EXTRACT, MINE AND REMOVE
THE SAME, AND TO MAKE SUCH USE OF THE SAID LAND BENEATH SUCH DEPTH AS IS
NECESSARY OR USEFUL IN CONNECTION THEREWITH, WHICH USE MAY INCLUDE LATERAL
OR SLANT DRILLING, BORING, DIGGING OR SINKING OF WELLS, SHAFTS OR TUNNELS,
WITHOUT THE USE OF THE SURFACE OF SAID LAND OR ANY PORTION OF THE SUBSURFACE
THEREOF ABOVE A DEPTH OF 500 FEET BELOW THE SURFACE IN THE EXERCISE OF ANY OF
SAID RIGHTS, AS EXCEPTED AND RESERVED BY S. M.

 

B-i

 

BERNARD
COMPANY, A CALIFORNIA CORPORATION IN DEED RECORDED NOVEMBER 14, 1969 IN BOOK
D4554 PAGE 504, OFFICIAL RECORDS.

 

PARCEL
3:

 

LOT
11 OF TRACT 27472, IN THE CITY OF LOS ANGELES, AS PER MAP RECORDED IN BOOK 771
PAGES 51 AND 52 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF LOS ANGELES
COUNTY.

 

EXCEPT
ALL OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES IN AND UNDER SAID LAND
BELOW A DEPTH OF 500 FEET FROM THE SURFACE THEREOF, WITHOUT THE RIGHT OF
SURFACE ENTRY, FOR THE DEVELOPMENT OR EXPLORATION THEREOF, AS RESERVED IN THE
DEED FROM INVESTMENT BANKERS, LTD., A CORPORATION, RECORDED MARCH 14, 1969
AS INSTRUMENT NO. 1195, IN BOOK D4307 PAGE 531 OFFICIAL RECORDS.

 

B-ii

 

Exhibit C

 

Rules and Regulations

 

1.             Sidewalks, halls,
passageways, exits, entrances, elevators, escalators, stairways, and other
common areas shall not be obstructed by Tenant or used by Tenant for any
purpose other than for ingress to and egress from the Premises and for going
from one part of the Building to another part of the Building. Landlord shall
in all cases retain the right to control and prevent access thereto by all
persons whose presence, in the reasonable judgment of the Landlord, shall be prejudicial
to the safety, character, reputation or interests of the Building, including
its tenants and occupants. Nothing shall be swept or thrown into the corridors,
halls, elevators or stairways.

 

2.             No sign, placard, picture,
name, advertisement or notice (a “Sign”)
visible from the exterior of the Premises shall be inscribed, painted,
affixed, installed or displayed by Tenant without the prior written consent of
Landlord. Absent any such consent, Landlord shall have the right to remove any
Sign without notice to and at the expense of Tenant. Any such consent shall be
deemed to relate to only the particular Sign so consented to by Landlord and
shall not be construed as dispensing with the necessity of obtaining the prior
written consent of Landlord with respect to any other Sign. All approved Signs
or lettering on doors and walls shall be inscribed, painted, affixed,
installed, printed or otherwise displayed, at the expense of Tenant, by a
person approved by Landlord and in a manner or style acceptable to Landlord.

 

3.             No curtains, draperies,
blinds, shutters, shades, screens or other coverings, awnings, hangings or
decorations shall be installed or used in connection with any window or door of
the Premises without the prior written consent of Landlord, except for normal
and customary interior decorations to the Premises not visible from the
exterior of the Building. In any event, any such items shall be installed so as
to face the interior surface of the standard window treatment established by
Landlord and shall in no way be visible from the exterior of the Building. No
articles shall be placed or kept on the windowsills or any terraces so as to be
visible from the exterior of the Building. No articles shall be placed against
glass partitions or doors which might appear unsightly from the outside of the
Premises. No sashes, sash doors, skylights, windows or doors that reflect or
admit light or air into the halls, passageways or other public places in the
Building shall be covered or obstructed by Tenant without the prior written
consent of Landlord.

 

4.             Tenant shall not employ or
permit any person(s) other than the janitorial contractor of the Landlord
to clean the Premises without the prior written consent of Landlord, which
consent shall not be unreasonably withheld. In the event of any permitted
person being employed by Tenant to do janitorial work, while in the Building
and outside of the Premises such person(s) shall be subject to the control
and direction of the Building’s management office (not as an agent or servant
of Landlord); however, Tenant shall in all cases be responsible for the acts of
such person(s).

 

5.             Tenant and its employees,
upon daily departure, shall cause (a) the doors of the Premises to be
securely locked, and (b) to the extent practical shut off all faucets,
valves and other

 

C-i

 

control apparatuses to water and other resources, so as to prevent
waste or damage. With the exception of permitting ingress and egress to the
Building, Tenant shall keep doors(s) to the Building’s corridors on
multi-tenant floors of the Building closed at all times.

 

6.             Tenant shall not waste
electricity, water, heating, air-conditioning or any other resources and shall
cooperate fully with Landlord to assure the most effective utilization of such
Building resources. Tenant shall not attempt to adjust any Building resource
controls other than any thermostats specifically installed for Tenant’s use. No
heating, air-conditioning unit or other similar apparatus shall be installed or
used by Tenant without the prior written consent of Landlord.

 

7.             Tenant shall not alter any
lock or access device, nor shall Tenant install any new or additional lock,
access device or bolt on any door of the Premises without the prior written
consent of Landlord. In the event of any permitted installation, Tenant shall
in each case furnish Landlord with a key for any such lock or device.

 

8.             Landlord shall furnish
Tenant, at no cost to Tenant, two (2) keys to the Premises. Tenant shall
pay a reasonable charge for any additional keys furnished by Landlord. Any
card-keys issued by Landlord shall upon such issuance require payment of a
refundable deposit in an amount reasonably determined from time to time by
Landlord. Tenant shall not make or have made copies of any keys or card-keys
furnished by Landlord. Tenant shall, upon the expiration or sooner termination
of its tenancy, deliver to Landlord all of such keys and card-keys in its
possession, together with any of the keys relating to the Premises including,
but not limited to, all keys to any vaults or safes which remain on the
Premises. In the event of the loss of any keys furnished by Landlord to Tenant,
Tenant shall pay Landlord (a) the cost thereof (less any deposit paid by Tenant)
or (b) the cost of changing the subject lock(s) or access
device(s) if Landlord deems it necessary to make such change.

 

9.             The toilet rooms, toilets,
urinals, washbowls, plumbing fixtures and any other Building apparatus shall
not be used for any purpose other than that for which they were constructed;
and no foreign substance of any kind shall be thrown therein. Any loss, cost or
expense relating to any breakage, stoppage or damage resulting from any
violation of this rule by a Tenant Party, or a transferee, invitee,
contractor or licensee of Tenant, shall be borne by Tenant.

 

10.           Tenant shall not permit any
cooking on the Premises (except that private, non commercial use by Tenant and
its employees of Underwriters’ Laboratory-approved equipment for the preparation
of coffee, tea, hot chocolate and similar beverages, and for the heating of
foods, shall be permitted; provided that such equipment is used in accordance
with all applicable federal, state and city laws, codes, ordinances,
rules and regulations). The Premises shall not be used for lodging or
sleeping purposes. If the Premises becomes infested with vermin or pests,
Tenant, at its sole cost and expense, shall have such pests exterminated by
Landlord approved exterminators.

 

11.           All tenants will refer any
contractors, contractor’s representatives and installation technicians
rendering any services to them to Landlord for Landlord’s supervision and

 

C-ii

 

approval prior to commencement of any work, which approval
shall not be unreasonably withheld.

 

12.           Tenant shall not install any
radio or television antenna, loudspeaker or other device on the roof or
exterior of the Building. Tenant shall not interfere with any radio or
television broadcast or reception from within the Building.

 

13.           Tenant shall not permit its
employees, licensees and invitees to loiter around the hallways, plazas,
lobbies, stairways, elevators, front, roof or any other part of the Building
neither used in common by the occupants thereof nor permits them to use the
same for purposes of lunches, coffee breaks or other similar activities.

 

14.           The freight elevator shall
be available for use by Tenant, subject to reasonable scheduling by Landlord.
No furniture, freight, equipment, materials, supplies, packages, merchandise or
other property shall be received in the Building or carried up or down the
elevators, except between such hours and in such elevators reasonably
designated by Landlord. Any deliveries, removals or relocations of large, bulky
or voluminous items, such as furniture, office machinery and equipment, etc.,
can only be made after obtaining approval from the Landlord, which approval
shall not be unreasonably withheld or delayed. The tenants assume all risks and
shall indemnify and hold Landlord harmless against claims of damage to articles
moved and injury to persons engaged in such movement, including without
limitation damages and injury to equipment, property and personnel of Landlord
resulting from acts in connection with such delivery, removal or relocation.
All damages done to the Building by the installation or removal of any tenant’s
property or caused by any tenant’s property within the Building, shall be
repaired at the expense of such tenant.

 

15.           Tenant shall not place a
load upon any floor of the Premises which exceeds the load per square foot the
floor was designed to carry, or any load allowed by applicable law. Landlord
shall have the right to prescribe the weight, size and position of safes, any
library or other shelving, furniture or other heavy equipment brought into the
Building, and Tenant shall bear the reasonable fees of any structural engineer
hired by Landlord in connection therewith. Safes or other heavy objects shall,
if considered necessary to Landlord, stand on wood strips of such thickness as
determined by Landlord to be necessary to properly distribute the weight
thereof. Landlord shall not be responsible for loss of or damage to any such
safes or other heavy objects for any cause; all damages done to the Building by
moving or maintaining of any such items shall be repaired at the expense of
Tenant.

 

16.           No machinery other than the
kind considered usual and standard for general office use shall be operated by
any tenant in its leased area without the prior written consent of Landlord.
Business machines or mechanical equipment of Tenant, which causes noise or
vibration that may be transmitted to the structure of the Building or any space
therein to such a degree objectionable to Landlord or any other tenants or
occupants of the Building, shall be placed and maintained by Tenant, at
Tenant’s expense, on vibration eliminators or other devices sufficient to
eliminate such noise or vibration. Tenant shall bear the reasonable fees of any
acoustical or structural engineer hired by Landlord in connection therewith.

 

C-iii

 

17.           Tenant shall not mark, drive
nails or screws, or drill into the partitions; ceilings or floors of the
Premises or in any way deface the Premises except for normal and customary
interior decorations.

 

18.           Tenant shall not install,
maintain or operate on the Premises any vending machine without the prior
written consent of Landlord.

 

19.           No animals (other than those
assisting the handicapped), including reptiles, birds, fish (or aquariums), or
other non-human, non-plant living things or organic Holiday décor of any kind
shall be allowed in the Building.

 

20.           There shall not be used in
the Building any hand trucks, except those equipped with rubber tires and side
guards, or any other material handling equipment, except as approved in advance
in writing by Landlord. No scooters, roller skates, roller blades, bicycles,
and no other vehicles of any kind shall be brought into and operated within the
project. Bicycles and vehicles may only be parked in areas designated for such
purpose.

 

21.           Tenant shall store all of
its trash and garbage within the interior of the Premises. No materials shall
be placed in the Building’s trash boxes or receptacles if such material is of
such a nature that it may not be disposed of in the ordinary and customary
manner, or if such an act would violate any applicable law governing such
removal and disposal.

 

22.           Canvassing, soliciting,
distributing of handbills or any other written material, and peddling in the
Building are prohibited; Tenant shall cooperate to prevent such activity.
Tenant shall not engage in office-to-office solicitation of business from other
tenants or occupants of the Building.

 

23.           Landlord reserves the right to
exclude or to expel from the Building any person who, in Landlord’s judgment,
is intoxicated or under the influence of liquor or drugs, or who is in
violation of any of these Rules and Regulations.

 

24.           Tenant shall comply with all
safety, fire protection and evacuation procedures and regulations established
by Landlord or any governmental agency. No firearms or weapons of any kind are
allowed within the Premises or the Building.

 

25.           No tenant shall invite to
its premises, or permit the visit of, persons in such numbers or under such
conditions to interfere with the use and enjoyment of any of the plazas,
entrances, corridors, escalators, elevators, and other facilities of the
Building by other tenants.

 

26.           Landlord will not be
responsible for lost or stolen personal property, money or jewelry from any
tenant’s Premises or public or common areas regardless of whether such loss
occurs when the area is locked against entry or not, except as may be otherwise
set forth in the Lease. Tenant assumes any and all responsibility for
protecting the Premises from theft, robbery and pilferage by taking necessary
steps including, but not limited to, keeping doors locked and other means of
entry to the Premises closed.

 

C-iv

 

27.           Any additional or special
requirements of Tenant shall be attended to only upon application to the office
of the Building by an authorized individual. Employees of Landlord shall not
perform any work or do anything outside of the regular duties unless under
special instructions from Landlord. No such employees shall admit any person
(Tenant or otherwise) to any office without specific instructions from
Landlord.

 

28.           Tenant shall not advertise
or permit any advertising which, in Landlord’s opinion, tends to impair the
reputation of the Building as a first class building. Upon written notice from
the Landlord, Tenant shall refrain from or discontinue any such advertising.

 

29.           Landlord may waive any of
these Rules and Regulations for the benefit of any particular tenant or
occupant of the Building in any particular instance; however, no such waiver by
Landlord shall be construed as a waiver of these Rules and Regulations
with respect to any other tenant or occupant thereof. Any revised rules and
regulations, when made and written notice thereof is given to a tenant, shall
be binding upon it in like manner as if originally herein prescribed.

 

30.           Landlord shall have the
following rights, exercisable without notice and without liability to any
tenant for damage or injury to property, persons or business; and to the extent
not in conflict with the Lease without effecting an eviction or disturbance of
any tenant’s use or possession; or giving cause to any claim for offset or
abatement or rent:

 

(A)        To install, affix and
maintain all signs on the exterior and interior of the Building.

 

(B)         To control all internal
lighting that may be visible from the Building exterior.

 

(C)         To decorate and to make
repairs, alterations, additions, changes or improvements, whether structural or
otherwise, in and about the Building or any part thereof; to enter upon any
tenant’s premises for such purpose; to temporarily close doors, entryways,
public space, corridors; to temporarily suspend Building services and
facilities; to change the arrangement and location of entrances, passageways,
doors, elevators, shafts, stairs, toilets, etc., all without abatement of rent
or affecting any obligations of any tenant under its lease so long as the
tenant’s premises are reasonably accessible.

 

(D)         To bear and retain a
permanent title to each tenant’s premises free and clear of any act of the
tenant purporting to burden or encumber its premises.

 

(E)         To grant to anyone the
exclusive right to conduct any business or render any service in or to the
Building; provided such exclusive right shall not operate to exclude a tenant
from the use expressly permitted in its lease.

 

(F)         To take all reasonable
measures as Landlord may deem advisable for the security of the Building and
its occupants, including, without limitation, the search of the Building and
its occupants and persons entering and leaving the Building; evacuation of the
Building for cause, suspected cause or drill purposes; temporary

 

C-v

 

denial of access to the Building; and closing of the Building after
regular working hours.

 

(G)         Landlord shall have the
right at any time to install and utilize metal detectors or similar security
screening devices in the Building and to deny access to persons who create an
unreasonable risk of bodily harm to tenants or other persons lawfully present
in the Building.

 

31.           No tenant shall obtain for
use in its premises ice, drinking water, food, beverage, towels or other
similar services; or accept barbering or shoe shinning services in its premises
from persons not authorized, or within the hours specified, or under
regulations fixed by Landlord, except as otherwise set forth in the tenant’s
lease.

 

32.           Except with the prior
written consent of Landlord, no tenant shall sell or permit the sale of
newspapers, magazines, periodicals, theater tickets or other goods or
merchandise in or on its premises; nor shall any tenant carry on, permit or
allow any employee or other person to carry on the business of stenography, typewriting
or any similar business in or from its premises for the services or
accommodation of occupants or any other portion of the Building.

 

These
Rules and Regulations are provided as a general guideline. Landlord
reserves the right to make such other and further reasonable rules and
regulations as in its judgment may from time to time be necessary for the
safety, care and cleanliness of the Building and its occupants and for the
preservation of good order therein. Please refer to your lease for information
specific to your tenancy. In the event of any conflict between the
Rules and Regulations and the terms of the Lease, the terms of the Lease
shall control.

 

C-vi

 

Exhibit D

 

Commencement Letter

 

Re:          Office Lease
dated               ,
2008 (the “Lease”) between
LUI2 LA PLAYA, L.P. (“Landlord”)
and GAMEFLY, INC. (“Tenant”) for the Premises, the Rentable
Square Footage of which is 11,572, located on the lst floor of the
Building. Unless otherwise specified, all capitalized terms used herein shall
have the same meanings as in the Lease.

 

Landlord
and Tenant agree that:

 

Landlord
has fully completed all Landlord Work required under the terms of the Lease, if
any.

 

Tenant
has accepted possession of the Premises, subject to any latent defects in the
Premises of which Tenant notifies Landlord within 180 days after the
Commencement Date other than work performed by Tenant Parties. The Premises are
usable by Tenant as intended, Landlord has no further obligation to perform any
Landlord Work or other construction, and Tenant acknowledges that both the
Building and the Premises are satisfactory in all respects.

 

The Commencement Date of the Lease
is                                   ,
200      .

 

The Expiration Date of the Lease is the last day
of                               ,             .

 

Tenant’s
Address at the Premises after the Commencement Date is:

 

 

Attention:                                       

Phone:                                            

Fax:                                                

 

All other terms and
conditions of the Lease are ratified and acknowledged to be unchanged.

 

EXECUTED as
of               ,
200       .

 

	
  LANDLORD:

  	
  TENANT:

  
	
   

  	
   

  
	
  LUI2 LA PLAYA, L.P.,

  	
  GAMEFLY, INC.,

  
	
  a
  Delaware limited partnership

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
  By:

  	
  LUI2
  LA Playa GP, LLC,

  	
   

  
	
   

  	
  a
  Delaware limited liability

  	
  By:

  	
   

  
	
   

  	
  company,
  its general partner

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  	
   

  
								

 

D-i

 

Exhibit E

 

Work Letter

 

This
Work Letter is attached as an Exhibit to an Office Lease (the “Lease”)  between LUI2
LA PLAYA L.P., as Landlord, and GAMEFLY, INC., as Tenant, for the Premises, the
Rentable Square Footage of which is 11,572, located on the 1st floor of the Building. Unless otherwise
specified, all capitalized terms used in this Work Letter shall have the same
meanings as in the Lease. In the event of any conflict between the Lease and
this Work Letter, the latter shall control.

 

1.             Construction. Tenant agrees
to construct leasehold improvements (the “Tenant Work”)  in a good and workmanlike manner
in and upon the Premises, at Tenant’s sole cost and expense, in accordance with
the following provisions. Tenant shall submit to Landlord for Landlord’s
approval complete plans and specifications for the construction of the Tenant
Work (“Tenant’s Plans”). Within
5 Business Days after receipt of Tenant’s Plans, Landlord shall review and
either approve or disapprove Tenant’s Plans, and Landlord’s approval shall not
be unreasonably withheld, conditioned or delayed. If Landlord disapproves
Tenant’s Plans, or any portion thereof, Landlord shall notify Tenant thereof
and of the revisions Landlord requires before Landlord will approve Tenant’s
Plans. Within 5 Business Days after Landlord’s notice, Tenant shall submit to
Landlord, for Landlord’s review and approval, plans and specifications
incorporating the required revisions. The final plans and specifications
approved by Landlord are hereinafter referred to as the “Approved Construction Documents”. Tenant
will employ experienced, licensed contractors, architects, engineers and other
consultants, reasonably approved by Landlord, to construct the Tenant Work and
will require in the applicable contracts that such parties (a) carry
insurance in such amounts and types of coverages as are reasonably required by
Landlord, and (b) design and construct the Tenant Work in a good and
workmanlike manner and in compliance with all Laws. Unless otherwise agreed to in
writing by Landlord and Tenant, all work involved in the construction and
installation of the Tenant Work shall be carried out by Tenant’s contractor
under the sole direction of Tenant, in compliance with all Building
rules and regulations and in such a manner so as not to unreasonably
interfere with or disturb the operations, business, use and enjoyment of the
Property by other tenants in the Building or the structural calculations for
imposed loads. Tenant shall obtain from its contractors and provide to Landlord
a list of all subcontractors providing labor or materials in connection with
any portion of the Tenant Work prior to commencement of the Tenant Work. Tenant
warrants that the design, construction and installation of the Tenant Work
shall conform to the requirements of all applicable Laws, including building,
plumbing and electrical codes and the requirements of any authority having
jurisdiction over, or with respect to, such Tenant Work. Subject to the
Building’s rules and regulations for contractors, Tenant’s contractors
shall be allowed to utilize power, water, HVAC (to the extent present) and
existing restroom facilities within the Premises and the freight dock (subject
to Landlord’s approval of scheduling thereof), as necessary and required in
connection with Tenant Work in the Premises at no charge.

 

2.             Costs. Subject to the terms and
conditions of this Paragraph 2, Landlord
will provide Tenant with an allowance (the “Reimbursement Allowance”) to be
applied towards the cost of constructing the Tenant Work.

 

E-i

 

(A)          Landlord’s obligation
to reimburse Tenant for Tenant’s construction of the Tenant Work shall be:
(i) limited to actual costs incurred by Tenant in its construction of the
Tenant Work; (ii) limited to an amount up to, but not exceeding, $20.00
multiplied by the Rentable Square Footage of the Premises; and
(iii) conditioned upon Landlord’s receipt of written notice (which notice
shall be accompanied by invoices and documentation set forth below) from Tenant
that the Tenant Work has been completed and accepted by Tenant. The cost of
(a) all space planning, design, consulting or review services,
construction drawings and permit fees, (b) extension of electrical wiring
from Landlord’s designated location(s) to the Premises,
(c) purchasing and installing all building equipment for the Premises
(including any submeters and other above building standard electrical equipment
approved by Landlord), (d) required metering, re-circuiting or re-wiring
for metering, equipment rental, engineering design services, consulting
services, studies, construction services, cost of billing and collections,
(e) materials and labor, including costs incurred for purchasing and
installing Cable, and (f) an asbestos survey of the Premises if required
by applicable Law, shall all be included in the cost of the Tenant Work and may
be paid out of the Reimbursement Allowance, to the extent sufficient funds are
available for such purpose. Any reimbursement obligation of Landlord under this
Work Letter shall be applied solely to the purposes specified above, as
allocated, within 180 days after the Effective Date or be forfeited with no
further obligation on the part of Landlord.

 

(B)           Landlord shall pay
the Reimbursement Allowance to Tenant within thirty-one (31) days following
Landlord’s receipt of (i) third-party invoices for costs incurred by
Tenant in constructing the Tenant Work; (ii) evidence that Tenant has paid
the invoices for such costs; and (iii) conditional and unconditional lien
waivers, as applicable and reasonably approved by Landlord, from any contractor
or supplier who has constructed or supplied materials for the Tenant Work.
Tenant may make up to 2 requests for payment of all or any portion of the
Reimbursement Allowance as the Tenant Work progresses provided that Landlord
shall not be required to make any payments unless and until all of the
conditions contained in this Paragraph 2 are
satisfied with respect to the portion of the Tenant Work to which the request
relates. If the costs incurred by Tenant in constructing the Tenant Work exceed
the Reimbursement Allowance, then Tenant shall pay all such excess costs and
Tenant agrees to keep the Premises and the Property free from any liens arising
out of the non-payment of such costs.

 

(C)           All installations
and improvements now or hereafter placed in the Premises other than building
standard improvements (“Above Building
Standard Improvements”)  shall be for Tenant’s account and at
Tenant’s cost. Tenant shall pay ad valorem taxes and increased insurance on or
attributable to Above Building Standard Improvements, which cost shall be
payable by Tenant to Landlord as additional Rent within 30 days after receipt
of an invoice therefor. Tenant’s failure to pay such cost shall constitute an
event of default under the Lease.

 

3.             Electrical Design Capacity. The following parameters
constitute building standard electrical design capacity: (i) the total
connected electrical load of all electrical equipment serving the Premises
shall not exceed an average of 4.0 watts multiplied by the Rentable Square
Footage of the Premises delivered through the electrical riser to the
electrical room on the floor where the Premises are located; (ii) the
connected electrical load for lighting shall not exceed an average of 1.5 watts
multiplied by the Rentable Square Footage of the Premises; (iii) emergency
power shall be limited to egress lighting only and at Landlord’s option shall
be provided by

 

E-ii

 

Tenant’s
battery backup fixtures or Landlord’s emergency power system; and (iv) no
electrical equipment shall exceed the safe and lawful capacity of the existing
electrical circuit(s) and facilities serving the Premises. Any
requirements, services or equipment in excess or contravention of the foregoing
parameters (or any combination thereof) shall constitute above building
standard electrical services subject to Landlord’s approval and Tenant’s
compliance with the other applicable provisions of the Lease. However, the cost
of purchasing and installing any above building standard electrical equipment
approved by Landlord (including submeters) shall be paid at Tenant’s expense.

 

4.             ADA Compliance. Tenant shall,
at its expense, be responsible for ADA compliance in the Premises. Landlord
shall not be responsible for determining whether Tenant is a public
accommodation under ADA or whether the Approved Construction Documents comply
with ADA requirements. Such determinations, if desired by Tenant, shall be the
sole responsibility of Tenant. Landlord’s approval of the Approved Construction
Documents shall not be deemed a statement of compliance with applicable Laws,
nor of the accuracy, adequacy, appropriateness, functionality or quality of the
improvements to be made according to the Approved Construction Documents.
Landlord shall, as Operating Expense (to the extent permitted pursuant to Section 4 of the Lease), be responsible for ADA
compliance for the core areas of the Building (including the Commons Areas, the
elevators and the service areas), the parking facilities of the Property and
all points of access into the Property; provided, however, Landlord shall not
have any obligation to comply with ADA (although Landlord may elect to comply)
until Landlord receives written notice from any applicable governmental
authority of the need to comply.

 

5.             Landlord’s Oversight and
Coordination. Construction of the Tenant Work shall be
subject to oversight and coordination by Landlord, but such oversight and
coordination shall not subject Landlord to any liability to Tenant, Tenant’s
contractors or any other person. Landlord has the right to inspect construction
of the Tenant Work from time to time. Within 10 days following the date of
invoice, Tenant shall, for oversight and coordination of the construction of
the Tenant Work, pay Landlord an oversight fee equal to 2% of the aggregate
contract price for the Tenant Work. Tenant’s failure to pay such oversight fee
when due shall constitute an event of default under the Lease.

 

6.             Assumption of Risk and Waiver. Tenant hereby
assumes any and all risks involved with respect to the Tenant Work and hereby
releases and discharges all Landlord Parties from any and all liability or
loss, damage or injury suffered or incurred by Tenant or third parties in any
way arising out of or in connection with the Tenant Work.

 

E-iii

 

Exhibit F

 

Parking Agreement

 

This
Parking Agreement (the “Agreement”)  is attached
as an Exhibit to an Office Lease (the “Lease”)  between LUI2 LA PLAYA, L.P., as
Landlord, and GAMEFLY, INC., as Tenant, for the Premises, the Rentable Square
Footage of which is 11,572, located on the 1st floor of the
Building. Unless otherwise specified, all capitalized terms used in this
Agreement shall have the same meanings as in the Lease.

 

1.                                       As of the
Commencement Date of the Lease, Tenant shall take and pay for 70 permits
allowing access to unreserved spaces in parking facilities which Landlord
provides for the use of tenants and occupants of the Building (the “Parking Facilities”). During the
initial Term, Tenant shall pay Landlord a monthly fee of $4,500 for use of such
70 unreserved permits, plus any taxes thereon. During any renewal or extension
of the Term, Tenant shall take and pay for permits at Landlord’s then-current
parking ratio for new tenant leases at the Property and shall pay Landlord’s
quoted monthly contract rate (as set from time to time) for each unreserved
permit, plus any taxes thereon.

 

2.                                       Tenant shall at
all times comply with all Laws respecting the use of the Parking Facilities.
Landlord reserves the right to adopt, modify, and enforce reasonable rules and
regulations governing the use of the Parking Facilities or the Property, from
time to time, including any key- card, sticker, or other identification or
entrance systems and hours of operations. Landlord may refuse to permit any
person who violates such rules and regulations to park in the Parking
Facilities, and any violation of the rules and regulations shall subject
the automobile in question to removal from the Parking Facilities.

 

3.                                       Tenant may
validate visitor parking by such method or methods as Landlord may approve, at
the validation rate (as set from time to time) generally applicable to visitor
parking. Unless specified to the contrary above, the parking spaces for the
parking permits provided hereunder shall be provided on an unreserved,
“first-come, first-served” basis. Tenant acknowledges that Landlord has
arranged or may arrange for the Parking Facilities to be operated by an
independent contractor, un-affiliated with Landlord. In such event, Tenant
acknowledges that Landlord shall have no liability for claims arising through
acts or omissions of such independent contractor. Landlord shall have no
liability whatsoever for any damage to vehicles or any other items located in
or about the Parking Facilities, and in all events, Tenant agrees to seek
recovery from its insurance carrier and to require Tenant’s employees to seek
recovery from their respective insurance carriers for payment of any property
damage sustained in connection with any use of the Parking Facilities. Landlord
reserves the right to assign specific parking spaces, and to reserve parking
spaces for visitors, small cars, handicapped persons and for other tenants,
guests of tenants or other parties, with assigned and/or reserved spaces. Such
reserved spaces may be relocated as determined by Landlord from time to time,
and Tenant and persons designated by Tenant hereunder shall not park in any
such assigned or reserved parking spaces. Landlord also reserves the right to
close all or any portion of the Parking Facilities, at its discretion or if
required by casualty, strike, condemnation, repair, alteration, act of God,
Laws, or other reason beyond Landlord’s reasonable control; provided, however,
that except for matters beyond Landlord’s reasonable control, any such closure
shall be

 

F-i

 

temporary
in nature. If Tenant’s use of any parking permit is precluded for any reason,
Tenant’s sole remedy for any period during which Tenant’s use of any parking
permit is precluded shall be abatement of parking charges for such precluded
permits. Tenant shall not assign its rights under this Agreement except in
connection with a Permitted Transfer.

 

4.                                       Tenant’s
failure to pay for any of the above-referenced parking permits or to otherwise
comply with any provision of this Agreement shall constitute an event of
default under the Lease. In addition to any rights or remedies available to
Landlord in the event of a Monetary Default under the Lease, Landlord shall
have the right to cancel this Agreement and/or remove any vehicles from the
Parking Facilities.

 

F-ii

 

Rider No. 1

 

OPTION TO EXTEND

 

1.                                                Renewal Period. Tenant may, at
its option, extend the Term for one renewal period of 3 years (the “Renewal Period”)  by written
notice to Landlord (the “Renewal Notice”)  given no
earlier than 12 nor later than 9 months prior to the expiration of the Term,
provided that at the time of such notice and at the commencement of such
Renewal Period, (i) Tenant remains in occupancy of the entire Premises,
and (ii) no uncured event of default exists under the Lease (beyond any
applicable notice and cure periods). The Base Rent payable during the Renewal
Period shall be at the Market Rental Rate (defined below). Except as provided
in this Rider No. 1, all
terms and conditions of the Lease shall continue to apply during the Renewal
Period, except that Tenant shall have no further Option to Extend the Term of
the Lease.

 

2.                                                Acceptance. Within 30 days
of the Renewal Notice, Landlord shall notify Tenant of the Base Rent for such
Renewal Period (the “Rental Notice”). Tenant may
accept or object to the Base Rent set forth in the Rental Notice by written
notice (the “Tenant’s Notice”)  to Landlord
given within 15 days after receipt of the Rental Notice. If Tenant timely
delivers the Tenant’s Notice and accepts the terms set forth in the Rental Notice,
Tenant shall, within 15 days after receipt, execute a lease amendment
confirming the Base Rent and other terms applicable during the Renewal Period.
If Tenant fails timely to deliver its Tenant’s Notice, then this Option to
Extend shall automatically expire and be of no further force or effect. If
Tenant timely delivers the Tenant’s Notice and objects to the Base Rent set
forth in the Rental Notice, Landlord and Tenant shall each work diligently and
in good faith for a period not to exceed 30 days after Landlord’s receipt of
Tenant’s Notice (the “Negotiation
Period”)  to
reach an agreement on the Market Rental Rate for the Renewal Period. If at the
end of the Negotiation Period, Landlord and Tenant are unable to agree on the
Market Rental Rate, Tenant shall have a period of 10 days after the end of the
Negotiation Period (the “Tenant’s
Decision Period”)  to elect to (i) accept the terms set forth
in the Rental Notice (without any modifications thereto) by written notice to
Landlord (the “Acceptance Notice”), (ii) withdraw
its renewal request by written notice to Landlord (the “Withdrawal
Notice”), or (iii) notify
Landlord that it has elected to renew the term of this Lease and elected to
have the Market Rental Rate determined in accordance with Paragraph 4 of this Rider No. 1 (the “Market Rental Rate Determination
Notice”).
If Tenant timely delivers its Acceptance Notice (or is
deemed to have accepted the Rental Notice), Landlord and Tenant shall, within
15 days after receipt, execute a lease amendment reasonably satisfactory to
Landlord and Tenant confirming the Base Rent and other terms applicable during
the Renewal Period. If Tenant delivers a Withdrawal Notice, then Tenant’s
option to extend shall automatically expire and be of no further force or effect.
If Tenant fails timely to deliver its Acceptance Notice or its Market Rental
Rate Determination Notice (as applicable), and if such failure continues for a
period of 5 Business Days after written notice thereof by Landlord, then Tenant
shall be deemed to have elected to accept the terms set forth in the Rental
Notice. In addition, this Option to Extend shall terminate upon assignment of
this Lease (except in the event of an assignment to an Affiliate pursuant to a
Permitted Transfer) or subletting of 50% or more of the Premises to one or more
subtenants (excluding Affiliated Sublessees). Furthermore, this Option to
Extend shall be voidable at Landlord’s election if (i) Tenant fails timely
to execute and return the required lease amendment, or (ii) an event of
default exists under the Lease (beyond

 

l-i

 

any
applicable notice and cure periods) or Tenant fails to occupy the entire
Premises at the commencement of the Renewal Period.

 

3.                                                Market Rental Rate. The “Market Rental Rate”  is the rate
(or rates) a willing tenant would pay and a willing landlord would accept for a
comparable transaction (e.g., renewal, expansion, relocation, etc., as
applicable, in comparable space and in a comparable building) as of the
commencement date of the applicable term, neither being under any compulsion to
lease and both having reasonable knowledge of the relevant facts, considering
the highest and most profitable use if offered for lease in the open market
with a reasonable period of time in which to consummate a transaction. In
calculating the Market Rental Rate, all relevant factors will be taken into
account, including the location and quality of the Building, lease term,
amenities of the Property, condition of the space and any concessions and
allowances commonly being offered by Landlord for comparable transactions in
the Property. The parties agree that the best evidence of the Market Rental
Rate will be the rate then charged for comparable transactions in the Property.
Although the determination of Market Rental Rate shall be made at a point in
time prior to the commencement date for the applicable Renewal Period, such
determination is to be made based on Landlord’s and Tenant’s opinion of what
the Market Rental Rate should be at the time the rate being determined will go
into effect.

 

4.                                                Market Rental Rate Determination. If Tenant delivers a Market
Rental Rate Determination Notice to Landlord prior to the expiration of
Tenant’s Decision Period, then the term of the Lease shall be renewed, and
Landlord and Tenant shall proceed to have the Market Rental Rate determined in
accordance with the procedure set forth below. At least 6 months prior to the
expiration of the initial Term, Landlord shall submit Landlord’s proposed Market
Rental Rate in writing (the “Landlord’s
Proposal”)
and Tenant shall submit Tenant’s proposed Market Rental
Rate in writing (the “Tenant’s
Proposal”), together with the supporting data that was
used to calculate such proposals, to a qualified independent licensed
commercial real estate broker or real estate appraiser who (i) is licensed
under the laws of the State of California, (ii) has been active over the
immediately preceding ten (10) year period in the leasing or appraising of
multi-story office buildings in the Playa Vista/Culver City/Marina del Rey
submarket, (iii) is recognized as a market expert in office leasing or
appraisal of office buildings, (iv) has not represented either Landlord or
Tenant during the preceding five years or in connection with this Lease, and
(v) has general experience and competence in determining market rates for
office space comparable to the Premises (the “Qualified Third Party”). The
Qualified Third Party shall be mutually agreed upon by Landlord and Tenant and
selected within 30 days following Tenant’s delivery to Landlord of the Market
Rental Rate Determination Notice. If the parties fail to select the Qualified
Third Party within such 30 day period, then the Qualified Third Party shall be
appointed by the American Arbitration Association in Los Angeles, California.
Within 20 days after the proposals are submitted, the Qualified Third Party
shall hold a hearing during which Landlord and Tenant may present evidence in
support of their respective proposals. Within 3 days after the date of the
hearing, the Qualified Third Party will determine the Market Rental Rate
provided the Qualified Third Party may select only Landlord’s Proposal or
Tenant’s Proposal (and no other amount) as the Market Rental Rate, which
proposal so selected shall be the Market Rental Rate for the applicable Renewal
Period. The Qualified Third Party’s determination shall be binding on Landlord
and Tenant and may be enforced by a court of competent jurisdiction. The cost
of such proceedings shall be paid by the party whose proposal was not selected.
Within 30 days after the Qualified Third Party’s determination of the Market

 

l-ii

 

Rental
Rate, Landlord and Tenant shall execute a mutually acceptable amendment to this
Lease specifying that this Lease has been extended at a rate equal to the
determined Market Rental Rate. If the foregoing process is not completed prior
to the commencement of the Renewal Period, Tenant shall continue to pay Base
Rent based on Landlord’s Proposal until such time as such process is complete,
at which time Tenant will pay Landlord, or Landlord will pay Tenant, the
amounts necessary to adjust the payments made prior to such date to be equal to
the Market Rental Rate determined by such process.

 

l-iii

 

Rider No. 2 

 

MUST TAKE SPACE

 

1.                                       Lease.  Effective on the 5th Business Day after the date Landlord notifies
Tenant (“Must Take Space Notice”)  that the Must
Take Space (defined below) is available (the “Must Take Commencement Date”), the Premises
shall be automatically expanded to include approximately 4,597 Rentable Square
Feet (+/-20%, in Landlord’s discretion) located on the 1st floor of the Building adjacent to the
Premises, as shown on the attached Schedule 1 (the “Must Take Space”); provided,
however, Tenant shall not be obligated to lease the Must Take Space if Landlord
delivers to Tenant the Must Take Space Notice after April 30, 2010, and
Tenant notifies Landlord in writing within 5 Business Days after its receipt of
the Must Take Space Notice that Tenant elects to not lease the Must Take Space
(in which case Tenant shall have no further rights hereunder, and neither
Landlord nor Tenant shall have obligations with respect to such space). The
lease of the Must Take Space is subject to all of the terms and conditions of
the Lease currently in effect, except as provided in this Rider No. 2. Landlord agrees not
to relet the space to the existing tenant of the Must Take Space, and Landlord
further agrees to use commercially reasonable efforts (without requiring the
expenditure of funds) to work with the existing tenant of the Must Take Space
to vacate such space so that the Must Take Space becomes available for lease on
or prior to April 30, 2010. Landlord agrees that Landlord is obligated to
offer the Must Take Space to the Tenant whenever the lease of the currently
existing tenant terminates and/or expires on its terms and such tenant vacates
the Must Take Space.

 

2.                                  Amendment.  Within 10
Business Days of delivery of the Must Take Space, Landlord and Tenant shall
execute a lease amendment adding the Must Take Space as part of the Premises
for all purposes under the Lease (including any extensions or renewals)
effective as of the delivery date of the same and confirming the Must Take
Space Commencement Date, Base Rent and other terms applicable to the Must Take
Space (some of which are specified in this Rider
No. 2). Such lease amendment shall contain a work letter (“MTS Work Letter”)  substantially
in the form of Exhibit E
to the Lease regarding the construction of leasehold improvements in the Must
Take Space, provided, however, that the construction allowance specified
therein shall be an amount equal to $10.00 multiplied by the Rentable Square
Footage of the Must Take Space (provided that such allowance shall be reduced
by any amount not utilized by Tenant within 180 days following the Must Take
Commencement Date).

 

3.                                  Condition of Must Take Space.  Tenant shall accept the Must Take Space in
its “as-is” condition, subject to (a) any necessary construction of
leasehold improvements, which shall be accomplished by Landlord and the cost of
such construction shall be paid in accordance with the MTS Work Letter,
(b) any latent defects in the Must Take Space which Tenant notifies
Landlord within 180 days after the Must Take Commencement Date other than work
performed by Tenant Parties; provided that Landlord shall be responsible for
construction of any demising walls required to separate the Must Take Space
from any remaining space on the floor, which demising walls shall be
constructed at Landlord’s cost using building standard materials (with Tenant
being responsible for any interior finish desired with respect to the portion
of the demising walls facing the interior of the Premises). Except as expressly
provided in the MTS Work Letter, Tenant acknowledges that Landlord has not
undertaken to perform any modification, alteration or improvement to the Must
Take Space. BY TAKING POSSESSION OF  THE
MUST TAKE SPACE, SUBJECT TO THE FIRST SENTENCE OF THIS PARAGRAPH 3, TENANT
HEREBY AGREES THAT, SUBJECT TO THE PREVIOUS SENTENCE, THE PREMISES ARE IN GOOD

 

2-i

 

ORDER AND SATISFACTORY CONDITION AND THAT, EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THIS LEASE, THERE ARE NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, BY LANDLORD REGARDING THE PREMISES,
THE BUILDING OR THE  PROPERTY. Tenant waives
the right to terminate the Lease due the condition of Must Take Space.

 

4.                                       Base Rent.  Commencing
on the Must Take Commencement Date and continuing through the Term, Tenant
shall, at the time and place and in the manner provided in the Lease, pay to
Landlord as Base Rent for the Must Take Space as follows: (a) if the Must
Take Space is delivered within 12 months following the Commencement Date of the
Lease, an amount based on the per Rentable Square Foot rate set forth in the
Base Rent schedule in Section 1.D, for
the applicable time period, i.e., if the Must Take Commencement Date occurs
during the 5th calendar month of the Term, then the Base Rent
will be $2.25 per Rentable Square Foot and will increase in accordance with
such schedule, or (b) if the Must Take Space is delivered after the 12
months following the Commencement Date of the Lease but before April 30,
2010, the Base Rent will be the Market Rental Rate as defined in Rider No. 1 above. Subject to Section 19.E of the Lease, and
provided no event of default has occurred, Base Rent for the Must Take Space
shall be abated for the first 3 full calendar months following Landlord’s
delivery to Tenant of the Must Take Space.

 

5.                                       Operating Expenses.   Commencing on the Must Take Commencement
Date, Tenant’s Pro Rata Share of Operating Expenses payable under Section 4.B of the Lease shall be
increased to take the Must Take Space into consideration.

 

6.                                       Parking.  For the Must
Take Space, Tenant shall take and pay for an additional 4 permits per 1,000
Rentable Square Feet in the Must Take Space allowing access to unreserved
spaces in parking facilities which Landlord provides for the use of tenants and
occupants of the Property. During the initial Term, Tenant shall pay $64.29 per
month per permit for each such unreserved permit, plus any taxes thereon.

 

2-ii

 

Schedule
1

 

Outline and Location of Must Take Space

 

 

2-iii

 

Landlord and Tenant have
executed this Lease as of the Effective Date specified below Landlord’s
signature.

 

 

	
   

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LUI2 LA PLAYA, L.P.,

  
	
   

  	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  LUI2 LA Playa GP, LLC, a Delaware
  limited liability company, its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Douglas C. McKinnon

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Douglas C. McKinnon

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  E.V.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Effective Date:                          ,
  2008

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GAMEFLY, INC.,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David A. Hodess

  
	
   

  	
   

  	
  Name:

  	
  David A. Hodess

  
	
   

  	
   

  	
  Title:

  	
  President
  & CEO

  
							

 

40

 

FIRST AMENDMENT TO OFFICE LEASE

 

THIS
FIRST AMENDMENT TO OFFICE LEASE (this “Amendment”)  is entered into by and between LUI2 LA
PLAYA, L.P., a Delaware limited partnership (“Landlord”), and GAMEFLY,
INC.,  a Delaware corporation (“Tenant”),  with reference to the following:

 

A.                                   Landlord and
Tenant entered into that certain Office Lease dated August 8, 2008 (the “Current
Lease”),  currently
covering approximately 11,572 Rentable Square Feet (the “Current Premises”)
of space located in Suite 110 of 5340 Alla Road, Los Angeles,
California (the “Building”).

 

B.                                     Landlord and
Tenant now desire to amend the Current Lease as set forth below. Unless
otherwise expressly provided in this Amendment, capitalized terms used in this
Amendment shall have the same meanings as in the Current Lease. The term “Lease”  where used in
the Current Lease and this Amendment shall herein and hereafter refer to the
Current Lease, as amended by this Amendment.

 

FOR
GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:

 

1.                                      Must
Take Space.
Notwithstanding anything to the contrary in Rider No. 2  to the Current
Lease, Landlord leases to Tenant and Tenant leases from Landlord the area shown
on Exhibit A attached hereto (the
“Must Take
Space”)  in
accordance with this Amendment, and Rider No. 2  to the Current
Lease is hereby deleted in its entirety. The Rentable Square Footage of the
Must Take Space is 4,972 square feet. Tenant’s lease of the Must Take Space
shall commence on the Must Take Commencement Date (as defined in Section 2  below) and
shall expire as of Expiration Date under the Current Lease (to wit,
October 31, 2012), subject to extension as provided in Rider
No. 1  to the Current Lease.

 

2.                                      Expansion
of Premises.  The Must Take Commencement Date shall be
May 11, 2009. Effective on the Must Take Commencement Date, the Premises
shall be automatically expanded to include the Must Take Space, and the term “Premises”  as used in the Current Lease shall
mean and include 16,544 Rentable Square Feet, being the sum of the Rentable
Square Feet of the Current Premises (i.e., 11,572 Rentable Square Feet) and the
Must Take Space (i.e., 4,972 Rentable Square Feet). The lease of the Must Take
Space is subject to all of the terms and conditions of the Current Lease
currently in effect, except as modified in this Amendment. Tenant acknowledges
that it has no further expansion rights or expansion
options under the Current Lease.

 

3.                                      Base
Rent.  Commencing
on the Must Take Commencement Date, and continuing through the Term, Tenant
shall, at the time and place and in the manner provided in the Current Lease,
pay to Landlord as Base Rent for the Must Take Space the amounts set forth in
the following rent schedule, plus any applicable rental, sales and use taxes
(but excluding income taxes) thereon:

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Monthly
  Rate

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Per
  Rentable

  	
   

  	
  Monthly

  	
   

  
	
   

  	
   

  	
  Period

  	
   

  	
   

  	
   

  	
  Square
  Foot

  	
   

  	
  Base
  Rent

  	
   

  
	
  May 11, 2009

  	
   

  	
  to

  	
   

  	
  October 31, 2009

  	
   

  	
  $

  	
  2.25

  	
   

  	
  $

  	
  11,187.00

  	
  *

  
	
  November 1, 2009

  	
   

  	
  to

  	
   

  	
  October 31, 2010

  	
   

  	
  $

  	
  2.33

  	
   

  	
  $

  	
  11,584.76

  	
   

  
	
  November 1, 2010

  	
   

  	
  to

  	
   

  	
  October 31, 2011

  	
   

  	
  $

  	
  2.41

  	
   

  	
  $

  	
  11,982.52

  	
   

  
	
  November 1, 2011

  	
   

  	
  to

  	
   

  	
  October 31, 2012

  	
   

  	
  $

  	
  2.49

  	
   

  	
  $

  	
  12,380.28

  	
   

  

 

*Subject to Section 19.E
of the Current Lease and provided that no event of
default has occurred under the Current Lease (beyond all applicable notice and
cure periods), the monthly Base Rent for the time period commencing on
May 11, 2009, and continuing through August 9, 2009, shall be abated.

 

4.                                      Operating
Expenses.   Commencing on Must Take Commencement Date,
Tenant’s Pro Rata Share of Operating Expenses payable under Section 4  of the Current
Lease shall be increased to take the Must Take Space into consideration, which
Tenant’s Pro Rata Share shall be fourteen and sixty-one hundredths percent
(14.61%); provided, however, all Operating Expenses shall be pro-rated for the
periods during the Term occurring before and after the Must Take Commencement
Date to take into consideration the applicable Rentable Square Feet comprising
the “Premises” during such time periods (i.e., without and with the Must Take
Space).

 

5.                                      Condition
of the Must Take Space.

 

(a)                                  Tenant accepts
the Must Take Space in its “as-is” condition, subject to (i) the terms and
conditions in this Paragraph  5
and (ii) any latent defects in the Must Take Space which Tenant
notifies Landlord within 180 days after the Must Take Commencement Date other
than work performed by Tenant Parties. Except as expressly provided in this Paragraph
5  and except for the work agreed upon between Landlord and Tenant and
performed prior the date of this Amendment (the “Landlord Work”),  Tenant acknowledges that Landlord
has not undertaken to perform any modification, alteration or improvement to
the Must Take Space, and Landlord has no further obligation to perform any
Landlord work or construction. BY TAKING POSSESSION OF
THE MUST TAKE SPACE, SUBJECT TO THE FIRST SENTENCE OF THIS PARAGRAPH 5,
TENANT HEREBY AGREES THAT THE MUST TAKE SPACE IS IN GOOD ORDER AND SATISFACTORY
CONDITION, THAT THE MUST TAKE SPACE IS USABLE BY TENANT AS INTENDED AND THAT,
EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AMENDMENT (INCLUDING, WITHOUT
LIMITATION, THE WORK LETTER ATTACHED HERETO), THERE ARE NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, BY LANDLORD REGARDING THE CURRENT
PREMISES, THE MUST TAKE SPACE, THE BUILDING OR THE PROPERTY.  Tenant waives
the right to terminate the Lease due the condition of Must Take Space.

 

(b)                                 The Must Take
Space shall be delivered to Tenant in compliance with all applicable Laws
(including, without limitation, Title 24 requirements and ADA), subject to
applicable grandfathered rights and variances granted, if any; provided that in
the event that the Must Take Space is determined to violate any such applicable
Laws, Landlord’s compliance therewith shall be Landlord’s sole obligation with
respect to any such violation and Tenant’s sole remedy therefor, including,
without limitation, Landlord’s obtaining additional governmental approvals, if
any, required to permit legal occupancy of the Must-Take Space.

 

2

 

(c)                                As soon as
reasonably possible after the execution of this Amendment, a representative of
Landlord and a representative of Tenant shall perform a walk-through inspection
of the Landlord Work to identify any “punchlist” items (i.e., minor defects or
conditions in such Landlord Work that do not impair Tenant’s ability to utilize
the Must Take Space for the purposes permitted hereunder), which items Landlord
shall repair or correct as soon as reasonably possible after the date of such
walk-through. Landlord shall use its commercially reasonable efforts to
complete all punchlist work within thirty (30) days, subject to material
delivery lead times or other matters beyond Landlord’s reasonable control,
provided that if Landlord fails to timely cause the completion of the same,
Tenant may directly enforce any obligation or warranty of the Contractor
(defined below) with respect to such punchlist items (as provided below).

 

(d)                               Landlord has
obtained from the general contractor completing the Landlord Work (the “Contractor”)  the warranties of the
Landlord Work (the “Warranties”)
as set forth in Section 1(j) of the “Terms and Conditions” of
that certain Service Contract dated March 19, 2009, between Landlord and
Gardner Austin Building Corporation. Landlord hereby assigns to Tenant all of
the rights, powers, privileges and interests of Landlord in and to any and all
the Warranties such that Landlord and Tenant are co-equals and may both enforce
such Warranties whether acting together or independently.

 

6.                                           Parking.  In connection with Tenant’s leasing of the
Must Take Space and as of the Must Take Commencement Date, Tenant shall take
and pay for an additional 4 permits per 1,000 Rentable Square Feet in the Must
Take Space (to wit, nineteen (19) parking permits) allowing access to
unreserved spaces in parking facilities which Landlord provides for the use of
tenants and occupants of the Property. After the Must Take Commencement Date
and during the balance of the initial Term, Tenant shall pay $64.29 per month
per permit for each such unreserved permit, plus any taxes thereon.

 

7.                                           Consent.  Intentionally deleted.

 

8.                                           Broker.  Tenant represents and warrants that it has
not been represented by any broker or agent in connection with the execution of
this Amendment, except Cresa Partners. Landlord represents and warrants that it
has not been represented by any broker or agent in connection with the
execution of this Amendment except CB Richard Ellis. Tenant shall indemnify and
hold harmless Landlord and its designated property management, construction and
marketing firms, and their respective partners, members, affiliates and
subsidiaries, and all of their respective officers, directors, shareholders,
employees, servants, partners, members, representatives, insurers and agents
from and against all claims (including reasonable costs of defense and
investigation) of any broker or agent or similar party other than Cresa
Partners claiming by, through or under Tenant in connection with this
Amendment. Landlord shall indemnify and hold harmless Tenant and its officers,
directors, shareholders, employees, servants, partners, members,
representatives, insurers and agents from and against all claims (including
reasonable costs of defense and investigation) of any broker or agent or
similar party other than CB Richard Ellis claiming by, through or under
Landlord in connection with this Amendment. Landlord shall be responsible for
payment of any brokerage commission due in connection with this Amendment
pursuant to separate agreement.

 

3

 

9.                                      OFAC
List Representation.  As of the date specified below Tenant’s
signature, Tenant  hereby represents and warrants to Landlord,
that to Tenant’s actual knowledge without inquiry, neither Tenant nor any of
its affiliates is an entity or person: (a) that is listed in the annex to,
or is otherwise subject to the provisions of, Executive Order 13224 issued on
September 24, 2001 (“EO 13224”);
(b) whose name appears on the United States Treasury Department’s
Office of Foreign Assets Control (“OFAC”)  most current list of
“Specifically Designated National and Blocked Persons” (which list may be
published from time to time in various mediums including, but not limited to,
the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); or (c) who commits,
threatens to commit or supports “terrorism,” as that term is defined in EO
13224.

 

10.                               Subordination.  In accordance with and pursuant to Landlord’s
obligations under  Section 25  of the Current
Lease, Landlord agrees to provide to Tenant, within ten (10) business days
after mutual execution of this Amendment, or as soon thereafter as is
reasonably practicable, a subordination, non-disturbance and attornment
agreement from Landlord’s current Mortgagee, which subordination,
non-disturbance and attornment agreement shall be promptly recorded by Landlord
in the Official Records of Los Angeles County, California following execution
by all the parties thereto.

 

11.                               Miscellaneous.  This Amendment shall become effective only
upon full execution and  delivery of this Amendment by Landlord and
Tenant. This Amendment contains the parties’ entire agreement regarding the
subject matter covered by this Amendment, and supersedes all prior correspondence,
negotiations, and agreements, if any, whether oral or written, between the
parties concerning such subject matter. There are no contemporaneous oral
agreements, and there are no representations or warranties between the parties
not contained in this Amendment (or the exhibits hereto). This Amendment may be
executed in multiple counterparts, each of which shall be deemed an original,
and all of which together shall be construed as one and the same instrument.
Landlord and Tenant hereby agree to execute such further documents or
instruments as may be necessary or appropriate to carry out the intention of
this Amendment.

 

12.                               No
Defaults.

 

(a)                                  Landlord hereby
represents and warrants to Tenant that, to Landlord’s actual knowledge, as of
the Effective Date of this Amendment: (i) Tenant is not in default under
the Current Lease; and (ii) there are no events or circumstances which,
given the passage of time, would constitute a default under the Current Lease
by Tenant.

 

(b)                                 Tenant hereby
represents and warrants to Landlord that, to Tenant’s actual knowledge, as of
the Effective Date of this Amendment: (i) Landlord is not in default under
the Current Lease; and (ii) there are no events or circumstances which,
given the passage of time, would constitute a default under the Current Lease
by Landlord.

 

13.                               No
Further Modifications.  Except as modified by this Amendment, the
terms and  provisions of the Current Lease shall remain in full force and effect,
and the Current Lease, as modified by this Amendment, shall be binding upon and
shall inure to the benefit of the parties hereto, their successors and
permitted assigns.

 

[Remainder of page intentionally left blank.]

 

4

 

LANDLORD AND TENANT enter
into this Amendment as of the Effective Date specified below Landlord’s
signature.

 

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  LUI2 LA PLAYA, L.P.,

  
	
   

  	
  a Delaware limited
  partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  LUI2 LA Playa GP, LLC, a
  Delaware limited liability company, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Thomas G. Bacon

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Thomas G. Bacon

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Effective Date: May 11, 2009

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  GAMEFLY, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Hodess

  
	
   

  	
  Name: David Hodess

  
	
   

  	
  Title: President

  
						

 

 

EXHIBIT
A

 

MUST
TAKE SPACE

 

 

A-iEXHIBIT 10.1

                          AGREEMENT BOARD OF DIRECTORS

        THIS AGREEMENT is made and entered into effective as of December 3, 2009
(the  "Effective  Date"),  by  and  between  Atomic  Paintball,  Inc.,  a  Texas
corporation, ("Company") and Don Mark Dominey, an individual ("Director").

        1. Term

               (a) This  Agreement  shall  continue for a period of one (1) year
from the Effective Date and shall continue thereafter for as long as Director is
elected as Board Member or Member of the Board of Directors

        2. Position and Responsibilities

               (a) Position.  Company hereby retains  Director to serve as Board
Members. Director shall perform such duties and responsibilities as are normally
related to such position in accordance with Company's bylaws and applicable law,
including those services described on Exhibit A, (the "Services"),  and Director
hereby  agrees to use his best efforts to provide the Services.  Director  shall
not allow any other  person or  entity to  perform  any of the  Services  for or
instead of Director. Director shall comply with the statutes, rules, regulations
and  orders  of any  governmental  or  quasi-governmental  authority,  which are
applicable to the performance of the Services, and Company's rules, regulations,
and practices as they may from time-to-time be adopted or modified.

               (b)  Other  Activities.  Director  may  be  employed  by  another
company,  may serve on other  Boards of Directors  or Advisory  Boards,  and may
engage in any other  business  activity  (whether or not  pursued for  pecuniary
advantage),  as  long as  such  outside  activities  do not  violate  Director's
obligations  under this  Agreement or Director's  fiduciary  obligations  to the
shareholders.  The ownership of less than a 5% interest in an entity, by itself,
shall not constitute a violation of this duty.  Director represents that, to the
best of his knowledge,  Director has no outstanding agreement or obligation that
is in conflict with any of the provisions of this Agreement, and Director agrees
to use his best efforts to avoid or minimize any such conflict and agrees not to
enter into any  agreement  or  obligation  that could  create  such a  conflict,
without the approval of the Chief  Executive  Officer or a majority of the Board
of Directors.  If, at any time,  Director is required to make any  disclosure or
take any action that may conflict with any of the provisions of this  Agreement,
Director will promptly notify the Chief  Executive  Officer or the Board of such
obligation, prior to making such disclosure or taking such action.

               (c) No Conflict.  Except as set forth in Section  2(b),  Director
will not engage in any activity that creates an actual conflict of interest with
Company, regardless of whether such activity is prohibited by Company's conflict
of interest  guidelines  or this  Agreement,  and Director  agrees to notify the
Board of  Directors  before  engaging in any  activity  that creates a potential
conflict  of  interest  with  Company.  Specifically  and except as set forth in
Section 2(b) of this  Agreement,  Director shall not engage in any activity that
is in direct  competition with the Company or serve in any capacity  (including,
but not limited to, as an  employee,  consultant,  advisor or  director)  in any

Atomic Paintball, Inc.                 1                    Company Confidential

<PAGE>

company  or entity  that  competes  directly  with the  Company,  as  reasonably
determined by a majority of Company's  disinterested board members,  without the
approval of the Chief Executive Officer.

        3. Compensation and Benefits

               (a)  Director's  Fee.  In  consideration  of the  services  to be
rendered under this  Agreement,  Company shall pay Director a fee at the rate of
Five Hundred Dollars ($500) per quarter,  which shall be paid in accordance with
Company's  regularly  established  practices regarding the payment of Directors'
fees,  but in no event  later than 12 months  after the  Effective  Date of this
Agreement and each of its subsequent anniversaries, if any.

               (b) Stock and Stock Options.  Company  acknowledges that Director
is an owner of both Common and  Preferred  Stock and holds an option to purchase
stock in Company,  and that the rights  attributable  to these  securities  (the
"Securities")  shall not be  affected by the  execution  of this  Agreement.  In
addition,  in consideration of the services to be rendered under this Agreement,
Company  agrees to grant  Director  the  following  grant of  100,000  shares of
Company's Common Stock.

               (c)  Expenses.  The  Company  shall  reimburse  Director  for all
reasonable business expenses incurred in the performance of his duties hereunder
in accordance with Company's expense reimbursement guidelines.

               (d)  Indemnification.  Company will indemnify and defend Director
against any liability incurred in the performance of the Services to the fullest
extent authorized in Company's Articles of Incorporation, as amended, bylaws, as
amended and  applicable  law.  Company will  purchase  Director's  and Officer's
liability  insurance,  and Director  shall be entitled to the  protection of any
insurance  policies the Company  maintains  for the benefit of its Directors and
Officers against all costs,  charges and expenses in connection with any action,
suit or proceeding to which he may be made a party by reason of his  affiliation
with Company, its subsidiaries, or affiliates.

               (e) Records.  Director shall have reasonable  access to books and
records of Company,  as necessary to enable  Director to fulfill his obligations
as a Director of Company.

        4. Termination

               (a) Right to Terminate.  At any time,  Director may be removed as
Board Member as provided in  Company's  Articles of  Incorporation,  as amended,
bylaws,  as amended,  and applicable law. Director may resign as Board Member or
Director as provided in Company's Articles of Incorporation, as amended, bylaws,
as  amended,  and  applicable  law.  Notwithstanding  anything  to the  contrary
contained in or arising  from this  Agreement or any  statements,  policies,  or
practices of Company,  neither Director nor Company shall be required to provide
any advance notice or any reason or cause for  termination of Director's  status
as Board Member,  except as provided in Company's Articles of Incorporation,  as
amended, Company's bylaws, as amended, and applicable law.

               (b) Effect of  Termination  as Director.  Upon a  termination  of
Director's  status as a Director,  this Agreement will terminate;  Company shall
pay to Director all  compensation  and expenses to which Director is entitled up
through the date of  termination;  and Director  shall be entitled to his rights
under any other applicable law. Thereafter,  all of Company's  obligations under
this Agreement  shall cease,  except as provided in Sections 1(b),  3(b),  3(d),
3(e) and 5.

Atomic Paintball, Inc.                 2                    Company Confidential

<PAGE>

        5. Termination Obligations

               (a)  Director  agrees  that  all  property,   including,  without
limitation, all equipment, tangible proprietary information, documents, records,
notes,  contracts,  and computer-generated  materials provided to or prepared by
Director  Incident  to his  services  belong to  Company  and shall be  promptly
returned at the request of Company.

               (b) Upon termination of this Agreement,  Director shall be deemed
to have  resigned  from all  offices  then  held with  Company  by virtue of his
position as Board  Member,  except that  Director  shall  continue to serve as a
director if elected as a director by the  shareholders of Company as provided in
Company's Articles of Incorporation,  as amended,  Company's bylaws, as amended,
and  applicable  law.  Director  agrees that  following any  termination of this
Agreement,  he shall cooperate with Company in the winding up or transferring to
other  directors of any pending work and shall also  cooperate  with Company (to
the extent  allowed by law,  and at  Company's  expense)  in the  defense of any
action brought by any third party against Company that relates to the Services.

               (c) The Company and Director agree that their  obligations  under
this Section,  as well as Sections 1(b),  3(b),  3(d),  3(e), 4(b), and 7, shall
survive the termination of this Agreement.

        6. Nondisclosure Obligations

            Director  shall  maintain in confidence  and shall not,  directly or
indirectly,  disclose or use, either during or after the term of this Agreement,
any Proprietary  Information (as defined below),  confidential  information,  or
trade secrets belonging to Company, whether or not it is in written or permanent
form,  except to the extent necessary to perform the Services,  as required by a
lawful  government  order or subpoena,  or as  authorized in writing by Company.
These nondisclosure  obligations also apply to Proprietary Information belonging
to customers  and  suppliers  of Company,  and other third  parties,  learned by
Director as a result of performing the Services. "Proprietary Information" means
all information pertaining in any manner to the business of Company,  unless (i)
the  information is or becomes  publicly  known through  lawful means;  (ii) the
information was part of Director's  general  knowledge prior to his relationship
with  Company;  or (iii)  the  information  is  disclosed  to  Director  without
restriction by a third party who rightfully  possesses the  information  and did
not learn of it from Company.

        7. Dispute Resolution

               (a)  Jurisdiction  and Venue.  The  parties  agree that any suit,
action,  or proceeding  between  Director (and his  attorneys,  successors,  and
assigns) and Company (and its  affiliates,  shareholders,  directors,  officers,
employees, members, agents, successors,  attorneys, and assigns) relating to the
Services or the  termination  of those  Services  shall be brought in either the
United  States  District  Court for the State of Texas or in a Texas state court
and that the parties shall submit to the jurisdiction of such court. The parties
irrevocably  waive,  to the fullest  extent  permitted by law, any objection the
party may have to the  laying of venue for any such suit,  action or  proceeding
brought in such court.  If any one or more  provisions of this Section shall for
any reason be held invalid or  unenforceable,  it is the specific  intent of the
parties that such provisions  shall be modified to the minimum extent  necessary
to make it or its application valid and enforceable.

Atomic Paintball, Inc.                 3                    Company Confidential

<PAGE>

               (b) Attorneys' Fees. Should any litigation,  arbitration or other
proceeding be commenced between the parties concerning the rights or obligations
of the parties under this  Agreement,  the party  prevailing in such  proceeding
shall be  entitled,  in  addition to such other  relief as may be granted,  to a
reasonable sum as and for its attorneys'  fees in such  proceeding.  This amount
shall be  determined  by the court in such  proceeding  or in a separate  action
brought for that purpose. In addition to any amount received as attorneys' fees,
the prevailing party also shall be entitled to receive from the party held to be
liable,  an amount equal to the attorneys'  fees and costs incurred in enforcing
any  judgment  against  such party.  This  Section is  severable  from the other
provisions of this  Agreement and survives any judgment and is not deemed merged
into any judgment.

        8. Entire Agreement

            This Agreement is intended to be the final,  complete, and exclusive
statement  of the terms of  Director's  relationship  solely with respect to his
position as Board Member or Director for The Company.  This  Agreement  entirely
super  cedes  and  may  not  be   contradicted  by  evidence  of  any  prior  or
contemporaneous  statements or agreements pertaining to Director's  relationship
as Board Member or Director.  Agreements related to Director's  ownership of the
Securities are not affected by this Agreement.

        9. Amendments; Waivers

            This  Agreement  may not be  amended  except by a writing  signed by
Director  and by a duly  authorized  representative  of the  Company  other than
Director.  Failure  to  exercise  any  right  under  this  Agreement  shall  not
constitute a waiver of such right.

        10. Assignment

            Director  agrees  that  Director  will  not  assign  any  rights  or
obligations  under this Agreement,  with the exception of Director's  ability to
assign rights with respect to the  Securities.  Nothing in this Agreement  shall
prevent  the  consolidation,  merger  or  sale  of  Company  or a sale of all or
substantially all of its assets.

        11. Severability

            If any  provision  of this  Agreement  shall  be held by a court  or
arbitrator  to be  invalid,  unenforceable,  or void,  such  provision  shall be
enforced to fullest extent permitted by law, and the remainder of this Agreement
shall  remain in full force and  effect.  In the event  that the time  period or
scope of any  provision  is  declared  by a court  or  arbitrator  of  competent
jurisdiction  to exceed  the  maximum  time  period or scope  that such court or
arbitrator  deems  enforceable,  then such court or arbitrator  shall reduce the
time period or scope to the maximum time period or scope permitted by law.

        12. Governing Law

            This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.

Atomic Paintball, Inc.                 4                    Company Confidential

<PAGE>

13. Interpretation

            This Agreement shall be construed as a whole,  according to its fair
meaning,  and not in  favor  of or  against  any  party.  Captions  are used for
reference  purposes  only and  should be ignored  in the  interpretation  of the
Agreement.

        14. Binding Agreement

            Each party  represents  and warrants to the other that the person(s)
signing this  Agreement  below has authority to bind the party to this Agreement
and that this  Agreement  will  legally  bind both  Company and  Director.  This
Agreement  will be  binding  upon and  benefit  the  parties  and  their  heirs,
administrators,  executors, successors and permitted assigns. To the extent that
the practices,  policies,  or procedures of Company,  now or in the future,  are
inconsistent with the terms of this Agreement,  the provisions of this Agreement
shall control.  Any subsequent  change in Director's  duties or  compensation as
Board  Member  will not affect the  validity or scope of the  remainder  of this
Agreement.

        15. Director Acknowledgment

            Director  acknowledges  Director has had the  opportunity to consult
legal counsel concerning this Agreement,  that Director has read and understands
the  Agreement,  that  Director  is fully  aware of its legal  effect,  and that
Director  has entered  into it freely  based on his own  judgment and not on any
representations or promises other than those contained in this Agreement.

        16. Counterparts

            This Agreement may be executed in any number of  counterparts,  each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

        17. Date of Agreement

            The parties have duly executed  this  Agreement as of the date first
written above.

    Atomic Paintball, Inc.,            Director:
    a Texas corporation:

    By:
        ----------------------------     --------------------------------
        Name:  David Cutler                   Don Mark Dominey
        Title:  Director                      Title: Director

Atomic Paintball, Inc.                 5                    Company Confidential

<PAGE>

                                    EXHIBIT A

                             DESCRIPTION OF SERVICES

        Responsibilities as Director.  Director shall have all  responsibilities
of a Director of the Company imposed by Texas or applicable law, the Articles of
Incorporation,   as  amended,   and  Bylaws,  as  amended,  of  Company.   These
responsibilities shall include, but shall not be limited to, the following:

1.  Attendance. Use best efforts to attend scheduled meetings of Company's Board
of Directors;

2.  Act as a Fiduciary.  Represent the shareholders and the interests of Company
as a fiduciary; and

3.  Participation.  Participate  as a full voting  member of Company's  Board of
Directors  in  setting  overall  objectives,  approving  plans and  programs  of
operation, formulating general policies, offering advice and counsel, serving on
Board Committees, and reviewing management performance.

Atomic Paintball, Inc.                 6                    Company Confidential

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