Exhibit 10.7

Lease Amendment

Copart, Inc. - Wickland Oil Company Lease

2701 Waterfront Road, Martinez, CA

 

This amendment (the “Lease Amendment”) is to that certain “Standard
Industrial/Commercial Single-Tenant Lease - Net” (the “Standard Lease”) dated as
of December 23, 1998, by and between Wickland Oil Martinez L.P., a California
limited partnership, as “Lessor”, and Copart Inc., a California corporation, as
“Lessee”, as modified by that certain “Addendum I, Standard
Industrial/Commercial Single-Tenant Lease - Net” (the “Addendum I”) also dated
December 23, 1998, by and between Wickland Oil Martinez L.P., as “Lessor”, and
Copart, Inc., as “Lessee”.  The Standard Lease as modified by Addendum I shall
hereafter be referred to as the “Modified Lease”.

 

If any portion of the Modified Lease should conflict with the terms of this
Lease Amendment, the terms of this Lease Amendment shall control.  Defined terms
not otherwise defined in this Lease Amendment shall have the meanings ascribed
to such terms in the Modified Lease.  All references to the “Lease” in the
Modified Lease or this Lease Amendment shall mean the Modified Lease as further
modified by this Lease Amendment.

 

The Modified Lease is hereby amended as follows:

 

1.             Paragraph 1.1 of the Modified Lease is amended to define “Lessor”
as “Wickland Oil Company, a California corporation”.  Lessee acknowledges that
Wickland Oil Martinez L.P. has previously transferred and assigned the Premises
and its interest in the Modified Lease to Wickland Oil Company.

 

2.             Paragraph 1.2 of the Modified Lease is amended to read in its
entirety as follows:

 

“Premises:  That certain real property, including all improvements thereon or to
be otherwise provided by Lessor under the terms of this Lease, and commonly
known as 2701 Waterfront Road, located in the City of Martinez, County of Contra
Costa, State of California, and more particularly depicted on Exhibit “One”
attached to this Lease Amendment (“Premises”).  Exhibit “A” attached to the
Standard Lease is deleted in its entirety.  The term “Premises” includes all
off-site improvements and equipment connecting the Premises to utilities except
to the extent said improvements and equipment are or will be owned by the
utility providers to which they are connected.”

 

3.             Paragraph 1.3 of the Modified Lease is amended to read in its
entirety as follows:

 

“Term:  Twenty (20) years and zero months (“Original Term”) commencing on
January 1, 2001 (“Commencement Date”), and ending on December 31, 2020
(“Expiration Date”).”

 

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4.             The first sentence of Paragraph 1.5 of the Modified Lease is
amended to read in its entirety as follows:

 

“Base Rent:  $65,000 per month (initial “Base Rent”) payable in advance in U.S.
currency on the first (1st) day of each calendar month commencing on March 1,
2001.  (See also Paragraph 4)”.  Lessee and Lessor acknowledge that rent for the
first two months of the Original Term was $54,886.00 per month, and acknowledge
that Lessee has already paid said rent.

 

5.             Paragraph 1.6 of the Modified Lease is deleted in its entirety.

 

6.             Paragraph 1.12 of the Modified Lease is amended to read in its
entirety as follows:

 

“Addenda, Exhibits and Amendments.  This Lease consists of the Modified Lease as
amended by the Lease Amendment.”

 

7.             Paragraph 2.2 is amended to read in its entirety as follows:

 

“Condition.  Lessor delivered the Premises to Lessee as of January 1, 2001 (the
“Start Date”), and Lessee accepted the Premises as of that date.  The Parties
acknowledge and agree that the Lessor Improvements were substantially completed
as of that date.  Lessee’s acceptance of the Premises in no way waives or
releases Lessor’s obligation hereunder to complete the Lessor Improvements as
soon as reasonably possible by finishing and/or rectifying the “punch list”
items identified on Exhibit “Two” to the Lease Amendment.  Lessee shall provide
Lessor with reasonable access to the Premises to so complete the Lessor
Improvements.  Lessee’s acceptance of the Premises is no way detracts from or
alters Lessor’s warranties and representations as contained in Paragraph 56 of
the Lease”

 

8.             The first sentence of Paragraph 2.3 of the Modified Lease is
amended to read in its entirety as follows:

 

“Compliance.  Lessor warrants that the completed Lessor Improvements shall
comply with all applicable laws, covenants or restrictions of record, building
codes, regulations, ordinances and governmental permits and entitlements
(“Applicable Requirements”) in effect on the Start Date.”

 

9.             The current Lessor’s address is:

 

Wickland Oil Company

3610 American River Drive Suite 140

Sacramento, California 95864

 

P.O. Box 13648

Sacramento, California 95853

 

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10.           The introductory sentence of Addendum I is amended to read in its
entirety as follows:

 

“This Addendum I to the Standard Industrial/Commercial Single-Tenant Lease - Net
(the “Addendum I”) is attached to, made a part of, and incorporated into that
certain Standard Industrial/Commercial Single-Tenant Lease - Net (the “Standard
Lease”) dated December 23, 1998, by and between Wickland Oil Company, a
California corporation, as Lessor (“Lessor”), and Copart, Inc., a California
corporation, as Lessee (“Lessee”), covering the Premises identified in Paragraph
1.2 of the Lease.”

 

11.           Paragraph 50(A) of the Modified Lease is deleted in its entirety.

 

12.           Lessor and Lessee each acknowledge and agree that all other
conditions precedent contained in Paragraph 50 were timely satisfied or waived
by the Parties.  Lessee and Lessor each agree that all Lease termination
requirements and options to cancel the Lease contained in Paragraph 50 have
lapsed, and that the Lease remains in full force and effect.  The Parties
mutually acknowledge and confirm that the Selby I Lease is completely null and
void and that neither Lessor nor Lessor’s predecessor in interest has any
remaining obligation whatsoever (under the Lease or otherwise) to execute the
Selby II Lease.

 

13.           Paragraph 51 of the Modified Lease is amended to read in its
entirety as follows:

 

“Commencement Date.  The Commencement Date of the Original Term is January 1,
2001.”

 

14.           Subparagraph 52(A) of the Modified Lease is amended to read in its
entirety as follows:

 

“Initial Base Rent.  As specified in Paragraph 1.5 of this Lease, the initial
Base Rent for the Premises shall be $65,000 per month.  The Base Rent shall be
subject to adjustment as specified in Subparagraphs 52(B) and 52(C) set forth
below.”

 

15.           Subparagraph 52(B) of the Modified Lease is amended to read in its
entirety as follows:

 

“CPI Adjustment.  For purposes of this Subparagraph 52(B), each twenty-four
month period of the Lease Term (the Original Term as extended by any duly
exercised Lease Extension Options) commencing on the Commencement Date shall
constitute an “Adjustment Period.”  Except as provided otherwise in Subparagraph
52(C), commencing on the first day of the twenty-fifth (25th) month of the Lease
Term and every twenty-four months thereafter (each an “Adjustment Date”), the
Base Rent in effect immediately prior to each such Adjustment Date shall be
increased by (i) the percentage increase, if any, shown by the CPI (as defined
below) most recently published in the 12th

 

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24th month of such Adjustment Period; plus (ii) the percentage increase, if any,
shown by the CPI most recently published at the 1st month of the Adjustment
Period as compared to the CPI most recently published at the 12th month of the
Adjustment Period.  Provided, however, in no event shall Base Rent decrease at
each Adjustment Date below Base Rent then in effect or increase at each
Adjustment Date more than three percent (3%) per year, based on the comparisons
made at (i) and (ii) above.

 

The term “CPI” shall mean the Consumer Price Index in the column for “All Items”
in the table entitled “Consumer Price Index for All Urban Consumers:  U.S. City
Average, (1982-84 = 100),” published by the Bureau of Labor Statistics of the
United States Department of Labor.  If the Bureau of Labor Statistics changes
the base period (now 1982-84 = 100), or the composition of CPI, the new index
numbers shall be substituted for the old index numbers in making the above
computations.  If the CPI is discontinued, the parties shall accept comparable
statistics on the purchasing power of the consumer dollar, as published at the
time of such discontinuation, by a responsible financial periodical of
recognized authority, to be chosen by Lessor and reasonably accepted by Lessee.”

 

16.           A Subparagraph 52(C) is added to the Lease reading as follows:

 

“Fair Market Rental Adjustment.  In addition to the CPI Adjustments required by
Subparagraph 52(B) of the Lease, a “Fair Market Rental Adjustment” shall be made
to the Base Rent effective at the beginning of years 11 and 16 of the Original
Term, and the first day of any duly exercised Lease Extension Option (each such
date hereafter referred to as a “Fair Market Rental Adjustment Date”).  In the
event that the Lease requires a CPI Adjustment and a Fair Market Rental
Adjustment on the same date, only the Fair Market Rental Adjustment required by
this Subparagraph 52(C) shall be made.

 

For purposes of this Subparagraph 52(C), “Fair Market Rental” shall be
determined in accordance with generally accepted appraisal principles and shall
be the market rent payable at the time for comparable properties with similar
acreage, Lessor Improvements (excluding the Building and Lessee Improvements)
and zoning, considering both the location of the Premises and Lessee’s use
thereof.

 

Commencing on or about the date one year prior to a Fair Market Rental
Adjustment Date, the Lessor and Lessee will attempt to determine by agreement
the Fair Market Rental which will take effect on said Fair Market Rental
Adjustment Date.  If the parties are unable to agree upon such a Fair Market
Rental within sixty (60) days, each party will, within thirty (30) days
thereafter at a meeting duly noticed in writing by Lessor, exchange each other’s
written estimate of monthly Fair Market Rental.  If the higher of the two (2)
estimates does not exceed the lower of the two (2) estimates by more than ten
percent (10%) of the lower estimate, the Fair Market Rental for the Premises
which will take effect on the Fair Market Rental Adjustment Date shall be ninety
percent (90%) of the average of the two estimates.  If the higher estimate
exceeds the lower estimate by more than ten percent (10%), each party shall,
within ten (10) days after the date of exchange of each other’s estimate of the
Fair Market Rental, designate an independent

 

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exchange of each other’s estimate of Fair Market Rental, designate an
independent appraiser who is a member of the American Institute of Real Estate
Appraisers (MAI) with at least five (5) years’ experience in
commercial/industrial appraisals in the San Francisco Bay Area.  The two (2) MAI
appraisers so selected shall select a third MAI appraiser with similar
qualifications who shall be an impartial person, unrelated or unaffiliated with
Lessor, Lessee and the other appraisers.  The third appraiser shall then
determine the Fair Market Rental for the Premises, and his determination shall
be binding on both Parties.  If one Party fails to designate an appraiser as
provided for above, then the other Party’s appraiser shall make his
determination of Fair Market Rental which shall be binding on both Parties.  If
a third appraiser can not be agreed upon, either Party to this Lease can, by
giving ten (10) days’ prior notice to the other Party, file a petition with the
American Arbitration Association solely for the purpose of selecting a third
appraiser who meets the qualifications set forth in this Subparagraph 52(C). 
Each Party shall compensate the appraiser designated by it and any compensation
payable to the third appraiser (and the American Arbitration Association, if
utilized) shall be shared equally by Lessor and Lessee.”

 

17.           Lessor and Lessee agree as follows with respect to Paragraph 53 of
the Modified Lease:

 

(a)           Except for the “punch list” items set forth on Exhibit Two to the
Lease Amendment, the “Site Work Preparation” required by Subparagraph 53(A) and
the “Site Improvements” required by Subparagraph 53(B) have been completed and
accepted by Lessor.  All items identified on Exhibit Two shall be completed by
Lessor in conformity with Paragraph 2.2 of the Lease.  Lessor acknowledges that
significant changes to the Drainage Plan occurred during the construction
process, and that said changes were approved by Lessor and Lessee.

 

(b)           Subparagraph 53(D) of the Modified Lease is deleted in its
entirety.

 

18.           With respect to Subparagraph 54(B) of the Modified Lease, Lessor
acknowledges and agrees that all the conditions precedent to Lessee’s
construction of the Lessee Improvements have been satisfied or waived.

 

19.           Paragraph 55 of the Modified Lease is deleted in its entirety, and
the Perimeter Fence reimbursement specified therein is hereby waived by Lessee.

 

20.           The current Paragraph 59 of the Modified Lease is deleted and
replaced with a new Paragraph 59 reading in its entirety as follows:

 

“Extension Options.  Lessee may, at Lessee’s option, extend the Original Term of
this Lease for three (3) additional periods of five (5) years each (the “Lease
Extension Options”), subject to all the provisions of this Lease, including but
not limited to the provisions for Base Rent adjustment contained in
Subparagraphs 52(B) and 52(C).  Failure to exercise a Lease Extension Option
shall nullify all subsequent Lease Extension

 

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Options.  Irrevocable notice of Lessee’s exercise of a Lease Extension Option
must be in writing and delivered to Lessor by Lessee by a date not more than
eighteen (18) months and not less than twelve (12) months before the date upon
which the Lease Extension Option being exercised is scheduled to commence.”

 

21.           The Parties acknowledge that the lot line adjustment referenced in
Paragraph 62 of the Modified Lease has occurred and that Wickland Oil Company is
the record owner of the Retained Parcel.

 

21.           Photocopies of the final recorded CC&Rs and Shore Easements
referenced in Paragraph 63 of the Modified Lease are attached to this Lease
Amendment as Exhibit “Three”.

 

22.           With respect to Paragraph 65 of the Modified Lease, Lessee hereby
confirms and acknowledges that Lessee has surrendered all rights to the real
property located in Crockett, California which had been leased by Wickland Oil
Company to Lessee pursuant to the terms of the Selby I Lease.

 

23.           A Paragraph 66 is added to the Lease reading as follows:

 

“Miscellaneous Matters.  Lessor and Lessee each acknowledge approval of the
memorandum dated July 20, 2000 from John Margowski to Mike Carson and Paul Styer
allocating and confirming responsibility for certain items relating to the
Premises.  A copy of said memorandum is attached as Exhibit “Four” to this Lease
Amendment.

 

Within two weeks after this Lease Amendment has been executed by Lessee and
Lessor, Lessee shall, pursuant to Paragraph 50(C) and as orally agreed upon on
June 1, 2000, remit to Lessor the sum of $550,000 as compensation for Lessee’s
negotiated share of excess costs incurred by Lessor in constructing the Lessor
Improvements.  In addition, Lessor and Lessee acknowledge and agree that the
cost of complying with Condition No. XVIII (K) of City of Martinez Conditional
Use Permit No. 99-05 (the “Skateboard Park Condition) shall be shared evenly by
Lessor and Lessee.  All payments to the City of Martinez pursuant to the
Skateboard Park Condition shall be made by Lessor.  Lessee shall reimburse
Lessor for fifty percent (50%) of each said payment within two weeks after
Lessor has made said payment to the City of Martinez and thereafter delivered an
invoice for the reimbursement amount to Lessee.

 

Lessor shall be solely responsible for fulfilling the following commitments made
during the permitting process for the Copart auto auction facility:

 

(i)            Wetland easement and fee simple dedication commitments made to
the East Bay Regional Parks District.

 

(ii)           Mitigation fee commitment in the amount of $15,000 made to the
East Bay Regional Parks District.

 

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(iii)          Mitigation fee commitment in the amount of $20,000 made to the
U.S. Fish and Wildlife Department.

 

Except as specifically amended herein, the provisions of the Modified Lease
shall remain in full force and effect.

 

 

Lessor:

 

 

Date:  Feb 26, 2001

Wickland Oil Company,
a California Corporation

 

 

 

By:

/s/ Daniel E. Hall

 

 

Its:

President

 

 

 

 

 

Lessee:

 

 

Date:  Feb 28, 2001

Copart, Inc.,
a California Corporation

 

 

 

By:

/s/ Paul A. Styer

 

 

Its:

Secretary

 

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AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

 

STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE – NET

 

(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)

 

1.                                      Basic Provisions (“Basic Provisions”).

 

1.1.          Parties:  This Lease (“Lease”), dated for reference purposes only,
December 23, 1998, is made by and between Wickland Oil Martinez, L.P. a
California limited partnership (“Lessor”) and Copart Inc., a California
corporation

 

(“Lessee”), (collectively the “Parties,” or individually a “Party”).

 

1.2           Premises:  That certain real property, including all Improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as address to follow, located in the County of Contra Contra, State of
California, and generally described as (describe briefly the nature of the
property and, if applicable, the “Project”, if the property is located within a
Project) approx. forty (40) acres of industrial land located in the City of
Martinez, California, generally depicted on Exhibit “A” to the Addendum
(“Premises”).  (See also Paragraph 2)

 

1.3           Term:  Ten (10) years and zero months (“Original Term”) commencing
on or about July 1, 2000 (“Commencement Date”) see Addendum, and ending Ten (10)
Years thereafter (“Expiration Date”).  (See also Paragraph 3)

 

1.4           Early Possession:  n/a (“Early Possession Date”).  (See also
Paragraphs 3.2 and 3.3)

 

1.5           Base Rent:  $54,886.00 per month (“Base Rent”), payable on the
first (1st) day of each month commencing upon substantial completion of Lessor’s
Improvements and satisfaction of the conditions set forth in the Addendum.  (See
also Paragraph 4)

ý  If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.

 

1.6           Base Rent Paid Upon Commencement:  $ 54,886.00 as Base Rent for
the period which commences upon substantial completion of Lessor’s Improvements
and satisfaction of the conditions set forth in the Addendum

 

1.7           Security Deposit:  $54,886.00 (“Security Deposit”).  (See also
Paragraph 5)

 

1.8           Agreed Use:  storage, distribution and auction of vehicles,
including damaged vehicles  (See also Paragraph 6)

 

1.9           Insuring Party:  Lessee is the “Insuring Party” unless otherwise
stated herein.  (See also Paragraph 8)

 

1.10         Real Estate Brokers:  (See also Paragraph 15)

 

(a) Representation:  The following real estate brokers (collectively, the
“Brokers”) and brokerage relationships exist in this transaction (check
applicable boxes):

o                                                         represents Lessor
exclusively (“Lessor’s Broker”);

o                                                         represents Lessee
exclusively (“Lessee’s Broker”); or

ý  Colliers International represents both Lessor and Lessee (“Dual Agency”).

 

(b) Payment to Brokers: Within five (5) days of Lessee’s occupancy of the
Premises, Lessor shall pay to the Broker the fee agreed to in their separate
written agreement.

 

1.12         Addenda and Exhibits.  Attached hereto is an Addendum or Addenda
consisting of Paragraphs 50 through 65 and Exhibits A – E all of which
constitute a part of this Lease.

 

2.                                      Premises.

 

2.1           Letting.  Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease.  Unless otherwise
provided herein, any statement of size set forth in this Lease, or that may have
been used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less.

 

2.2           Condition.  Lessor shall deliver the Premises to Lessee free of
debris on the Commencement Date (“Start Date”).  If a non-compliance with said
warranty exists as of the Start Date, Lessor shall, as Lessor’s sole obligation
with respect to such matter, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor’s expense.

 

2.3           Compliance.  Lessor warrants that the Lessor Improvements on the
Premises (see Addendum) comply with all applicable laws, covenants or
restrictions of record, building codes, regulations and ordinances (“Applicable
Requirements”) in effect on the Start Date.  Said warranty does not apply to the
use to which Lessee will put the Premises or to any Alterations or Utility
Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee.  If
the Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the same
at Lessor’s expense.  If the Applicable Requirements are hereafter changed (as
opposed to being in existence at the Start Date, which is addressed in Paragraph
6.2(e) below) so as to require during the term of this Lease the construction of
an addition to or an alteration of Lessor Improvements or the Building,
(“Capital Expenditure”), Lessor and Lessee shall allocate the cost of such work
as follows:

 

Initials

 /s/ DEH/PAS

 

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Lessee shall be fully responsible for the cost thereof provided, however that if
such Capital Expenditure is required during the last two (2) years of this Lease
??? the cost thereof exceeds six (6) months’ Base Rent Lessee may instead
terminate this Lease unless Lessor notifies Lessee, in writing, within ten (10)
days after receipt of Lessee’s termination notice that Lessor has elected to pay
the difference between the actual cost thereof and the amount equal to six (6)
months’ Base Rent.  If Lessee elects termination, Lessee shall immediately cease
the use of the Premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days
thereafter.  Such termination date shall, however, in no event be earlier than
the last day that Lessee could legally utilize the Premises without commencing
such Capital Expenditure.

 

(c) Notwithstanding the above, the provisions concerning Capital Expenditures
are intended to apply only to non-voluntary, unexpected, and now Applicable
Requirements.  If the Capital Expenditures are instead triggered by Lessee as a
result of an actual or proposed change in use, change in intensity of use, or
modification to the Premises then, and in that event, Lessee shall be fully
responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.

 

2.4           Acknowledgements.  Lessee acknowledges that: (a) it has been
advised by Lessor and/or Brokers to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Lessee’s intended use;
(b) Lessee has made such investigation as it deems necessary with reference to
such matters and assumes all responsibility therefor as the same relate to its
occupancy of the Premises; and (c) neither Lessor, Lessor’s agents, nor any
Broker has made any oral or written representations or warranties with respect
to said matters other than as set forth in this Lease.  In addition, Lessor
acknowledges that: (a) Broker has made no representations, promises or
warranties concerning Lessee’s ability to honor the Lease or suitability to
occupy the Premises; and (b) it is Lessor’s sole responsibility to investigate
the financial capability and/or suitability of all proposed tenants.

 

2.5           Lessee as Prior Owner/Occupant.  The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises.  In such event, Lessee
shall be responsible for any necessary corrective work.

 

3.                                      Term.  See Addendum

 

3.1           Term.  The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.

 

3.4           Lease Compliance.  Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5).  Pending delivery of such
evidence, Lessee shall be required to perform all of its obligations under this
Lease from and after the Start Date, including the payment of Rent,
notwithstanding Lessor’s election to withhold possession pending receipt of such
evidence of insurance.  Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.

 

4.                                      Rent.  See Addendum

 

4.1           Rent Defined.  All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be rent
(“Rent”).

 

4.2           Payment.  Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease), on or before the day on which it is
due.  Rent for any period during the term hereof which is for less than one (1)
full calendar month shall be prorated based upon the actual number of days of
said month.  Payment of Rent shall be made to Lessor at its address stated
herein or to such other persons or place as Lessor may from time to time
designate in writing.  Acceptance of a payment which is less than the amount
then due shall not be a waiver of Lessor’s rights to the balance of such Rent,
regardless of Lessor’s endorsement of any check so stating.

 

5.                                      Security Deposit.  Lessee shall deposit
with Lessor upon execution hereof the Security Deposit as security for Lessee’s
faithful performance of its obligations under this Lease.  If Lessee fails to
pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or
retain all or any portion of said Security Deposit for the payment of any amount
due Lessor or to reimburse or compensate Lessor for any liability, expense, loss
or damage which Lessor may suffer or incur by reason thereof.  If Lessor uses or
applies all or any portion of said Security Deposit, Lessee shall within ten
(10) days after written request therefor deposit monies with Lessor sufficient
to restore said Security Deposit to the full amount required by this Lease.  If
the Base Rent increases during the term of this Lease, Lessee shall, upon
written request from Lessor, deposit additional monies with Lessor so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the increased Base Rent as the initial Security Deposit bore to the initial
Base Rent.  Should the Agreed Use be amended to accommodate a material change in
the business of Lessee or to accommodate a sublessee or assignee, Lessor shall
have the right to increase the Security Deposit to the extent necessary, in
Lessor’s reasonable judgment, to account for any increased wear and tear that
the Premises may suffer as a result thereof.  If a change in control of Lessee
occurs during this Lease and following such change the financial condition of
Lessee is, in Lessor’s reasonable judgment, significantly reduced, Lessee shall
deposit such additional monies with Lessor as shall be sufficient to cause the
Security Deposit to be at a commercially reasonable level based on said change
in financial condition.  Lessor shall not be required to keep the Security
Deposit separate from its general accounts.  Within fourteen (14) days after the
expiration or termination of this Lease, if Lessor elects to apply the Security
Deposit only to unpaid Rent, and otherwise within thirty (30) days after the
Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall
return that portion of the Security Deposit not used or applied by Lessor.  No
part of the Security Deposit shall be considered to be held in trust, to bear
interest or to be prepayment for any monies to be paid by Lessee under this
Lease.

 

6.                                      Use.

 

6.1           Use.  Lessee shall use and occupy the Premises only for the Agreed
Use, and for no other purpose.  Lessee shall not use or permit the use of the
Premises in a manner that is unlawful, creates damage, waste or a nuisance, or
that disturbs owners and/or occupants of, or causes damage to neighboring
properties.

 

6.2           Hazardous Substances.

 

(a) Reportable Uses Require Consent.  The term “Hazardous Substance” as used in
this Lease shall mean any product, substance, or waste whose presence, use,
manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either:
(i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory.  Hazardous Substances shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products
or fractions thereof.  Lessee shall not engage in any activity in or on the
Premises which constitutes a Reportable Use of Hazardous Substances without the
express prior written consent of Lessor and timely compliance (at Lessee’s
expense) with all Applicable Requirements.  “Reportable Use” shall mean (i) the
Installation or use of any above or below ground storage

 

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tank, (ii) the generation, possession, storage, us?? transportation, or disposal
of a Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required ?? filed with, any
governmental authority, and/or (iii) the ?? at the Premises of a Hazardous
Substance with respect to which any Applicable Requirements requires that a
notice be given to persons entering or occupying the Premises or neighboring
properties.  Notwithstanding the foregoing, Lessee may use any ordinary and
customary materials reasonably required to be used in the normal course of the
Agreed Use, so long as such use is in compliance with all Applicable
Requirements, is not a Reportable Use, and does not expose the Premises or
neighboring property to any meaningful risk of contamination or damage or expose
Lessor to any liability therefor.  In addition, Lessor may condition its consent
to any Reportable Use upon receiving such additional assurances as Lessor
reasonably deems necessary to protect itself, the public, the Premises and/or
the environment against damage, contamination, injury and/or liability,
including, but not limited to, the installation (and removal on or before Lease
expiration or termination) of protective modifications (such as concrete
encasements) and/or increasing the Security Deposit.

 

(b) Duty to Inform Lessor.  If Lessee knows, or has reasonable cause to believe,
that a Hazardous Substance has come to be located in, on, under or about the
Premises, other than as previously consented to by Lessor, Lessee shall
immediately give written notice of such fact to Lessor, and provide Lessor with
a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.

 

(c) Lessee Remediation.  Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under, or about the Premises
(including through the plumbing or sanitary sewer system) and shall promptly, at
Lessee’s expense, take all investigatory and/or remedial action reasonably
recommended, whether or not formally ordered or required, for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of the
Premises or neighboring properties, that was caused or materially contributed to
by Lessee, or pertaining to or involving any Hazardous Substance brought onto
the Premises during the term of this Lease, by or for Lessee, or any third
party.

 

(d) Lessee Indemnification.  Lessee shall indemnify, defend and hold Lessor, its
agents, employees, lenders and ground lessor, if any, harmless from and against
any and all loss of rents and/or damages, liabilities, judgments, claims,
expenses, penalties, and attorneys’ and consultants’ fees arising out of or
involving any Hazardous Substance brought onto the Premises by or for Lessee,
its agents or employee in violation of the Applicable Requirements, (provided,
however, that Lessee shall have no liability under this Lease with respect to
underground migration of any Hazardous Substance under the Premises from
adjacent properties).  Lessee’s obligations shall include, but not be limited
to, the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation,
removal, remediation, restoration and/or abatement, and shall survive the
expiration or termination of this Lease.  No termination, cancellation or
release agreement entered into by Lessor and Lessee shall release Lessee from
its obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.

 

(e) Lessor Indemnification.  Lessor and its successors and assigns shall
indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused by the negligence or
willful misconduct of Lessor, its agents or employees.  Lessor’s obligations, as
and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.

 

(f) Investigations and Remediations.  Lessor shall retain the responsibility and
pay for any investigations or remediation measures required by governmental
entities having jurisdiction with respect to the existence of Hazardous
Substances on the Premises prior to the Start Date, unless such remediation
measure is required as a result of Lessee’s use (including “Alterations”, as
defined in Paragraph 7.3(a) below) of the Premises, in which event Lessee shall
be responsible for such payment.  Lessee shall cooperate fully in any such
activities at the request of Lessor, including allowing Lessor and Lessor’s
agents to have reasonable access to the Premises at reasonable times in order to
carry out Lessor’s investigative and remedial responsibilities.

 

(g) Lessor Termination Option.  If a Hazardous Substance Condition occurs during
the term of this Lease, where such condition renders all or substantially all of
the Premises untenantable, unless Lessee is legally responsible therefor (in
which case Lessee shall make the investigation and remediation thereof required
by the Applicable Requirements and this Lease shall continue in full force and
effect, but subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph 13),
Lessor may, at Lessor’s option, either (i) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably possible at
Lessor’s expense, in which event this Lease shall continue in full force and
effect, or (ii) if the estimated cost to remediate such condition exceeds Five
Million Dollars ($5,000,000), give written notice to Lessee, within thirty (30)
days after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition, of Lessor’s desire to terminate this Lease as of the date
sixty (60) days following the date of such notice.  In the event Lessor elects
to give a termination notice, Lessee may, within ten (10) days thereafter, give
written notice to Lessor of Lessee’s commitment to pay the amount by which the
cost of the remediation of such Hazardous Substance Condition exceeds Five
Million Dollars ($5,000,000).  Lessee shall provide Lessor with said funds or
satisfactory assurance thereof within thirty (30) days following such
commitment.  In such event, this Lease shall continue in full force and effect,
and Lessor shall proceed to make such remediation as soon as reasonably possible
after the required funds are available.  If Lessee does not give such notice and
provide the required funds or assurance thereof within the time provided, this
Lease shall terminate as of the date specified in Lessor’s notice of
termination.  In the event that Lessor terminates this Lease pursuant to the
terms of this paragraph, or in the event that a governmental agency or authority
orders the premises vacated longer than ninety (90) days, as a result of an
unabated Hazardous Substance Condition, Lessor shall reimburse Lessee for the
unamortized cost of Lessee improvements placed upon the Premises.

 

6.3           Lessee’s Compliance with Applicable Requirements.  Except as
otherwise provided in this Lease, Lessee shall, at Lessee’s sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor’s engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date.  Lessee
shall, within ten (10) days after receipt of Lessor’s written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee’s compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable Requirements.

 

6.4           Inspection; Compliance.  Lessor and Lessor’s “Lender” (as defined
in Paragraph 30 below) and consultants shall have the right to enter into
Premises at any time, in the case of an emergency, and otherwise at reasonable
times, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease.  The cost of any such
inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or a contamination is found to exist or be imminent, or the
inspection is requested or ordered by a governmental authority.  In such case,
Lessee shall upon request reimburse Lessor for the cost of such inspections, so
long as such inspection is reasonably related to the violation or contamination.

 

7.                                      Maintenance; Repairs, Utility
Installations; Trade Fixtures and Alterations.

 

7.1           Lessee’s Obligations.

 

(a) In General.  Subject to the provisions of Paragraph 2.2 (Condition), 2.3
(Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2
(Lessor’s Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee
shall, at Lessee’s sole expense, keep the Premises, Utility Installations, and
Alterations in good order, condition and repair.  (whether or not the portion of
the Premises requiring repairs, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee’s use, any prior use, the elements or the
age of such portion of the Premises), including, but not limited to, all
equipment or facilities, such as plumbing, heating, ventilating,
air-conditioning, electrical, lighting facilities, boilers, pressure vessels,
fire protection system, fixtures, walls (interior and exterior), foundations,
ceilings, roofs, floors, windows, doors, plate glass, skylights, landscaping,
driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways
located in, on, or adjacent to the Premises.  Lessee, in keeping the Premises in
good order, condition and repair, shall exercise and perform good maintenance
practices.  Lessee’s obligations shall include restorations, replacements or
renewals when necessary to keep the Premises and all improvements thereon or a
part thereof in good order, condition and state of repair.  Lessee shall, during
the term of this Lease, keep the exterior appearance of the Building in a
first-class condition consistent with the exterior appearance of other similar
facilities of comparable age and size in the vicinity, including, when
necessary, the exterior repainting of the Building.

 

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7.2                                 Lessor’s Obligations.  Subject to the
provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance); 9 (Damage or
Destruction) and 14 (Condemnation), it is intended by the Parties hereto that
Lessor have no obligation, in any manner whatsoever, to repair and maintain the
Premises, or the equipment therein, all of which obligations are intended to be
that of the Lessee.  It is the intention of the Parties that the terms of this
Lease govern the respective obligations of the Parties as to maintenance and
repair of the Premises, and they expressly waive the benefit of any statute now
or hereafter in effect to the extent it is inconsistent with the terms of this
Lease.

 

7.3                                 Utility Installations; Trade Fixtures;
Alterations.

 

(a) Definitions; Consent Required.  The term “Utility Installations” refers to
all floor and window coverings, air lines, power panels, electrical
distribution, security and fire protection systems, communication systems,
lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. 
The term “Trade Fixtures” shall mean Lessee’s machinery and equipment that can
be removed without doing material damage to the Premises.  The term
“Alterations” shall mean any modification of the improvements, other than
Utility Installations or Trade Fixtures, whether by addition or deletion. 
“Lessee Owned Alterations and/or Utility Installations” are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a).  Lessee shall not make any Alterations
or Utility Installations to the Premises without Lessor’s prior written
consent.  Lessee may, however, make non-structural Utility Installations to the
interior of the Premises (excluding the roof) without such consent but upon
notice to Lessor, as long as they are not visible from the outside, do not
involve puncturing, relocating or removing the roof or any existing walls, and
the cumulative cost thereof during this Lease as extended does not exceed
$50,000 in the aggregate or $10,000 in any one year.

 

(b) Consent.  Any Alterations or Utility Installations that Lessee shall desire
to make and which require the consent of the Lessor shall be presented to Lessor
in written form with detailed plans.  Consent shall be deemed conditioned upon
Lessee’s:  (i) acquiring all applicable governmental permits, (ii) furnishing
Lessor with copies of both the permits and the plans and specifications prior to
commencement of the work, and (iii) compliance with all conditions of said
permits and other Applicable Requirements in a prompt and expeditious manner. 
Any Alterations or Utility Installations shall be performed in a workmanlike
manner with good and sufficient materials.  Lessee shall promptly upon
completion furnish Lessor with as-built plans and specifications.

 

(c) Indemnification.  Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanic’s or
materialmen’s lien against the Premises or any interest therein.  Lessee shall
give Lessor not less than ten (10) days’ notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility.  If Lessee shall contest the validity of any such
lien, claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof.  If Lessor shall require, Lessee shall furnish a surety bond in an
amount equal to one and one-half times the amount of such contested lien, claim
or demand, indemnifying Lessor against liability for the same.  If Lessor elects
to participate in any such action, Lessee shall pay Lessor’s attorneys’ fees and
costs.

 

7.4                                 Ownership; Removal; Surrender; and
Restoration.

 

(a) Ownership.  All Alterations and Utility Installations made by Lessee shall
be the property of Lessee, but considered a part of the Premises.  Lessor may,
at any time, elect in writing to be the owner of all or any specified part of
the Lessee Owned Alterations and Utility Installations.  All Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of
this Lease, become the property of Lessor and be surrendered by Lessee with the
Premises.

 

(c) Surrender/Restoration.  Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear excepted. 
“Ordinary wear and tear” shall not include any damage or deterioration that
would have been prevented by good maintenance practice.  Lessee shall repair any
damage occasioned by the installation, maintenance or removal of Trade Fixtures,
Lessee Owned Alterations and/or Utility Installations, furnishings, and
equipment as well as the removal of any storage tank installed by or for Lessee,
and the removal, replacement, or remediation of any soil, material or
groundwater contaminated by Lessee.  Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee.  The failure by Lessee to timely vacate
the Premises pursuant to this Paragraph 7.4(c) without the express written
consent of Lessor shall constitute a holdover under the provisions of Paragraph
26 below.

 

8.                                      Insurance; Indemnity.

 

8.1                                 Payment For Insurance.  Lessee shall pay for
all insurance required under Paragraph 8 except to the extent of the cost
attributable to liability insurance carried by Lessor under Paragraph 8.2(b) in
excess of $2,000,000 per occurrence.  Premiums for policy periods commencing
prior to or extending beyond the Lease term shall be prorated to correspond to
the Lease term.  Payment shall be made by Lessee to Lessor within ten (10) days
following receipt of an invoice.

 

8.2                                 Liability Insurance.

 

(a) Carried by Lessee.  Lessee shall obtain and keep in force a Commercial
General Liability Policy of Insurance protecting Lessee and Lessor against
claims for bodily injury, personal injury and property damage based upon or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto.  Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $2,000,000 per
occurrence with an “Additional Insured-Managers or Lessors of Premises
Endorsement”.  The Policy shall not contain any intra-insured exclusions as
between insured persons or organizations, but shall include coverage for
liability assumed under this Lease as an ‘insured contract’ for the performance
of Lessee’s indemnity obligations under this Lease.  The limits of said
insurance shall not, however, limit the liability of Lessee nor relieve Lessee
of any obligation hereunder.  All insurance carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.

 

8.3                                 Property Insurance - Building, Improvements
and Rental Value.

 

(a) Building and Improvements.  The Insuring Party shall obtain and keep in
force a policy or policies in the name of Lessor, with loss payable to Lessor,
any groundlessor, and to any Lender(s) insuring loss or damage to the Premises. 
The amount of such insurance shall be equal to the full replacement cost of the
Premises, as the same shall exist from time to time, or the amount required by
any Lenders, but in no event more than the commercially reasonable and available
Insurable value thereof.  If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations, Trade Fixtures, and Lessee’s personal
property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor. 
If the coverage is available and commercially appropriate, such policy or
policies shall insure against all risks of direct physical loss or damage
(except the perils of flood and/or earthquake unless required by a Lender),
including coverage for debris removal and the enforcement of any Applicable
Requirements requiring the upgrading, demolition, reconstruction or replacement
of any portion of the Premises as the result of a covered loss.  Said policy or
policies shall also contain an agreed valuation provision in lieu of any
coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located.  If
such insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount in the event of an Insured Loss.

 

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8.4                                 Lessee’s Property/Business Interruption
Insurance.

 

(a) Property Damage. Lessor shall obtain and maintain insurance coverage on all
??????oe’s personal property, Trade Fixtures, and Lessee Owned Alterations and
Utility Installations.  Such insurance shall be full replacement cost coverage
with a deductible of not to exceed $1,000 per occurrence.  The proceeds from any
such insurance shall be used by Lessee for the replacement of personal property,
Trade Fixtures and Lessee Owned Alterations and Utility Installations.  Lessee
shall provide Lessor with written evidence that such insurance is in force.

 

(c) No Representation of Adequate Coverage.  Lessor makes no representation that
the limits or forms of coverage of insurance specified herein are adequate to
cover Lessee’s property, business operations or obligations under this Lease.

 

8.5                                 Insurance Policies.  Insurance required
herein shall be by companies duly licensed or admitted to transact business in
the state where the Premises are located, and maintaining during the policy term
a “General Policyholders Rating” of at least B+, V, as set forth in the most
current issue of “Best’s Insurance Guide”, or such other rating as may be
required by a Lender.  Lessee shall not do or permit to be done anything which
invalidates the required insurance policies.  Lessee shall, prior to the Start
Date, deliver to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of the required insurance.  No
such policy shall be cancelable or subject to modification except after thirty
(30) days prior written notice to Lessor.  Lessee shall, at least thirty (30)
days prior to the expiration of such policies, furnish Lessor with evidence of
renewals or “insurance binders” evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.  Such policies shall be for a term of
at least one year, or the length of the remaining term of this Lease, whichever
is less.  If either Party shall fail to procure and maintain the insurance
required to be carried by it, the other Party may, but shall not be required to,
procure and maintain the same.

 

8.6                                 Waiver of Subrogation.  Without affecting
any other rights or remedies, Lessee and Lessor each hereby release and relieve
the other, and waive their entire right to recover damages against the other,
for loss of or damage to its property arising out of or incident to the perils
required to be insured against herein.  The effect of such releases and waivers
is not limited by the amount of insurance carried or required, or by any
deductibles applicable hereto.  The Parties agree to have their respective
property damage insurance carriers waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.

 

8.7                                 Indemnity.  Except for Lessor’s negligence
or willful misconduct, Lessee shall indemnify, protect, defend and hold harmless
the Premises, Lessor and its agents, Lessor’s master or ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or damages,
liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee.  If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee’s expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense.  Lessor need not
have first paid any such claim in order to be defended or indemnified.

 

8.8                                 Exemption of Lessor from Liability.  Lessor
shall not be liable for injury or damage to the person or goods, wares,
merchandise or other property of Lessee, Lessee’s employees, contractors,
invitees, customers, or any other person in or about the Premises, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures,
or from any other cause, whether the said injury or damage results from
conditions arising upon the Premises or upon other portions of the Building of
which the Premises are a part, or from other sources or places.  Lessor shall
not be liable for any damages arising from any act or neglect of any other
tenant of Lessor.  Notwithstanding Lessor’s negligence or breach of this Lease,
Lessor shall under no circumstances be liable for injury to Lessee’s business or
for any loss of income or profit therefrom.

 

9.                                      Damage or Destruction.

 

9.1                                 Definitions.

 

(a) “Premises Partial Damage” shall mean damage or destruction to the
improvements on the Premises, other than the Lessee constructed building and
Lessee Owned Alterations and Utility Installations, which can reasonably be
repaired in six (6) months or less from the date of the damage or destruction. 
Lessor shall notify Lessee in writing within thirty (30) days from the date of
the damage or destruction as to whether or not the damage is Partial or Total.

 

(b) “Premises Total Destruction” shall mean damage or destruction to the
Premises, other than the Lessee constructed building and Lessee Owned
Alterations and Utility Installations and Trade Fixtures, which cannot
reasonably be repaired in six (6) months or less from the date of the damage or
destruction.  Lessor shall notify Lessee in writing within thirty (30) days from
the date of the damage or destruction as to whether or not the damage is Partial
or Total.

 

(c) “Insured Loss” shall mean damage or destruction to Improvement on the
Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
Insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.

 

(d) “Replacement Cost” shall mean the cost to repair or rebuild the improvements
owned by Lessor at the time of the occurrence to their condition existing
immediately prior thereto, including demolition, debris removal and upgrading
required by the operation of Applicable Requirements, and without deduction for
depreciation.

 

(e) “Hazardous Substance Condition” shall mean the occurrence or discovery of a
condition involving the presence of, or a contamination by, a Hazardous
Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.

 

9.2                                 Partial Damage - Insured Loss.  If a
Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at
Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee
Owned Alterations and Utility Installations) as soon as reasonably possible and
this Lease shall continue in full force and effect; provided, however, that
Lessee shall, at Lessor’s election, make the repair of any damage or destruction
the total cost to repair of which is $10,000 or less, and, in such event, Lessor
shall make any applicable Insurance proceeds available to Lessee on a reasonable
basis for that purpose.  Notwithstanding the foregoing, if the required
Insurance was not in force or the insurance proceeds are not sufficient to
effect such repair, the Insuring Party shall promptly contribute the shortage in
proceeds (except as to the deductible which is Lessee’s responsibility) as and
when required to complete said repairs.  In the event, however, such shortage)
was due to the fact that, by reason of the unique nature of the Improvements,
full replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor.  If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, the party responsible for making the repairs
shall complete them as soon as reasonable possible and this Lease shall remain
in full force and effect.  If such funds or assurance are not received, Lessor
shall make such restoration and repair as is commercially reasonably with Lessee
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect, Lessee shall not be entitled to reimbursement of any funds
contributed by Lessee to repair any such damage or destruction.  Premises
Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3,
notwithstanding that there may be some Insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.

 

9.3                                 Partial Damage - Uninsured Loss.  If a
Premises Partial Damage that is not an Insured Loss occurs, Lessor shall repair
such damage as soon as reasonably possible at lessee’s expense, in which event
this Lease shall continue in full force and effect.  Lessee shall provide Lessor
with said funds or satisfactory assurance thereof within thirty (30) days after
notice of the uninsured loss.  In such event this Lease shall continue in full
force and effect, and Lessor shall proceed to make such repairs as soon as
reasonably possible after the required funds are available.  If Lessee does not
make the funds available, this Lease shall terminate as of the expiration of the
thirty (30) day period.

 

9.4                                 Total Destruction.  Notwithstanding any
other provision hereof, if a Premises Total Destruction occurs, at the sole
option of Lessee, this Lease shall terminate sixty (60) days following such
Destruction.  If the damage or destruction was caused by the negligence or
willful misconduct of Lessee, Lessor shall have the right to recover Lessor’s
damages from Lessee, except as provided in Paragraph 8.6.

 

9.5                                 Damage Near End of Term.  If at any time
during the last six (6) months of this Lease there is damage for which the cost
to repair exceeds one (1) month’s Base Rent, whether or not an Insured Loss,
Lessor may terminate this Lease effective sixty (60) days following the date of
occurrence of such damage by giving a written termination notice to Lessee
within thirty (30) days after the date of occurrence of such damage. 
Notwithstanding the foregoing, if Lessee at that time has an exercisable option
to extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, (a) exercising such option and (b)

 

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providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs on or before the earlier of (i) the date
which is ten days after Lessee’s receipt of Lessor’s written ??ce purporting to
terminate this Lease, or (ii) the day ???? the date upon which such option
expires.  If Lessee duly exercises such option during such period and provides
Lessor with funds (or adequate assurance thereof) to cover any shortage in
Insurance proceeds, Lessor shall, at Lessor’s commercially reasonable expense,
repair such damage as soon as reasonably possible and this Lease shall continue
in full force and effect.  If Lessee fails to exercise such option and provide
such funds or assurance during such period, then this Lease shall terminate on
the date specified in the termination notice and Lessee’s option shall be
extinguished.

 

9.6           Abatement of Rent; Lessee’s Remedies.

 

(a) Abatement.  In the event of Premises Partial Damage or Premises Total
Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee’s use of the Premises is impaired.  All
other obligations of Lessee hereunder shall be performed by Lessee, and Lessor
shall have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.

 

(b) Remedies.  If Lessor shall be obligated to repair or restore the Premises
and does not commence, in a substantial and meaningful way, such repair or
restoration within ninety (90) days after such obligation shall accrue.  Lessee
may, at any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual notice,
of Lessee’s election to terminate this Lease on a date not less than sixty (60)
days following the giving of such notice.  If Lessee gives such notice and such
repair or restoration is not commenced within thirty (30) days thereafter, this
Lease shall terminate as of the date specified in said notice.  If the repair or
restoration is commenced within said thirty (30) days, this Lease shall continue
in full force and effect.  “Commence” shall mean either the unconditional
authorization of the preparation of the required plans, or the beginning of the
actual work on the Premises, whichever first occurs.

 

9.7           Termination - Advance Payments.  Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor.  Lessor shall, in addition, return to Lessee so much of Lessee’s
Security Deposit as has not been, or is not then required to be, used by Lessor.

 

9.8           Walve Statutes.  Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.

 

10.          Real Property Taxes.

 

10.1         Definition of “Real Property Taxes.”  As used herein, the term
“Real Property Taxes” shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); Improvement bond; and/or license
fee imposed upon or levied against any legal or equitable Interest of Lessor in
the Premises, Lessor’s right to other income therefrom, and/or Lessor’s business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Building address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Premises are located.  The
term “Real Property Taxes” shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring during
the term of this Lease, including but not limited to, a change in the ownership
of the Premises.

 

10.2

 

(a) Payment of Taxes.  Lessee shall pay the Real Property Taxes applicable to
the Premises during the term of this Lease.  Subject to Paragraph 10.2(b), all
such payments shall be made at least ten (10) days prior to any delinquency
data.  Lessee shall promptly furnish Lessor with satisfactory evidence that such
taxes have been paid.  If any such taxes shall cover any period of time prior to
or after the expiration or termination of this Lease, Lessee’s share of such
taxes shall be prorated to cover only that portion of the tax bill applicable to
the period that this Lease is in effect, and Lessor shall reimburse Lessee for
any overpayment.  If Lessee shall fail to pay any required Real Property Taxes,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand.

 

(b) Advance Payment.  In the event Lessee incurs a late charge on any Rent
payment, Lessor may, at Lessor’s option, estimate the current Real Property
Taxes, and require that such taxes be paid in advance to Lessor by Lessee,
either; (i) in a lump sum amount equal to the Installment due, at least twenty
(20) days prior to the applicable delinquency date, or (ii) monthly in advance
with the payment of the Base Rent.  If Lessor elects to require payment monthly
in advance, the monthly payment shall be an amount equal to the amount of the
estimated installment of taxes divided by the number of months remaining before
the month in which said installment becomes delinquent.  When the actual amount
of the applicable tax bill is known, the amount of such equal monthly advance
payments shall be adjusted as required to provide the funds needed to pay the
applicable taxes.  If the amount collected by Lessor is insufficient to pay such
Real Property Taxes when due, Lessee shall pay Lessor, upon demand, such
additional sums as are necessary to pay such obligations.  All monies paid to
Lessor under this Paragraph may be intermingled with other monies of Lessor and
shall not bear interest.  In the event of a Breach by Lessee in the performance
of its obligations under this Lease, then any balance of funds paid to Lessor
under the provisions of this Paragraph may, at the option of Lessor, be treated
as an additional Security Deposit.

 

10.3         Joint Assessment.  If the Premises are not separately assessed,
Lessee’s liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor’s work sheets or such other information as
may be reasonably available.

 

10.4         Personal Property Taxes.  Lessee shall pay, prior to delinquency,
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee.  When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor.  If any of Lessee’s said
personal property shall be assessed with Lessor’s real property, Lessee shall
pay Lessor the taxes attributable to Lessee’s property within ten (10) days
after receipt of a written statement.

 

11.          Utilities.  Lessee shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon.  If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered.

 

12.          Assignment and Subletting.

 

12.1         Lessor’s Consent Required.

 

(a) Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage or encumber (collectively, “assign or assignment”) or sublet all or any
part of Lessee’s interest in this Lease or in the Premises without Lessor’s
prior written consent.  Notwithstanding the above, Lessor hereby expressly
consents to Lessee subletting portions of the Premises to customers that supply
Lessee with vehicles for sale at auction.  Lessee shall provide Lessor with
copies of any and all subleases entered into by Lessee.

 

(e) Lessee’s remedy for any breach of Paragraph 12.1 by Lessor shall be limited
to compensatory damages and/or injunctive relief.

 

12.2         Terms and Conditions Applicable to Assignment and Subletting.

 

(a) Regardless of Lessor’s consent, any assignment or subletting shall not: 
(i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease;  (ii) release Lessee of
any obligations hereunder; or  (iii) alter the primary liability of Lessee for
the payment of Rent or for the performance of any other obligations to be
performed by Lessee.

 

(b) Lessor may accept Rent or performance of Lessee’s obligations from any
person other than Lessee pending approval or disapproval of an assignment. 
Neither a delay in the approval or disapproval of such assignment nor the
acceptance of Rent or performance shall constitute a waiver or estoppel of

 

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Lessor’s right to exercise its remedies for Lesso? ??fault or Breach.

 

(c) Lessor’s consent to any as????ment or subletting shall not constitute a
consent to any subsequent assignment or subletting.

 

(d) In the event of any Default or Breach by Lessee, Lessor may proceed directly
against Lessee, any Guarantors or anyone else responsible for the performance of
Lessee’s obligations under this Lease, including any assignee or sublessee,
without first exhausting Lessor’s remedies against any other person or entity
responsible therefore to Lessor, or any security held by Lessor.

 

(e) Each request for consent to an assignment or subletting shall be in writing,
accompanied by information relevant to Lessor’s determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, Lessee agrees to provide Lessor
with such other or additional information and/or documentation as may be
reasonably requested.  This provision is inapplicable as to subleases with
Lessee’s vehicle supplying customers, as set forth in Sec. 12.1 (a).

 

(f) Any assignee of, or sublessee under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing.

 

12.3         Additional Terms and Conditions Applicable to Subletting.  The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

 

(a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in
all Rent payable on any sublease, and Lessor may collect such Rent and apply
same toward Lessee’s obligations under this Lease; provided, however, that until
a Breach shall occur in the performance of Lessee’s obligations, Lessee may
collect said Rent.  Lessor shall not, by reason of the foregoing or any
assignment of such sublease, nor by reason of the collection of Rent, be deemed
liable to the sublessee for any failure of Lessee to perform and comply with any
of Lessee’s obligations to such sublessee.  Lessee hereby irrevocably authorizes
and directs any such sublessee, upon receipt of a written notice from Lessor
stating that a Breach exists in the performance of Lessee’s obligations under
this Lease, to pay to Lessor all Rent due and to become due under the sublease. 
Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to
Lessor without any obligation or right to inquire as to whether such Breach
exists, notwithstanding any claim from Lessee to the contrary.

 

(b) In the event of a Breach of Lessee, Lessor may, at its option, require
sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.

 

(c) Any matter requiring the consent of the sublessor under a sublease shall
also require the consent of Lessor.

 

(d) No sublessee shall further assign or sublet all or any part of the Premises
without Lessor’s prior written consent.

 

(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to
the sublessee, who shall have the right to cure the Default of Lessee within the
grace period, if any, specified in such notice.  The sublessee shall have a
right of reimbursement and offset from the against Lessee for any such Defaults
cured by the sublessee.

 

13.          Default; Breach; Remedies.

 

13.1         Default; Breach.  A “Default” is defined as a failure by the Lessee
to comply with or perform any of the terms, covenants, conditions or rules under
this Lease.  A “Breach” is defined as the occurrence of one or more of the
following Defaults, and the failure of Lessee to cure such Default within any
applicable grace period:

 

(a) The abandonment of the Premises; or the vacating of the Premises without
providing a commercially reasonable level of security, or where the coverage of
the property insurance described in Paragraph 8.3 is jeopardized as a result
thereof, or without providing reasonable assurances to minimize potential
vandalism.

 

(b) The failure of Lessee to make any payment of Rent or any Security Deposit
required to be made by Lessee hereunder, whether to Lessor or to a third party,
when due, to provide reasonable evidence of insurance or surety bond, or to
fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of three (3) business days
following written notice to Lessee.

 

(c) The failure by Lessee to provide (i) reasonable written evidence of
compliance with Applicable Requirements, (iii) the rescission of an unauthorized
assignment or subletting, (iv) a Tenancy Statement, (v) a requested
subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any
document requested under Paragraph 42 (easements), or (viii) any other
documentation or information which Lessor may reasonably require of Lessee under
the terms of this Lease, where any such failure continues for a period thirty
(30) days following written notice to Lessee.

 

(d) A Default by Lessee as to the terms, covenants, conditions or provisions of
this Lease, other than those described in subparagraphs 13.1(a), (b) or (c),
above, where such Default continues for a period of thirty (30) days after
written notice; provided, however, that if the nature of Lessee’s Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach if Lessee commences such cure within said
thirty (30) day period and thereafter diligently prosecutes such cure to
completion.

 

(e) The occurrence of any of the following events:  (i) the making of any
general arrangement or assignment for the benefit of creditors; (ii) becoming a
“debtor” as defined in 11 U.S.C. § 101 or any successor statute thereto (unless,
in the case of a petition filed against Lessee, the same is dismissed within
sixty (60) days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee’s assets located at the Premises or of
Lessee’s interest in this Lease, where possession is not restored to Lessee
within thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee’s assets located at the Premises or of
Lessee’s interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, in the event that any provision of this
subparagraph 13.1 (e) is contrary to any applicable law, such provision shall be
of no force or effect, and not affect the validity of the remaining provisions.

 

(f) The discovery that any financial statement of Lessee or of any Guarantor
given to Lessor was materially false.

 

13.2         Remedies.  If Lessee fails to perform any of its affirmative duties
or obligations, within ten (10) days after written notice (or in case of an
emergency, without notice), Lessor may, at its option, perform such duly or
obligation on Lessee’s behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals.  The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor.  If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier’s check.  In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:

 

(a)  Terminate Lessee’s right to possession of the Premises by any lawful means,
in which case this Lease shall terminate and Lessee shall immediately surrender
possession to Lessor.  In such event Lessor shall be entitled to recover from
Lessee: (i) the unpaid Rent which had been earned at the time of termination;
(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 rental loss that the Lessee proves could have been reasonably
avoided; (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 rental loss that the Lessee proves could be reasonably avoided; and (iv)
any other amount necessary to compensate Lessor for all the detriment
proximately caused by the Lessee’s failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom, including but not limited to the cost of recovering possession of the
Premises, expenses of reletting including necessary renovation and alteration of
the Premises, reasonable attorneys’ fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease.  The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of the District within which the Premises are located at the time of award
plus one percent (1%).  Efforts by Lessor to mitigate damages caused by Lessee’s
Breach of this Lease shall not waive Lessor’s right to recover damages under
Paragraph 12.  If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any part thereof in a separate suit.  If a
notice and grace period required under Paragraph 13.1 was not previously given,
a notice to pay rent or quit, or to perform or quit given to Lessee under the
unlawful detainer statute shall also constitute the notice required by Paragraph
13.1.  In such case, the applicable grace period required by Paragraph 13.1 and
the unlawful detainer statute shall run concurrently, and the failure of Lessee
to cure the Default within the greater of the two such grace periods shall
constitute both an unlawful

 

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detainer and a Breach of this Lease entitling Lessor?? the remedies provided for
in the this Lease and/or by said statute.

 

(b)  Continue the Lease and Le????’s right to possession and recover the Rent as
it becomes due, in which event Lessee may sublet or assign, subject only to
reasonable limitations.  Acts of maintenance, efforts to relet, and/or the
appointment of a receiver to protect the Lessor’s interest, shall not constitute
a termination of the Lessee’s right to possession.

 

(c)  Pursue any other remedy now or hereafter available under the laws or
judicial decisions of the state wherein the Premises are located.  The
expiration or termination of this Lease and/or the termination of Lessee’s right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee’s occupancy of the Premises.

 

13.3         Inducement Recapture.  Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee’s entering into this
Lease, all of which concessions are hereinafter referred to as “Inducement
Provision,” shall be deemed conditioned upon Lessee’s full and faithful
performance of all of the terms, covenants and conditions of this Lease.  Upon
Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee.  The acceptance by Lessor of Rent or
the cure of the Breach which initiated the operation of this paragraph shall not
be deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.

 

13.4         Late Charges.  Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain.  Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be Imposed upon Lessor by any Lender.  Accordingly, if any
Rent shall not be received by Lessor within ten (10) days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a one-time late charge equal to five percent (5%) of each such
overdue amount.  The Parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of such
late payment.  Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee’s Default or Breach with respect to such overdue
amount, nor prevent the exercise of any of the other rights and remedies granted
hereunder.  In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding any provision of this Lease to the contrary, Base Rent shall, at
Lessor’s option, become due and payable quarterly in advance.

 

13.5         Interest.  Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor, when due as to scheduled payments (such as
Base Rent) or within thirty (30) days following the date on which it was for
non-scheduled payment, shall bear interest from the date when due, as to
scheduled payments, or the thirty-first (31st) day after it was due as to
non-scheduled payments.  The interest (“Interest”) charged shall be equal to the
prime rate reported in the Wall Street Journal as published closest prior to the
date when due plus two percent (2%), but shall not exceed the maximum rate
allowed by law.  Interest is payable in addition to the potential late charge
provided for in Paragraph 13.4.

 

13.6         Breach by Lessor.

 

(a)  Notice of Breach.  Lessor shall not be deemed breach of this Lease unless
Lessor falls within a reasonable time to perform an obligation required to be
performed by Lessor.  For purposes of this Paragraph, a reasonable time shall in
no event be less than thirty (30) days after receipt by Lessor, and any Lender
whose name and address shall have been furnished lessee in writing for such
purpose, of written notice specifying wherein such obligation of Lessor has not
been performed; provided, however, that if the nature of Lessor’s obligation is
such that more than thirty (30) days are reasonably required for its
performance, then Lessor shall not be in breach if performance is commenced
within such thirty (30) day period and thereafter diligently pursued to
completion.

 

(b)  Performance by Lessee on Behalf of Lessor.  In the event that neither
Lessor nor Lender cures said breach within thirty (30) days after receipt of
said notice, or if having commenced said cure they do not diligently pursue it
to completion, then Lessee may elect to cure said breach at Lessee’s expense and
offset from Rent an amount equal to the greater of one month’s Base Rent or the
Security Deposit, and to pay an excess of such expense under protest, reserving
Lessee’s right to reimbursement from Lessor.  Lessee shall document the cost of
said cure and supply said documentation to Lessor.

 

14.          Condemnation.  If the Premises or any portion thereof are taken
under the power of eminent domain or sold under the threat of the exercise of
said power (collectively “Condemnation”), this Lease shall terminate as to the
part taken as of the date the condemning authority takes title or possession,
whichever first occurs.  If more than ten percent (10%) of any building portion
of the Premises, or more than twenty-five percent (25%) of the land area portion
of the Premises not occupied by any building, is taken by Condemnation, Lessee
may, at Lessee’s option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, with ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession.  If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be reduced in
proportion to the reduction in utility of the Premises caused by such
Condemnation.  Condemnation awards and/or payments shall be the property of
Lessor, whether such award shall be made as compensation for diminution in value
of the leasehold, the value of the part taken, or for severance damages;
provided, however, that Lessee shall be entitled to any compensation for
Lessee’s relocation expenses, loss of business goodwill and/or Trade Fixtures,
without regard to whether or not this Lease is terminated pursuant to the
provisions of this Paragraph.  All Alterations and Utility Installations made to
the Premises by Lessee, for purposes of Condemnation only, shall be considered
the property of the Lessee and Lessee shall be entitled to any and all
compensation which is payable therefor.  In the event that this Lease is not
terminated by reason of the Condemnation, Lessor shall repair any damage to the
Premises caused by such Condemnation.

 

15.          Brokers’ Fee.  Reference Separate Broker’s Agreement

 

15.2         Assumption of Obligations.  Any buyer or transferee of Lessor’s
interest in this Lease shall be deemed to have assumed Lessor’s obligation
hereunder.  Each Broker shall be a third party beneficiary of the provisions of
Paragraphs 1.10, 15, 22 and 31.  If Lessor fails to pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue interest.  In addition, if Lessor fails to pay any amounts to
Lessee’s Broker when due, Lessee’s Broker may send written notice to Lessor and
Lessee of such failure and if Lessor fails to pay such amounts with ten (10)
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent.  In addition, Lessee’s Broker shall be deemed to be a
third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor’s Broker.

 

15.3         Representations and Indemnities of Broker Relationships.  Lessee
and Lessor each represent and warrant to the other that it has had no dealings
with any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokars is
entitled to any commission or finder’s fee in connection herewith.  Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, Including any costs,
expenses, and/or attorney’s fees reasonably incurred with respect thereto.

 

16.          Estoppel Certificates.

 

(a)  Each party (as “Responding Party”) shall within ten (10) days after written
notice from the other Party (the “Requesting Party”) execute acknowledge and
deliver to the Requesting Party a statement in writing in form similar to the
then most current “Estoppel Certificate” form published by the American
industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

 

(b)  If the Responding Party shall fail to execute or deliver the Estoppel
Certificate within such ten day period, the Requesting Party may execute an
Estoppel Certificate stating that: (i) the Lease is in full force and effect
without modification except as may be represented by the Requesting Party, (ii)
there are no uncured defaults in the Requesting Party’s performance, and (iii)
if Lessor is the Requesting Party, not more than one month’s Rent has been paid
in advance, Prospective purchasers and encumbrancers may rely upon the
Requesting Party’s Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.

 

(c)  If Lessor desires to finance, refinance, or sell the Premises, or any part
thereof, Lessee and all Guarantors shall deliver to any potential lender or
purchaser designated by Lessor such financial statements as may be reasonably
required by such lender or purchaser, including, but not limited to, Lessee’s
financial statements for the past three (3) years.  All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.

 

17.          Definition of Lessor.  The term “Lessor” as used herein shall mean
the owner or owners at the time in question of the fee title to the Premises,
or, if this is a sublease, of the Lessee’s interest in the prior lease.  In the
event of a transfer of Lessor’s title or interest in the Premises or this Lease,
Lessor shall deliver to

 

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the transferee or assignee (in cash or by credit) any unused Security Deposit
held by Lessor.  Except as provided in Paragraph 15, upon such transfer or
assignment and delivery of the Security Deposit as aforesaid ??? prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor.  Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined. 
Notwithstanding the above, and subject to the provisions of Paragraph 20 below,
the original Lessor under this Lease, and all subsequent holders of the Lessor’s
interest in this Lease shall remain liable and responsible with regard to the
potential duties and liabilities of Lessor pertaining to Hazardous Substances as
outlined in Paragraph 6 above.

 

18.          Severability.  The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.

 

19.          Days.  Unless otherwise specifically indicated to the contrary, the
word “days” as used in this Lease shall mean and refer to calendar days.

 

20.          Limitation on Liability.  Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.

 

21.          Time of Essence.  Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.

 

22.          No Prior or Other Agreements; Broker Disclaimer.  This Lease
contains all agreements between the Parties with respect to any matter mentioned
herein, and no other prior or contemporaneous agreement or understanding shall
be effective.  Lessor and Lessee each represents and warrants to the Brokers
that it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party to
this Lease and as to the nature, quality and character of the Premises.  Brokers
have no responsibility with respect thereto or with respect to any default or
breach hereof by either Party.  The liability (including court costs and
Attorneys’ fees), of any Broker with respect to negotiation, execution, delivery
or performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker’s liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.

 

23.          Notices.

 

23.1         Notice Requirements.  All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by land or by courier)
or may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23. 
The addresses noted adjacent to a Party’s signature on this Lease shall be that
Party’s address for delivery or mailing of notices.  Either Party may be written
notice to the other specify a different address for notice.  A copy of all
notices to Lessor shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate in writing.

 

23.2         Date of Notice.  Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon.  If
sent by regular mail the notice shall be deemed given forty-eight (48) hours
after the same is addressed as required herein and mailed with postage prepaid. 
Notices delivered by United States Express Mail or overnight courier that
guarantee next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the Postal Service or courier.  Notices transmitted by
facsimile transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt, provided a copy is also delivered via delivery or
mail.  If notice is received on a Saturday, Sunday or legal holiday, it shall be
deemed received on the next business day.

 

24.          Waivers.  No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof.  Lessor’s
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor’s consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent.  The acceptance of
Rent by Lessor shall not be a waiver of any Default or Breach by Lessee.  Any
payment by Lessee may be accepted by Lessor on account of monies or damages due
Lessor, notwithstanding any qualifying statements or conditions made by Lessee
in connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.

 

25.          Recording.  Either Lessor or Lessee shall, upon request of the
other, execute acknowledge and deliver to the other a short form memorandum of
this Lease for recording purposes.  The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.

 

26.          No Right To Holdover.  Lessee has no right to retain possession of
the Premises or any part thereof beyond the expiration or termination of this
Lease.  In the event that Lessee holds over, then the Base Rent shall be
increased to one hundred twenty five percent (125%) of the Base Rent applicable
during the month immediately preceding the expiration or termination.  Nothing
contained herein shall be construed as consent by Lessor to any holding over by
Lessee.

 

27.          Cumulative Remedies.  No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.

 

28.          Covenants and Conditions; Construction of Agreement.  All
provisions of this Lease to be observed or performed by Lessee are both
covenants and conditions.  In construing this Lease, all heading and titles are
for the convenience of the Parties only and shall not be considered a part of
this Lease.  Whenever required by the context, the singular shall include the
plural and vice versa.  This Lease shall not be construed as if prepared by one
of the Parties, but rather according to its fair meaning as a whole, as if both
the Parties had prepared it.

 

29.          Binding Effect; Choice of Law.  This Lease shall be binding upon
the parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located.  Any
litigation between the Parties hereto concerning this Lease shall be initiated
in the country in which the Premises are located.

 

30.          Subordination; Attornment; Non-Disturbance.

 

30.1         Subordination.  This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, “Security Device”), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof.  However,
Lessor hereby warrants and represents that no Security Devices encumber the
Premises as of the execution date of this Agreement.  Lessee agrees that the
holders of any such Security Devices (in this Lease together referred to as
“Lessor’s Lender”) shall have no liability or obligation to perform any of the
obligations of Lessor under this Lease unless and until they take title to the
Premises after foreclosure.  Any Lender may elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device by giving
written notice thereof to Lessee, whereupon this Lease and such Options shall be
deemed prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.

 

30.2         Attornment.  Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not:  (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor; or (iii) be bound by
prepayment of more than one (1) month’s rent.

 

30.3         Non-Disturbance.  With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee’s subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a “Non-Disturbance Agreement” from the Lender which Non-Disturbance
Agreement provides that Lessee’s possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises.  With respect to Security Devices entered into by Lessor prior to the
execution of this Lease, Lessor hereby represents and warrants that no such
Security Devices exist as of the execution date of this Agreement.

 

30.4         Self-Executing.  The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.

 

31.          Attorneys’ Fees.  If any Party or Broker brings an action or
proceeding involving the Premises to enforce the terms hereof or to declare
rights hereunder, the Prevailing Party (as hereafter defined) in any such
proceeding, action, or appeal thereon, shall be entitled to reasonable
attorney’s’ fees.  Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to decision
or judgment.  The term, “Prevailing Party” shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense.  The attorneys’ fees award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys’ fees reasonably incurred.  In
addition, Lessor shall be entitled to attorneys’ fees, costs

 

Initials

 /s/ DEH/PAS

 

16

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and expenses incurred in the preparation and service of notices of Default and
consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or ??? Breach.

 

32.          Lessor’s Access; Showing Premises; Repairs.  Lessor and Lessor’s
agents shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem
necessary.  All such activities shall be without abatement of rent or liability
to Lessee.  Lessor may at any time place on the Premises any ordinary “For Sale”
signs and Lessor may during the last six (6) months of the term hereof place on
the Premises any ordinary “For Lease” signs.  Lessee may at any time place on or
about the Premises any ordinary “For Sublease” sign.

 

34.          Signs.  See Addendum.

 

35.          Termination; Merger.  Unless specifically stated otherwise in
writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the
mutual termination or cancellation hereof, or a termination hereof by Lessor for
Breach by Lessee, shall automatically terminate any sublease or lesser estate in
the Premises; provided, however, that Lessor may elect to continue any one or
all existing subtenancies.  Lessor’s failure within ten (10) days following any
such event to elect to the contrary by written notice to the holder of any such
lesser Interest, shall constitute Lessor’s election to have such event
constitute the termination of such interest.

 

36.          Consents.  Except as otherwise provided herein, wherever in this
Lease the consent of a Party is required to an act by or for the other Party,
such consent shall not be unreasonably withheld or delayed.  Lessor’s actual
reasonable costs and expenses (including, but not limited to, architects’,
attorneys’, engineers’ and other consultants’ fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including, but not limited to, consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor.  Lessor’s consent to any
act, assignment or subletting shall not constitute an acknowledgement that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent. 
The failure to specify herein any particular condition to Lessor’s consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given.  In the event that either Party disagrees with
any determination made by the other hereunder and reasonably requests the
reasons for such determination, the determining party shall furnish its reasons
in writing and in reasonable detail within ten (10) business days following such
request.

 

38.          Quiet Possession.  Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee’s part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.

 

39.          Options.

 

39.1         Definition.  “Option” shall mean: (a) the right to extend the term
of or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.

 

39.2         Options Personal To Original Lessee.  Each Option granted to Lessee
in this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.

 

39.3         Multiple Options.  In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validity exercised.

 

39.4         Effect of Default on Options.

 

(a)  Lessee shall have no right to exercise an Option:  (i) during the period
commencing with the giving of any notice of Default and continuing until said
Default is cured, (ii) during the period of time any Rent is unpaid (without
regard to whether notice thereof is given Lessee), (iii) during the time Lessee
is in Breach of this Lease, or (iv) in the event that Lessee has been given
three (3) or more notices of separate Default, whether or not the Defaults are
cured, during the twelve (12) month period immediately preceding the exercise of
the Option.

 

(b)  The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee’s inability to exercise an Option
because of the provisions of Paragraph 39.4 (a).

 

(c)  An Option shall terminate and be of no further force or effect,
notwithstanding Lessee’s due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term, (i) Lessee fails to
pay Rent for a period of thirty (30) days after such Rent becomes due (without
any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee
three (3) or more notices of separate Default during any twelve (12) month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a
Breach of this Lease.

 

41.          Security Measures.  Lessee hereby acknowledges that the rental
payable to Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same.  Lessee assumes all responsibility for the protection of the
Premises, Lessee, its agents and invitees and their property from the acts of
third parties.

 

42.          Reservations.  Lessor reserves to itself the right, from time to
time, to grant, without the consent or joinder of Lessee, such easements, rights
and dedications that Lessor deems necessary, and to cause the recordation of
parcel maps and restrictions, so long as such easements, rights, dedications,
maps and restrictions do not unreasonably interfere with the use of the Premises
by Lessee.  Lessee agrees to sign any documents reasonably requested by Lessor
to effectuate any such easement rights, dedication, map or restrictions.

 

43.          Performance Under Protest.  If at any time a dispute shall arise as
to any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment “under protest” and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of each sum.  If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay.

 

44.          Authority.  If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf.  Each Party
shall, within thirty (30) days after request, deliver to the other Party
satisfactory evidence of such authority.

 

45.          Conflict.  Any conflict between the printed provisions of this
Lease and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.

 

46.          Offer.  Preparation of this Lease by either Party or their agent
and submission of same to the other Party shall not be deemed an offer to lease
to the other Party.  This Lease is not intended to be binding until executed and
delivered by all parties hereto.

 

47.          Amendments.  This lease may be modified only in writing, signed by
the Parties in interest at the time of the modification.  As long as they do not
materially change Lessee’s obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.

 

48.          Multiple Parties.  If more than one person or entity is named
herein as either Lessor or Lessee, such multiple Parties shall have joint and
several responsibility to comply with the terms of this Lease.

 

49.          Mediation and Arbitration of Disputes.  An Addendum requiring the
Meditation and/or the Arbitration of all disputes between the Parties and/or
Brokers arising out of this Lease o is ý is not attached to this Lease.

 

Initials

 /s/ DEH/PAS

 

17

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LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
???RMED AND VOLUNTARY CONSENT THERETO ??? PARTIES HEREBY AGREE THAT, AT THE TIME
THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

 

ATTENTION:  NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES.  THE PARTIES ARE URGED TO:

 

1.  SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

 

2.  RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES.  SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDED USE.

 

WARNING:  IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.

 

The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

 

Executed at:

Benicia, CA

 

Executed at:

Benicia, CA

on:

12/23/98

 

on:

12/23/98

By LESSOR:

 

By LESSEE:

Wickland Oil Martinez, L.P., A California limited partnership

 

Copart Inc., a California corporation

 

 

 

By:

/s/ Daniel E. Hall

 

By:

/s/ Paul A. Styer

 

 

 

Name Printed:

Daniel E. Hall

 

Name Printed: Paul A. Styer

Title:

Vice Pres.

 

Title: General Counsel

 

 

 

By:

 

 

By:

 

Name Printed:

 

Name Printed:

Title:

 

Title:

Address:

P.O. Box 13648 - 3640 American River
Dr., Sacramento, CA 95864

 

Address:

5500 East Second St., 2nd Floor
Benicia, CA 94510

Telephone:  (916)  978 - 2400

 

Telephone:  (707)  748 - 5000

Facsimile:  (916)  978 - 2410

 

Facsimile:  (707)   748 - 5099

Federal ID No.

 

Federal ID No.

 

NOTE:           These forms are often modified to meet the changing requirements
of law and industry needs.  Always write or call to make sure you are utilizing
the most current form:  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So,
Flower Street, Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No.
(213) 687-8616

 

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Addendum I

Standard Industrial/Commercial Single-Tenant Lease - Net

 

This Addendum I to the Standard Industrial/Commercial Single-Tenant Lease - Net
(the “Addendum I”) is attached to, made a part of, and incorporated into that
certain Standard Industrial/Commercial Single-Tenant Lease-Net (the “Lease”)
dated December 23, 1998, by and between Wickland Oil Martinez, L.P., a
California Limited Partnership as Lessor (“Lessor”) and Copart, Inc., a
California Corporation as Lessee (“Lessee”) covering the Premises consisting of
approximately forty (40) acres of real property located in the City of Martinez,
County of Contra Costa, State of California, and more generally depicted on
Exhibit “A” to the Lease.

 

If any portion of the Lease should conflict with the terms of this Addendum I,
the terms of this Addendum I shall control.

 

Defined terms not otherwise defined in this Addendum I shall have the meanings
ascribed to such terms in the Standard Lease.

 

All references to the “Lease” in the Lease or in this Addendum I shall mean the
Lease as modified by this Addendum I.

 

Additional Provisions:

 

50.                               Conditions Precedent to Lease.  Lessor’s
obligation to lease the Premises to Lessee shall be conditioned upon completion
of the following to Lessor’s satisfaction:

 

A.                                    Survey.  A mutually acceptable survey
(“Survey”) of the Premises will be completed by Lessor and the exact square
footage of the Premises will be determined.  Once the Survey is completed the
legal description of the Premises shall be attached as part of Exhibit A and be
made a part of the Lease.

 

B.                                    Permits.  Lessor shall take commercially
reasonable efforts to obtain all permits, approvals, consents and entitlements
(“Permits”) required by all governmental authorities having jurisdiction to
permit Lessee’s Agreed Use as described in Paragraph 1.8 of the Lease.  Lessee
shall cooperate with Lessor in executing necessary documents, attending hearings
with local governmental authorities and the like.  All conditions to Permits
must be mutually acceptable to Lessor and Lessee; provided, however, that
neither Lessor nor Lessee shall unreasonably disapprove of any Permit
condition.  In addition to other reasonable bases, Lessee agrees that Lessor
shall be deemed to be reasonable in withholding its consent to a Permit
condition which requires Lessor to install substantial offsite improvements. 
If, during the Permit process, Lessor requests in writing that Lessee approve of
any proposed Permit condition, Lessee shall, within five (5) working days of
Lessee’s receipt of the request, deliver to Lessor a written approval or
disapproval, which also contains, in the event of a disapproval, the reasons for
such action.  Attached hereto as Exhibit E hereto are conditions contained in a
use permit recently issued by Contra Costa County for a use similar to the
Agreed Use.  Lessee hereby approves the conditions contained in the attached use
permit, and confirms that similar conditions are acceptable for inclusion in the
Permits.

 

C.                                    Agreement On Payment of Excess Costs. 
Lessor shall be satisfied that the cost of Lessor’s Improvements (as defined
below) plus the cost of any improvements to the Premises required as conditions
to the Permits shall not exceed Sixty-Two Thousand Five Hundred Dollars
($62,500.00) per acre multiplied by the exact useable acreage of the Premises as
reflected by the Survey (“Allowance”).  For purposes of determining the useable
acreage of the Premises, any acreage in excess of one (1) acre required for a
storm water retention pond (“Retention Pond”) shall be excluded.  In the event
such costs exceed the Allowance, then the parties agree to meet and attempt to
negotiate an equitable sharing of the portion of the costs which exceed the

 

19

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Allowance.  Either party shall have the right, but not the obligation, to pay
such excess costs in whole or in part.  In the event the parties fail to agree
on payment of the excess costs, either party may terminate the Lease as provided
below.  For purposes of this provision, “Lessor’s costs” shall mean all hard and
soft costs of constructing the improvements, but excluding costs associated with
permit processing or studies required for permit processing.

 

D.                                    Building Permit.  Lessee shall have
obtained all Permits necessary to complete Lessee’s Improvements (as defined
below).

 

E.                                      Taxes, Levies and Assessments.  Lessee
shall have reviewed and approved information provided by Lessor on real property
taxes, bonds, assessments and levies affecting the Premises.

 

If the above conditions precedent have not been satisfied to Lessor’s and
Lessee’s satisfaction by October 1, 2000, this Lease shall at the option of
either Lessor or Lessee be canceled upon written notice to the other party, and
all funds and deposits made by Lessee to Lessor shall be returned to Lessee.

 

If prior to October 1, 2000, despite Lessor’s good faith and commercially
reasonable efforts, the parties are unable to obtain the Permits with mutually
acceptable conditions, or the parties believe that one or more of the other
conditions precedent set forth above cannot be satisfied, Lessor and Lessee
shall terminate this Lease.  In such event, Wickland Oil Company as Lessor and
Lessee will execute a new Lease and Addendum (“Selby II Lease”) for certain real
property located in the City of Crocket, California and pursue obtaining Permits
for such property pursuant to the Lease.  The form of the Selby II Lease is
attached as Exhibit C to that certain Lease and Addendum executed by Wickland
Oil Company as Lessor dated 12/23, 1998 (“Selby I Lease”).

 

51.                               Commencement Date.  The Lease Term shall
commence upon satisfaction of the conditions set forth in Paragraph 50 and upon
substantial completion of Lessor’s Improvements as described in Paragraph 53
below.  Lessor anticipates that Lessor will substantially complete Lessor’s
Improvements within one hundred twenty (120) days from the date the Permits are
obtained.  Upon substantial completion of Lessor’s Improvements, the parties
agree to execute an amendment to this Lease confirming the actual Commencement
Date.

 

52.                               Rent.

 

A.                                    Initial Base Rent.  The initial Base Rent
for the Premises shall be $0.0315 per Useable Square Foot or $54,886.00 per
month based on a 40-acre useable parcel.  If the acreage of the Premises changes
based on the Survey, the initial monthly Base Rent shall be adjusted accordingly
based on the rental rate of $0.0315 per Useable Square Foot per month.  For
purposes of determining the useable square footage of the Premises, any square
footage in excess of one (1) acre required for the Retention Pond shall be
excluded.  In the event the square footage of the Premises is adjusted, Lessor
and Lessee agree to execute an amendment to this Lease confirming the initial
Base Rent.

 

B.                                    CPI Adjustment.

 

(i) For purposes of this provision, each twenty-four month period of the Lease
Term commencing on the Commencement Date shall constitute an “Adjustment
Period.”  Commencing with the monthly installment of Base Rent due on the
twenty-fifth (25th) month of the Lease Term and every twenty-four (24) months
thereafter (each an “Adjustment Date”), the Base Rent in effect immediately
prior to each such Adjustment Date shall be increased by (i) the percentage
increase, if any, shown by the CPI (as defined below) most recently published at
the 12th month of the Adjustment Period as compared to the CPI most recently
published at the 24th month of such Adjustment Period; plus (ii) the percentage
increase, if any, shown by the CPI

 

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most recently published at the 1st month of such Adjustment Period as compared
to the CPI most recently published at the 12th month of the Adjustment Period. 
Provided, however, in no event shall Base Rent decrease at each Adjustment Date
below Base Rent then in effect or increase at each Adjustment Date more than
three percent (3%) per year, based on the comparisons made at (i) and (ii)
above.

 

(ii) “CPI” shall mean the Consumer Price Index in the column for “All Items” in
the table entitled “Consumer Price Index for All Urban Consumers:  U.S. City
Average, (1982-84=100),” published by the Bureau of Labor Statistics of the
Unites States Department of Labor.  If the Bureau of Labor Statistics changes
the base period (now 1982-84=100), or the composition of the CPI, the new index
numbers shall be substituted for the old index numbers in making the above
computations.  If the CPI is discontinued, the parties shall accept comparable
statistics on the purchasing power of the consumer dollar, as published at the
time of such discontinuation, by a responsible financial periodical of
recognized authority, to be chosen by Lessor and reasonably accepted by Lessee.

 

53.                               Lessor’s Improvements.

 

Subject to Paragraph 50.C. above, Lessor at Lessor’s sole cost shall complete
the following improvements to the Premises prior to Lessee’s occupancy and the
Commencement Date (collectively, “Lessor’s Improvements”):

 

A.                                    Site Work Preparation.  The site is to be
filled if necessary, graded and compacted to 95% to the extent that it is
reasonably possible, per the Drainage Plan attached as Exhibit B.

 

B.                                    Site Improvements.

 

(i)                           The site (±40 acres) is to be improved with 6
inches of 3/8-inch to 1/2-inch rock. The rock is to be placed in two 3-inch
lifts compacted to ±95%.

 

(ii)                        Asphalt - 4 inches of asphalt shall be placed and
compacted in two 2-inch lifts covering 10 acres.

 

(iii)                     Drainage - Lessor will install drainage on the site
through sheet drainage, pursuant to the Drainage Plan agreed upon by the parties
and attached as Exhibit B hereto.

 

(iv)                    Utilities - The site will be separately metered with
adequate city water, firewater (if required by local authorities) and sewer
service.  Minimum power service of 600 amps @ 277/480 volts will be provided to
the Premises with phone/data service to the site.  City water, firewater, sewer
service and phone/data service shall all be stubbed and brought to the Premises
at a mutually acceptable location.

 

(v)                       Landscaping - Lessor will install such landscaping at
the Premises as required by the Permits, pursuant to a mutually acceptable
landscaping plan, and Lessee shall maintain the landscaping pursuant to
Paragraph 7.1 of the Lease.

 

C.                                    Fees.  Lessor at Lessor’s cost shall
obtain and pay for all fees and assessments required by applicable governmental
authorities necessary for Lessee’s use (excluding any fees or assessments such
as building permit fees associated with Lessee’s construction of the Building
described in Paragraph 54 below, which shall be Lessee’s responsibility).

 

D.                                    Substantial Completion.  Lessor’s
Improvements shall be deemed substantially complete when (i) Lessor’s general
contractor certifies to Lessor and Lessee that the work is complete pursuant to
this provision; (ii) representatives of the appropriate

 

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governmental authorities have inspected and approved Lessor’s Improvements; and
(iii) Lessor has obtained a certificate of completion or similar written
evidence from appropriate governmental authorities that the improvements are
complete.

 

E.                                      Lessee Access.  Lessor agrees to
cooperate with Lessee in facilitating Lessee’s development of the Premises
during the time frame when Lessor is completing Lessor’s Improvements.  Lessor
agrees that Lessee may have reasonable access to the Premises prior to the
Commencement Date while Lessor is completing Lessor’s Improvements in order to
commence construction of Lessee’s Improvements (described in Paragraph 54
below), on the following conditions:

 

(i) Lessee and Lessee’s employees, agents and contractors will work in harmony
with and not interfere with Lessor and its employees, agents and contractors in
performing Lessor’s Improvements;

 

(ii) Such entry by and occupancy of the Premises by Lessee and Lessee’s agents,
employees and contractors shall be subject to all the terms and conditions of
the Lease and this Addendum, excluding the covenant to pay rent; and

 

(iii) At Lessor’s request, Lessee shall provide Lessor evidence of all insurance
required under the Lease and this Addendum.

 

54.                               Lessee Improvements:

 

A.                                    Lessee’s Building - Lessee at Lessee’s
cost shall construct an approximately 10,000 square foot metal structure (“the
Building”) at a mutually acceptable location on the Premises and shall install a
solid (nontransparent), metal fence (at least six (6) feet in height) around the
perimeter of the Premises (“Perimeter Fence”).  Together, the Building and the
Perimeter Fence constitute “Lessee’s Improvements.”  Lessee shall be responsible
for taking all utilities stubbed at the site into the Building.

 

B.                                    Conditions to Lessee’s Construction. 
Prior to constructing Lessee’s Improvements, Lessee shall:

 

(i)                                     Deliver to Lessor for Lessor’s approval
two (2) sets of preliminary construction plans and specifications prepared by an
architect or engineer, sufficient to enable potential contractors and
subcontractors to make reasonably accurate bid estimates Lessor shall review and
either approve or disapprove such preliminary plans and specifications within
ten (10) days of receipt.  Lessor shall not unreasonably disapprove preliminary
plans and specifications.  Lessee shall not deliver working drawings to any
governmental body for a building permit until preliminary plans are approved as
required by this Paragraph 54.B

 

(ii)                                  Prepare final working plans and
specifications conforming to preliminary plans previously approved by Lessor,
submit them to the appropriate governmental agencies for approval, and deliver
to Lessor one complete set as approved by the governmental agencies.

 

(iii)                               Notify Lessor of Lessee’s intention to
commence work not less than ten (10) calendar days before commencement of any
such work or delivery of any materials.  Lessor reserves the right at any time
and from time to time to maintain on the Premises such notices as may be
necessary to protect Lessor against liability for all subcontractors’,
mechanics’ and materialmen’s liens and claims.

 

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(iv)                              Deliver to Lessor certificates of insurance
evidencing coverage for “builder’s risk” insuring against all insurable risks in
an amount equal to the estimated costs of construction of Lessee’s Improvements,
evidence of workers’ compensation insurance covering all persons employed in
connection with the work and with respect to whom death or bodily injury claims
could be asserted against Lessor or the Premises, and evidence that Lessee has
paid or caused to be paid all premiums for the coverage described above in this
Paragraph 54.B(iv) and any increase in premiums on insurance provided for in
Article 8 of the Lease, sufficient to ensure maintenance of all insurance
described above during the anticipated course of the work. Furthermore,
insurance coverage required by the foregoing sentence shall comply in all
applicable respects with the requirements of Article 8 of the Lease.  Lessee
shall maintain, keep in force and pay all premiums required to maintain and keep
in force all insurance described above at all times during which such work is in
progress.

 

C.                                    Completion of Work.  Construction of
Lessee’s Improvements shall be performed in a good and workmanlike manner, shall
substantially comply with plans and specifications submitted to Lessor as
required by the Lease, and shall comply with all applicable government permits,
laws, ordinances and regulations.  Immediately upon completion of Lessee’s
Improvements, Lessee shall file or cause to be filed a notice of completion.

 

D.                                    Ownership of Improvements.  Lessee’s
Improvements shall be owned by Lessee during the Term of this Lease but shall
remain a part of the Premises and shall be surrendered therewith at the end of
the Term hereof or sooner termination of this Lease, at which time they shall
become the property of Lessor without the payment of any consideration therefor.

 

E.                                      Liens.

 

(i)    Lessee shall not suffer or permit to be enforced against the Premises, or
any part thereof, or Lessee’s Improvements thereon, any mechanics’,
materialmen’s, contractors’ or subcontractors’ liens arising from or any claim
for damages growing out of the work of any construction, repair, restoration,
replacement or improvement, or any other claim or demand howsoever the same may
arise, but Lessee shall pay or cause to be paid all of such liens, claims or
demands before any action is brought to enforce the same against the Premises. 
Lessee agrees to indemnify, defend and hold Lessor and the Premises free and
harmless from all liability for any and all such liens, claims and demands,
together with reasonable attorneys’ fees and all costs and expenses in
connection therewith.  The foregoing notwithstanding, if Lessee shall in good
faith contest the validity of any such lien, claim or demand, then Lessee shall,
at its sole expense, defend itself and Lessor against the same and shall pay and
satisfy any adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessee or the Premises, upon the condition that if Lessor
shall require, Lessee shall furnish to Lessor a surety bond satisfactory to
Lessor in an amount equal to such contested lien, claim or demand indemnifying
Lessor against liability for the same, and holding the Premises free from the
effect of such lien or claim or, if Lessor shall request, Lessee shall procure
and record the bond provided for in California Civil Code section 3143, or any
comparable statute hereafter enacted, providing for a bond freeing the Premises
from the effect of such lien or claim or action thereon.

 

(ii)    If Lessee does not cause to be recorded the bond described in California
Civil Code section 3143 or otherwise protect the Premises under any alternative
or successor statute, Lessor shall have the right, but not the duty, to pay or
otherwise discharge the claim or lien or both.  Lessee shall reimburse Lessor
for all sums paid by Lessor under this Paragraph, together with all Lessor’s
reasonable attorneys’ fees and costs, plus interest on those sums, fees and
costs at the lesser of ten percent

 

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(10%) per annum or the highest rate permitted by law from the date of payment
until the date of reimbursement.

 

55.                               Lessor’s Allowance.  Upon installation of the
Perimeter Fence in compliance with Paragraph 54, Lessor shall reimburse Lessee
up to One Hundred Thousand Dollars ($100,000.00) for Lessee’s cost to acquire
and install the Perimeter Fence.  Lessee shall provide Lessor invoices
evidencing such cost for payment by Lessor.

 

56.                               Representations Regarding Improvements. 
Lessor and Lessee acknowledge that the specifications for Lessor’s Improvements
have been provided by Lessee with the understanding that the site improvements
completed to such specifications create a system adequate to handle the loads
and uses dictated by Lessee’s Agreed Use (the “System”).  Lessor represents that
Lessor’s Improvements will comply with Lessee’s specifications for the System,
but Lessor does not represent or warrant that the System is adequate for
Lessee’s Agreed Use.  Lessor shall be responsible for structural maintenance and
repair of Lessor’s Improvements if such maintenance or repair is due to a defect
in Lessor’s construction of Lessor’s Improvements.  However, Lessee shall be
responsible for any maintenance or repair required due to the inadequacy of the
System to support Lessee’s Agreed Use, or due to normal wear and tear.

 

57.                               Common Road Maintenance.  Lessor and Lessee
acknowledge and agree that Lessee will share use of the main access road
(“Wickland access road”) into the Premises with the adjoining property owner. 
Lessee agrees to cooperate with the adjacent owner in using the Wickland access
road, and not unreasonably interfere with such owner’s continued use of the
road.  Lessee shall use the Wickland access road for ingress and egress and
shall not allow vehicles to park or otherwise stop on the road.  Lessee shall
not use the Wickland access road for loading or unloading vehicles or as a
staging area for transporting vehicles.  Lessor acknowledges that Lessee’s use
of the Wickland access road in compliance with this provision and the Lease will
not unreasonably interfere with the adjoining property owner’s use.  Subject to
the rights of the parties under the Shore Easements described at Paragraph 62(b)
below, Lessor agrees not to allow any current or future user of the Wickland
access road to unreasonably interfere with Lessee’s use of the road during the
Lease Term.  Lessee shall be responsible for reimbursing Lessor for Fifty
percent (50%) of all costs incurred to maintain, protect and repair in its
current condition that portion of such road used by Lessee to enter the Premises
(as depicted on the survey listed on Exhibit D referenced below) as necessary to
prevent deterioration or as otherwise required by any applicable governmental
authorities.  Lessee shall reimburse Lessor for such costs and expenses within
ten (10) days following Lessor’s delivery of a written statement therefor.  The
foregoing notwithstanding, Lessee shall pay one hundred percent (100%) of all
costs and expenses for any capital improvements to the Wickland access road as a
result of any increased traffic on the road caused by Lessee’s use or
development of the Premises or if required by applicable governmental
authorities as a condition of issuance of any Permits related to Lessee’s use or
development of the Premises.

 

58.                               Right of First Refusal.  If Lessor desires to
sell the Premises during the Term of the Lease or receives from a third party a
bona fide offer acceptable to Lessor during the Term of the Lease to purchase
the Premises, Lessee shall have a prior right to purchase such Premises on the
terms offered by the third party.  Lessor shall give Lessee notice of such
offer, together with a copy thereof, and Lessee shall have fifteen (15) days
from receipt of said notice to enter into an agreement to acquire such interest
at the terms of such offer and to close escrow for such acquisition within sixty
(60) days of such agreement to acquire.  If Lessee fails to exercise such right
of first refusal within the fifteen (15) day period or fails to close escrow
within the subsequent sixty (60) day period, Lessor shall have one hundred
eighty (180) days thereafter to sell the Premises to such third party (or any
other party on similar terms) without resubmitting such offer to Lessee;
provided, however, that any such sale shall be subject to this Lease and
Lessee’s leasehold interest shall remain intact following the transfer of title
to the Premises; provided further, Lessee shall attorn to any purchaser of the
Premises as Lessor hereunder as long as the new owner does not disturb Lessee’s
quiet enjoyment of the Premises in compliance with the Lease.  This Right of
First Refusal shall be inapplicable to

 

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any transfers to affiliates of Lessor or transfers through merger, consolidation
or reorganization of Lessor.  For purposes of this provision, “affiliates” shall
mean entities controlled by or under common control of Lessor.  The foregoing
Right of First Refusal shall apply only during the initial Lease Term, and shall
not apply during any Option Term (as defined below).

 

59.          Options to Renew.

 

A.                                    Option.  Upon notice to Lessor received
not more than eighteen (18) months but not less than twelve (12) months prior to
the Expiration Date, Lessee shall have one (1) option (“Option”) to renew this
Lease for a five (5) year term (“Option Term”) under the same terms and
conditions of the Lease, except Base Rent.  Rent shall be at the then “Fair
Market Rental,” as defined below.

 

B.                                    Fair Market Value.  For the purposes of
this Paragraph 59, ‘‘Fair Market Rental” shall be rent paid for comparable
properties with similar premises and Lessor Improvements (excluding the Building
and Lessee Improvements), uses consistent with the zoning of the Premises,
located in and around Martinez, California.  The rent paid for such comparable
properties shall be determined by the agreement of the parties within sixty (60)
days after Lessee gives notice to Lessor of its exercise of the Option.  If the
parties are unable to agree upon such rent during the sixty (60) day period,
each party shall, within thirty (30) days thereafter, simultaneously exchange
each other’s written estimate of rent on a per square foot per year basis.  If
one party fails to make the simultaneous exchange of the written estimates of
rent, then the estimate made by the other party shall be deemed to be the Fair
Market Rental.  If the higher of the two (2) estimates does not exceed the lower
of the two (2) estimates by more than ten percent (10%) of the lower estimate,
the Fair Market Rental for the Premises during the Option Term shall be ninety
percent (90%) of the average of the two estimates.  If the higher estimate
exceeds the lower estimate by more than ten percent (10%), each party shall,
within ten (10) days after the date of exchange of each other’s estimate of Fair
Market Rental, designate an independent appraiser who is a member of the
American Institute of Real Estate Appraisers (MAI) with at least five (5) years’
experience in commercial/industrial appraisals in the San Francisco Bay Area. 
The two (2) MAI appraisers so selected shall select a third MAI appraiser with
similar qualifications who shall be an impartial person, unrelated or
unaffiliated with, Lessor, Lessee, and the other appraisers.  The third
appraiser shall then determine the Fair Market Rental for the Premises, and his
determination shall be binding on both parties.  If one party fails to designate
an appraiser as provided for above, then the other party’s appraiser shall make
his determination for Fair Market Rental which shall be binding on both
parties.  Each party shall compensate the appraiser designated by it and any
compensation payable to the third appraiser shall be paid equally by Lessor and
Lessee.

 

C.                                    Agreement to Negotiate.  During the second
(2nd) year of the Option Term Lessor and Lessee agree to meet, and use good
faith efforts to attempt to negotiate a Lease extension for an additional five
(5) year period beyond expiration of the Option Term.

 

60.                               Force Majeure.  Lessor shall incur no
liability to Lessee with respect to, and shall not be responsible for any
failure to perform, any of Lessor’s obligations under the Lease if such failure
is caused by any reason beyond the control of Lessor including, but not limited
to, strike, labor trouble, governmental rule, regulations, ordinance, status or
interpretation, or by fire, flood, earthquake, civil commotion, or failure or
disruption of utility services.  The amount of time for Lessor to perform any of
Lessor’s obligations shall be extended by the amount of time Lessor is delayed
in performing such obligation by reason of any force majeure occurrence whether
similar to or different from the foregoing types of occurrences.

 

61.                               Signage.  Subject to approval of applicable
governmental authorities and Lessor’s reasonable approval, Lessee may install
signage on the Premises.

 

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62.                               Acknowledgment Regarding Ownership.  Lessor
recently has conveyed (i) approximately seventy (70) acres of property of which
the Premises are a part (“Retained Parcel”), and (ii) certain other adjacent
property (“Buyer’s Parcel”) to Shore Terminals, LLC, a Delaware LLC (“Buyer”). 
Buyer and Lessor have agreed that Seller will complete a lot line adjustment
whereby the Retained Parcel will be separated out from Buyer’s Parcel and
reconveyed to Lessor.  Pursuant to an Agreement for Grant and Reservation of
Easements between Lessor and Buyer dated October 30, 1998, Lessor has the right
to Lease the Premises to third parties without Buyer’s consent during the time
period between the closing of the sale to Buyer and the completion of the lot
line adjustment.

 

63.                               Acknowledgment of CC&R’s and Conditions of
Record.

 

A.                                   As part of the conveyance of the Retained
Parcel and Buyer’s Parcel to Buyer as described in Paragraph 62, Buyer executed
and recorded against the Retained Parcel, including the Premises, a Declaration
of Covenants, Conditions and Restrictions for the Martinez Terminal dated as of
October 30, 1998, in substantially the form attached as Exhibit C hereto
(“CC&R’s”).  Lessor represents that upon Lessee and Lessor obtaining all
necessary Permits, Lessee’s Agreed Use in compliance with all conditions to such
Permits and all other Applicable Requirements will not violate the CC&R’s. 
Lessee agrees to comply with the CC&R’s and all other conditions, covenants and
easements of record against the Premises, whether such conditions, covenants and
easements are recorded prior to the Commencement Date or during the Lease Term,
as long as, to the extent that such covenants, conditions or easements are
recorded after the Commencement Date, they do not materially interfere with
Lessee’s use of the Premises.

 

B.                                     As part of the conveyance of the Retained
Parcel and Buyer’s Parcel to Buyer, Lessor has recorded against the Retained
Parcel and Buyer’s Parcel certain easements more particularly described on
Exhibit D to this Lease (the “Shore Easements”).  Lessee has been provided
copies of the Shore Easements and acknowledges that:  (i) its leasehold interest
is subject to the Shore Easements; and, (ii) The Shore Easements do not
interfere with Lessee’s use or occupancy of the Premises.

 

64.                               No Leasehold Encumbrances.  Lessee shall not
record any documents against the Premises or encumber the Premises during the
Lease term or any Option Term without first obtaining Lessor’s consent, which
may be withheld in Lessor’s sole discretion.

 

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65.                               Termination.  Prior to the Commencement Date,
and as a condition to Lessor’s delivery of possession of the Premises to Lessee,
Lessee shall surrender all rights to the real property located in Crockett,
California, leased by Wickland Oil Company to Lessee pursuant to the terms of
the Selby I Lease.

 

 

 

Lessor:

 

 

 

 

 

Date: 12/23/98

 

Wickland Oil Martinez, L.P.,
a California Limited Partnership

 

 

 

 

 

 

 

By:

/s/ Daniel E. Hall

 

 

 

 

Its:

Vice-President

 

 

 

 

 

 

 

Lessee:

 

 

 

 

 

Date: 12/23/98

 

Copart, Inc.,
a California Corporation

 

 

 

 

 

 

 

By:

/s/ Paul A. Styer

 

 

 

 

Its:

Secretary

 

 

 

Date:

 

 

27

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EXHIBIT A

 

MARTINEZ INDUSTRIAL LAND

 

DRAWING OF PROPERTY

 

28

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EXHIBIT B

 

DRAINAGE PLAN

 

Map of Martinez

 

29

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EXHIBIT C

 

CC&R’s

 

30

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RECORDING REQUESTED BY:

AND WHEN RECORDED MAIL TO:

 

Brobeck, Phleger & Harrison LLP

550 South Hope Street, Suite 2100

Los Angeles, California 9007-2630

Attention:  Jerry Walsh, Esq.

 

 

(Space Above Line For Recorder’s Use Only)

 

 

DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS

FOR THE MARTINEZ TERMINAL

 

THIS DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS (this “Declaration”)
dated as of October 30, 1998, is made by SHORE TERMINALS LLC, a Delaware limited
liability company (“Declarant”) with reference to the following Recitals:

 

R E C I T A L S

 

A.                                   Declarant is the present fee title owner of
certain real property (the “Property”) located in the City of Martinez, Contra
Costa County, State of California, and more particularly described in Exhibit A
attached hereto.

 

B.                                     Declarant intends to convey a portion of
the Property (the “Restricted Property”) to Wickland Oil Martinez, L.P., a
California limited partnership (“WOM”) pursuant to that certain Purchase and
Sale Agreement, dated August 7, 1998 (as amended, collectively, the “Purchase
Agreement”) between WOM and Declarant.

 

C.                                     Pursuant to the Purchase Agreement,
Declarant desires to subject the Property to the covenants, conditions,
restrictions and reservations set forth in this Declaration to insure that the
Restricted Property is developed, used and maintained in a manner which is
consistent with this Declaration for the benefit of the Terminal Property.

 

ARTICLE I.

DEFINITIONS

 

Unless the context requires otherwise, the terms defined in this Article I
shall, for all purposes of this Declaration, have the meaning herein specified.

 

“Affiliate” shall mean any and all subsidiaries of Declarant, partnerships or
corporations of which Declarant owns or controls fifty percent (50%) or more of
the stock, partnership interests or voting rights or for which there are
substantially the same management and key employees as Declarant.

 

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“Declarant” shall mean Shore Terminals LLC, a Delaware limited liability
company, and its successors in interest and assignees that expressly assume in
writing the obligations of Declarant under this Declaration.

 

“Declaration” shall mean this Declaration of Covenants, Conditions and
Restrictions, as amended from time to time.

 

“Effective Date” shall mean the date of recordation of this Declaration.

 

“Improvements” shall mean and include, but not be limited to buildings, parking
areas, loading areas, fences, walls, hedges, landscaping, plantings, poles,
signs and any other structures or improvements of any type or kind located on
the Property or any portion thereof and any replacements, additions, repairs or
alterations thereto of any kind whatsoever.

 

‘‘Leases” shall mean any leases encumbering the Property or any portion thereof,
and any and all assignments, addenda, amendments, exhibits, modifications and
subleases thereof or thereto, and consents to assignments thereto.

 

“Lessee” shall mean each lessee, sublessee, licensee, concessionaire or other
occupant (except for any Owner as defined below) in possession of any portion of
the Property.

 

“Owner” shall mean each and every owner of the Property or any portion thereof
or interest therein during the term of this Declaration, including Declarant and
WOM.

 

“Permitted Use” shall mean light or heavy industrial uses permitted under zoning
laws existing as of the date of this Declaration or as dedicated open space.

 

“Prohibited Purposes” shall mean the operation or development of a petroleum or
hydrocarbon product tank farm storage terminal.

 

“Property” is defined in Recital A above.

 

“Regulations” shall mean all present and future applicable laws, statutes,
codes, ordinances, rules, regulations, limitations, restrictions, orders,
judgments or other requirements of any governmental or quasi-governmental
authority having jurisdiction over the Property, Restricted Property,
Improvements or Owner.

 

“Restricted Property” is defined in Paragraph 3.1 below.

 

“Term” is defined in Paragraph 2.3 below.

 

“Terminal Property” shall mean all portions of the Property except for the
Restricted Property.

 

“WOM” shall mean Wickland Oil Martinez, L.P., a California limited partnership,
its successors and assigns.

 

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ARTICLE II.

PROPERTY SUBJECT TO THIS DECLARATION

 

2.1                               General Declaration.  Declarant hereby
covenants, agrees and declares that the Property is and shall be, conveyed,
hypothecated, encumbered, leased, occupied, built upon or otherwise used,
improved or transferred in whole or in part subject to this Declaration.  All of
the covenants, restrictions and equitable servitudes contained in this
Declaration are declared and agreed to be in furtherance of a plan for the use,
maintenance and development of the Property and are established for such
purposes.  All of the covenants, conditions and equitable servitudes contained
in this Declaration shall run with the Property for all purposes and shall be
binding upon Owner and Declarant and their successors and assigns and shall
inure to the benefit of Owner and Declarant and their successor and assigns and
the Terminal Property.

 

2.2                               Binding on Lessees.  Owner shall require all
Lessees under any Leases entered into after the Effective Date to comply with
this Declaration.  Therefore, a copy of this Declaration shall either be
attached as an exhibit to any such Leases executed after the Effective Date or
shall be delivered to the Lessees thereunder.

 

2.3                               Term.  The term of this Declaration shall
commence upon the Effective Date and shall continue and remain in full force and
effect at all times with respect to the Property and each part thereof, until
ninety-nine (99) years after the Effective Date (the “Term”).

 

ARTICLE III.

REGULATION OF OPERATIONS AND USES

 

3.1                               Permitted Uses.  During the first fifteen (15)
years of the Term of this Declaration, the Restricted Property, as more
particularly described on Exhibit B attached hereto, shall be used solely for
the Permitted Use and no other use shall be permitted during the first fifteen
(15) years of the Term of this Declaration without the prior written approval of
Declarant, which approval may be withheld in Declarant’s sole and absolute
discretion.

 

3.2                               Prohibited Uses.  Neither Owner nor any other
person or entity shall use the Restricted Property or any portion thereof, for
any of the Prohibited Purposes during the Term of this Declaration.

 

ARTICLE IV.

MAINTENANCE AND REPAIR

 

4.1                               General.  Owner shall at all times maintain or
cause the maintenance of the Restricted Property in good condition and repair
and in compliance with all Regulations.

 

ARTICLE V.

EVENTS OF DEFAULT AND REMEDIES

 

5.1                               Events of Default.  It shall be an event of
default (“Event of Default”) under this Declaration if Owner fails to observe
and perform any provision of this Declaration to be observed or performed by
Owner if such failure continues for fifteen (15) days after written notice
thereof by Declarant.

 

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5.2                               Remedies.  In addition to any other remedies
provided by law or equity, Declarant may enforce the obligations under this
Declaration if an Event of Default by any Owner under this Declaration has
occurred, Declarant may commence and maintain a suit against any Owner for
damages, declaratory or injunctive relief, specific performance or any other
legal or equitable relief permitted under applicable law.

 

ARTICLE VI.

MISCELLANEOUS

 

6.1                               Interpretation.  This Declaration shall be
construed in accordance with and governed by the laws of the State of
California.  If any provision of this Declaration or application thereof to any
person or circumstances shall to any extent be invalid, the remainder of this
Declaration shall not be affected and each provision of this Declaration shall
be valid and enforced to the fullest extent permitted by law.  Exhibits A and B
attached hereto are incorporated by reference herein. This Declaration can only
be modified by a writing executed by Declarant.  No waiver of any Event of
Default or any covenant, condition or restriction imposed by this Declaration
shall be implied from any omission by Declarant to take action on account of
such Event of Default if such Event of Default persists or is repeated.

 

6.2                               Attorneys’ Fees.  If any legal action,
arbitration or other proceeding is commenced to enforce or interpret any
provision of this Declaration, the prevailing party shall be entitled to an
award of its actual attorney’s fees and expenses, whether or not such action is
pursued to judgment.  The phrase “prevailing party” shall include a party who
receives substantially the relief desired whether by dismissal, summary judgment
or otherwise.

 

6.3                               Notices. All notices and requests given under
this Declaration shall be in writing and shall be served either personally, by
FedEx or by registered or certified mail, return receipt requested. Notices
shall be deemed received at the earlier of actual receipt or three (3) days
following deposit in the U.S. Mail, postage prepaid.  Notices shall be directed
to the following addresses:

 

Declarant:

 

Shore Terminals LLC
2801 Waterfront Road
Martinez, California 94553
Attention: Richard (Beau) Shore

 

 

 

with copies to:

 

Shore Terminals LLC
c/o Onyx Holdings, Inc.
Northwest Bank Tower
2550 Middle Road, Suite 603
Bettendorf, Iowa 52772
Attention: David L. Widener

 

 

 

Owner:

 

Wickland Oil Martinez, L.P.
3640 American River Drive
Sacramento, California 95864
Attention: Roy L. Wickland

 

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Declarant may change its address for notice by giving written notice in
accordance with this Section.

 

6.4                               Constructive Notice and Acceptance. Every
person or other entity who now or hereafter owns or acquires any right, title or
interest in or to any portion of the Property, including the Restricted
Property, subject to this Declaration is and shall be conclusively deemed to
have consented and agreed to every covenant, condition and restriction contained
herein, whether or not any reference to this Declaration is contained in the
instrument by which such person or entity acquired an interest in the Property.

 

6.5                               No Third Party Beneficiaries. This Declaration
shall be binding upon and inure to the benefit of Declarant and its successors
and assigns. Except for the foregoing, this Declaration is not intended and
shall not be deemed or construed to create any rights in any third parties
(including, without limitation, any Lessees of future Leases or any successors
and assigns of Declarant that are not also Affiliates).

 

IN WITNESS WHEREOF, Declarant has caused its duly authorized representatives to
execute this Declaration as of this 30th day of October, 1998.

 

 

SHORE TERMINALS LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Richard S. Shore, Jr.

 

 

 

Richard S. Shore, Jr.

 

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EXHIBIT A

 

(Legal Description of the Property)

 

DRAWING OF LEASED PROPERTY

 

 

Exhibit A

 

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EXHIBIT B

 

DRAWING OF DRAINAGE PLAN

 

Exhibit B

 

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CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT

 

State of California

County of

 

— OPTIONAL SECTION —
CAPACITY CLAIMED BY
SIGNER

 

 

 

On

 

, before me,

 

 

 

Though statute does not require the Notary to fill in the data below, doing so
may prove invaluable to persons relying on the document.

 

DATE

 

Name and Title of the Officer - e.g., “JANE DOE NOTARY PUBLIC”

 

 

 

 

 

 

 

 

personally appeared Richard (Beau) Shore,

 

 

o INDIVIDUAL

 

Name(s) of Signer(s)

 

ý CORPORATE OFFICER(S)

o personally known to me – OR o proved to me on the basis of satisfactory
evidence

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TITLE(S)

 

 

 

 

to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

 

 

 

o PARTNER(S)

o LIMITED

 

o GENERAL

o ATTORNEY-IN-FACT

 

 

o TRUSTEE(S)

 

WITNESS my hand and official seal.

 

o GUARDIAN/CONSERVATOR

 

 

 

o OTHER:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURE OF NOTARY

 

 

 

 

 

 

SIGNER IS
REPRESENTING
NAME OF PERSON(S) OR ENTITY(IES)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPTIONAL SECTION

 

 

 

 

 

 

 

 

THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED AT RIGHT:

 

Title or Type of Document

 

 

Number of Pages                           Date of Document

 

 

 

Though the data requested here is not required by law, it could prevent
fraudulent reattachment of this form.

 

Signer(s) Other Than Named Above

 

 

 

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EXHIBIT D

 

SHORE EASEMENTS

 

MARTINEZ TERMINAL

 

I.                                         Easements

 

1.                                       Agreement for Grant and Reservation of
Easements (Martinez Terminal), dated October 30, 1998, between Shore Terminals
LLC, a Delaware limited liability company (“Grantor”), and Wickland Oil
Martinez, L.P., a California limited partnership (“Grantee”), as recorded in the
Official Records of Contra Costa County, California, on November 2,1998, as
Document No. 98-0273349-00.

 

2.                                       Agreement for Grant of Easement
(Martinez Terminal Natural Gas Pipeline Easement), dated October 30, 1998,
between Grantor and Grantee, as recorded in the Official Records of Contra Costa
County, California, on November 2, 1998, as Document No. 98-0273350-00.

 

II.                                     Survey

 

1.                                       ALTA/ACSM Survey - Martinez Terminal
for Wickland Oil, dated September 1998, prepared by David Evans and Associates,
Inc. (Page 4, only).

 

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EXHIBIT E

 

PERMIT CONDITIONS

 

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Archaeology

 

4.                                       Should archaeological materials be
uncovered during grading, trenching or other on-site excavation(s), earthwork
within 30 yards of these materials shall be stopped until a professional
archaeologist who is certified by the Society of Professional Archaeology (SOPA)
has had an opportunity to evaluate the significance of the find and suggest
appropriate mitigation(s), if deemed necessary.

 

5.                                       The applicant shall submit grading
plans for review and approval of the Community Development Department prior to
issuance of grading permits.

 

Landscaping

 

6.                                       Prior to Phase Two construction period,
a landscaping and irrigation plan for all areas shown on the plan shall be
submitted for review and approval of the Zoning Administrator at least 30 days
prior to issuance of building permits. A cost estimate shall be submitted with
the landscaping program plan. Landscaping shall conform to the County Water
Conservation Landscape Ordinance 82-26 and shall be installed prior to or
approval of final building permit.

 

The plan shall be prepared by a licensed landscape architect and shall be
certified to be in compliance with the County Water Conservation Ordinance.

 

7.                                       If occupancy is requested prior to the
installation of the landscape and irrigation improvements, then either: (1) a
cash deposit; (2) a bond; or (3) a letter of credit, shall be delivered to the
County for 125 percent of the estimated cost of the uncompleted portion of the
landscape and irrigation improvements. If compliance is not achieved after six
months of occupancy as determined by the County Zoning Administrator, the County
shall contract for the completion of the landscaping and irrigation improvements
to be paid for by the held sum. The County shall return the unused portion
within one year of receipt or at the completion of all work.

 

Signs

 

8.                                       All signs shall be subject to the
review and approval of the Zoning Administrator. No other outside displays are
permitted.

 

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Phase II

 

•                                          Applicant shall inspect each vehicle
upon delivery to the site. Prior to storage on-site, any compromised system
containing fluids shall be drained and fluids disposed of properly.

 

•                                          Fluid removal shall be permitted
on-site within a permanent facility located on the project site.

 

•                                          The facility where fluid removal will
take place shall have a concrete floor and be covered to prevent exposure to
precipitation. The area where this work will take place shall be sloped to drain
to the sanitary sewer system or other acceptable filtering facility.

 

•                                          Vehicles with damaged that have the
potential for exposure of pollutants to precipitation shall be stored in a
covered area or shall be covered to prevent exposure to precipitation during the
period from October 1 to April 15 or during any significant storm event after
April 5.

 

•                                          Bulk vehicle fluid storage areas
shall have a concrete floor, be covered and a containment berm provided around
storage containers. Any drainage required for storage areas shall be discharged
to the sanitary sewer system or other acceptable filtering facility.

 

•                                          Stencil all storm drain inlets with
“No Dumping, Drains to Delta” using thermoplastic tape. Incorporate ongoing
employee training programs on the potential to pollute storm water and the
property handling of hazardous materials.

 

Fees:

 

31.                                 Applicant shall comply with the requirements
of the Bridge/Thoroughfare Fee ordinance for the Bay Point Area of Benefit and
the Eastern Contra Costa Subregional Transportation Mitigation Fee Area of
Benefit as adopted by the Board of Supervisors for Phase I of the project. A
building permit hold shall be placed on this parcel for the construction of any
improvements related to Phase II of this project as approved with this
application.  The building permit hold shall be released after review of the
Phase II improvements by the Public Works. Transportation Engineering Division
and a determination made as to the appropriate area of benefit fee schedule for
the proposed project.

 

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