EXHIBIT 10.18


INDUSTRIAL REAL ESTATE LEASE

(Multi-Tenant Facility)


ARTICLE
ONE:  BASIC TERMS


This Article One contains the Basic Terms of the
Lease between the Landlord and Tenant named below.  Other Articles, Sections and Paragraphs of
the Leases 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:

  	
  January 20, 2006

  
	
  Section
  1.02.

  	
  Landlord
  (include legal entity):

  	
  Paulus
  Enterprises

  
	
   

  	
   

  	
  a California Limited
  Liability Company

  
	
  Address of Landlord: 

  	
   

  	
  6060 Business Center Ct.

  
	
   

  	
   

  	
  San Diego, California
  92154

  
	
  Section
  1.03.

  	
  Tenant
  (include legal entity):

  	
  Liquidity
  Services Inc.

  
	
   

  	
   

  	
  1920 L Street NW

  
	
  Address of Tenant:

  	
   

  	
  Suite 600

  
	
   

  	
   

  	
  Washington, DC  20036

  






 


Section 1.04         Property:  The
Property is part of Landlord’s multi-tenant real property development known as
NorthGate Industrial Center 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 


An approximate 54,000 square foot (net rentable are) office /warehouse
located within the +/- 108,000 square foot “Project” consisting of approximately
2,000 square feet of office space and located at 3824 North 5th Street, Suite A & B, North
Las Vegas Nevada  89030.  See site plan as Exhibit “A” attached hereto.


Section 1.05.        Lease Term:         Three
(3) years beginning on February 1st., 2006 or such other
date as is specified in this Lease, and ending on January 31st 2009 or 36 months from start
date if other than February 1st, 2006.


Section 1.06.        Permitted
Uses:  (See Article Five) General
office/administrative, warehousing, storage, and distribution of consumer goods
and non-hazardous general property.


Section 1.07.        Tenant’s
Guarantor:  (If none, so state) None


Section 1.08.        Brokers:  (See
Article Fourteen)


Landlord’s
Broker:  General Realty Group Inc. — Eric
L. Sallie


Tenant’s
Broker:     C.B. Richard Ellis — Greg
Tassi


Section 1.09.        Commission
Payable to Landlord’s Broker:  (See Article Fourteen)  2% General Realty Group Inc.  2% C.B. Richard Ellis.


Section 1.10.        Initial
Security Deposit:  (See Section 3.03)  $16,740.00


Section 1.11.        Vehicle
Parking Spaces Allocated to Tenant:  (See Section 4.05)  Twenty-Nine (29)


	
  

  	
   

  	
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Section 1.12.        Rent and
Other Charges Payable by Tenant:


(a)                                                    BASE RENT: 
Sixteen Thousand Seven Hundred Forty and 00/100 ($16,740.00) Dollars per
month for the first twelve (12) months, as provided in Section 3.01, and shall
be increased on the first day of the 13th and 25th month(s) after the Commencement Date as
follows.


13th through 24th month $ 18,360.00 (Eighteen Thousand Three
Hundred Sixty Dollars)


25th through 36th month $ 19,440.00 (Nineteen Thousand Four
Hundred Forty Dollars)


(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 Initial Pro Rata Share of Common Area Expenses  (See Section 4.05); (v) Impounds for
Insurance Premiums and Property Taxes (See Section 4.08); (vi) Maintenance,
Repairs and Alterations (See Article Six).


(c)                                                    Tenant’s share of the property taxes,
insurance and common area operating expenses shall be Fifty (50%) Percent.  Tenant’s share has been determined by
dividing the net leasable square footage of the Property by the net leaseable
square footage of the Project as set out in Section 4.05 (e).


Section 1.13.        Landlord’s Share of Profit on Assignment
or Sublease:  (See Section 9.05) One Hundred (100%) of the
Profit (the “Landlord’s Share”).


Section 1.14.        Riders:  The following Riders are attached to and made
a part of this Lease:


Exhibit
“A: - Site Plan


Exhibit
“B” — Disclosure Statement


Exhibit
“C” — Rules and Regulations


Duties Owed By A Nevada Real Estate Licensee


Section 1.15.        Tenant
Improvements: Landlord at it’s sole cost shall provide the
following improvements.  Lessee agrees
that T.I.’s will be completed as soon as practicable,


·                  Lessor
shall create a 20’x 20’ opening between two units or as close to that size that
is practical.


·                  Lessor
shall replace carpet in office space.


·                  Lessor
shall repaint office space.


·                  Lessor
shall install three (3) hydraulic pit levelers.


·                  Lessor
shall install +/- thirty-two (32) additional metal halide fixtures.


Landlord
will complete said improvements up to a maximum of Forty Thousand ($40,000)
Dollars. Landlord and Tenant agree that Landlord shall obtain estimates in
advance of beginning the improvements and in the event such estimates exceed
said maximum of $40,000 then at Tenants option all or part of the improvements
shall be cancelled or Tenant will accept to pay for any extra cost. In the
event any work results in a cost overrun that causes the total cost of said
improvement to be over $40,000 then Tenant agrees to pay for said cost
overruns.


ARTICLE
TWO:  LEASE TERM


Section 2.01.        Lease of Property for Lease Term. 
Landlord leases the Property 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 of the dates specified in Section 1.05 above, unless the beginning or end
of the Lease Term is changed under any provision of this Lease.  The “Commencement Date” shall be the date
specified in Section 1.05 above for the beginning of the Lease Term, unless
advanced or delayed under any provision of this Lease.


	
  

  	
   

  	
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Section 2.02.        Delay in Commencement.  Landlord shall not be liable
to Tenant if Landlord does not deliver possession of the Property to Tenant on
the Commencement Date.  Landlord’s
non-delivery of the Property to Tenant on that date shall not affect this Lease
or the obligations of Tenant under this Lease except that the Commencement Date
shall be delayed until Landlord delivers possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a month.  If Landlord does not deliver possession of
the Property to Tenant within sixty (60) days after the Commencement Date,
Tenant may elect to cancel this Lese by giving written notice to Landlord
within ten (10) days after the sixty (60)-day period ends. If Tenant gives such
notice, the Lease shall be canceled and neither Landlord not Tenant shall have
any further obligations to the other.  If
Tenant does not give such notice, Tenant’s right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant.  If delivery of
possession of the Property to Tenant is delayed, Landlord and Tenant shall,
upon such delivery, execute an amendment to this Lease setting forth the actual
Commencement Date and expiration of the Lease. 
Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease.


Section 2.03.        Early Occupancy.  If Tenant occupies the
Property prior to the Commencement Date, Tenant’s occupancy of the Property
shall be subject to all of the provisions of this Lease.  Early occupancy of the Property shall not
advance the expiration date of this Lease. 
Tenant shall pay Base Rent and all other charges specified in this Lease
for the early occupancy period.


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 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 twenty-five percent (25%).


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 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.  Payment of rent shall not be
conditioned on receiving a statement or invoice from Landlord.


Section 3.02.  Security Deposit; Increases.


(a)           Upon the execution of this Lease,
Tenant shall deposit with Landlord cash Security Deposit in the amount set
forth in Section 1.10 above.  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’ 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
Based 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, 


	
  

  	
   

  	
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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 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 at
least ten (10) days prior to the delinquency date of the taxes.  Within such ten (10)-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.  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 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; (iii) any
tax or charge fro fire protection, streets, sidewalks, road maintenance, refuse
of other services provided to the Property by any governmental agency; (iv) 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 (v) 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 or estate taxes.


(c)           Joint Assessment.  If the
Property is not separately assessed, Landlord shall reasonably determine Tenant’s
share of the real property tax payable by Tenant under Paragraph4.02 (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.


(l)            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.


(ll)           If any of
Tenant’s person al property is taxed with the Property 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.


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) 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
Landlord against 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
obligation under this Lease.  Landlord
may also obtain comprehensive public liability insurance in an amount and with
coverage determined by Landlord 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 reasonable necessary.  Landlord shall have the right to obtain flood
and earth quake insurance if required by any lender holding a security interest
in the Property.  Landlord shall not
obtain insurance of 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 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 Ten Thousand Dollars
($10,000).  Tenant shall not do or permit
anything to be done which invalidates any such insurance policies.


(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).  For insurance policies maintained by Landlord
which cover improvement s on the entire Project, Tenant shall pay Tenant’s
prorated share of the premiums, in accordance with the formula in Paragraph
4.05(e) for determining Tenant’s share of common Area costs.  If insurance policies maintained by Landlord
cover improvement s on real property other that the Project, 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 he 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 reasonable
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 any
policy, certificate or renewal to Landlord required under this Lease within the
prescribed time period or if any such policy is canceled or modified during the
Lease Term without Landlord’s consent, Landlord may obtain such insurance, in
which case Tenant shall reimburse 


	
  

  	
   

  	
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Landlord for the cost of
such insurance within fifteen (15) days after receipt of a statement that
indicates the cost of such insurance.


(iii)         Tenant
shall maintain all insurance required under this Lease with companies holding a
“General Policy Rating” or 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 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 area, access roads, corridors,
landscaping and planted areas.  Landlord,
from time t time, may change the size, location, nature and use of any of the
Common Areas, convert Common Areas into leaseable 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 inconvenience to Tenant.  Such
activities and changes are permitted if they do not materially affect Tenant’s
use of the Property.


(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.


(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 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 parks more vehicles in the parking area than the number set forth in Section
1.11 of this Lease, such conduct shall be a materi8al breach of this Lease.  In addition to Landlord’s other remedies
under the Lese, Tenant shall pay a daily charge determined by Landlord for each
such additional vehicle.


	
  

  	
   

  	
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(d)           Maintenance of Common Areas. 
Landlord shall maintain the Common Areas in good order, condition and
repair 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;
utilities, water and sewage charges; maintenance of signs (other than tenants’
signs); premiums for liability, property damage, fire and other types of
casually insurance of the Common Areas and worker’s compensation insurance; all
property taxes and assessments levied on or attributable to personal property
used in connection with the Common Areas; straight-line depreciation on
personal property owned by Landlord which is consumed in the operation or
maintenance of 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; 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 (not to exceed five percent (5%) of the gross
rents of the Project for the calendar year). 
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
Common Area costs shall not include depredation of real property which forms
part of the Common Areas.


(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) upon written notice from Landlord that such
costs are due and payable, and in any event prior to delinquency.  Tenant’s pro rata share shall be 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, as of the date on which the computation is
made.  Tenant’s initial pro rata share is
set out in Paragraph 1.12 (b).  Any
changes in the Common Area costs and/or the aggregate area of the Project
leased or held for lease during the Lease Term shall be effective on the first
day of the month after such change occurs. 
Landlord may, at Landlord’s election, estimate in advance and charge to
Tenant as Common Area costs, all real property taxes for which Tenant is liable
under Section4.02 of the Lese, 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. 
At Landlord’s election, such statements of estimated Common Area costs
shall be delivered monthly, quarterly or at any other periodic intervals to be
designated by Landlord.  Landlord may
adjust such estimates at any time based upon Landlord’s experience and
reasonable anticipation of costs.  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 Lese 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.  The initial estimated budget for 2006 for
Common Area costs are $0.095 per square foot total Five Thousand One Hundred
Thirty ($5,130) Dollars and shall be reimbursed monthly in advance.


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 Landlord a late charge equal to ten percent (10%) of the over due 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 when due 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.  If the interest rate 


	
  

  	
   

  	
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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 by Tenant under this Lease, together with each payment of Base
Rent.  Landlord shall hold such payments
in a non-interest bearing impound account. 
If unknown, Landlord shall reasonable estimate the amount of real
property taxes and insurance premiums when due. 
Tenant shall pay any deficiency of funds in the impound account to
Landlord upon written request.  If Tenant
defaults under this Lease, Landlord any apply any 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 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, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.


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, including any substances
defined as or 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, sub-lessees or invitees without the prior written consent of
Landlord.  Landlord shall be entitled to
take into account such other factors or facts as Landlord may reasonable
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 of 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 not
conduct or permit any auctions or sheriff’s sales at the Property, except for
Tenant’s on-line auctions.


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;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant.  


	
  

  	
   

  	
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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, Tenant assumes all risk
of damage to property or injury to persons in or about the Property arising
from any cause, 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
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 of pipes,
sprinklers, wires, appliances, plumbing, air conditioning  or lighting fixtures or any other cause; (c)
any act or omission of any other tenant to 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 the 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
often than once every five (5) years, if necessary) and all components of
electrical, mechanical, plumbing, heating and air conditioning systems and
facilities located on 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 


	
  

  	
   

  	
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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, Article Seven (Damage or Destruction) and Article
Eight (Condemnation), Tenant shall keep all portions of the Property (including
structural, non-structural, interior, system and equipment) in good order,
condition and repair (including interior repainting and refinishing, as
needed).  If any portion of the Property
or any sys tem 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 in the Property, regardless of
whether the benefit of such replacement extends beyond the Lease Term; but 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 heating and air conditioning system by a licensed heating
and air conditioning contractor, unless Landlord maintains such equipment under
Section 6.03 above.  If any part of the
Property or the Project 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 other wise 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 bin 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 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) 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 if form
and amount satisfactory to Landlord. 
Tenant shall promptly remove and alterations, additions, or improvements
constructed in violation of this Paragraph 6.05 (a) upon Landlord’s written
request.  All alterations, additions, and
improvement s 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 in
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 Lese, 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 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 improvement s
which Landlord has not required Tenant to remove 


	
  

  	
   

  	
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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
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 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 Lese 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 repair the damage,
Tenant shall pay Landlord the “deductible amount” (if any) under Landlord’s
insurance policies and, if the damage was due to an act or omission of Tenant,
or Tenant’s employees, agents, contractors or invitees, the difference between
the actual cost of repair and any insurance proceeds received by Landlord.  If Landlord elects to terminate the Lease,
Tenant may elect continue this Lease if 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.


(c)           If the damage to the Property occurs during
the last six (6) months of the Lease Term and such damage will require more
that 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.  Not withstanding 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.


	
  

  	
   

  	
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Section 7.03.  Temporary Reduction of Rent.  If the Property is 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 protecting of any statute, code or judicial decision which grants a tenant
the right to terminate 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
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 building in which the Property is located, or which is
located on the Property, 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.  Any Condemnation award or payment shall be
distributed in the following order:  (a)
first, to any ground lessor, mortgageee 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.  If 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 common
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corporation resulting from the merger of or consolidation with Tenant
(Tenant’s Affiliate”).  In such case, any
Tenant’s Affiliate shall assume in 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 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.


Section 9.04.  Offer 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), and any other information Landlord deems 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 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.


(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 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 assignments 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 for real estate broker’s commissions and costs of
renovation or construction of tenant improvements required under such assignment
or sublease.  Tenant is entitled to
recover such costs 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, truce and correct.  Landlord’s receipt of Landlord’s Share shall
no to 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.


	
  

  	
   

  	
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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.


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 when 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 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) is not default under this Lease, and a trustee is appointed to
take possession (or if Tenant remains a debtor in possession and such trustee
or Tenant transfers Tenant’s interest hereunder, then Landlord shall receive,
as Additional Rent, the excess, if any, of the rent (or 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 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, Additional 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 by likely to result
there from, 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 relettling, including
necessary renovations or 


	
  

  	
   

  	
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alterations of the Property, Landlord’s reasonable attorneys’ fees
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%).  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
possessing, in which case this Lease shall continue in effect whether or not
Tenant has abandoned the Property.  Inc
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.


(a)                                  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 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, in the filling 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 filling, 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 stat 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 Tennant 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.  Landlord shall
have the right to subordinate this Lease to any ground lease, deed of trust or
mortgage encumbering the Property, 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 that 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 of
Tenant pays the rent and perform all of Tenant’s obligations under this Lease
and is not otherwise in default.  If any
ground lessor, beneficiary or mortgage elects to have this 


	
  

  	
   

  	
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Lease prior to the lien of its 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.


Section
11.02.  Attornment.  If Landlord’s interest in
the Property is acquired by any ground lessor, beneficiary under a deed of
trust, mortgage, or purchaser at a foreclosure sale, Tenant shall attorn to the
transferee of 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 that 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 canceled 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 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 require.  Tenant shall deliver such statement to
Landlord within ten (10) days after Landlord’s request. Landlord may give any
such statement by Tenant to an6 prospective purchaser or encumbrancer of the
Property.  Such purchaser or encumbrancer
may rely conclusively upon such statements true and correct.


(b)           If Tenant does not deliver
such statement to Landlord within such ten (10)-day period, Landlord, and 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 canceled 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 stopped 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 verifying 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 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 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 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 is such action 


	
  

  	
   

  	
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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 material furnished to or
for 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:  MISCELLANOUS
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.


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
Project or the leasehold estate under a ground lease of the Property or Project
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 the Project, and neither the Landlord nor its partners,
shareholders, officers or other principals shall have any personal liability
under this Lease.


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.


	
  

  	
   

  	
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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.


Section 13.06.  Notices. 
All notices required or permitted under this Lease shall be in writing
and shall be personally delivered 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 any change its notice address
upon written notice to the other party.


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 of 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 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 


	
  

  	
   

  	
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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, or the sum stated in Section 1.09 above for services rendered to
Landlord by Landlord’s Broker in this transaction. Landlord shall pay Landlord’s
Broker a commission if Tenant exercises any option to extend the Lease Term or
to buy the Property, or any similar option or right which Landlord may grant to
Tenant, or if Landlord’s Broker is the procuring cause of any other lease or
sale entered into between Landlord and Tenant covering the Property. Such
commission shall be the amount set forth in Landlord’s Broker’s commission
schedule in effect as of the execution of this Lease. 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


Section 14.02.   Protection of Brokers.  If
Landlord sells the Property, or assigns Landlord’s interest in this Lease, the
buyer or assignee shall, by accepting such conveyance of the Property or
assignment of the Lease, be conclusively deemed to have agreed to make all
payments to Landlord’s Broker thereafter required of Landlord under this Article
Fourteen. Landlord’s Broker shall have the right to bring a legal action to
enforce or declare rights under this provision. The prevailing party in such
action shall be entitled to reasonable attorneys’ fees to be paid by the losing
party. Such attorneys’ fees shall be fixed by the court in such action. This
Paragraph is included in this Lease for the benefit of Landlord’s Broker.


Section 14.03.  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.


ARTICLE FIFTEEN:  OPTION TO RENEW 


Provided that lessee is not in default in
the performance of this Lease, Lessee will have the option to renew the Lease
for an additional term of 36 months commencing at the expiration of the initial
Lease term.  All of the terms and
conditions of the Lease will apply during the renewal term, except that the
monthly rent will be the then current Market Value for rental rates in the
North Las Vegas area for similar properties without consideration for lease
inducements offered by Landlord. In no event shall the rental rate for the
renewal period be less than the rate in last month of the preceding term plus
Three (3%) percent. In the event the parties cannot agree on the Market Value
rental rate then each party shall designate a real estate broker active in the
North Las Vegas market and said two designees shall determine the Market Value
rental rate.


The option will be exercised by written
notice given to Lessor not less than six (6) months prior to the expiration of
the initial Lease term.  If notice is not
given within the time specified, this Option will expire.


ARTICLE SIXTEEN: 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
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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 OR RIDERS 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.




	
  Paulus Enterprises LLC

  	
   

  	
  Liquidity Services Inc.

  
	
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  Wail Paulus

  	
   

  	
  Jaime Mateus-Tique

  
	
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