#### **Exhibit 10.5**

####  

**SECOND LEASE AMENDMENT**

 

THISSECOND LEASE AMENDMENT (the “Amendment”) is executed this 5th day of October,2005 and effective as of the 1st day of October, 2005  by and between DUGAN FINANCING LLC, aDelaware limited liability company (“Landlord”), and GAIAM, INC., a Coloradocorporation (“Tenant”).

 

WITNESSETH :

 

WHEREAS, Duke-Weeks Realty Limited Partnership, as predecessor ininterest to Landlord, and Tenant entered into a certain lease dated December 16,1999, as amended April 12, 2000 (collectively, the “Lease”), wherebyTenant leases from Landlord certain premises consisting of approximately208,120 square feet of space (the “Leased Premises”) in a building commonlyknown as World Park at Union Centre, Building No. 8, located at 9107Meridian Way, Cincinnati, Ohio 45069; and

 

##### WHEREAS, Landlordand Tenant desire to extend the Lease Term; and

#####  

WHEREAS,Landlord and Tenant desire to amend certain provisions of the Lease to reflectsuch extension and other changes to the Lease;

 

NOW, THEREFORE,in consideration of the foregoing premises, the mutual covenants hereincontained and each act performed hereunder by the parties, Landlord and Tenanthereby agree that the Lease is amended as follows:

 

1.             Incorporationof Recitals.  The above recitals arehereby incorporated into this Amendment as if fully set forth herein.

 

2.             Extensionof Lease Term.  The Lease Term ishereby extended through September 30, 2008.

 

3.             Amendmentof Section 1.01.  Basic LeaseProvisions and Definitions.  CommencingOctober 1, 2005, Section 1.01 of the Lease is hereby amendedby deleting subsections D, E, F, H and M and substituting the following in lieuthereof:

 

“D.          MinimumAnnual Rent:

 
| October 1,  2005 - September 30, 2006 |   | $ | 613,953.96  |   |
|-------------------------------------------------|--------|---|-------------|--------|
| October 1, 2006 - September 30, 2007  |   | $ | 628,522.44  |   |
| October 1, 2007 - September 30, 2008  |   | $ | 645,171.96; |   |

 

E.             MonthlyRental Installments:

 
| October 1,  2005 - September 30, 2006 |   | $ | 51,162.83 per month  |   |
|-------------------------------------------------|--------|---|----------------------|--------|
| October 1, 2006 - September 30, 2007  |   | $ | 52,376.87 per month  |   |
| October 1, 2007 - September 30, 2008  |   | $ | 53,764.33 per month; |   |

 

F.             Landlord’sShare of Expenses:  $0.00;

 

H.            LeaseTerm:  extended through September 30,2008;

 

M.           Addressfor payments and notices as follows:

 
| Landlord: | Dugan Financing  LLC                          |
|-----------|-----------------------------------------------|
|      | c/o Duke Realty  Services Limited Partnership |
|      | Attn.: Senior  Property Manager               |
|      | 4555 Lake Forest  Drive, Suite 400       |
|      | Cincinnati, OH  45242                         |

 

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| With a copy to:    | Dugan Financing  LLC                          |
|--------------------|-----------------------------------------------|
|               | c/o Duke Realty  Services Limited Partnership |
|               | Attn: Jeff Behm                               |
|               | 600 East 96th  Street, Suite 100         |
|               | Indianapolis, IN  46240                       |
|               |                                          |
| With payments  to: | Dugan Financing  LLC                          |
|               | 75 Remittance  Drive, Suite 1128         |
|               | Chicago, IL  60675-1128                       |
|               |                                          |
| Tenant:            | Gaiam, Inc.                              |
|               | Attn.: Mark  Lipien                           |
|               | 360 Interlochen  Boulevard, Suite 300    |
|               | Broomfield, CO  80021                         |
|               |                                          |
| With a Copy to:    | Gaiam, Inc.                              |
|               | 9107 Meridian  Way                            |
|               | Cincinnati, OH  45069;”                  |

 

 

4.             Amendmentof Section 2.02.  Constructionof Tenant Improvements.  Section 2.02of the Lease is hereby amended by substituting **Exhibit B-2**, attached hereto and incorporated hereinby reference, in lieu of Exhibit B-1 attached to the Lease.  Landlord shall ensure that the improvementsset forth in **Exhibit B-2**shall be made in accordance with all applicable laws, regulations and buildingcodes.  Landlord shall use commerciallyreasonable speed and diligence to timely complete such improvements.

 

5.             Amendmentof Section 3.02.  AdditionalRent.

 

(a)           CommencingOctober 1, 2005, the first sentence of Section 3.02 of theLease is hereby deleted and the following is substituted in lieu thereof:

 

“In addition to theMinimum Annual Rent Tenant shall pay to Landlord for each calendar year duringthe Lease Term, as “Additional Rent,” Tenant’s Proportionate Share of all costsand expenses incurred by Landlord during the Lease Term for Real Estate Taxesand Operating Expenses for the Building and common areas (collectively “CommonArea Charges”).”

 

(b)           CommencingOctober 1, 2005, the portion of the second sentence of Section 3.02of the Lease that reads “management fees not to exceed four percent (4%) ofgross rent for the Building” is hereby deleted and the following is substitutedin lieu thereof:  “management fees not toexceed three percent (3%) of gross rent for the Building”.

 

6.             Amendmentof Article 4.  SecurityDeposit.  The last two sentences of Article 4of the Lease are hereby deleted in their entirety and shall be of no furtherforce or effect.

 

7.             Amendmentof Section 9.02.  Tenant’sInsurance.  Section 9.02of the Lease is hereby amended to require in lieu of the limits of the policystated in subparagraph (B) thereof the following:  Commercial General Liability Insurance,including blanket, contractual liability, broad form property damage, personalinjury, completed operations, products liability, and fire damage:  Not less than $3,000,000 Combined SingleLimit for both bodily injury and property damage.

 

8.             Amendmentof Section 16.13.  Option toExtend.  Section 16.13 ofthe Lease is hereby deleted in its entirety and shall be of no further force oreffect.

 

9.             Amendmentof Section 16.14.  Right ofFirst Refusal.  Section 16.14of the Lease is hereby deleted in its entirety and shall be of no further forceor effect.

 

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10.           Amendmentof Article 16.  Article 16of the Lease is hereby amended by adding the following additional sections:

 

“Section 16.15.  Financial Statements.  During the Lease Term and any extensionsthereof, Tenant shall provide to Landlord on an annual basis, within ninety(90) days following the end of Tenant’s fiscal year, a copy of Tenant’s mostrecent certified and audited financial statements prepared as of the end ofTenant’s most recent fiscal year.  Suchfinancial statements shall be prepared in conformity with generally acceptedaccounting principles, consistently applied. Notwithstanding the foregoing, if (i) the named tenant, Gaiam, Inc.,is Tenant, (ii) Tenant’s financial statements are publicly available, and (iii) suchstatements comply with the provisions hereinabove, then Landlord shall notrequest Tenant’s financial statements from Tenant.

 

Section 16.16.  ERISA Matters.

 

(a)           Tenantacknowledges that it has been advised that an affiliate of Landlord is acollective investment fund (the “Fund”) which holds the assets of one or moreemployee benefit plans or retirement arrangements which are subject to Title Iof the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)and/or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”)(each a “Plan”), and with respect to which Morgan Guaranty Trust Company of NewYork (“MGT”) is the Trustee and that, as a result, Landlord may be prohibitedby law from engaging in certain transactions.

 

(b)           Landlordhereby represents and warrants to Tenant that, as of the date hereof, the onlyPlans whose assets are invested in the Fund which, together with the interestsof any other Plans maintained by the same employer or employee organization,represent a collective interest in the Fund in excess of ten percent (10%) ofthe total interests in the Fund (each, a “10% Plan”) are referenced on **Exhibit E** (collectively, the “Existing10% Plan”).

 

(c)           Tenantrepresents and warrants that as of the date hereof, and at all times while itis a Tenant under this Lease, one of the following statements is, and willcontinue to be, true:  (1) Tenant isnot a “party in interest” (as defined in Section 3(14) of ERISA) or a “disqualifiedperson” (as defined in Section 4975 of the Code) (each, a “Party inInterest”) with respect to the Existing 10% Plan or, (2) if Tenant is aParty in Interest, that:

 

(A)          neitherTenant nor its “affiliate” (as defined in Section V(c) of PTCE 84-14,“Affiliate”) has, or during the immediately preceding one (1) year has,exercised the authority to either:  (i) appointor terminate MGT as the qualified professional asset manager (as defined in Section V(a) ofPTCE 84-14, “QPAM”) of any of the assets of the Existing 10% Plan with respectto which Tenant or its Affiliate is a Party in Interest; or (ii) negotiatethe terms of the management agreement with MGT, including renewals ormodifications thereof, on behalf of the Existing 10% Plan; and

 

(B)           neitherTenant nor any entity controlling, or controlled by Tenant owns a five percent(5%) or more interest (within the meaning of PTCE 84-14, “5% Interest”) in J.P.Morgan Chase & Co.

 

(d)           In theevent that Landlord or the Fund notifies Tenant in writing that a Plan otherthan the Existing 10% Plan may become a 10% Plan, Tenant will, within ten (10) daysof such notification, inform the Fund in writing as to whether it can make thesame representations which it made in subsection (c) of this Section withrespect to such prospective 10% Plan. Thereafter, if based on such representations made by Tenant such Planbecomes a 10% Plan, Tenant represents and warrants that, at all times duringthe period Tenant is a tenant 

 

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underthe Lease, one of the statements set forth in subsection (c) will betrue with respect to such 10% Plan.

 

Section 16.17. Option to Extend.

 

(a)           Grantand Exercise of Option.  Providedthat (i) no default has occurred and is then continuing, (ii) thecreditworthiness of Tenant is then reasonably acceptably to Landlord, and (iii) Tenantoriginally named herein [or its Permitted Transferee] remains in possession ofand has been continuously operating in the entire Leased Premises throughoutthe Lease Term, Tenant shall have one (1) option to extend the Lease Termfor one (1) additional period of three (3) years (the “Extension Term”).  The Extension Term shall be upon the sameterms and conditions contained in the Lease except (x) Tenant shall not haveany further option to extend, (y) any improvement allowances or otherconcessions applicable to the Leased Premises under the Lease shall not applyto the Extension Term, and (z) the Minimum Annual Rent shall be adjusted as setforth herein (“Rent Adjustment”).  Tenantshall exercise such option by delivering to Landlord, no later than six (6) monthsprior to the expiration of the current Lease Term, written notice of Tenant’sdesire to extend the Lease Term.  Tenant’sfailure to properly exercise such option shall be deemed a waiver of suchoption.  If Tenant properly exercises itsoption to extend, Landlord shall notify Tenant of the Rent Adjustment no laterthan ninety (90) days prior to the commencement of the Extension Term.  Tenant shall be deemed to have accepted theRent Adjustment if it fails to deliver to Landlord a written objection theretowithin five (5) business days after receipt thereof.  If Tenant properly exercises its option toextend, Landlord and Tenant shall execute an amendment to the Lease (or, atLandlord’s option, a new lease on the form then in use for the Building)reflecting the terms and conditions of the Extension Term within thirty (30)days after Tenant’s acceptance (or deemed acceptance) of the Rent Adjustment.

 

(b)           RentAdjustment.  The Minimum Annual Rentfor the Extension Term shall be an amount equal to the Minimum Annual Rent thenbeing quoted by Landlord to prospective renewing tenants of the Building forspace of comparable size and quality and with similar or equivalentimprovements as are found in the Building, and if none, then in similarbuildings in the Park; provided, however, that in no event shall the MinimumAnnual Rent during the Extension Term be less than the highest Minimum AnnualRent payable during the immediately preceding term.  The Monthly Rental Installments shall be anamount equal to one-twelfth (1/12) of the Minimum Annual Rent for the ExtensionTerm and shall be paid at the same time and in the same manner as provided inthe Lease.”

 

11.           Acknowledgmentof Completion of Improvements.  Tenant hereby acknowledges that theimprovements designated as Landlord’s obligations in Exhibit B-1 ofthe Lease have been completed in a satisfactory manner.

 

12.           BrokerageCommissions.  The parties herebyrepresent and warrant that the only real estate brokers involved in thenegotiation and execution of this Amendment are Duke Realty Services LimitedPartnership, representing Landlord, and Colliers Turley Martin Tucker,representing Tenant.  Each party shallindemnify the other party from any and all liability for the breach of thisrepresentation and warranty on its part and shall pay any compensation to anyother broker or person who may be entitled thereto.

 

13.           Tenant’sRepresentations and Warranties.  Theundersigned represents and warrants to Landlord that (i) Tenant is dulyorganized, validly existing and in good standing in accordance with the laws ofthe state under which it was organized; (ii) all action necessary toauthorize the execution of this Amendment has been taken by Tenant; and (iii) theindividual executing and delivering this Amendment on behalf of Tenant has beenauthorized to do so, and such execution and delivery shall bind Tenant.  Tenant, at Landlord’s request, shall provideLandlord with evidence of such authority.

 

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14.           Examinationof Amendment.  Submission of thisinstrument for examination or signature to Tenant does not constitute areservation or option, and it is not effective until execution by and deliveryto both Landlord and Tenant.

 

15.           Definitions.  Except as otherwise provided herein, thecapitalized terms used in this Amendment shall have the definitions set forthin the Lease.

 

16.           Incorporation.  This Amendment shall be incorporated into andmade a part of the Lease, and all provisions of the Lease not expresslymodified or amended hereby shall remain in full force and effect.

 

INWITNESS WHEREOF, the parties have caused this Amendment to be executed on theday and year first written above.

 
|   | LANDLORD:                             |
|--------|---------------------------------------|
|   |                                  |
|   | DUGAN FINANCING LLC,                  |
|   | a Delaware  limited liability company |
|   |                                  |
|   | By:                                   | Dugan Realty,  L.L.C., its sole member |
|   |                                  |
|   |                                  | By: | Duke Realty  Limited Partnership, |
|   |                                  | its manager |
|   |                                  |
|   |                                  | By: | Duke Realty  Corporation, |
|   |                                  | its general  partner |
|   |                                  |
|   |                                  | By: |   |   |
|   |                                  | Kevin T. Rogus |
|   |                                  | Senior Vice President |
|   |                                  |
|        |                                       |  |  |  |  |  |  |

 
|   | TENANT:                              |
|--------|--------------------------------------|
|   |                                 |
|   | GAIAM, INC., a  Colorado corporation |
|   |                                 |
|   | By:                                  |   |   |
|   |                                 |
|   | Printed:                             |   |   |
|   |                                 |
|   | Title:                               |   |   |
|        |                                      |  |  |  |  |

 

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