EXHIBIT 10.63

 

LEASE AGREEMENT

(Multi-Tenant Facility)

 

ARTICLE ONE: BASIC TERMS.

 

This Article One contains the Basic Terms of this Lease between the Landlord and
Tenant named below. Other Articles, Sections and Paragraphs of the Lease
referred to in this Article One explain and define the Basic Terms and are to be
read in conjunction with the Basic Terms.

 

Section 1.01. Date of Lease: October 2, 2003

 

Section 1.02. Landlord (include legal entity): Anderson-Tully Company, a
Mississippi corporation,

 

Address of Landlord: 1242 North Second Street, Memphis, Tennessee 38107

 

 

______________________________________________________________________________________________________________________________

 

Section 1.03. Tenant: A-F SERVICES, Inc., a Delaware corporation

 

Address of Tenant: 2555 West 190th Street, Torrance, California 90504, Attention
Simon Abuyones

 

______________________________________________________________________________________________________________________________

 

Section 1.04. Property: The Property is part of Landlord’s multi-tenant real
property development known as Shelby I, 4715 East Shelby Drive, Memphis,
Tennessee 38118 and described or depicted in Exhibit “A” (the “Project”). The
Project includes the land, the buildings and all other improvements located on
the land, and the common areas described in Paragraph 4.05(a). The Property is
(include street address, approximate square footage and description):
approximately 212,000 square feet at Shelby I, 4715 East Shelby Drive, Memphis,
Tennessee, as shown on Exhibit B.

 

Section 1.05. Lease Term: 40 months beginning on September 1, 2003, or such
other date as is specified in this Lease, and ending on December 31, 2006.

 

Section 1.06. Permitted Uses (See Article Five): Office, warehouse and
distribution of computers, electronic components or related equipment and other
uses related to Tenant’s business.

 

Section 1.07. Tenant’s Guarantor (if none, so state): PC Mall, Inc.

 

Section 1.08. Broker(s) (See Article fourteen) (if none, so state):

 

Landlord’s Broker: CB Richard Ellis Memphis, LLC

 

Tenant’s Broker: None

 

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Section 1.09. Commission payable to Landlord’s Broker (See Article Fourteen):
per separate agreement

 

Section 1.10. Initial Security Deposit (See Section 3.03): None

 

Section 1.11. Vehicle Parking Spaces Allocated to Tenant: (See Section 4.05)
_325_

 

Section 1.12. Rent and Other Charges Payable by Tenant:

 

(a) BASE RENT: for the period September 1, 2003 through December 31, 2003:
THIRTY-FOUR THOUSAND SIX HUNDRED SIXTEEN AND 66/100 DOLLARS ($34,616.66) per
month; for the period January 1, 2004 through December 31, 2006, FORTY-SEVEN
THOUSAND THREE HUNDRED FORTY SIX AND 67/100 DOLLARS ($47,346.67)

 

(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02); (ii)
Utilities (See Section 4.03); (iii) Insurance Premiums (See Section 4.04); (iv)
Tenant’s Pro-Rata Share of Common Area Expenses: 65.23 percent (65.23%) (See
Section 4.05); (v) Impounds for Insurance Premiums and Property Taxes ( if
required pursuant to Section 4.08); (vi) Maintenance, Repairs and Alterations
(See Article Six).

 

Section 1.13. Landlord’s Share of Profit on Assignment or Sublease: (See Section
9.05) Fifty percent (50%) of the profit (the “Landlord’s Share”).

 

Section 1.14. Riders: The following Riders are attached to and made a part of
this Lease: (If none, so state) Addendum to Lease Agreement

 

ARTICLE TWO. LEASE TERM.

 

Section 2.01. Lease of Property for Lease Term. Landlord leases the Property
from Landlord to Tenant and Tenant leases the Property from Landlord for the
Lease Term. The Lease Term is for the period stated in Section 1.05 above and
shall begin and end on the dates specified in Section 1.05 above, unless
terminated or extended pursuant to the terms hereof. The “Commencement Date”
shall be the date specified in Section 1.05 above for the beginning of the Lease
Term. Section 2.02 Delay in Commencement. N/A

 

Section 2.03 Early Occupancy. N/A

 

Section 2.04 Holding Over. Tenant shall vacate the Property upon the expiration
or earlier termination of this Lease. Tenant shall reimburse Landlord for and
indemnify Landlord against all reasonable damages which Landlord incurs from
Tenant’s delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant’s occupancy of the Property shall be a “month
to month” tenancy, subject to all of the terms of this Lease applicable to a
month-to-month tenancy, except that the Base Rent then in effect shall be
increased by fifty percent (50%).

 

ARTICLE THREE: BASE RENT.

 

Section 3.01. Time and Manner of Payment. Upon execution of this Lease, Tenant
shall pay Landlord the Base Rent in the amount stated in Paragraph 1.12(a) above
for the first

 

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month of the Lease Term. On the first day of the second month of the Lease Term
and each month thereafter, Tenant shall pay Landlord the Base Rent, in advance,
without offset, deduction or prior demand. The Base Rent shall be payable at
Landlord’s address or at such other place as Landlord may designate in writing.

 

Section 3.02 Cost of Living Increases. N/A

 

Section 3.03. Security Deposit; Increases.

 

(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a cash
Security Deposit in the amount set forth in Section 1.10 above, if any. Landlord
may apply all or part of the Security Deposit to any unpaid rent or other
charges due from Tenant or to cure any other defaults of Tenant. If Landlord
uses any part of the Security Deposit, Tenant shall restore the Security Deposit
to its full amount within ten (10) days after Landlord’s written request.
Tenant’s failure to do so shall be a material default under this Lease. No
interest shall be paid on the Security Deposit. Landlord shall not be required
to keep the Security Deposit separate from its other accounts and no trust
relationship is created with respect to the Security Deposit.

 

(b) Each time the Base Rent is increased, Tenant shall deposit additional funds
with Landlord sufficient to increase the Security Deposit to an amount which
bears the same relationship to the adjusted Base Rent as the initial Security
Deposit bore to the initial Base Rent.

 

Section 3.03. Termination; Advance Payments. Upon termination of this Lease
under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any
other termination not resulting from Tenant’s default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant’s successor) the unused portion of the Security
Deposit, any advance rent or other advance payments made by Tenant to Landlord,
and any amounts paid for real property taxes and other reserves which apply to
any time periods after termination of the Lease.

 

ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT.

 

Section 4.01. Additional Rent. All charges payable by Tenant, pursuant to this
Article Four other than Base Rent are called “Additional Rent.” Unless this
Lease provides otherwise, Tenant shall pay all Additional Rent then due with the
next monthly installment of Base Rent. The term “rent” shall mean Base Rent and
Additional Rent.

 

Section 4.02. Property Taxes.

 

(a) Real Property Taxes. Tenant shall pay all real property taxes on the
Property (including any fees, taxes or assessments against, or as a result of,
any tenant improvements installed on the Property by or for the benefit of
Tenant) during the Lease Term. Subject to Paragraph 4.02(c) and Section 4.08
below, such payment shall be made to the applicable taxing authority at least
ten (10) days prior to the delinquency date of the taxes. Within such ten (10)-

 

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day period, Tenant shall furnish Landlord with satisfactory evidence that the
real property taxes have been paid. Landlord shall reimburse Tenant for any real
property taxes paid by Tenant covering any period of time prior to or after the
Lease Term (except taxes paid under Tenant’s prior Lease of the Project). If
Tenant fails to pay the real property taxes when due, Landlord may pay the taxes
and Tenant shall reimburse Landlord for the amount of such tax payment as
Additional Rent.

 

(b) Definition of “Real Property Tax.” “Real Property Tax” means: (i) any fee,
license fee, license tax, business license fee, commercial rental tax, levy
charge, assessment, penalty or tax imposed by any taxing authority against the
Property; (ii) any tax or charge for fire protection, streets, sidewalks, road
maintenance, refuse or other services provided to the Property by any
governmental agency; (iii) any tax imposed upon this transaction or based upon a
re-assessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord’s interest in the
Property; and (iv) any charge or fee replacing any tax previously included
within the definition of real property tax. “Real property tax” does not,
however, include Landlord’s federal or state income, franchise, inheritance,
estate taxes or any tax on the Landlord’s right to receive, or the receipt of,
rent or income from the Property or against Landlord’s business of leasing the
Property.

 

(c) Joint Assessment. If the Property is not separately assessed from the
remainder of the Project, or any portion thereof, Landlord shall reasonably
determine Tenant’s share of the real property tax payable by Tenant under
Paragraph 4.02(a) from the assessor’s worksheets or other reasonably available
information. Tenant shall pay such share to Landlord within fifteen (15) days
after receipt of Landlord’s written statement.

 

(d) Personal Property Taxes.

 

(i) Tenant shall pay all taxes charged against trade fixtures, furnishings,
equipment or any other personal property belonging to Tenant. Tenant shall try
to have personal property taxed separately from the Property.

 

(ii) If any of Tenant’s personal property is taxed with the Property, but only
to the extent Tenant does not pay such taxes to the applicable taxing authority
pursuant to §4.02(a) above, Tenant shall pay Landlord the taxes for the personal
property within fifteen (15) days after Tenant receives a written statement from
Landlord for such personal property taxes with copies of tax bills setting forth
amount of taxes attributable to Tenant’s personal property.

 

Section 4.03. Utilities. Tenant shall pay, directly to the appropriate supplier,
the cost of all natural gas, heat, light, power, sewer service, telephone,
water, refuse disposal and other utilities and services supplied to the
Property. However, if any services or utilities are jointly metered with other
property, Landlord shall make a reasonable determination of Tenant’s
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord’s
written statement.

 

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Section 4.04. Insurance Policies.

 

(a) Liability Insurance. During the Lease Term, Tenant shall maintain a policy
of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property. Tenant
shall name Landlord as an additional insured under such policy. The initial
amount of such insurance shall be ONE MILLION DOLLARS ($1,000,000.00) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord’s professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii)
contain cross-liability endorsements; and (iii) insure Tenant’s performance
under Section 5.05, if the matters giving rise to the indemnity under Section
5.05 result from the negligence of Tenant. The amount and coverage of such
insurance shall not limit Tenant’s liability nor relieve Tenant of any other
obligations under this Lease. Landlord may also obtain comprehensive public
liability insurance in an amount and with coverage determined by Landlord, in
its reasonable discretion insuring Landlord against liability arising out of
ownership, operation, use or occupancy of the Property. The policy obtained by
Landlord shall not be contributory and shall not provide primary insurance.

 

(b) Property and Rental Income Insurance. During the Lease Term, Landlord shall
maintain policies of insurance covering loss of or damage to the Property in the
full amount of its replacement value. Such policy shall contain an inflation
Guard Endorsement and shall provide protection against all perils included
within the classification of fire, extended coverage, vandalism, malicious
mischief, special extended perils (all risk), sprinkler leakage and any other
perils which Landlord deems reasonably necessary. Landlord shall have the right
to obtain flood and earthquake insurance if required by any lender holding a
security interest in the Property. Landlord shall not obtain insurance for
Tenant’s fixtures or equipment or building improvements installed by Tenant on
the Property. During the Lease Term, Landlord shall also maintain a rental
income insurance policy, with loss payable to Landlord, in an amount equal to
one (1) year’s Base Rent, plus estimated real property taxes and insurance
premiums. Tenant shall be liable for the payment of any deductible amount under
Landlord’s or Tenant’s insurance policies maintained pursuant to this Section
4.04, in an amount not to exceed TWENTY THOUSAND DOLLARS ($20,000.00). Tenant
shall not do or permit anything to be done which invalidates any such insurance
policies.

 

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(c) Payment of Premiums. Subject to Section 4.08, Tenant shall pay all premiums
for the insurance policies described in Paragraphs 4.04(a) and (b) (whether
obtained by Landlord or Tenant) within fifteen (15) days after Tenant’s receipt
of a copy of the premium statement or other evidence of the amount due, except
Landlord shall pay all premiums for non-primary comprehensive public liability
insurance which Landlord elects to obtain as provided in Paragraph 4.04(a). If
insurance policies maintained by Landlord cover improvements on real property
other than the Property, Landlord shall deliver to Tenant a statement of the
premium applicable to the Property showing in reasonable detail how Tenant’s
share of the premium was computed. If the Lease Term expires before the
expiration of an insurance policy maintained by Landlord, Tenant shall be liable
for Tenant’s prorated share of the insurance premiums. Before the Commencement
Date, Tenant shall deliver to Landlord a copy of any policy of insurance which
Tenant is required to maintain under this Section 4.04. At least thirty (30)
days prior to the expiration of any such policy, Tenant shall deliver to
Landlord a renewal of such policy. As an alternative to providing a policy of
insurance, Tenant shall have the right to provide Landlord a certificate of
insurance, executed by an authorized officer of the insurance company, showing
that the insurance which Tenant is required to maintain under this Section 4.04
is in full force and effect and containing such other information which Landlord
reasonably requires.

 

(d) General Insurance Provisions.

 

(i) Any insurance which Tenant is required to maintain under this Lease shall
include a provision which requires the insurance carrier to give Landlord not
less than thirty (30) days’ written notice prior to any cancellation or
modification of such coverage.

 

(ii) If Tenant fails to deliver a policy, certificate or renewal to Landlord
required under this Lease within the prescribed time period or if any such
policy is cancelled or modified during the Lease Term without Landlord’s
consent, Landlord may obtain such insurance, in which case Tenant shall
reimburse Landlord for the cost of such insurance within fifteen (15) days after
receipt of a statement that indicates the cost of such insurance.

 

(iii) Any insurance required to be provided by Tenant under this Section 4.04
may be provided by blanket or umbrella coverage covering Tenant’s operations at
the Property as well as at other locations; provided that all coverage amounts
required under this Section 4.04 shall remain available at all times for
coverage of claims related to the Property or Tenant’s operation thereon. Tenant
shall maintain all insurance required under this Lease with companies holding a
“General Policy Rating” of A-12 or better, as set forth in the most current
issue of “Best Key Rating Guide”. Landlord and Tenant acknowledge the insurance
markets are rapidly changing and that insurance in the form and amounts
described in this Section 4.04 may not be available in the future. Tenant
acknowledges that the insurance described in this Section 4.04 is for the
primary benefit of Landlord. If at any time during the Lease Term, Tenant is
unable to

 

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maintain the insurance required under the Lease, Tenant shall nevertheless
maintain insurance coverage which is customary and commercially reasonable in
the insurance industry for Tenant’s type of business, as that coverage may
change from time to time. Landlord makes no representation as to the adequacy of
such insurance to protect Landlord’s or Tenant’s interests. Therefore, Tenant
shall obtain any such additional property or liability insurance which Tenant
deems necessary to protect Landlord and Tenant.

 

(iv) Unless prohibited under any applicable insurance policies maintained,
Landlord and Tenant each hereby waive any and all rights of recovery against the
other, or against the officers, employees, agents or representatives of the
other, for loss of or damage to its property or the property of others under its
control, if such loss or damage is covered by any insurance policy in force
(whether or not described in this Lease) at the time of such loss or damage.
Upon obtaining the required policies of insurance, Landlord and Tenant shall
give notice to the insurance carriers of this mutual waiver of subrogation.

 

Section 4.05. Common Areas: Use, Maintenance and Costs.

 

(a) Common Areas. As used in this Lease, “Common Areas” shall mean all areas
within the Project which are available for the common use of tenants of the
Project and which are not leased or held for the exclusive use of Tenant or
other tenants, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, access roads, corridors, landscaping and planted
areas. Landlord, from time to time but subject to compliance with all applicable
zoning and land use regulations, ordinances or requirements, may change the
size, location, nature and use of any of the Common Areas, convert Common Areas
into leasable areas, construct additional parking facilities (including parking
structures) in the Common Areas, and increase or decrease Common Area land
and/or facilities Tenant acknowledges that such activities may result in an
increase or decrease in Common Area Land or facilities. Tenant acknowledges that
such activities may result in inconvenience to Tenant. Such activities are
permitted if they do not materially affect Tenant’s use of the Property. Common
Areas shall also include the Property’s share of the Project’s share of
landscape maintenance and street sweeping expenses for Southpoint Industrial
Park. The Project’s share of landscape maintenance and street sweeping expenses
for Southpoint Industrial Park is currently approximately 6.09%.

 

(b) Use of Common Areas. Tenant shall have the nonexclusive right (in common
with other tenants and all others to whom Landlord has granted or may grant such
rights) to use the Common Areas for the purposes intended, subject to such
reasonable rules and regulations as Landlord may establish from time to time.
Tenant shall abide by such rules and regulations and shall use its best effort
to cause others who use the Common Areas with Tenant’s express or implied
permission to abide by Landlord’s rules and regulations. At any time, Landlord
may close any Common Areas to perform any acts in the Common Areas as, in
Landlord’s judgment, are desirable to improve the Project. Tenant shall not
interfere with the rights of Landlord, other tenants or any other person
entitled to use the Common Areas.

 

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(c) Specific Provision re: Vehicle Parking. Tenant shall be entitled to use the
number of vehicle parking spaces in the Project allocated to Tenant in Section
1.11 of the Lease without paying any additional rent. Tenant’s parking shall not
be reserved, shall be located adjacent to the Property and shall be limited to
vehicles no larger than standard size automobiles or pickup utility vehicles.
Tenant shall not cause large trucks or other large vehicles to be parked within
the Project or on the adjacent public streets. Temporary parking of large
delivery vehicles in the Project may be permitted by the rules and regulations
established by Landlord. Vehicles shall be parked only in striped parking spaces
and not in driveways, loading areas or other locations not specifically
designated for parking. Handicapped spaces shall only be used by those legally
permitted to use them. If Tenant knowingly permits use by its employees or
invitees of parking spaces in excess of the number set forth in Section 1.11 of
this Lease, and such excess parking persists for more than ten (10) days after
written notice thereof from Landlord, such conduct shall be a material breach of
this Lease. In such event, in addition to Landlord’s other remedies under the
Lease, Tenant shall pay a daily charge determined by Landlord for each such
additional vehicle if Landlord can reasonably demonstrate that vehicles being
parked in the parking area of the Project on a recurring basis and belong to
Tenant or to one of Tenant’s employees or invitees.

 

(d) Maintenance of Common Areas. Landlord shall maintain the Common Areas in
good order, condition and repair (including snow removal) and shall operate the
Project, in Landlord’s sole discretion, as a first-class industrial/commercial
real property development. Tenant shall pay Tenant’s pro rata share (as
determined below) of all costs incurred by Landlord for the operation and
maintenance of the Common Areas. Common Area costs include, but are not limited
to, costs and expenses for the following: gardening and landscaping; snow
removal; utilities, water and sewage charges; maintenance of signs (other than
tenants’ signs); premiums for liability, property damage, fire and other types
of casualty insurance on the Common Areas and all Common Area improvements; all
property taxes and assessments levied on or attributable to the Common Areas and
all Common Area improvements; all personal property taxes levied on or
attributable to personal property used in connection with the Common Areas;
rental or lease payments paid by Landlord for rented or leased personal property
used in the operation or maintenance of the Common Areas; fees for required
licenses and permits; repairing, resurfacing, repaving, maintaining, painting,
lighting, cleaning, refuse removal, security and similar items; reasonable
reserves for roof replacement and exterior painting and other appropriate
reserves; and a reasonable allowance to Landlord for Landlord’s supervision of
the Common Areas which shall be fixed for the term of this lease at six cents
($.06) per square foot

 

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per year payable in the same manner as other items composing Additional Rent.
Landlord may cause any or all of such services to be provided by third parties
and the cost of such services shall be included in Common Area Costs; provided
however, that if any such services are provided by affiliates or subsidiaries of
Landlord, the cost of such services to be included in Common Area maintenance
costs shall be limited to the cost for obtaining such services if rendered by
unaffiliated third parties on a competitive basis (based upon a standard of
similar buildings in the general area of the Property.) Common Area costs shall
not include depreciation of real property which forms part of the Common Areas,
marketing or leasing commission costs, attorneys’ fees or other expenses
incurred in connection with negotiations or disputes with present or prospective
tenants (except Tenant) of the Project.

 

(e) Tenant’s Share and Payment. Tenant shall pay Tenant’s annual pro rata share
of all Common Area costs (prorated for any fractional month) as set forth in
this Section 4.05(e) . Tenant’s pro rata share has been calculated by dividing
the square foot area of the Property, as set forth in Section 1.04 of the Lease,
by the aggregate square foot area of the Project which is leased or held for
lease by tenants. Tenant’s pro rata share is set out in Paragraph 1.12(b).
Landlord represents and warrants to Tenant that Tenant’s Prorata Share as set
forth in Section 1.12(b) above is true and correct and has been calculated in
accordance with IRAM standards in effect as of the date of this Lease. Landlord
shall estimate in advance and charge to Tenant as Common Area costs, all real
property taxes for which Tenant is liable under Section 4.02 of the Lease, all
insurance premiums for which Tenant is liable under Section 4.04 of the Lease,
all maintenance and repair costs for which Tenant is liable under Section 6.04
of the Lease, and all other Common Area costs payable by Tenant hereunder. Such
statements of estimated Common Area costs shall be delivered monthly, and Tenant
shall pay such installments of estimated Common Area costs on a monthly basis.
Landlord may adjust such estimates of estimated Common Area costs based upon
Landlord’s experience and reasonable anticipation of costs not more often than
twice per year. Such adjustments shall be effective as of the next rent payment
date after notice to Tenant. Within sixty (60) days after the end of each
calendar year of the Lease Term, Landlord shall deliver to Tenant a statement
prepared in accordance with generally accepted accounting principles setting
forth, in reasonable detail, the Common Area costs paid or incurred by Landlord
during the preceding calendar year and Tenant’s pro rata share. Upon receipt of
such statement, there shall be an adjustment between Landlord and Tenant, with
payment to or credit given by Landlord (as the case may be) so that Landlord
shall receive the entire amount of Tenant’s share of such costs and expenses for
such period. Any further payment due to Landlord shall be due and payable with
tenant’s next monthly payment of Base Rent. In the event that Tenant is entitled
to a credit, such credit may be offset against Tenant’s next monthly rental
payment.

 

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Section 4.06. Late Charges. Tenant’s failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay to Landlord a late charge equal
to three percent (3.0%) of the overdue amount. The parties agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of such late payment.

 

Section 4.07. Interest on Past Due Obligations. Any amount owed by Tenant to
Landlord which is not paid within ten (10) days after its due date shall bear
interest at the rate of fifteen percent (15%) per annum from the due date of
such amount. However, interest shall not be payable on late charges to be paid
by Tenant under this Lease. The payment of interest on such amounts shall not
excuse or cure any default by Tenant under this Lease. If the interest rate
specified in this Lease is higher than the rate permitted by law, the interest
rate is hereby decreased to the maximum legal interest rate permitted by law.

 

Section 4.08. Impounds for Insurance Premiums and Real Property Taxes. If
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12) month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real
property taxes and insurance premiums payable directly by Tenant under this
Lease, together with each payment of Base Rent. Landlord shall hold such
payments in a non-interest bearing impound account and shall apply such amounts
to payment of such property taxes or insurance premiums prior to the due date
thereof. If unknown, Landlord shall reasonably estimate the amount of real
property taxes and insurance premiums when due. Tenant shall pay any deficiency
of funds in the impound account to any obligation then due under this Lease.

 

ARTICLE FIVE: USE OF PROPERTY.

 

Section 5.01. Permitted Uses. Tenant may use the Property only for the Permitted
Uses set forth in Section 1.06 above.

 

Section 5.02. Manner of Use. Tenant shall not cause or permit the Property to be
used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
other tenants of the Project, or which constitutes a nuisance or waste. Tenant
shall obtain and pay for all permits, including a Certificate of Occupancy,
required for Tenant’s occupancy of the Property and shall promptly take all
actions necessary to comply with all applicable statutes, ordinances, rules,
regulations,

 

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orders and requirements regulating the use by Tenant of the Property, including
the Occupational Safety and Health Act. Landlord represents and warrants to
Tenant that the Property, as of the date on which Tenant first commenced
occupancy of the Property under the prior lease, complied with all applicable
statutes, ordinances, rules, regulations, orders and requirements applicable
thereto. Tenant accepts the property in its current condition and acknowledges
that Landlord shall have no liability for ensuring compliance with the Americans
with Disabilities Act (“ADA”) for the interior of the Property or any of
Tenant’s improvements. Landlord shall maintain all exterior and common elements
in compliance with ADA.

 

Section 5.03. Hazardous Materials. As used in this Lease, the term “Hazardous
Material” means any flammable items, explosives, radioactive materials,
hazardous or toxic substances, material or waste or related materials, included
in the definition of “hazardous substances”, “hazardous wastes”, “hazardous
materials” or “toxic substances” now or subsequently regulated under any
applicable federal, state or local laws or regulations, including, without
limitation petroleum-based products, paints, solvents, lead, cyanide, DDT,
printing inks, acids, pesticides, ammonia compounds and other chemical products,
asbestos, PCBs and similar compounds, and including any different products and
materials which are subsequently found to have adverse effects on the
environment or the health and safety of persons. Tenant shall not cause or
permit any Hazardous Material to be generated, produced, brought upon, used,
stored, treated or disposed of in or about the Property by Tenant, its agents,
employees, contractors, sublessees other than in the ordinary course of Tenant’s
business and in strict compliance with all applicable Hazardous Materials rules,
regulations and laws without the prior written consent of Landlord. Landlord
shall be entitled to take into account such other factors or facts as Landlord
may reasonably determine to be relevant in determining whether to grant or
withhold consent to Tenant’s proposed activity with respect to Hazardous
Material. In no event, however, shall Landlord be required to consent to the
installation or use of any storage tanks on the Property.

 

Section 5.04. Signs and Auctions. Tenant shall not place any signs on the
Property without Landlord’s prior written consent. Tenant shall obtain all
necessary permits and governmental approval for operation of any retail sales or
auctions on the Property.

 

Section 5.05. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant’s use of the Property; (b) the conduct of Tenant’s business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant’s obligations under this Lease;
or (d) any misrepresentation or breach of warranty by Tenant under this Lease;
(e) other negligent acts or

 

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omissions of Tenant. Tenant shall defend Landlord against any such cost, claim
or liability at Tenant’s expense with counsel reasonably acceptable to Landlord
or, at Landlord’s election, Tenant shall reimburse Landlord for any reasonable
legal fees or costs incurred by Landlord in connection with any such claim. As a
material part of the consideration to Landlord, Tenant assumes all risk of
damage to property or injury to persons in or about the Property arising from
any cause, other than Landlord’s gross negligence or intentional misconduct and
Tenant hereby waives all claims in respect thereof against Landlord, except for
any claim arising out of Landlord’s gross negligence or willful misconduct. As
used in this Section, the term “Tenant” shall include Tenant’s employees,
agents, contractors and invitees, if applicable.

 

Section 5.06. Landlord’s Access. Landlord or its agents may enter the Property
at all reasonable times to show the Property to potential buyers, investors or
tenants or other parties; to do any other act or to inspect and conduct tests in
order to monitor Tenant’s compliance with all applicable environmental laws and
all laws governing the presence and use of Hazardous Material; or for any other
purpose Landlord deems necessary. Landlord shall give Tenant not less than 24
hours prior notice of such entry, except in the case of an emergency. Landlord
may place customary “For Sale” or “For Lease” signs on the Property.

 

Section 5.07. Quiet Possession. If Tenant pays the rent and complies with all
other terms of this Lease, Tenant may occupy and enjoy the Property for the full
Lease Term, subject to the provisions of this Lease.

 

ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS

 

Section 6.01. Existing Conditions. Tenant accepts the Property in its condition
as of the execution of the Lease, subject to all recorded matters, laws,
ordinances, and governmental regulations and orders. Except as provided herein,
Tenant acknowledges that neither Landlord nor any agent of Landlord has made any
representation as to the condition of the Property or the suitability of the
Property for Tenant’s intended use. Tenant represents and warrants that Tenant
has made its own inspection of and inquiry regarding the condition of the
Property and is not relying on any representations of Landlord or any Broker
with respect thereto. If Landlord or Landlord’s Broker has provided a Property
Information Sheet or other Disclosure Statement regarding the Property, a copy
is attached as an exhibit to the Lease.

 

Section 6.02. Exemption of Landlord from Liability. Landlord shall not be liable
for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant’s
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects

 

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of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures or any other cause; (c) conditions arising in or about the Property or
upon other portions of the Project, or from other sources or places; or (d) any
act or omission of any other tenant of the Project. Landlord shall not be liable
for any such damage or injury even though the cause of or the means of repairing
such damage or injury are not accessible to Tenant. The provisions of this
Section 6.02 shall not, however, exempt Landlord from liability for Landlord’s
gross negligence or willful misconduct.

 

Section 6.03. Landlord’s Obligations.

 

(a) Except as provided in Article Seven (Damage or Destruction) and Article
Eight (Condemnation), Landlord shall keep the following in good order, condition
and repair: the foundations, exterior walls and roof of the Property (including
painting the exterior surface of the exterior walls of the Property not more
than once every five (5) years, if necessary, and all components of electrical,
mechanical, plumbing, heating and air conditioning systems and facilities
located in the Property which are concealed or used in common by tenants of the
Project. However, Landlord shall not be obligated to maintain or repair windows,
doors, plate glass or the interior surfaces of exterior walls. Landlord shall
make repairs under this Section 6.03 within a reasonable time after receipt of
written notice from Tenant of the need for such repairs.

 

(b) Tenant shall pay or reimburse Landlord for all costs Landlord incurs under
Paragraph 6.03(a) above as Common Area costs as provided for in Section 4.05 of
the Lease. Tenant waives the benefit of any statute in effect now or in the
future which might give Tenant the right to make repairs at Landlord’s expense
or to terminate this Lease due to Landlord’s failure to keep the Property in
good order, condition and repair.

 

Section 6.04. Tenant’s Obligations.

 

(a) Except as provided in Section 6.03(a) above, Article Seven (Damage
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of
the Property (including, nonstructural, interior, exterior, and landscaped
areas, portions, systems and equipment) in good order, condition and repair
(including interior repainting and refinishing, as needed). If any portion of
the Property or any system or equipment in the Property which Tenant is
obligated to repair cannot be fully repaired or restored, Tenant shall promptly
replace such portion of the Property or system or equipment or equipment in the
Property, and provided however if the benefit or useful life of such replacement
extends beyond the Lease Term (as such term may be extended by exercise of any
options), the useful life of such replacement shall be prorated over the
remaining portion of the Lease Term (as extended), and Tenant shall be liable
only for that portion of the cost which is applicable to the Lease Term (as
extended). Tenant shall maintain a preventive maintenance contract providing for
the regular inspection and maintenance of the

 

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heating and air conditioning system by a licensed heating and air conditioning
contractor. If any part of the Property is damaged by any act or omission of
Tenant, Tenant shall pay Landlord the cost of repairing or replacing such
damaged property, whether or not Landlord would otherwise be obligated to pay
the cost of maintaining or repairing such property. It is the intention of
Landlord and Tenant that at all times Tenant shall maintain the portions of the
Property which Tenant is obligated to maintain in an attractive, first-class and
fully operative condition.

 

(b) Tenant shall fulfill all of Tenant’s obligations under this Section 6.04, at
Tenant’s sole expense. If Tenant fails to maintain, repair or replace the
Property as required by this Section 6.04, Landlord may, upon ten (10) days’
prior notice to Tenant (except that no notice shall be required in the case of
an emergency), enter the Property and perform such maintenance or repair
(including replacement, as needed) on behalf of Tenant. In such case, Tenant
shall reimburse Landlord for all costs reasonably incurred in performing such
maintenance or repair immediately upon demand.

 

Section 6.05. Alterations, Additions, and Improvements.

 

(a) Tenant shall not make any alterations, additions, or improvements to the
Property without Landlord’s prior written consent, except for non-structural
alterations which do not exceed Ten Thousand Dollars ($10,000.00) in cost
cumulatively over the Lease Term and which are not visible from the outside of
any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord’s written request. All alterations, additions, and improvements
shall be done in a good and workmanlike manner, in conformity with all
applicable laws and regulations, and by a contractor approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with “as built”
plans, copies of all construction contracts, and proof of payment for all labor
and materials.

 

(b) Tenant shall pay when due all claims for labor and material furnished to the
Property. Tenant shall give Landlord at least twenty (20) days’ prior written
notice of the commencement of any work on the Property, regardless of whether
Landlord’s consent to such work is required. Landlord may elect to record and
post notices of non-responsibility on the Property.

 

Section 6.06. Condition upon Termination. Upon the termination of the Lease,
Tenant shall surrender the Property to Landlord, broom clean and in the same
condition as received except for ordinary wear and tear which Tenant was not
otherwise obligated to remedy under any provision of this Lease. However, Tenant
shall not be obligated to repair any damage which Landlord is required to repair
under Article Seven (Damage or Destruction). In addition, Landlord may require
Tenant to remove any alterations, additions or improvements (whether or

 

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not made with Landlord’s consent) prior to the expiration of the Lease and to
restore the Property to its prior condition, all at Tenant’s expense. All
alterations, additions and improvements which Landlord has not required Tenant
to remove shall become Landlord’s property and shall be surrendered to Landlord
upon the expiration or earlier termination of the Lease, except that Tenant may
remove any of Tenant’s furniture, fixtures, machinery or equipment which can be
removed without material damage to the Property. Tenant shall repair, at
Tenant’s expense, any damage to the Property caused by the removal of any such
machinery or equipment. In no event, however, shall Tenant remove any of the
following materials or equipment (which shall be deemed Landlord’s property)
without Landlord’s prior written consent; any power wiring or power panels;
lighting or lighting fixtures; wall coverings; drapes, blinds or other window
coverings; carpets or other floor coverings; heaters, air conditioners or any
other heating or air conditioning equipment; fencing or security gates; or other
similar building operating equipment and decorations.

 

ARTICLE SEVEN: DAMAGE OR DESTRUCTION

 

Section 7.01. Partial Damage to Property.

 

(a) Tenant shall notify Landlord in writing immediately upon the occurrence of
any material damage to the Property. If the Property is only partially damaged
(i.e., less than fifty percent (50%) of the Property is untenantable as a result
of such damage or less than fifty percent (50%) of Tenant’s operations are
materially impaired) and if the proceeds received by Landlord from the insurance
policies described in Paragraph 4.04(b) are sufficient to pay for the necessary
repairs, this Lease shall remain in effect and Landlord shall repair the damage
as soon as reasonably possible. Landlord may elect (but is not required) to
repair any damage to Tenant’s fixtures, equipment, or improvements.

 

(b) If the insurance proceeds received by Landlord are not sufficient to pay the
entire cost of repair, or if the cause of the damage is not covered by the
insurance policies which Landlord maintains under Paragraph 4.04(b), Landlord
may elect either to (i) repair the damage as soon as reasonably possible, in
which case this Lease shall remain in full force and effect, or (ii) terminate
this Lease as of the date the damage occurred. Landlord shall notify Tenant
within thirty (30) days after receipt of notice of the occurrence of the damage
whether Landlord elects to repair the damage or terminate the Lease. If Landlord
elects to terminate the Lease, Tenant may elect to continue this Lease in full
force and effect, in which case Tenant shall repair any damage to the Property
and any building in which the Property is located. Tenant shall pay the cost of
such repairs, except that upon satisfactory completion of such repairs, Landlord
shall deliver to Tenant any insurance proceeds received by Landlord for the
damage repaired by Tenant. Tenant shall give Landlord written notice of such
election within ten (10) days after receiving Landlord’s termination notice.

 

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(c) If the damage to the Property occurs during the last six (6) months of the
Lease Term and such damage will require more than thirty (30) days to repair,
either Landlord or Tenant may elect to terminate this Lease as of the date the
damage occurred, regardless of the sufficiency of any insurance proceeds. The
party electing to terminate this Lease shall give written notification to the
other party of such election within thirty (30) days after Tenant’s notice to
Landlord of the occurrence of the damage.

 

Section 7.02. Substantial or Total Destruction. If the Property is substantially
or totally destroyed by any cause whatsoever (i.e., the damage to the Property
is greater than partial damage as described in Section 7.01), and regardless of
whether Landlord receives any insurance proceeds, this Lease shall terminate as
of the date the destruction occurred. Notwithstanding the preceding sentence, if
the Property can be rebuilt within six (6) months after the date of destruction,
Landlord may elect to rebuild the Property at Landlord’s own expense, in which
case this Lease shall remain in full force and effect. Landlord shall notify
Tenant of such election within thirty (30) days after Tenant’s notice of the
occurrence of total or substantial destruction. If Landlord so elects, Landlord
shall rebuild the Property at Landlord’s sole expense, except that if the
destruction was caused by an act or omission of Tenant, Tenant shall pay
Landlord the difference between the actual cost of rebuilding and any insurance
proceeds received by Landlord.

 

Section 7.03. Temporary Reduction of Rent. If the Property is partially,
substantially or totally destroyed or damaged and Landlord or Tenant repairs or
restores the Property pursuant to the provisions of this Article Seven, any rent
payable during the period of such damage, repair and/or restoration shall be
reduced according to the degree, if any, to which Tenant’s use of the Property
is impaired. However, the reduction shall not exceed the sum of one year’s
payment of Base Rent, insurance premiums and real property taxes. Except for
such possible reduction in Base Rent, insurance premiums and real property
taxes, Tenant shall not be entitled to any compensation, reduction, or
reimbursement from Landlord as a result of any damage, destruction, repair, or
restoration of or to the Property.

 

Section 7.04. Waiver. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.

 

ARTICLE EIGHT: CONDEMNATION

 

If all or any portion of the Property is taken under the power of eminent domain
or sold under the threat of that power (all of which are called “Condemnation”),
this Lease shall

 

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terminate as to the part taken or sold on the date the condemning authority
takes title or possession, whichever occurs first. If more than twenty percent
(20%) of the floor area of the Property, or such other portion of the parking or
loading areas or accessways that directly service Tenant’s operations so as to
materially impair Tenant’s use of the Premises for its intended use, is taken,
either Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property or impairment of
Tenant’s use thereof. Any Condemnation award or payment shall be distributed in
the following order: (a) first, to any ground lessor, mortgagee or beneficiary
under a deed of trust encumbering the Property, the amount of its interest in
the Property; (b) second, to Tenant, only the amount of any award specifically
designated for loss of or damage to Tenant’s trade fixtures or removable
personal property; and (c) third, to Landlord, the remainder of such award,
whether as compensation for reduction in the value of the leasehold, the taking
of the fee, or otherwise. If this Lease is not terminated, Landlord shall repair
any damage to the Property caused by the Condemnation, except that Landlord
shall not be obligated to repair any damage for which Tenant has been reimbursed
by the condemning authority. If the severance damages received by Landlord are
not sufficient to pay for such repair, Landlord shall have the right to either
terminate this Lease or make such repair at Landlord’s expense.

 

ARTICLE NINE: ASSIGNMENT AND SUBLETTING

 

Section 9.01. Landlord’s Consent Required. No portion of the Property or of
Tenant’s interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, operation of law, or
act of Tenant, without Landlord’s prior written consent, except as provided in
Section 9.02 below. Landlord has the right to grant or withhold its consent as
provided in Section 9.05 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease. If Tenant is a
partnership, any cumulative transfer of more than twenty percent (20%) of the
partnership interests shall require Landlord’s consent. Subject to Section 9.02
below, Tenant is a corporation, any change in the ownership of a controlling
interest of the voting stock of the corporation shall require Landlord’s
consent.

 

Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease the
Property, without Landlord’s consent, to any corporation which controls, is
controlled by or is under

 

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common control with Tenant, or to any corporation resulting from the merger of
or consolidation with Tenant (“Tenant’s Affiliate”). In such case, any Tenant’s
Affiliate shall assume writing all of Tenant’s obligations under this Lease.

 

Section 9.03. No Release of Tenant. No transfer permitted by this Article Nine,
whether with or without Landlord’s consent, shall release Tenant or change
Tenant’s primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord’s acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant’s transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant’s transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant’s liability under
this Lease provided however, that if any amendment or modification of the Lease
entered into without Tenant’s consent increases the obligations or liabilities
of Tenant hereunder, such amendment or modification shall not be enforceable
against Tenant.

 

Section 9.04. Offer to Terminate. If Tenant desires to assign the Lease or
sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.

 

Section 9.05. Landlord’s Consent.

 

(a) Tenant’s request for consent to any transfer described in Section 9.01 shall
set forth in writing the details of the proposed transfer, including the name,
business and financial condition of the prospective transferee, financial
details of the proposed transfer (e.g., the term of and the rent and security
deposit payable under any proposed assignment or sublease). Upon Landlord’s
request, Tenant shall provide any other information Landlord deems reasonably
relevant. Landlord shall have the right to withhold consent, if reasonable, or
to grant consent, based on the following factors: (i) the business of the
proposed assignee or subtenant and the proposed use of the Property: (ii) the
net worth and financial reputation of the proposed assignee or subtenant: (iii)
Tenant’s compliance with all of its obligations under the Lease: and (iv) such
other factors as Landlord may reasonably deem relevant. If landlord objects to a
proposed assignment solely because of the net worth and/or financial reputation
of the proposed assignee, Tenant may nonetheless sublease (but not assign), all
or a portion of the Property to the proposed transferee, but only on the other
terms of the proposed transfer.

 

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(b) If Tenant assigns or subleases, the following shall apply:

 

(i) Tenant shall pay to Landlord as Additional Rent under the Lease the
Landlord’s Share (stated in Section 1.13) of the Profit (defined below) on such
transaction as and when received by Tenant, unless Landlord gives written notice
to Tenant and the assignee or subtenant that Landlord’s Share shall be paid by
the assignee or subtenant to Landlord directly. The “Profit” means (A) all
amounts paid to Tenant for such assignment or sublease, including “key” money,
monthly rent in excess of the monthly rent payable under the Lease, and all fees
and other consideration paid for the assignment or sublease, including fees
under any collateral agreements, less (B) costs and expenses directly incurred
by Tenant in connection with the execution and performance of such assignment or
sublease, including real estate broker’s commissions and legal fees, costs of
renovation or construction of tenant improvements required under such assignment
or sublease. Tenant is entitled to recover such cost and expenses before Tenant
is obligated to pay the Landlord’s Share to Landlord. The Profit in the case of
a sublease of less than all the Property is the rent allocable to the subleased
space as a percentage on a square footage basis.

 

(ii) Tenant shall provide Landlord a written statement certifying all amounts to
be paid from any assignment or sublease of the Property within thirty (30) days
after the transaction documentation is signed, and Landlord may inspect Tenant’s
books and records to verify the accuracy of such statement. On written request,
Tenant shall promptly furnish to Landlord copies of all the transaction
documentation, all of which shall be certified by Tenant to be complete, true
and correct. Landlord’s receipt of Landlord’s Share shall not be consent to any
further assignment or subletting. The breach of Tenant’s obligation under this
Paragraph 9.05(b) shall be a material default of the Lease.

 

Section 9.06. No Merger. No merger shall result from Tenant’s sublease of the
Property under this Article Nine, Tenant’s surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.

 

ARTICLE TEN: DEFAULTS; REMEDIES

 

Section 10.01. Covenants and Conditions. Tenant’s performance of each of
Tenant’s obligations under this Lease is a condition as well as a covenant.
Tenant’s right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.

 

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Section 10.02. Defaults. Tenant shall be in material default under this Lease:

 

(a) If Tenant abandons the Property or if Tenant’s vacation of the Property
results in the cancellation of any insurance described in Section 4.04;

 

(b) If Tenant fails to pay rent or any other charge within ten (10) days after
such payment is due;

 

(c) If Tenant fails to perform any of Tenant’s non-monetary obligations under
this Lease for a period of thirty (30) days after written notice from Landlord;
provided that if more than thirty (30) days are required to complete such
performance, Tenant shall not be in default if Tenant commences such performance
within the thirty (30)-day period and thereafter diligently pursues its
completion. However, Landlord shall not be required to give such notice if
Tenant’s failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.

 

(d)(i) If Tenant makes a general assignment or general arrangement for the
benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant’s assets located at the
Property or of Tenant’s interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant’s assets
located at the Property or of Tenant’s interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee of Tenant transfers Tenant’s interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.

 

(e) If any guarantor of the Lease revokes or otherwise terminates, or purports
to revoke or otherwise terminate, any guaranty of all or any portion of Tenant’s
obligations under the Lease. Unless otherwise expressly provided, no guaranty of
the Lease is revocable.

 

Section 10.03. Remedies. On the occurrence of any material default by Tenant,
Landlord may, at any time thereafter, with or without notice or demand and
without limiting Landlord in the exercise of any right or remedy which Landlord
may have:

 

(a) Terminate Tenant’s right to possession of the Property by any lawful means,
in which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Property to Landlord. In such event, Landlord shall be
entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant’s default, including (i) the worth at the time of the award of the unpaid
Base Rent, Additional Rent and other charges which Landlord had

 

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earned at the time of the termination; (ii) the worth at the time of the award
of the amount by which the unpaid Base Rent, Additional Rent and other charges
which Landlord would have earned after termination until the time of the award
exceeds the amount of such rental loss that Tenant proves Landlord could have
reasonably avoided;(iii) the worth at the time of the award of the amount by
which the unpaid Base Rent, and other charges which Tenant would have paid for
the balance of the Lease Term after the time of award exceeds the amount of such
rental loss that Tenant proves Landlord could have reasonably avoided; and (iv)
any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform its obligations under the
Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, any costs or expenses Landlord incurs
in maintaining or preserving the Property after such default, the cost of
recovering possession of the Property, expenses of reletting, including
necessary renovation or alteration of the Property, Landlord’s reasonable
attorneys’ fee incurred in connection therewith, and any real estate commission
paid or payable. As used in subparts (i) and (ii) above, the “worth at the time
of the award” is computed by allowing interest on unpaid amounts at the rate of
fifteen percent (15%) per annum, or such lesser amount as may then be the
maximum lawful rate. As used in subpart (iii) above, the “worth at the time of
the award” is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%) (but in no event less than 1%). If Tenant has abandoned the Property,
Landlord shall have the option of (i) retaking possession of the Property and
recovering from Tenant the amount specified in this Paragraph 10.03(a), or (ii)
proceeding under Paragraph 10.03(b);

 

(b) Maintain Tenant’s right to possession, in which case this Lease shall
continue in effect whether or not Tenant has abandoned the Property. In such
event, Landlord shall be entitled to enforce all of Landlord’s rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;

 

(c) Pursue any other remedy now or hereafter available to Landlord under the
laws or judicial decisions of the state in which the Property is located.

 

Section 10.04. Repayment of “Free” Rent. If this Lease provides for a
postponement of any monthly rental payments, a period of “free” rent or other
rent concession, such postponed rent or “free” rent is called the “Abated Rent”.
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant’s obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant’s full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any

 

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applicable grace period, the Abated Rent shall immediately become due and
payable in full and this Lease shall be enforced as if there were no such rent
abatement or other rent concession. In such case, Abated Rent shall be
calculated based on the full initial rent payable under this Lease.

 

Section 10.05. Automatic Termination. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord’s intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord’s damages for default shall
include all costs and fees, including reasonable attorneys’ fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord’s right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.

 

Section 10.06. Cumulative Remedies. Landlord’s exercise of any right or remedy
shall not prevent it from exercising any other right or remedy.

 

ARTICLE ELEVEN. PROTECTION OF LENDERS.

 

Section 11.01. Subordination. Subject to the Landlord’s delivery to Tenant of a
commercially reasonable non-disturbance agreement from the holder of any ground
lease, deed of trust, mortgage or other lien encumbering the Property, Landlord
shall have the right to subordinate this Lease to any such ground lease, deed of
trust or mortgage, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever made
or recorded. Tenant shall cooperate with Landlord and any lender which is
acquiring a security interest in the Property or the Lease. Tenant shall execute
such further documents and assurances as such lender may require, provided that
Tenant’s obligations under this Lease shall not be increased in any material way
(the performance of ministerial acts shall not be deemed material), and Tenant
shall not be deprived of its rights under this Lease. Tenant’s right to quiet
possession of the Property during the Lease Term shall not be disturbed if
Tenant pays the rent and performs all of Tenant’s obligations under this Lease
and is not otherwise in default. If any ground lessor, beneficiary or mortgagee
elects to have this Lease prior to the lien of its ground lease, deed of trust
or mortgage and gives written notice thereof to Tenant, this Lease shall be
deemed prior to such ground lease, deed of trust or mortgage whether this Lease
is dated prior or subsequent to the date of said ground lease, deed of trust or
mortgage or the date of recording thereof.

 

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Section 11.02. Attornment. If Landlord’s interest in the Property is acquired by
any ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at
a foreclosure sale, Tenant shall attorn to the transferee or successor to
Landlord’s interest in the Property and recognize such transferee or successor
as Landlord under this Lease. Tenant waives the protection of any statute or
rule of law which gives or purports to give Tenant any right to terminate this
Lease or surrender possession of the Property upon the transfer of Landlord’s
interest.

 

Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.

 

Section 11.04. Estoppel Certificates.

 

(a) Upon Landlord’s written request, Tenant shall execute, acknowledge and
deliver to Landlord a written statement certifying: (i) that none of the terms
or provisions of this Lease have been changed (or if they have been changed,
stating how they have been changed); (ii) that this Lease has not been cancelled
or terminated; (iii) the last date of payment of the Base Rent and other charges
and the time period covered by such payment; (iv) that to Tenant’s knowledge,
Landlord is not in default under this Lease (or, if Landlord is claimed to be in
default, stating why); and (v) such other representations or information with
respect to Tenant or the Lease as Landlord may reasonably request or which any
prospective purchaser or encumbrancer of the Property may reasonably require.
Tenant shall deliver such statement to Landlord within ten (10) business days
after Landlord’s request. Landlord may give any such statement by Tenant to any
prospective purchaser or encumbrancer of the Property. Such purchaser or
encumbrancer may rely conclusively upon such statement as true and correct.

 

(b) If Tenant does not deliver such statement to Landlord within such ten (10)
day period, any prospective purchaser or encumbrancer may conclusively presume
and rely upon the following facts: (i) that the terms and provisions of this
Lease have not been changed except as otherwise represented by Landlord; (ii)
that this Lease has not been cancelled or terminated except as otherwise
represented by Landlord; (iii) that not more than one month’s Base Rent or other
charges have been paid in advance; and (iv) that Landlord is not in default
under the Lease. In such event, Tenant shall be estopped from denying the truth
of such facts.

 

Section 11.05. Tenant’s Financial Condition. Within ten (10) days after written
request from Landlord, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verify the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord any financial

 

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statements required by such lender to facilitate the financing or refinancing of
the Property. Tenant represents and warrants to Landlord that each such
financial statement is a true and accurate statement as of the date of such
statement. All financial statements shall be confidential and shall be used only
for the purposes set forth in this Lease.

 

ARTICLE TWELVE: LEGAL COSTS

 

Section 12.01. Legal Proceedings. If Tenant or Landlord shall be in breach or
default under this Lease, such party (the “Defaulting Party”) shall reimburse
the other party (the “Nondefaulting Party”) upon demand for any reasonable costs
or expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include reasonable legal fees
and costs incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys’ fees and
costs. The losing party in such action shall pay such attorneys’ fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability Landlord may incur if Landlord becomes or
is made a party to any claim or action (a) instituted by Tenant against any
third party, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant; (b) for foreclosure of any lien for labor or material furnished to or
for Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord’s interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States Code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant’s expense with
counsel reasonably acceptable to Landlord or, at Landlord’s election, Tenant
shall reimburse landlord for any legal fees or costs Landlord incurs in any such
claim or action.

 

Section 12.02. Landlord’s Consent. Tenant shall pay Landlord’s reasonable
attorneys’ fees incurred in connection with Tenant’s request for Landlord’s
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord’s consent.

 

ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS

 

Section 13.01. Non-Discrimination. Tenant promises, and it is a condition to the
continuance of this Lease, that there will be no discrimination against, or
segregation of, any person or group of persons on the basis of race, color, sex,
creed, national origin or ancestry in the leasing, subleasing, transferring,
occupancy, tenure or use of the Property or any portion thereof.

 

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Section 13.02. Landlord’s Liability; Certain Duties.

 

(a) As used in this Lease, the term “Landlord” means only the current owner or
owners of the fee title to the Property or the leasehold estate under a ground
lease of the Property at the time in question. Each Landlord is obligated to
perform the obligations of Landlord under this Lease only during the time such
Landlord owns such interest or title. Any Landlord who transfers its title or
interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer.
However, each Landlord shall deliver to its transferee all funds that Tenant
previously paid if such funds have not yet been applied under the terms of this
Lease.

 

(b) Tenant shall give written notice of any failure by Landlord to perform any
of its obligations under this Lease to Landlord and to any ground lessor,
mortgagee or beneficiary under any deed of trust encumbering the Property whose
name and address have been furnished to Tenant in writing. Landlord shall not be
in default under this Lease unless Landlord (or such ground lessor, mortgagee or
beneficiary) fails to cure such non-performance within thirty (30) days after
receipt of Tenant’s notice. However, if such non-performance reasonably requires
more than thirty (30) days to cure, Landlord shall not be in default if such
cure is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.

 

(c) Notwithstanding any term or provision herein to the contrary, the liability
of Landlord for the performance of its duties and obligations under this Lease
is limited to Landlord’s interest in the Property, and neither the Landlord nor
its partners, shareholders, officers or other principals shall have any personal
liability under this Lease.

 

Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.

 

Section 13.04. Interpretation. The captions of the Articles or Sections of this
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term “Tenant” shall include Tenant’s agents, employees, contractors,
invitees, successors or others using the Property with Tenant’s expressed or
implied permission.

 

Section 13.05. Incorporation of Prior Agreements; Modifications. This Lease is
the only agreement between the parties pertaining to the lease of the Property
and no other agreements are effective. All amendments to this Lease shall be in
writing and signed by all parties. Any other attempted amendment shall be void.

 

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Section 13.06. Notices. All notices required or permitted under this Lease shall
be in writing and shall be personally delivered, sent by a nationally recognized
overnight courier, or sent by certified mail, return receipt requested, postage
prepaid. Notices to Tenant shall be delivered to the address specified in
Section 1.03 above. Notices to Landlord shall be delivered to the address
specified in Section 1.02 above. All notices shall be effective upon delivery.
Either party may change its notice address upon written notice to the other
party. Any such notice shall be deemed received on the earlier of the date of
actual receipt thereof or, in the case of notices sent by overnight courier, one
business day after the date deposited with such service, or in the case of
certified mail, two business days after the date deposited in the U.S. Mail. The
time period for responding to any such notice shall begin on the date the notice
is deemed received, but refusal to accept delivery or inability to accomplish
delivery because the party can no longer be found at the then current notice
address shall be deemed receipt. If either party notifies the other party of an
appropriate telefacsimile number and/or e-mail address to be used for notice
purposes, the party receiving such information shall use reasonable efforts to
provide a courtesy copy of any future notices to the party providing such
information by fax and/or electronic mail; provided that receipt of notice
solely by fax or electronic mail shall not be deemed to be receipt of notice
hereunder.

 

Section 13.07. Waivers. All waivers must be in writing and signed by the waiving
party. Landlord’s failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.

 

Section 13.08. No Recordation. Tenant shall not record this Lease without prior
written consent from Landlord. However, either Landlord or Tenant may require
that a “Short Form” memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.

 

Section 13.09. Binding Effect; Choice of Law. This Lease binds any party who
legally acquires any rights or interest in this Lease from Landlord or Tenant.
However, Landlord shall have no obligation to Tenant’s successor unless the
rights or interests of Tenant’s successor are acquired in accordance with the
terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.

 

Section 13.10. Corporate Authority; Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full

 

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authority to do so and that this Lease binds the corporation. Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a certified
copy of a resolution of Tenant’s Board of Directors authorizing the execution of
this Lease or other evidence of such authority reasonably acceptable to
Landlord. If Tenant is a partnership, each person or entity signing this Lease
for Tenant represents and warrants that he or it is a general partner of the
partnership, that he or it has full authority to sign for the partnership and
that this Lease binds the partnership and all general partners of the
partnership. Tenant shall give written notice to Landlord of any general
partner’s withdrawal or addition. Within thirty (30) days after this Lease is
signed, Tenant shall deliver to Landlord a copy of Tenant’s recorded statement
of partnership or certificate of limited partnership.

 

Section 13.11. Joint and Several Liability. All parties signing this Lease as
Tenant shall be jointly and severally liable for all obligations of Tenant.

 

Section 13.12. Force Majeure. If Landlord cannot perform any of its obligations
due to events beyond Landlord’s control, the time provided for performing such
obligations shall be extended by a period of time equal to the duration of such
events. Events beyond Landlord’s control include, but are not limited to, acts
of God, war, civil commotion, labor disputes, strikes, fire, flood or other
casualty, shortages of labor or material, government regulation or restriction
and weather conditions.

 

Section 13.13. Execution of Lease. This Lease may be executed in counterparts
and, when all counterpart documents are executed, the counterparts shall
constitute a single binding instrument. Landlord’s delivery of this Lease to
Tenant shall not be deemed to be an offer to lease and shall not be binding upon
either party until executed and delivered by both parties.

 

Section 13.14. Survival. All representations and warranties of Landlord and
Tenant shall survive the termination of this Lease.

 

ARTICLE FOURTEEN: BROKERS

 

Section 14.01. Broker’s Fee. When this Lease is signed by and delivered to both
Landlord and Tenant, Landlord shall pay a real estate commission to Landlord’s
Broker named in Section 1.08 above, if any, as provided in the written agreement
between Landlord and Landlord’s Broker. If a Tenant’s Broker is named in Section
1.08 above, Landlord’s Broker shall pay an appropriate portion of its commission
to Tenant’s Broker if so provided in any agreement between Landlord’s Broker and
Tenant’s Broker. Nothing contained in this Lease shall impose any obligation on
Landlord to pay a commission or fee to any party other than Landlord’s Broker.

 

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Section 14.02. Agency Disclosure; No Other Brokers. Landlord and Tenant each
warrant that they have dealt with no other real estate broker(s) in connection
with this transaction except: Whitetail Real Estate Management, Inc., who
represents Landlord.

 

ARTICLE FIFTEEN: COMPLIANCE

 

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

 

ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER ATTACHED HERETO OR IN THE
BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED, PLEASE DRAW A LINE
THROUGH THE SPACE BELOW.

 

Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all Riders which
are attached to or incorporated by reference in this Lease.

 

   

“LANDLORD”

Signed on October 2, 2003

 

ANDERSON-TULLY COMPANY,

a Mississippi corporation

at                                          

           

By:

 

/s/ E. David Comb

--------------------------------------------------------------------------------

   

Its:

 

Exec V.P. – Treas.

   

“TENANT”

Signed on October 2, 2003

 

AF SERVICES, INC.,

a Delaware corporation

at                                          

           

By:

 

/s/ Simon Abuyounes

--------------------------------------------------------------------------------

   

Its:

 

President

 

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Exhibit A

 

[Property Description]

 

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