Document:

EXHIBIT
10.16

LEASE

THIS LEASE, made and entered into this 8th day of
June, 2006 by and between Le Baron Investments and Southern Textile Recycling,
Inc. hereinafter respectively referred to as Landlord and Tenant, without
regard to number or gender.

WITNESSETH

1.             USE.  The landlord hereby leases to Tenant and
Tenant hereby hires from Landlord, for purposes of conducting thereon wholesale
and retail sales of general merchandise those certain premises with
appurtenances described as hereinafter set forth.

2.             PREMISES.  The premises leased to Tenant, together with
appurtenances, are hereinafter referred to as the “demised premises” 1850-1900
East Orangethorpe Avenue and are situated in the City of Fullerton, County of
Orange, State of California.  The demised
premises shall be approximately 68,000 square feet.

3.             TERMS.  The term of this lease shall be for a period
of five (5) years.  The term of this
lease, and a Tenant’s obligation to pay rent, shall commence on July 11, 2006.

4.             RENTAL.

A.            Guaranteed
Minimum Monthly Rental.  Tenant shall pay
to the Landlord during the term of this lease as minimum monthly rental for the
demised premises the sum of **See Below ($                 )
Dollars per month, which sum shall be paid in advance on the first day of each
calendar month.  All rental to be paid by
Tenant to Landlord shall be in lawful money of the United States of America and
shall be paid without deduction or offset, prior notice or demand at the
address designated in Article 30.  Any
rent payment not paid within ten (10) days of its due date shall be subject to
a ten (10) percent late charge. 

	
  **Year 1:

  	
   

  	
  Base rent of $39,698.40, plus R.E. Tax/CAM charges
  of $5,861.60 = $45,560.00 mo.

  
	
   

  	
   

  	
   

  
	
  Years 2 through 5:

  	
   

  	
  Base rent increased each July by CPI adjustment (not
  less than 3%, nor greater than 6%), plus R.E. Tax/CAM charges

  

 

5.             REAL ESTATE TAXES
AND RENTAL TAX.  In addition to all
rentals herein reserved, Tenant shall pay to Landlord annual real estate taxes
and assessments levied upon the demised premises together with a prorata share
of the parking and common area of the Shopping center.  Such amount shall be payable within ten (10)
days after the receipt of a semi-annual statement to be sent by Landlord to
Tenant setting forth the amount of such tax based upon the actual tax bill
received by Landlord; or Landlord at its option shall have the right to
estimate the amount of taxes next due and to collect and impound them from
Tenant on a monthly or quarterly basis the amount of Tenant’s estimated tax
obligation.  Within thirty (30) days
following receipt of the actual tax bill, Landlord shall provide to Tenant a
reconciliation of Tenant’s impound account.

 

In the event the demised premises together with a prorata share of the
parking lot and common area are not separately assessed, the applicable taxes
and assessments shall be determined by the ratio that the floor area of the
demised premises, including mezzanine, if any, bears to the total floor area,
including mezzanines, of the building or buildings which included the demised
premises and for which a separate assessment is made.  In the event such separate assessment does
not reflect a pro rata share of the parking and common area based upon the
ratio of building to parking and common area shown on the attached exhibit A an
appropriate adjustment shall be made.

Any such tax for the year in which this lease commences or ends shall
be apportioned and adjusted.  With
respect to any assessment which may be levied against or upon the demised
premises and which, under the laws then in force, may be evidenced by
improvement or other bonds, payable in annual installments, only the annual
payments on said assessment shall be included in computing Tenant’s obligation
for taxes and assessments.

The term “real estate taxes” as used herein shall be deemed to mean all
taxes imposed upon the real property and permanent improvements constituting
the demised premises, and all assessments levied against said premises, but
shall not include personal income taxes, personal property taxes, inheritance
taxes, or franchise taxes levied against the Landlord, but not directly against
said property, even though such taxes shall become a lien against said
property.

Tenant shall pay to Landlord any and all excise, privilege and other
taxes, other than net income and estate taxes levied or assessed by any
federal, state or local authority upon the rent received by Landlord hereunder,
and Tenant shall bear any business tax imposed upon Landlord by any
governmental authority which is based or measured in whole or in part by
amounts charged or received by Landlord from Tenant under this lease.

6.             PERSONAL PROPERTY
TAX.  During the term hereof Tenant shall
pay prior to delinquency all taxes assessed against and levied upon fixtures,
furnishings, equivalent and all shall cause said fixtures, furnishings,
equivalent and other personal property to be assessed and billed separately
from the real property of Landlord.  In
the event any or all of the Tenant’s fixtures, furnishings, equipment and other
personal property shall be assessed and taxed with the Landlord’s real
property, the Tenant shall pay to Landlord its share of such taxes within ten
(10) days after delivery to Tenant by Landlord of a statement in writing
setting forth the amount of such taxes applicable to the Tenant’s property.

7.             PARKING AND COMMON
FACILITIES. Landlord covenants that the common and parking areas of the
shopping center of which the demised premises are a part shall be available for
the non-exclusive use of Tenant during the full term of this lease or any
extension of the term hereof, provided that the condemnation or any other
taking by any public authority, or sale in lieu of condemnation, or any or all
of such common and parking areas shall not constitute a violation of this
covenant.  Landlord reserves the right to
change the entrances, exits, traffic lanes and the boundaries and locations of
such parking area or areas.  This lease
shall be subordinate to any agreement existing as of the date of this lease or
subsequently placed upon the real property of which the demised premises are a
part, which agreement provides for reciprocal easements and restrictions
pertaining to the common and parking areas, and in the event of conflict
between the provisions of such agreement and this lease, the provisions of said

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agreement shall prevail.  Provided, however, nothing therein shall
cause the Tenant to pay a greater share of the common area maintenance cost
than herein provided, and shall further that there shall at all times be
maintained common and parking areas of not less than two (2) square feet of
common and parking area for each square foot of ground floor building area
within the shopping center.

A.            Prior to the date of
Tenant’s occupation of the demised premises, Landlord shall cause said common
and parking area or areas to be graded, blacktopped, lighted and appropriately
marked and landscaped at no expense to Tenant, and shall cause the same to be
maintained in good condition and repair during the entire term hereof.

B.            The Landlord shall
keep or cause to be kept said automobile parking and common areas in a neat,
clean and orderly condition, property lighted and landscaped, and shall repair
any damage to the facilities thereof, but all expenses in connection with said
automobile parking and common areas shall be charged and prorated in the manner
hereinafter set forth.  It is understood
and agreed that the phrase “expenses in connection with said automobile parking
and common areas” as used herein shall be construed to include, but not limited
to, all sums expended by Landlord in connection with said automobile parking
and common areas for all general maintenance and repairs, resurfacing,
painting, restriping, cleaning, sweeping and janitorial services; planting and
landscaping; lighting and other utilities; directional signs and other markers
and bumpers; personnel to implement such services and to police the automobile
parking and common areas; required fees or charges levied pursuant to any
governmental requirements; and a fee equal to ten (10%) percent of said costs
to Landlord for Landlord’s supervision of said automobile parking and common
areas.

In addition to monthly rental, Tenant agrees to pay to Landlord, on a
monthly basis, Tenant’s pro rata share of automobile parking and common area
expenses.  Tenant’s prorata share of the
total expenses shall be that portion of all such expenses which is equal to the
proportion thereof which the number of square feet of gross floor area in the
demised premises bears to the total number of square feet of gross floor area
of the building.  There shall be
appropriate adjustments of Tenant’s share of the automobile parking and common
area expenses as of the commencement and expiration of the term of this
lease.  The term “gross floor area” as
used herein shall be deemed to mean the ground floor in either the demised
premises or any other buildings in the shopping center, with measurements to be
from outside of exterior walls and from the center of interior separation
partitions.

C.            Tenant, for the use
and benefit of Tenant, its agents, employees, customers, licensees and
subtenants, shall have the non-exclusive right in common with Landlord, and
other present and future owners, tenants and their agents, employees,
customers, licensees and subtenants, to use said common and parking areas
during the entire term of this lease, or any extension thereof, for ingress and
egress, roadway, sidewall, and automobile parking, provided however Tenant and
Tenant’s employees shall park their automobiles in those areas designated for
employee parking, or at Landlord’s written request shall park their automobiles
outside of the shopping center.

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D.            The Tenant, in the
use of said common and parking areas, agrees to comply with such reasonable
rules and regulations as the Landlord may adapt from time to time for the
orderly and proper operation of said common areas.

8.             USES
PROHIBITED.  Tenant shall not use, or
permit said premises, or any part thereof, to be used for any purpose or
purposes other than the purpose or purposes for which said premises are hereby
leased; and no use shall be made or permitted to be made of said premises, nor
acts done, which will increase the existing rate of insurance upon the building
in which said premises may be located (once said rate is established), or cause
a cancellation of any insurance policy covering said building or any part
thereof, nor shall Tenant sell or permit to be kept, used or sold in or about
said premises any article which may be prohibited by standard form of fire
insurance policies.  Tenant shall, at his
sole cost, comply with any and all requirements, pertaining to the use of said
premises, of any insurance organization or company necessary for the maintenance
of reasonable fire and public liability insurance, covering said building and
appurtenances.  In the event Tenant’s use
of the premises, as recited in Article 1 hereof, results in a rate increase for
the building of which the demised premises are a part, Tenant shall pay
annually on the anniversary date of this lease, as additional rent, a sum equal
to that of the additional premium occasioned by said rate increase.

9.             ALTERATIONS AND
FIXTURES.  Tenant shall not make, or
suffer to be made, any alteration of the demised premises, or any part thereof,
without the prior written consent of Landlord, and any additions to, or
alterations of, said premises, except movable furniture and trade fixtures,
shall become at once a part of the realty and belong to Landlord.  Any such alterations shall be in conformance
with the requirements of all municipal, state and federal authorities.

Tenant agrees to promptly fixturize the store in a manner comparable to
a store of similar nature.

10.           MAINTENANCE AND REPAIR.  Tenant shall, subject to Landlord’s
obligations hereinafter provided, at all times during the term hereof, and at
Tenant’s sole cost and expense, keep, maintain and repair the building and
other improvements upon the demised premises in good and sanitary order and
condition (except as hereinafter provided) including without limitation, the
maintenance and repair of any store front, doors, window casements, glazing,
heating and air conditioning system (if any), plumbing, pipes, electrical
wiring and conduits.  Tenant shall also
at its sole cost and expense be responsible for any alterations or improvements
to the demised premises necessitated as a result of the requirement of any
municipal, state or federal authority. 
Tenant hereby waives all right to make repairs at the Expense of the
landlord, and if the demised premises are located in the State of California,
Tenant hereby waives all rights provided by Section 1941 of the Civil Code of
the State of California to make said repairs. 
By entering into the demised premises, Tenant shall be deemed to have
accepted the demised premises as being in good and sanitary order, condition
and repair, and Tenant agrees on the last day of said term or sooner
termination of this lease to surrender the demised premises with appurtenances,
in the same condition as when received, reasonable use and wear thereof and
damage by fire, act of God or by the elements excepted.  Tenant shall periodically sweep and clean the
sidewalks adjacent to the demised premises, as needed.

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Landlord shall, subject to Tenant’s reimbursement as herein provided,
maintain in good repair the exterior walls, roof and sidewalks.  Tenant agrees that it will not, nor will
authorize any person to, go onto the roof of the building of which the demised
premises are a part without the prior written consent of Landlord.  Said consent will be given only upon Landlord’s
satisfaction that any repairs necessitated as a result of Tenant’s action will
be made by Tenant at Tenant’s expense and will be made in such a manner so as
not to invalidate any guarantee relating to said roof.  Landlord shall not be required to make any
repairs to the exterior walls, roof and sidewalls unless and until Tenant has
notified Landlord in writing of the need for such repairs and Landlord shall
have had a reasonable period of time thereafter to commence and complete said
repairs.  Tenant shall reimburse Landlord
for its prorata share of the cost of said repairs and maintenance incurred by
Landlord, said prorata share to be determined according to the area of the
demised premises as it relates to the total area of the building which contains
the demised premises.

11.           COMPLIANCE WITH
LAWS.  Tenant shall, at its sole cost and
expense, comply with all of the requirements of all municipal, state and
federal authorities now in force or which may hereafter be in force pertaining
to the use of said premises, and shall faithfully observe in said use all
municipal ordinances and state and federal statutes now in force or which shall
hereinafter be in force.  The judgment of
any court of competent jurisdiction, or the admission of Tenant in any action
or proceeding against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any such order or statute in said use, shall be conclusive
of that fact as between the Landlord and Tenant.

Tenant shall not commit, or suffer to be committed, any waste upon the
demised premises, or any nuisance or other act of thing which may disturb the
quiet enjoyment of any other Tenant in the building in which the demised
premises may be located.

12.           INSURANCE.  Landlord shall maintain fire and extended
coverage insurance throughout the term of this lease in an amount equal to at
least ninety (90%) percent of the replacement value of the building which
includes the demised premises, together with such other insurance as may be
required by Landlord’s lender or by any governmental agency.  Tenant hereby waives any right of recovery
from Landlord, its officers and employees, and Landlord hereby waives any right
of recovery from Tenant, its officers or employees, for any loss or damage
(including consequential loss) resulting from any of the perils insured against
in the standard form fire insurance policy with extended coverage endorsement.  Tenant agrees to pay Landlord its prorata
share of the cost of said insurance to be determined by the relationship that
the gross floor area of the demised premises bears to the total gross floor
area of the building or buildings for which such policy relates.

Tenant, if involved in food preparation and sales as a cafe,
restaurant, or similar use, and/or food takeout service, shall install at
Tenant’s expense any fire protective systems in grill, deep fry, and cooking
areas which are required by city, county, state fire ordinances, and such
system when installed shall qualify for full fire protective credits allowed by
the fire insurance rating and regulatory body in whose jurisdiction the
premises are located.

13.           INDEMNIFICATION OF
LANDLORD - LIABILITY INSURANCE BY TENANTS. 
Tenant, as a material part of the consideration to be rendered to
Landlord under this

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lease, hereby waives all claims against Landlord for
damage to goods, wares and merchandise, in, upon or about said premises and for
injuries to persons in or about said premises, from any cause arising at any
time; and Tenant will hold Landlord exempt and harmless from any damage or
injury to any person, or the goods, wares, and merchandise of any person,
arising from the use of the premises by Tenant, or from the failure of Tenant
to keep the premises in good condition and repair, as herein provided.

During the entire term of this lease, the Tenant shall, at the Tenant’s
sole cost and expense, but for the mutual benefit of Landlord and Tenant,
maintain general public liability insurance against claims for personal injury,
death or property damage occurring in, upon or about the demised premises and
on any sidewalks directly adjacent to the demised premises.  The limitation of liability of such insurance
shall be not less than One Million and 00/100 ($1,000,000.00) Dollars in
respect to injury or death on one person and to the limit of not less than One
Million and 00/100 ($1,000,000.00) Dollars in respect to anyone accident and to
the limit of not less than Five Hundred Thousand and 00/100 ($500,000.00)
Dollars in respect to property damage or policy in the amount of One Million
and 00/100 ($1,000,000.00) Dollars combined single liability limit.  All such policies of insurance shall be
issued in the name of Tenant and Landlord and for the mutual and joint benefit
and protection of the parties, and such policies of insurance or copies thereof
shall be delivered to the Landlord.

14.           FREE FROM
LIENS.  Tenant shall keep the demised
premises and the property in which the demised premises are situated free from
any liens arising out of any work performed, material furnished, or obligation
incurred by Tenant.

15.           ABANDONMENT.  Tenant shall not vacate or abandon the
demised premises at any time during the term of this lease; and if Tenant shall
abandon, vacate of surrender the demised premises or be dispossessed by process
of law, or otherwise, any personal property belonging to the Tenant and left on
the demised premises shall be deemed to be abandoned, at the option of Landlord,
except such property as may be mortgaged to Landlord.

16.           SIGNS AND
AUCTIONS.  Tenant shall not place or
permit to be placed any sign upon the exterior or in the windows of the demised
premises without Landlord’s prior written consent, nor shall Tenant change the
color or exterior appearance of the demised premises without Landlord’s prior
written consent.  Landlord will provide
to Tenant an approved sign criteria drawing, and Tenant shall thereafter at its
sole cost and expense prepare sign construction drawings, in accordance with
said criteria drawings, which shall be submitted to Landlord for Landlord’s
written approval.  Tenant agrees to
install a sign in accordance with approved sign construction drawings within
thirty (30) days after the commencement of the term of this lease.

Tenant shall not without Landlord’s prior written consent display or
sell merchandise outside the defined exterior walls and permanent doorways of
the demised premises.  Tenant shall not
conduct or permit to be conducted any sale by auction in, upon or from the
demised premises, whether said auction be voluntary, involuntary, pursuant to
any assignment for the payment of creditors, or pursuant to any bankruptcy or
other solvency proceeding.

17.           UTILITIES.  Tenant shall pay before delinquency all
charges for water, gas, heat, electricity, power, telephone service, and all
other services of utilities used in, upon, or about the

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demised premises by Tenant or any of its subtenants,
licensees, or concessionaires during the term of this lease.  If any utility is not separately metered,
Tenant agrees to reimburse Landlord for the cost of said service.

18.           ENTRY AND
INSPECTION.  Tenant shall permit landlord
and his agents to enter into and upon the demised premises at all reasonable
times for the purpose of inspecting the same or for the purpose of maintaining
the building in which said premises are situated, or for the purpose of making
repairs, alterations or additions to any other portion of said building,
including the erection and maintenance of such scaffolding, canopy, fences and
props as may be required, or for the purpose of posting notices of
non-liability for alterations, additions or repairs, or for the purpose of
placing upon the property in which the premises are located any usual or
ordinary “For Sale” signs.  Landlord
shall be permitted to do any of the above without any rebate of rent and
without any liability to Tenant for any loss of occupation or quiet enjoyment
of the premises thereby occasioned. 
Tenant shall permit Landlord, at any time within thirty (30) days prior
to the expiration of this lease, to place upon said premises any usual or
ordinary “For Lease” signs, and during such thirty (30) day period Landlord or
his agents may, during normal business hours, enter upon said premises and
exhibit same to prospective Tenants.

19.           DAMAGE AND
DESTRUCTION OF PREMISES.  In the event of
(a) partial or total destruction of said building containing same during said
term which requires repairs to said building, or (b) said building being
declared unsafe or unfit for occupancy by any authorized public authority for
any reason other than Tenant’s act, use or occupation, which declaration
requires repairs to said building, Landlord shall forthwith make said repairs
provided Tenant gives to landlord thirty (30) days written notice of the
necessity therefor.  No such partial
destruction (including any destruction necessary in order to make repairs
required by any declaration made by any public authority) shall in any wise annul
or void this lease except that Tenant shall be entitled to a proportionate
reduction of minimum guaranteed rental while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall interfere with the business carried on by Tenant in said
premises.  However, if during the last
four (4) years of the term of this lease the building is damaged as a result of
fire or any other insured casualty to an extent in excess of twenty-five (25%)
percent of its then replacement cost, (excluding foundation(s)), Landlord may
within thirty (30) days following the date such damage occurs terminate this
lease by written notice to Tenant.  If
Landlord, however, elects to make said repairs, and provided Landlord uses due
diligence in making said repairs to building, this lease shall continue in full
force and effect, and the minimum guaranteed rental shall be proportionately
reduced as hereinabove provided.  If
Landlord elects to terminate this lease, all rentals shall be prorated between
Landlord and Tenant as of the date of such destruction.

The foregoing to the contrary notwithstanding, if the building is
damaged or destroyed at any time during the term hereof to an extent of more
than twenty-five (25%) percent of its then replacement cost (excluding
foundation(s)) as a result of a casualty not insured against, Landlord may
within thirty (30) days following the date of such destruction terminate this
lease upon written notice to tenant.  If
Landlord does not elect to so terminate because of said uninsured casualty,
Landlord shall promptly rebuild and repair said building and Tenant’s rental
obligation shall be proportionately reduced as hereinabove provided.

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In respect to any partial or total destruction (including any
destruction necessary in order to make repairs required by any such declaration
of any authorized public authority) which Landlord is obligated to repair or
may elect to repair under the terms of this Article 20, Tenant waives any
statutory right it may have to cancel this lease as a result of such
destruction.

20.           ASSIGNMENT AND
SUBLETTING.  Tenant shall not assign this
lease, or any interest therein, and shall not sublet the demised premises or
any part thereof, or any right or privilege appurtenant thereto, or permit any
other person (the agents and servants of Tenant excepted) to occupy or use the
demised premises, or any portion thereof, without first obtaining the written
consent of Landlord, which consent shall not be unreasonably withheld.  Consent by Landlord to one assignment,
subletting, occupation or use by another person shall not be deemed to be a
consent to any subsequent assignment, subletting, occupation or use by another
person.  Consent to an assignment shall
not release the original named Tenant from liability for the continued
performance of the terms and provisions on the part of Tenant to be kept and
performed, unless Landlord specifically releases the original named Tenant from
said liability.  Any assignment or
subletting without the prior written consent of Landlord shall be void, and
shall, at the option of Landlord terminate this lease.  Neither this lease nor any interest therein
shall be assignable, as to the interest of Tenant, by operation of law, without
the prior written consent of Landlord. 
Furthermore, any increase in rent over Tenant’s current rent received by
Tenant related to such sublease shall be split equally between Landlord and
Tenant.

21.           DEFAULT.  If Tenant fails to make any payment required
by the provisions of this lease, when due, or fails within thirty (30) days
after written notice thereof to correct any breach or default of the other
covenants, terms or conditions of this lease, or if Tenant breaches this lease
and abandons the property before the end of the term, Landlord shall have the
right at any time thereafter to elect to terminate said lease and Tenant’s
right to possession thereunder.  Upon
such termination, Landlord shall have the right to recover against Tenant:

A.            The worth at the
time of award of the unpaid rent which has been earned at the time of
termination;

B.            The worth at the
time of award of the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that the Tenant proves could have been reasonably avoided;

C.            The worth at the
time of award of the amount by which the unpaid rent for the balance of the
term after the time of award exceeds the amount of such rental loss that the
Tenant proves could be reasonably avoided; and

D.            Any other amount
necessary to compensate the Landlord for all the detriment proximately caused
by Tenant’s failure to perform its obligations under the lease or which in the
ordinary course of things would be likely to result therefrom.

The “worth at the time of award” of the amounts referred to in
subparagraphs A and B above shall be computed by allowing interest at ten (10%)
percent per annum.  The Worth at the time
of award of the amount referred to in subparagraph C shall be computed by
discounting

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such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one (1%) percent.

Such efforts as Landlord may make to mitigate the damages caused by
Tenant’s breach of this lease shall not constitute a waiver of Landlord’s right
to recover damages against Tenant hereunder, nor shall anything herein
contained affect Landlord’s right to indemnification against Tenant for any
liability arising prior to the termination of this lease for personal injuries
or property damage, and Tenant hereby agrees to indemnify and hold Landlord
harmless from any such injuries and damages, including all attorney’s fees and
costs incurred by Landlord in defending any action brought against Landlord for
any recovery thereof, and in enforcing the terms and Provisions of this
indemnification against Tenant.

Notwithstanding any of the foregoing, the breach of this lease by
Tenant, or an abandonment of the demised premises by Tenant, shall not
constitute a termination of this lease, or of Tenant’s right of possession
hereunder, unless and until Landlord elects to do so, and until such time
Landlord shall have the right to enforce all of its rights and remedies under
this lease, including the right to recover rent, and all other payments to be
made by Tenant hereunder, as it becomes due; provided, however, that until such
time as Landlord elects to terminate this lease, and Tenant’s right of
possession hereunder, Tenant shall have the right to sublet the demised premises
or to assign its interests in this lease, or both, subject only to the written
consent of Landlord, which consent shall not be unreasonably withheld.

As security for the performance by Tenant of all of its duties and
obligations hereunder, Tenant does hereby assign to Landlord the right, power
and authority, during the continuance of this lease, to collect the rents,
issues and profits of the demised premises, reserving unto Tenant the right,
prior to any breach or default by it hereunder, to collect and retain said
rents, issues and profits as they become due and payable.  Upon any such breach or default, Landlord
shall have the right at any time thereafter, without notice except as provided
for above, either in person, by agent or by a receiver to be appointed by a
court, enter and take possession of said demised premises and collect such
rents, issues and profits, including those past due and unpaid, and apply the
same, less costs and expenses of operation and collection, including reasonable
attorney’s fees, upon any indebtedness secured hereby, and in such order as
Landlord may determine.

The parties hereto agree that acts of maintenance or preservation or
efforts to release the premises, or the appointment of a receiver upon the
initiative of the Landlord to protect its interests under this lease shall not
constitute a termination of Tenant’s right of possession for the purposes of
this paragraph unless accompanied by a written notice from Landlord to Tenant
of Landlord’s election to so terminate.

22.           INSOLVENCY OF
TENANT.  Tenant agrees that in the event
all or substantially all of its assets be placed in the hands of a receiver or
trustee, and in the event such receivership or trusteeship continue for a
period of ten (10) days, or should Tenant make an assignment for the benefit of
creditors, or be adjudicated a bankrupt, or should Tenant institute any
proceedings under any state or federal bankruptcy act wherein Tenant seeks to
be adjudicated a bankrupt, or seeks to be discharged of its debts, or should
any voluntary proceeding be filed against such Tenant under such bankruptcy
laws and Tenant consents thereto or acquiesces therein by

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pleading or default, then this lease or any interest
in and to the demised premises shall not become an asset in any such
proceedings and, in any of such events and in addition to any and all rights or
remedies of Landlord hereunder or as provided by law, it shall be lawful for
Landlord at his option to declare the term hereof ended and to re-enter the
demised premises and take possession thereof and remove all persons therefrom
and Tenant shall have no further claim, therein or hereunder.

23.           SURRENDER OF
LEASE.  The voluntary or other surrender
of this lease by Tenant, or a mutual cancellation thereof, shall not work a merger,
and shall, at the option of Landlord, terminate all or any existing subleases
or subtenancies, or may, at the option of Landlord, operate as an assignment to
him of any or all of such subleases or subtenancies.

24.           SALE OF PREMISES BY
LANDLORD.  In the event of any sale of
the demised premises by Landlord, Landlord shall be and is hereby entirely
freed and relieved of all liability under any and all of its covenants and
obligations contained in or derived from this lease arising out of any act, occurrence
or omission occurring after the consummation of such sale; and the purchaser,
at such sale or any subsequent sale of the demised premises, shall be deemed
without any further agreement between the parties or their successors in
interest or between the parties and any such purchaser, to have assumed and
agreed to carry out any and all of the covenants and obligations of the
Landlord under this lease.

25.           HOURS OF
BUSINESS.  Subject to the provisions of
Article 19 hereof, Tenant shall continuously during the entire term hereof
conduct and carry on Tenant’s business in the demised premises and shall keep
the demised premises open for business and cause Tenant’s business to be
conducted therein during the usual business hours of each and every business day
as it is customary for businesses of like character in the city in which the
demised premises are located to be open for business; provided, however, that
this provision shall not apply if the demised premises should be closed and the
business of Tenant temporarily discontinued therein on account of strikes,
lockouts, or similar causes beyond the reasonable control of Tenant, or closed
for not more than three (3) days out of respect to the memory of any deceased
officer or employee of Tenant, or the relative of any such officer or
employee.  Tenant shall keep the demised
premises adequately stocked with merchandise, and with sufficient sales
personnel to care for the patronage, and to conduct said business in accordance
with sound business practices.

26.           ATTORNEY’S
FEES.  If Landlord is involuntarily made
a party defendant to any litigation concerning this lease or the demised
premises by reason of any act or omission of Tenant, then, Tenant shall hold
harmless Landlord from all liabilities by reason thereof, including reasonable
attorney’s fees and all costs incurred by Landlord in such litigation.

If either landlord or Tenant shall commence any legal proceedings
against the other with respect to any of the terms and conditions of this
lease, the non-prevailing party therein shall pay to the other all expenses of
said litigation, including a reasonable attorneys’ fees as may be fixed by the
court having jurisdiction over the matter. 
The parties hereto agree that the State of California is the proper jurisdiction
for litigation of any matters relating to this lease, and service mailed to the
address of tenants set forth herein shall be adequate service for such
litigation.

 10

 

27.           SECURITY
DEPOSIT.  Tenant contemporaneously with
the execution of this lease, has deposited with landlord the sum of **Thirty
Thousand and 00/100 ($30.000.00) Dollars, receipt of which is hereby
acknowledged by Landlord, said deposit being given to secure the faithful
performance by the Tenant of all of the terms, covenants, and conditions of
this lease by the Tenant to be kept and performed during the term hereof.  Tenant agrees that if the Tenant shall fail
to pay the rent herein reserved promptly when due, said deposit may, at the
option of the Landlord (but Landlord shall not be required to) be applied to
any rent due and unpaid, and if the Tenant violates any of the other terms,
covenants, and conditions of this lease, said deposit shall be applied to any
damages suffered by Landlord as a result of Tenant’s default to the extent of
the amount of the damages suffered.

Nothing contained in this Article 28 shall in any way diminish or be
construed as waiving any of the Landlord’s other remedies as provided in
Article 22 hereof, or by law or in equity. 
Should the entire security deposit, or any portion thereof, be
appropriated and applied by Landlord for the payment of overdue rent or other
sums due and payable to Landlord by Tenant hereunder, then Tenant shall, on the
written demand of Landlord, forthwith remit to landlord a sufficient amount in
cash to restore said security deposit to its original amount, and Tenant’s
failure to do so within fifteen (15) days after receipt of such demand, shall
constitute a breach of this lease. 
Should Tenant comply with all of the terms, covenants, and conditions of
this lease and promptly pay all of the rental herein provided for as it falls
due, and all other sums payable by Tenant to landlord hereunder, said security
deposit shall be returned in full to Tenant at the end of the term of this
lease, or upon the earlier termination of this lease pursuant to the provisions
of Article 20 hereof, except in the event the demised premises are sold as a
result of the exercise of any power of sale under any mortgage or deed of
trust, in which event this lease shall be automatically amended to delete any
reference to this Article 28, and Tenant shall be entitled to immediate
reimbursement of its security deposit from the party then holding said deposit.

**Transferred from Lease dated July 11, 2001

28.           HOLDING OVER.  Any holding over after the expiration of the
term of this lease, with the consent of landlord, shall be construed to be a
tenancy from month to month, cancelable upon thirty (30) days written notice,
and at a monthly rental, terms and conditions as agreed upon between landlord
and Tenant.

29.           NOTICES.  Wherever in this lease it shall be required
or permitted that notice and demand be given or served by either party to this
lease to or on the other, such notice or demand shall be given or served and
shall not be deemed to have been duly given or served unless in writing and
forwarded by 1st class mail, addressed as follows: 

	
  TO: Landlord

  	
   

  	
  TO: Tenant

  
	
   

  	
   

  	
   

  
	
  Le Baron Investments

  2020 E. Orangethorpe Avenue

  Fullerton, CA 92831-5327

  Telephone: (714) 680-3812

  Fax: (714) 680-3340

  	
   

  	
  Southern Textile Recycling, Inc.

  Attn: Carl C. Jones

  1850-1900 E. Orangethorpe Avenue

  Fullerton, CA 92831

  phone: (714) 738-6400

  

 

 11
 

 

Either party may change such address by written notice by certified
mail to the other.

30.           SUCCESSORS IN
INTEREST.  The covenants herein contained
shall, subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.

31.           TENANT’S
PERFORMANCE.  In the event Tenant shall
fall within any time limits which may be provided herein to complete any work
or perform any other requirements provided to be performed by Tenant prior to
the commencement of the term hereof, or in the event Tenant shall cause a delay
in the completion of any work, landlord may send Tenant written notice of said
default and if said default is not corrected within ten (10) days thereafter,
Landlord may by written notice prior to the curing of said default terminate
this lease. landlord shall be entitled to retain as liquidated damages all
deposits made hereunder and such improvements as Tenant may have annexed to the
realty that cannot be removed without damage thereto.

32.           FORCE MAJEURE.  If either party hereto shall be delayed or
prevented from the performance of any act required hereunder by reasons of acts
of God, strikes, lockouts, labor troubles, inability to procure materials,
restrictive governmental laws or regulations or other cause without fault and
beyond the control of the party obligated (financial liability excepted),
performance of such act shall be excused for the period of the delay and the
period for the performance of any such act shall be extended for a period
equivalent to the period of such delay; provided, however, nothing in this
Article 33 contained shall excuse Tenant from the prompt payment of any rental
or other charge required of Tenant hereunder except as may be expressly
provided elsewhere in this lease.

33.           PARTIAL
INVALIDITY.  If any term, covenant,
condition or provision of this lease is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
provisions hereof shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereof.

34.           MARGINAL
CAPTIONS.  The various headings and
numbers herein and the grouping of the provisions of this lease into separate
articles and paragraphs are for the purpose of convenience only and shall not
be considered a part hereof.

35.           TIME.  Time is of the essence of this lease.

36.           SUBORDINATION,
ATTORNMENT.  This lease, at Landlord’s
option, shall be subordinate to the lien of any first deed of trust or first
mortgage subsequently placed upon the real property of which the demised
premises are a part, and to any and all advances made on the security thereof,
and to all renewals, modifications, consolidations, replacements and extensions
thereof; provided, however, that as to the lien of any such deed of trust or
mortgage Tenant’s right to quiet possession of the premises shall not be
disturbed if Tenant is not in default and so long as Tenant shall pay the rent
and observe and perform all of the provisions of this lease, unless this lease
is otherwise terminated pursuant to its terms. 
If any mortgagee, trustee or ground lessor shall elect to have this
lease prior to the lien of its mortgage, deed of trust, or

 12
 

 

ground lease, and shall give written notice thereof to
Tenant, this lease shall be deemed prior to such mortgage, deed of trust or
ground lease, whether this lease is dated prior or subsequent to the date of
said mortgage, deed of trust or ground lease or the date of recording thereof.

In the event any proceedings are brought, or in the event the exercise
of the power of sale under any mortgage or deed of trust made by the landlord
covering the demised premises, Tenant shall attorn to the purchaser upon any
such foreclosure or sale and recognize such purchaser as the landlord under
this lease.

If upon any sale, assignment, or hypothecation of the demised premises
or the land thereunder by Landlord, or at any other time, an estoppel
certificate and/or financial statement shall be requested of Tenant, Tenant
agrees, within ten (10) days thereafter, to deliver such financial statement,
and to deliver such estoppel certificate (in recordable form) addressed to any
such proposed mortgagee or purchaser or to the Landlord certifying the
requested information, including among other things the dates of commencement
and termination of this lease, the amounts of security deposits, and that this
lease is in full force and effect (if such be the case) and that there are no
differences, offsets or defaults of Landlord, or noting such differences,
offsets or defaults as actually exist. 
Tenant shall be liable for any loss or liability resulting from any incorrect
information certified, and such mortgagee and purchaser shall have the right to
rely on such estoppel certificate and financial statement.  Tenant shall in the same manner acknowledge
and execute any assignment of rights to receive rents as required by any
mortgagee of Landlord.

37.           RIGHT TO
RELOCATE.  Landlord reserves the
unrestricted and unconditional right, after the commencement of the term
hereof, to relocate the demised premises to substantially comparable space
within the shopping center.  Landlord
will give Tenant written notice of its intention to relocate the demised
premises, and Tenant will complete such relocation within thirty (30) days
after receipt of such written notice.  If
the furnishings of the space to which Landlord proposes to relocate Tenant are
not substantially the same as those of the demised premises, or if the
Guaranteed Minimum Monthly Rental of the new space is not substantially the
same as the prior Guaranteed Minimum Monthly Rental, Tenant may so notify
Landlord, and if landlord fails to offer other space satisfactory to Tenant,
Tenant may terminate this Lease effective as of the thirtieth (30th) day after
Landlord’s initial notice.  Upon Tenant’s
peaceable vacation and abandonment of the demised premises pursuant to this
Section, landlord will pay to Tenant a sum equal to one monthly installment of
the Guaranteed Minimum Monthly Rental then payable under this Lease.  If Tenant does relocate within the shopping
center then effective on the date of such relocation this Lease will be amended
by deleting the description of the original demised premises and substituting
for it a description of the relocated space. 
Landlord agrees to reimburse Tenant for its actual, reasonable moving
costs to such other space within the shopping center.

38.           COST OF LIVING
ADJUSTMENT.  Upon the first anniversary
date of commencement of the term of this lease, the Guaranteed Minimum Monthly
Rental shall be changed to an amount that bears the same relationship to the
Guaranteed Minimum Monthly Rental in effect immediately preceding such
adjustment which the consumer price index for the month in which said
adjustment occurs bears to the index for the month one year(s) preceding the
month in which such adjustment occurs. 
However, in no event shall the rent be reduced

 13
 

 

below that Guaranteed Minimum Monthly Rental in effect
immediately preceding such adjustment. 
The consumer price index to be used is the Consumer Price Index — All
Items, for the United States, published monthly by the United States
Department of labor, in which 1967 equals 100. 
If said Consumer Price Index is no longer published at the adjustment
date, it shall be constructed by conversion tables included in such new
index.  Annual CPI
adjustment to be not less than 3%, nor greater than 6%, each year.

39.           SURRENDER OF PREMISES.  At the expiration of the tenancy hereby
created, Tenant shall surrender the leased premises in the same condition as
the leased premises were in upon delivery of possession thereto under this
lease, in addition to any alterations or additions which Landlord elects to
keep pursuant to Paragraph 10, reasonable wear and tear excepted, and shall
surrender all keys for the leased premises to Landlord at the place then fixed
for the payment of rent and shall inform Landlord of all combinations on locks,
safes and vaults, if any, in the leased premises.  No act or conduct of Landlord, except a
written acknowledgement of acceptance of surrender signed by Landlord, shall be
deemed to be or constitute an acceptance of the surrender of the leased
premises by Tenant prior to the expiration of the term of this lease.

If prior to the termination of this lease, or within 15 days
thereafter, Landlord elects, by written notice to Tenant, Tenant shall promptly
remove the additions, improvements, fixtures, trade fixtures and installations
which were placed in the leased premises by Tenant and which are designated in
said notice, and shall repair any damage occasioned by such removal; and in
default thereof Landlord may effect said removals and repairs at Tenant’s expense.  The covenants of Tenant contained herein
shall survive the expiration or termination of the lease term.

40.           PREMATURE SURRENDER
OF PREMISES.  If tenant, prior to the
expiration of the term of this set forth herein, prematurely vacates the
premises in breach of the Lease Agreement, without the written consent of
Landlord, in addition to all other damages and remedies set forth in this Lease
Agreement, the Tenant will be responsible for consequential losses allowed by
Code of Civil Procedures § 1951.2(4). 
These losses will include, but are not limited to, all necessary
expenses to relocate any existing tenant from another location to occupy the
subject premises, any expenses necessary to prepare the subject premises for a
new tenant, any expenses required to procure a new tenant including, but not
limited to lease concessions, tenant improvements, all repairs necessary to
make the subject premises re-leasable and all other expenses arising from
Tenant’s premature surrender of the premises. 
Tenant agrees that Landlord shall have exclusive discretion to make
commercially reasonable decisions in order to mitigate the losses arising from
the premature surrender of the subject premises.

41.           CONDEMNATION.  In the event of a condemnation or a transfer
in lieu thereof twenty (20%) percent or more of the demised premises is taken,
or in the event as a result of such taking or transfer in lieu thereof Landlord
is unable to provide the parking required by Article 8 hereof, landlord or
Tenant may, upon written notice given within thirty (30) days after such taking
or transfer in lieu thereof, terminate this lease.  Tenant shall not be entitled to share in any
portion of the award and Tenant hereby expressly waives any right or claim to
any part thereof.  Tenant shall, however,
have the right to claim and recover, only from the condemning authority (but
not from the Landlord), any amounts necessary to reimburse Tenant for the cost
of removing stock and fixtures.

 14
 

 

42.           NO ORAL
AGREEMENTS.  This lease covers in full
each and every agreement of every kind or nature whatsoever between the parties
hereto concerning this lease, and all preliminary negotiations and agreements
of whatsoever kind or nature are merged herein, and there are no oral
agreements or implied covenants.

43.           CONFIDENTIALITY:  In consideration of the mutual promises
herein contained, Landlord and Tenant agree not to communicate or disclose to
any other person, entity, or organization, orally or in writing, direct or
implied, the provisions contained in the Lease relating to the rental
rate.  Tenant understands that this is a
material inducement to Landlord’s execution of the Lease.  If Tenant breaches this confidentiality
provision, then the base rent shall be increased retroactively to equal the
highest lease rate charged by Landlord to any other Tenant on the premises,
calculated as of the date of this lease.

44.           If not in default
under the terms of this lease, Landlord grants Tenant a five (5) year option at
the then market rents and terms, but not less than the previous rate.

IN WITNESS WHEREOF, the parties have duly executed this lease together
with the herein referred to Exhibits which are attached hereto, on the day and
year first above written. 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  Le Baron Investments

  	
   

  	
  Southern Textile Recycling,
  Inc.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Carl
  C. Jones, President            

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PERSONALLY GUARANTEED
  BY: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Carl
  C. Jones                      51%

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Eddie
  R. Fischer                 49%

  

 

 15EXHIBIT 10.17

LEASE AGREEMENT

THIS LEASE
AGREEMENT is made this     day of August 2005, between ProLogis
Development Services Incorporated (“Landlord”), and the Tenant named below.

	
  Tenant:

  	
   

  	
  Liquidity Services, Inc.

  
	
   

  	
   

  	
   

  
	
  Tenant’s Representative,

  	
   

  	
  Brian Johnson

  
	
  Address, and Telephone:

  	
   

  	
  2131 K Street NW, 4th Floor

  
	
   

  	
   

  	
  Washington, DC 20037

  
	
   

  	
   

  	
  (202) 467-6868 ext. 262

  
	
   

  	
   

  	
   

  
	
  Premises:

  	
   

  	
  That portion of the Building, containing
  approximately 48,507 rentable square feet, as determined by Landlord, as
  shown on Exhibit A.

  
	
   

  	
   

  	
   

  
	
  Project:

  	
   

  	
  Cranbury Business Park

  
	
   

  	
   

  	
   

  
	
  Building:

  	
   

  	
  Building Five

  
	
   

  	
   

  	
  5 Santa Fe Way

  
	
   

  	
   

  	
  Suite 2

  
	
   

  	
   

  	
  Cranbury, NJ 08512

  
	
   

  	
   

  	
   

  
	
  Tenant’s Proportionate Share of Project:

  	
   

  	
  2.35%

  
	
   

  	
   

  	
   

  
	
  Tenant’s Proportionate Share of Building:

  	
   

  	
  36.09%

  
	
   

  	
   

  	
   

  
	
  Lease Term:

  	
   

  	
  Beginning on the Commencement Date and ending on the
  last day of the 49 full calendar month thereafter.

  
	
   

  	
   

  	
   

  
	
  Lease Commencement Date:

  	
   

  	
  October 1, 2005

  
	
   

  	
   

  	
   

  
	
  Rent Commencement Date:

  	
   

  	
  November 1, 2005

  
	
   

  	
   

  	
   

  
	
  Initial Monthly Base Rent:

  	
   

  	
  See Addendum 1

  
	
   

  	
   

  	
   

  
	
  Initial Estimated Monthly Operating Expense
  Payments: (estimates only and subject to adjustment to
  actual costs and expenses according to the provisions of this Lease)

  	
   

  	
  1. Utilities:                                

                                                     

  2. Common Area
  Charges:     $1,374.37

                                                     

  3. Taxes:                                   $2,991.27

                                                     

  4. Insurance:                            $202.11

                                                     

  5. Others:   Mgmt.
  Fee          $687.18

   

  
	
   

  	
   

  	
   

  
	
  Initial Estimated Monthly Operating Expense
  Payments:

  	
   

  	
  $5,254.93

  
	
   

  	
   

  	
   

  
	
  Initial Monthly Base Rent and Operating Expense
  Payments:

  	
   

  	
  $24,051.39

  
	
   

  	
   

  	
   

  
	
  Security Deposit:

  	
   

  	
  $50,000.00

  
	
   

  	
   

  	
   

  
	
  Broker:

  	
   

  	
  Sheldon Gross Realty, Inc.

  
	
   

  	
   

  	
   

  
	
  Addenda:

  	
   

  	
  1.   Base Rent Adjustments   2.   Construction
  (Turnkey)   3.   One Renewal Option at Market   4.   Right of
  First Offer

  
	
   

  	
   

  	
   

  
	
  Exhibits:

  	
   

  	
  A. Site Plan B. Standard Customer Workletter C.
  Office Layout

  

 

1.             Granting
Clause.  In consideration of
the obligation of Tenant to pay rent as herein provided and in consideration of
the other terms, covenants, and conditions hereof, Landlord leases to Tenant,
and Tenant takes from Landlord, the Premises, to have and to hold for the Lease
Term, subject to the terms, covenants and conditions of this Lease.

2.             Acceptance
of Premises.  Tenant shall
accept the Premises in its condition as of the Commencement Date, subject to
all applicable laws, ordinances, regulations, covenants and restrictions.  Landlord has made no representation or warranty
as to the suitability of the Premises for the conduct of Tenant’s business, and

 1
 

Tenant waives any implied warranty that the Premises
are suitable for Tenant’s intended purposes. 
Except as provided in Paragraph 10, in no event shall Landlord have any
obligation for any defects in the Premises or any limitation on its use.  The taking of possession of the Premises
shall be conclusive evidence that Tenant accepts the Premises and that the
Premises were in good condition at the time possession was taken except for
items that are Landlord’s responsibility under Paragraph 10 and any punchlist
items agreed to in writing by Landlord and Tenant.

3.             Use.  The Premises shall be used only for the
purpose of receiving, storing, shipping and selling (but limited to wholesale
sales and Tenant’s online sales) products, materials and merchandise made
and/or distributed by Tenant and for such other lawful purposes as may be
incidental thereto; provided, however, with Landlord’s prior written consent,
Tenant may also use the Premises for light manufacturing.  Tenant shall not conduct or give notice of
any auction, liquidation, or going out of business sale on the Premises, except
for Tenant’s online sales.  Tenant will
use the Premises in a careful, safe and proper manner and will not commit
waste, overload the floor or structure of the Premises or subject the Premises
to use that would damage the Premises.  
Tenant shall not permit any objectionable or unpleasant odors, smoke,
dust, gas, noise, or vibrations to emanate from the Premises, or take any other
action that would constitute a nuisance or would disturb, unreasonably
interfere with, or endanger Landlord or any tenants of the Project.  Outside storage, including without limitation,
storage of trucks and other vehicles, is prohibited without Landlord’s prior
written consent. Tenant, at its sole expense, shall use and occupy the Premises
in compliance with all laws, including, without limitation, the Americans With
Disabilities Act, orders, judgments, ordinances, regulations, codes,
directives, permits, licenses, covenants and restrictions now or hereafter
applicable to the Premises (collectively, “Legal Requirements”).  The Premises shall not be used as a place of
public accommodation under the Americans With Disabilities Act or similar state
statutes or local ordinances or any regulations promulgated thereunder, all as
may be amended from time to time.  Tenant
shall, at its expense, make any alterations or modifications, within or without
the Premises, that are required by Legal Requirements related to Tenant’s use
or occupation of the Premises.  Tenant
will not use or permit the Premises to be used for any purpose or in any manner
that would void Tenant’s or Landlord’s insurance, increase the insurance risk,
or cause the disallowance of any sprinkler credits.  If any increase in the cost of any insurance
on the Premises or the Project is caused by Tenant’s use or occupation of the
Premises, or because Tenant vacates the Premises, then Tenant shall pay the
amount of such increase to Landlord.  Any
occupation of the Premises by Tenant prior to the Commencement Date shall be
subject to all obligations of Tenant under this Lease.

4.             Base Rent.  Tenant shall pay Base Rent in the amount set
forth above.  The first month’s Base
Rent, the Security Deposit, and the first monthly installment of estimated
Operating Expenses (as hereafter defined) shall be due and payable on the date
hereof, and Tenant promises to pay to Landlord in advance, without demand,
deduction or set-off, monthly installments of Base Rent on or before the first
day of each calendar month succeeding the Commencement Date.  Payments of Base Rent for any fractional
calendar month shall be prorated.  All
payments required to be made by Tenant to Landlord hereunder (or to such other
party as Landlord may from time to time specify in writing) shall be made by
Electronic Fund Transfer (“EFT”) of immediately available federal funds before
11:00 a.m., Eastern Time, at such place, within the continental United States,
as Landlord may from time to time designate to Tenant in writing.  The obligation of Tenant to pay Base Rent and
other sums to Landlord and the obligations of Landlord under this Lease are
independent obligations.  Tenant shall
have no right at any time to abate, reduce, or set-off any rent due hereunder
except as may be expressly provided in this Lease.  If Tenant is delinquent in any monthly
installment of Base Rent or of estimated Operating Expenses for more than 5 days,
Tenant shall pay to Landlord on demand a late charge equal to 8 percent of such
delinquent sum.  The provision for such
late charge shall be in addition to all of Landlord’s other rights and remedies
hereunder or at law and shall not be construed as a penalty.

5.             Security
Deposit.  The Security Deposit
shall be held by Landlord as security for the performance of Tenant’s
obligations under this Lease.  The
Security Deposit is not an advance rental deposit or a measure of Landlord’s
damages in case of Tenant’s default. 
Upon each occurrence of an Event of Default (hereinafter defined),
Landlord may use all or part of the Security Deposit to pay delinquent payments
due under this Lease, and the cost of any damage, injury, expense or liability
caused by such Event of Default, without prejudice to any other remedy provided
herein or provided by law.  Tenant shall
pay Landlord on demand the amount that will restore the Security Deposit to its
original amount.  Landlord’s obligation
respecting the Security Deposit is that of a debtor, not a trustee; no interest
shall accrue thereon.  The Security
Deposit shall be the property of Landlord, but shall be paid to Tenant when
Tenant’s obligations under this Lease have been completely fulfilled.  Landlord shall be released from any
obligation with respect to the Security Deposit upon transfer of this Lease and
the Premises to a person or entity assuming Landlord’s obligations under this
Paragraph 5.

6.             Operating
Expense Payments.  During each
month of the Lease Term, on the same date that Base Rent is due, Tenant shall
pay Landlord an amount equal to 1/12 of the annual cost, as estimated by
Landlord from time to time, of Tenant’s Proportionate Share (hereinafter
defined) of Operating Expenses for the Project. 
Payments thereof for any fractional calendar month shall be
prorated.  The term “Operating Expenses”
means all costs and expenses incurred by Landlord with respect to the
ownership, maintenance, and operation of the Project including, but not limited
to costs of: Taxes (hereinafter defined) and fees payable to tax consultants
and attorneys for consultation and contesting taxes; insurance; utilities;
maintenance, repair and replacement of all portions of the Project, including
without limitation, paving and parking areas, roads, roofs (including the roof membrane),
alleys, and driveways, mowing, landscaping, snow removal, exterior painting,
utility lines, heating, ventilation and air conditioning systems, lighting,
electrical systems and other mechanical and building systems; amounts paid to
contractors and subcontractors for work or services performed in connection
with any of the foregoing; charges or assessments of any association to which
the Project is subject; property management fees payable to a property manager,
including any affiliate of Landlord, or if there is no property manager, an
administration fee of 15 percent of Operating Expenses payable to Landlord;
security services, if any; trash collection, sweeping and removal; and
additions or alterations made by Landlord to the Project or the Building in
order to comply with Legal Requirements

 2
 

(other than those expressly required herein to be made
by Tenant) or that are appropriate to the continued operation of the Project or
the Building as a bulk warehouse facility in the market area, provided that the
cost of additions or alterations that are required to be capitalized for
federal income tax purposes shall be amortized on a straight line basis over a
period equal to the lesser of the useful life thereof for federal income tax
purposes or 10 years.  Operating Expenses
do not include costs, expenses, depreciation or amortization for capital
repairs and capital replacements required to be made by Landlord under
Paragraph 10 of this Lease, debt service under mortgages or ground rent under
ground leases, costs of restoration to the extent of net insurance proceeds
received by Landlord with respect thereto, leasing commissions, or the costs of
renovating space for tenants.

If Tenant’s total payments of Operating Expenses for any year
are less than Tenant’s Proportionate Share of actual Operating Expenses for
such year, then Tenant shall pay the difference to Landlord within 30 days
after demand, and if more, then Landlord shall retain such excess and credit it
against Tenant’s next payments.  For
purposes of calculating Tenant’s Proportionate Share of Operating Expenses, a
year shall mean a calendar year except the first year, which shall begin on the
Commencement Date, and the last year, which shall end on the expiration of this
Lease.  With respect to Operating
Expenses which Landlord allocates to the entire Project, Tenant’s “Proportionate
Share” shall be the percentage set forth on the first page of this Lease as
Tenant’s Proportionate Share of the Project as reasonably adjusted by Landlord
in the future for changes in the physical size of the Premises or the Project;
and, with respect to Operating Expenses which Landlord allocates only to the
Building, Tenant’s “Proportionate Share” shall be the percentage set forth on
the first page of this Lease as Tenant’s Proportionate Share of the Building as
reasonably adjusted by Landlord in the future for changes in the physical size
of the Premises or the Building. 
Landlord may equitably increase Tenant’s Proportionate Share for any
item of expense or cost reimbursable by Tenant that relates to a repair,
replacement, or service that benefits only the Premises or only a portion of
the Project or Building that includes the Premises or that varies with
occupancy or use.  The estimated
Operating Expenses for the Premises set forth on the first page of this Lease
are only estimates, and Landlord makes no guaranty or warranty that such
estimates will be accurate.

7.             Utilities.  Tenant shall pay for all water, gas,
electricity, heat, light, power, telephone, sewer, sprinkler services, refuse
and trash collection, and other utilities and services used on the Premises,
all maintenance charges for utilities, and any storm sewer charges or other
similar charges for utilities imposed by any governmental entity or utility provider,
together with any taxes, penalties, surcharges or the like pertaining to Tenant’s
use of the Premises.  Landlord may cause
at Tenant’s expense any utilities to be separately metered or charged directly
to Tenant by the provider.  Tenant shall
pay its share of all charges for jointly metered utilities based upon
consumption, as reasonably determined by Landlord.  No interruption or failure of utilities shall
result in the termination of this Lease or the abatement of rent. Tenant agrees
to limit use of water and sewer for normal restroom use.

8.             Taxes.  Landlord shall pay all taxes, assessments and
governmental charges (collectively referred to as “Taxes”) that accrue against
the Project during the Lease Term, which shall be included as part of the Operating
Expenses charged to Tenant.  Landlord may
contest by appropriate legal proceedings the amount, validity, or application
of any Taxes or liens thereof.  All
capital levies or other taxes assessed or imposed on Landlord upon the rents
payable to Landlord under this Lease and any franchise tax, any excise,
transaction, sales or privilege tax, assessment, levy or charge measured by or
based, in whole or in part, upon such rents from the Premises and/or the
Project or any portion thereof shall be paid by Tenant to Landlord monthly in
estimated installments or upon demand, at the option of Landlord, as additional
rent; provided, however, in no event shall Tenant be liable for any net income
taxes imposed on Landlord unless such net income taxes are in substitution for
any Taxes payable hereunder.  If any such
tax or excise is levied or assessed directly against Tenant, then Tenant shall
be responsible for and shall pay the same at such times and in such manner as
the taxing authority shall require. 
Tenant shall be liable for all taxes levied or assessed against any
personal property or fixtures placed in the Premises, whether levied or
assessed against Landlord or Tenant.

9.             Insurance.  Landlord shall maintain all risk property
insurance covering the full replacement cost of the Building.  Landlord may, but is not obligated to,
maintain such other insurance and additional coverages as it may deem
necessary, including, but not limited to, commercial liability insurance and
rent loss insurance.  All such insurance
shall be included as part of the Operating Expenses charged to Tenant.  The Project or Building may be included in a
blanket policy (in which case the cost of such insurance allocable to the
Project or Building will be determined by Landlord based upon the insurer’s
cost calculations).  Tenant shall also
reimburse Landlord for any increased premiums or additional insurance which
Landlord reasonably deems necessary as a result of Tenant’s use of the
Premises.

Tenant,
at its expense, shall maintain during the Lease Term: all risk property
insurance covering the full replacement cost of all property and improvements
installed or placed in the Premises by Tenant at Tenant’s expense; worker’s
compensation insurance with no less than the minimum limits required by law;
employer’s liability insurance with such limits as required by law; and
commercial liability insurance, with a minimum limit of $1,000,000 per
occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 (together with such
additional umbrella coverage as Landlord may reasonably require) for property
damage, personal injuries, or deaths of persons occurring in or about the
Premises.  Landlord may from time to time
require reasonable increases in any such limits.  The commercial liability policies shall name
Landlord as an additional insured, insure on an occurrence and not a
claims-made basis, be issued by insurance companies which are reasonably
acceptable to Landlord, not be cancelable unless 30 days’ prior written notice
shall have been given to Landlord, contain a hostile fire endorsement and a
contractual liability endorsement and provide primary coverage to Landlord (any
policy issued to Landlord providing duplicate or similar coverage shall be
deemed excess over Tenant’s policies). 
Such policies or certificates thereof shall be delivered to Landlord by
Tenant upon commencement of the Lease Term and upon each renewal of said
insurance.

 3
 

The
all risk property insurance obtained by Landlord and Tenant shall include a
waiver of subrogation by the insurers and all rights based upon an assignment
from its insured, against Landlord or Tenant, their officers, directors,
employees, managers, agents, invitees and contractors, in connection with any
loss or damage thereby insured against. 
Neither party nor its officers, directors, employees, managers, agents,
invitees or contractors shall be liable to the other for loss or damage caused
by any risk coverable by all risk property insurance, and each party waives any
claims against the other party, and its officers, directors, employees,
managers, agents, invitees and contractors for such loss or damage.  The failure of a party to insure its property
shall not void this waiver.  Landlord and
its agents, employees and contractors shall not be liable for, and Tenant
hereby waives all claims against such parties for, business interruption and
losses occasioned thereby sustained by Tenant or any person claiming through
Tenant resulting from any accident or occurrence in or upon the Premises or the
Project from any cause whatsoever, including without limitation, damage caused
in whole or in part, directly or indirectly, by the negligence of Landlord or
its agents, employees or contractors.

10.           Landlord’s Repairs.  Landlord shall maintain, at its expense, the
structural soundness of the roof, foundation, and exterior walls of the
Building in good repair, reasonable wear and tear and uninsured losses and
damages caused by Tenant, its agents and contractors excluded.  The term “walls” as used in this Paragraph 10
shall not include windows, glass or plate glass, doors or overhead doors,
special store fronts, dock bumpers, dock plates or levelers, or office
entries.  Tenant shall promptly give Landlord
written notice of any repair required by Landlord pursuant to this
Paragraph 10, after which Landlord shall have a reasonable opportunity to
repair.

11.           Tenant’s Repairs.  Landlord, at Tenant’s expense as provided in
Paragraph 6, shall maintain in good repair and condition the parking areas and
other common areas of the Building, including, but not limited to driveways,
alleys, landscape and grounds surrounding the Premises.  Subject to Landlord’s obligation in Paragraph
10 and subject to Paragraphs 9 and 15, Tenant, at its expense, shall
repair,  replace and maintain in good
condition all portions of the Premises and all areas, improvements and systems
exclusively serving the Premises including, without limitation, dock and
loading areas, truck doors, plumbing, water and sewer lines up to points of
common connection, fire sprinklers and fire protection systems, entries, doors,
ceilings, windows, interior walls, and the interior side of demising walls, and
heating, ventilation and air conditioning systems.  Such repair and replacements include capital
expenditures and repairs whose benefit may extend beyond the Term.  Heating, ventilation and air conditioning
systems and other mechanical and building systems serving the Premises shall be
maintained at Tenant’s expense pursuant to maintenance service contracts
entered into by Tenant or, at Landlord’s election, by Landlord.  The scope of services and contractors under
such maintenance contracts shall be reasonably approved by Landlord.  At Landlord’s request, Tenant shall enter
into a joint maintenance agreement with any railroad that services the
Premises.  If Tenant fails to perform any
repair or replacement for which it is responsible, Landlord may perform such
work and be reimbursed by Tenant within 10 days after demand therefor.  Subject to Paragraphs 9 and 15, Tenant shall
bear the full cost of any repair or replacement to any part of the Building or
Project that results from damage caused by Tenant, its agents, contractors, or
invitees and any repair that benefits only the Premises.

12.           Tenant-Made Alterations
and Trade Fixtures.  Any
alterations, additions, or improvements made by or on behalf of Tenant to the
Premises (“Tenant-Made Alterations”) shall be subject to Landlord’s prior
written consent.  Tenant shall cause, at
its expense, all Tenant-Made Alterations to comply with insurance requirements
and with Legal Requirements and shall construct at its expense any alteration
or modification required by Legal Requirements as a result of any Tenant-Made Alterations.  All Tenant-Made Alterations shall be
constructed in a good and workmanlike manner by contractors reasonably
acceptable to Landlord and only good grades of materials shall be used.   All plans and specifications for any
Tenant-Made Alterations shall be submitted to Landlord for its approval.  Landlord may monitor construction of the
Tenant-Made Alterations.  Tenant shall
reimburse Landlord for its costs in reviewing plans and specifications and in
monitoring construction.  Landlord’s
right to review plans and specifications and to monitor construction shall be
solely for its own benefit, and Landlord shall have no duty to see that such
plans and specifications or construction comply with applicable laws, codes,
rules and regulations.  Tenant shall
provide Landlord with the identities and mailing addresses of all persons
performing work or supplying materials, prior to beginning such construction,
and Landlord may post on and about the Premises notices of non-responsibility
pursuant to applicable law.  Tenant shall
furnish security or make other arrangements satisfactory to Landlord to assure
payment for the completion of all work free and clear of liens and shall
provide certificates of insurance for worker’s compensation and other coverage
in amounts and from an insurance company satisfactory to Landlord protecting
Landlord against liability for personal injury or property damage during
construction.  Upon completion of any
Tenant-Made Alterations, Tenant shall deliver to Landlord sworn statements setting
forth the names of all contractors and subcontractors who did work on the
Tenant-Made Alterations and final lien waivers from all such contractors and
subcontractors.  Upon surrender of the
Premises, all Tenant-Made Alterations and any leasehold improvements
constructed by Landlord or Tenant shall remain on the Premises as Landlord’s
property, except to the extent Landlord requires removal at Tenant’s expense of
any such items or Landlord and Tenant have otherwise agreed in writing in
connection with Landlord’s consent to any Tenant-Made Alterations.  Tenant shall repair any damage caused by such
removal.

Tenant,
at its own cost and expense and without Landlord’s prior approval, may erect
such shelves, bins, machinery and trade fixtures (collectively “Trade Fixtures”)
in the ordinary course of its business provided that such items do not alter
the basic character of the Premises, do not overload or damage the Premises,
and may be removed without injury to the Premises, and the construction,
erection, and installation thereof complies with all Legal Requirements and
with Landlord’s requirements set forth above. 
Tenant shall remove its Trade Fixtures and shall repair any damage
caused by such removal.

13.           Signs.  Tenant shall not make any changes to the
exterior of the Premises, install any exterior lights, decorations, balloons,
flags, pennants, banners, or painting, or erect or install any signs, windows
or door

 4
 

lettering, placards, decorations, or advertising media
of any type which can be viewed from the exterior of the Premises, without
Landlord’s prior written consent.  Upon
surrender or vacation of the Premises, Tenant shall have removed all signs and
repair, paint, and/or replace the building facia surface to which its signs are
attached.  Tenant shall obtain all
applicable governmental permits and approvals for sign and exterior
treatments.  All signs, decorations,
advertising media, blinds, draperies and other window treatment or bars or
other security installations visible from outside the Premises shall be subject
to Landlord’s approval and conform in all respects to Landlord’s requirements.

14.           Parking.  Tenant shall be entitled to park in common
with other tenants of the Project in those areas designated for nonreserved
parking.  Landlord may allocate parking
spaces among Tenant and other tenants in the Project if Landlord determines
that such parking facilities are becoming crowded.  Landlord shall not be responsible for
enforcing Tenant’s parking rights against any third parties.

15.           Restoration.  If at any time during the Lease Term the
Premises are damaged by a fire or other casualty, Landlord shall notify Tenant
within 60 days after such damage as to the amount of time Landlord reasonably
estimates it will take to restore the Premises. 
If the restoration time is estimated to exceed 6 months, either Landlord
or Tenant may elect to terminate this Lease upon notice to the other party
given no later than 30 days after Landlord’s notice.  If neither party elects to terminate this
Lease or if Landlord estimates that restoration will take 6 months or less,
then, subject to receipt of sufficient insurance proceeds, Landlord shall
promptly restore the Premises excluding the improvements installed by Tenant or
by Landlord and paid by Tenant, subject to delays arising from the collection
of insurance proceeds or from Force Majeure events.  Tenant at Tenant’s expense shall promptly
perform, subject to delays arising from the collection of insurance proceeds,
or from Force Majeure events, all repairs or restoration not required to be
done by Landlord and shall promptly re-enter the Premises and commence doing
business in accordance with this Lease. 
Notwithstanding the foregoing, either party may terminate this Lease if
the Premises are damaged during the last year of the Lease Term and Landlord
reasonably estimates that it will take more than one month to repair such
damage.  Base Rent and Operating Expenses
shall be abated for the period of repair and restoration in the proportion
which the area of the Premises, if any, which is not usable by Tenant bears to
the total area of the Premises.  Such
abatement shall be the sole remedy of Tenant, and except as provided herein,
Tenant waives any right to terminate the Lease by reason of damage or casualty
loss.

16.           Condemnation.  If any part of the Premises or the Project
should be taken for any public or quasi-public use under governmental
law, ordinance, or regulation, or by right of eminent domain, or by private
purchase in lieu thereof (a “Taking” or “Taken”), and the Taking would prevent
or materially interfere with Tenant’s use of the Premises or in Landlord’s
judgment would materially interfere with or impair its ownership or operation
of the Project, then upon written notice by Landlord this Lease shall terminate
and Base Rent shall be apportioned as of said date.  If part of the Premises shall be Taken, and
this Lease is not terminated as provided above, the Base Rent payable hereunder
during the unexpired Lease Term shall be reduced to such extent as may be fair
and reasonable under the circumstances. 
In the event of any such Taking, Landlord shall be entitled to receive
the entire price or award from any such Taking without any payment to Tenant,
and Tenant hereby assigns to Landlord Tenant’s interest, if any, in such
award.  Tenant shall have the right, to
the extent that same shall not diminish Landlord’s award, to make a separate
claim against the condemning authority (but not Landlord) for such compensation
as may be separately awarded or recoverable by Tenant for moving expenses and
damage to Tenant’s Trade Fixtures, if a separate award for such items is made
to Tenant.

17.           Assignment and Subletting.  Without Landlord’s prior written consent,
Tenant shall not assign this Lease or sublease the Premises or any part thereof
or mortgage, pledge, or hypothecate its leasehold interest or grant any
concession or license within the Premises and any attempt to do any of the
foregoing shall be void and of no effect. 
For purposes of this paragraph, a transfer of the ownership interests
controlling Tenant shall be deemed an assignment of this Lease unless such
ownership interests are publicly traded. 
Notwithstanding the above, Tenant may assign or sublet the Premises, or
any part thereof, to any entity controlling Tenant, controlled by Tenant or
under common control with Tenant (a “Tenant Affiliate”), without the prior
written consent of Landlord.  Tenant
shall reimburse Landlord for all of Landlord’s reasonable out-of-pocket
expenses in connection with any assignment or sublease.  Upon Landlord’s receipt of Tenant’s written
notice of a desire to assign or sublet the Premises, or any part thereof (other
than to a Tenant Affiliate), Landlord may, by giving written notice to Tenant
within 30 days after receipt of Tenant’s notice, terminate this Lease with
respect to the space described in Tenant’s notice, as of the date specified in
Tenant’s notice for the commencement of the proposed assignment or sublease.

Notwithstanding
any assignment or subletting, Tenant and any guarantor or surety of Tenant’s
obligations under this Lease shall at all times remain fully responsible and
liable for the payment of the rent and for compliance with all of Tenant’s
other obligations under this Lease (regardless of whether Landlord’s approval
has been obtained for any such assignments or sublettings).  In the event that the rent due and payable by
a sublessee or assignee (or a combination of the rental payable under such
sublease or assignment plus any bonus or other consideration therefor or
incident thereto) exceeds the rental payable under this Lease, then Tenant
shall be bound and obligated to pay Landlord as additional rent hereunder all
such excess rental and other excess consideration within 10 days following
receipt thereof by Tenant.

If
this Lease be assigned or if the Premises be subleased (whether in whole or in
part) or in the event of the mortgage, pledge, or hypothecation of Tenant’s
leasehold interest or grant of any concession or license within the Premises or
if the Premises be occupied in whole or in part by anyone other than Tenant,
then upon a default by Tenant hereunder Landlord may collect rent from the
assignee, sublessee, mortgagee, pledgee, party to whom the leasehold interest
was hypothecated, concessionee or licensee or other occupant and, except to the
extent set forth in the preceding paragraph, apply the amount collected to the
next rent payable hereunder; and all such rentals collected by Tenant shall be
held in trust for Landlord and immediately forwarded to Landlord.  No such

 5
 

transaction or collection of rent or application
thereof by Landlord, however, shall be deemed a waiver of these provisions or a
release of Tenant from the further performance by Tenant of its covenants,
duties, or obligations hereunder.

18.           Indemnification.  Except for the
negligence of Landlord, its agents, employees or contractors, and to the extent
permitted by law, Tenant agrees to indemnify, defend and hold harmless
Landlord, and Landlord’s agents, employees and contractors, from and against
any and all losses, liabilities, damages, costs and expenses (including
attorneys’ fees) resulting from claims by third parties for injuries to any
person and damage to or theft or misappropriation or loss of property occurring
in or about the Project and arising from the use and occupancy of the Premises
or from any activity, work, or thing done, permitted or suffered by Tenant in
or about the Premises or due to any other act or omission of Tenant, its
subtenants, assignees, invitees, employees, contractors and agents.  The furnishing of insurance required
hereunder shall not be deemed to limit Tenant’s obligations under this
Paragraph 18.

19.           Inspection and Access.  Landlord and its agents, representatives, and
contractors may enter the Premises at any reasonable time to inspect the
Premises and to make such repairs as may be required or permitted pursuant to
this Lease and for any other business purpose. 
Landlord and Landlord’s representatives may enter the Premises during
business hours for the purpose of showing the Premises to prospective
purchasers and, during the last year of the Lease Term, to prospective
tenants.  Landlord may erect a suitable
sign on the Premises stating the Premises are available to let or that the
Project is available for sale.  Landlord
may grant easements, make public dedications, designate common areas and create
restrictions on or about the Premises, provided that no such easement,
dedication, designation or restriction materially interferes with Tenant’s use
or occupancy of the Premises.  At
Landlord’s request, Tenant shall execute such instruments as may be necessary
for such easements, dedications or restrictions.

20.           Quiet Enjoyment.  If Tenant shall perform all of the covenants
and agreements herein required to be performed by Tenant, Tenant shall, subject
to the terms of this Lease, at all times during the Lease Term, have peaceful
and quiet enjoyment of the Premises against any person claiming by, through or
under Landlord.

21.           Surrender.  Upon termination of the Lease Term or earlier
termination of Tenant’s right of possession, Tenant shall surrender the
Premises to Landlord in the same condition as received, broom clean, ordinary
wear and tear and casualty loss and condemnation covered by Paragraphs 15 and
16 excepted.  Any Trade Fixtures,
Tenant-Made Alterations and property not so removed by Tenant as permitted or
required herein shall be deemed abandoned and may be stored, removed, and
disposed of by Landlord at Tenant’s expense, and Tenant waives all claims against
Landlord for any damages resulting from Landlord’s retention and disposition of
such property.  All obligations of Tenant
hereunder not fully performed as of the termination of the Lease Term shall
survive the termination of the Lease Term, including without limitation,
indemnity obligations, payment obligations with respect to Operating Expenses
and obligations concerning the condition and repair of the Premises.

22.           Holding Over.  If Tenant retains possession of the Premises
after the termination of the Lease Term, unless otherwise agreed in writing,
such possession shall be subject to immediate termination by Landlord at any
time, and all of the other terms and provisions of this Lease (excluding any
expansion or renewal option or other similar right or option) shall be
applicable during such holdover period, except that Tenant shall pay Landlord
from time to time, upon demand, as Base Rent for the holdover period, an amount
equal to double the Base Rent in effect on the termination date, computed on a
monthly basis for each month or part thereof during such holding over.  All other payments shall continue under the
terms of this Lease.  In addition, Tenant
shall be liable for all damages incurred by Landlord as a result of such
holding over.  No holding over by Tenant,
whether with or without consent of Landlord, shall operate to extend this Lease
except as otherwise expressly provided, and this Paragraph 22 shall not be
construed as consent for Tenant to retain possession of the Premises.  For purposes
of this Paragraph 22, “possession of the Premises” shall continue until, among
other things, Tenant has delivered all keys to the Premises to Landlord,
Landlord has complete and total dominion and control over the Premises, and
Tenant has completely fulfilled all obligations required of it upon termination
of the Lease as set forth in this Lease, including, without limitation, those
concerning the condition and repair of the Premises.

23.           Events of Default.  Each of the following events shall be an event
of default (“Event of Default”) by Tenant under this Lease:

(i)            Tenant shall fail to pay any
installment of Base Rent or any other payment required herein when due, and
such failure shall continue for a period of 5 days from the date such payment
was due.

(ii)           Tenant or any guarantor or surety of
Tenant’s obligations hereunder shall (A) make a general assignment for the
benefit of creditors; (B) commence any case, proceeding or other action seeking
to have an order for relief entered on its behalf as a debtor or to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or of any substantial part of its property (collectively a “proceeding
for relief”); (C) become the subject of any proceeding for relief which is not
dismissed within 60 days of its filing or entry; or (D) die or suffer a legal
disability (if Tenant, guarantor, or surety is an individual) or be dissolved
or otherwise fail to maintain its legal existence (if Tenant, guarantor or
surety is a corporation, partnership or other entity).

 6
 

(iii)          Any insurance required to be
maintained by Tenant pursuant to this Lease shall be cancelled or terminated or
shall expire or shall be reduced or materially changed, except, in each case,
as permitted in this Lease.

(iv)          Tenant shall not occupy or shall
vacate the Premises or shall fail to continuously operate its business at the
Premises for the permitted use set forth herein, whether or not Tenant is in
monetary or other default under this Lease.

(v)           Tenant shall attempt or there shall
occur any assignment, subleasing or other transfer of Tenant’s interest in or
with respect to this Lease except as otherwise permitted in this Lease.

(vi)          Tenant shall fail to discharge any
lien placed upon the Premises in violation of this Lease within 30 days after
any such lien or encumbrance is filed against the Premises.

(vii)         Tenant shall fail to comply with any
provision of this Lease other than those specifically referred to in this
Paragraph 23, and except as otherwise expressly provided herein, such default
shall continue for more than 30 days after Landlord shall have given Tenant
written notice of such default.

24.           Landlord’s Remedies.  Upon each occurrence of an Event of Default
and so long as such Event of Default shall be continuing, Landlord may at any
time thereafter at its election: terminate this Lease or Tenant’s right of
possession, (but Tenant shall remain liable as hereinafter provided) and/or
pursue any other remedies at law or in equity. 
Upon the termination of this Lease or termination of Tenant’s right of
possession, it shall be lawful for Landlord, without formal demand or notice of
any kind, to re-enter the Premises by summary dispossession proceedings or any
other action or proceeding authorized by law and to remove Tenant and all
persons and property therefrom.  If Landlord
re-enters the Premises, Landlord shall have the right to keep in place and use,
or remove and store, all of the furniture, fixtures and equipment at the
Premises.

If
Landlord terminates this Lease, Landlord may recover from Tenant the sum
of:  all Base Rent and all other amounts
accrued hereunder to the date of such termination; the cost of reletting the
whole or any part of the Premises, including without limitation brokerage fees
and/or leasing commissions incurred by Landlord, and costs of removing and
storing Tenant’s or any other occupant’s property, repairing, altering,
remodeling, or otherwise putting the Premises into condition acceptable to a
new tenant or tenants, and all reasonable expenses incurred by Landlord in
pursuing its remedies, including reasonable attorneys’ fees and court costs;
and the excess of the then present value of the Base Rent and other amounts
payable by Tenant under this Lease as would otherwise have been required to be
paid by Tenant to Landlord during the period following the termination of this
Lease measured from the date of such termination to the expiration date stated
in this Lease, over the present value of any net amounts which Tenant
establishes Landlord can reasonably expect to recover by reletting the Premises
for such period, taking into consideration the availability of acceptable
tenants and other market conditions affecting leasing.  Such present values shall be calculated at a
discount rate equal to the 90-day U.S. Treasury bill rate at the date of such
termination.

If
Landlord terminates Tenant’s right of possession (but not this Lease), Landlord
may, but shall be under no obligation to, relet the Premises for the account of
Tenant for such rent and upon such terms as shall be satisfactory to Landlord
without thereby releasing Tenant from any liability hereunder and without
demand or notice of any kind to Tenant. 
For the purpose of such reletting Landlord is authorized to make any
repairs, changes, alterations, or additions in or to the Premises as Landlord
deems reasonably necessary or desirable. 
If the Premises are not relet, then Tenant shall pay to Landlord as
damages a sum equal to the amount of the rental reserved in this Lease for such
period or periods, plus the cost of recovering possession of the Premises
(including attorneys’ fees and costs of suit), the unpaid Base Rent and other
amounts accrued hereunder at the time of repossession, and the costs incurred
in any attempt by Landlord to relet the Premises.  If the Premises are relet and a sufficient
sum shall not be realized from such reletting [after first deducting therefrom,
for retention by Landlord, the unpaid Base Rent and other amounts accrued
hereunder at the time of reletting, the cost of recovering possession
(including attorneys’ fees and costs of suit), all of the costs and expense of
repairs, changes, alterations, and additions, the expense of such reletting
(including without limitation brokerage fees and leasing commissions) and the
cost of collection of the rent accruing therefrom] to satisfy the rent provided
for in this Lease to be paid, then Tenant shall immediately satisfy and pay any
such deficiency.  Any such payments due
Landlord shall be made upon demand therefor from time to time and Tenant agrees
that Landlord may file suit to recover any sums falling due from time to
time.  Notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect in writing to
terminate this Lease for such previous breach.

Exercise
by Landlord of any one or more remedies hereunder granted or otherwise available
shall not be deemed to be an acceptance of surrender of the Premises and/or a
termination of this Lease by Landlord, whether by agreement or by operation of
law, it being understood that such surrender and/or termination can be effected
only by the written agreement of Landlord and Tenant.  Any law, usage, or custom to the contrary
notwithstanding, Landlord shall have the right at all times to enforce the
provisions of this Lease in strict accordance with the terms hereof; and the
failure of Landlord at any time to enforce its rights under this Lease strictly
in accordance with same shall not be construed as having created a custom in
any way or manner contrary to the specific terms, provisions, and covenants of
this Lease or as having modified the same. 
Tenant and Landlord further agree that forbearance or waiver by Landlord
to enforce its rights pursuant to this Lease or at law or in equity, shall not
be a waiver of Landlord’s right to enforce one or more of its rights in
connection with any subsequent default. 
A receipt by Landlord of rent or other payment with knowledge of the
breach of any covenant hereof shall not be deemed a waiver of such breach, and
no waiver by Landlord of any provision of this Lease shall be deemed to have
been made unless expressed in writing and signed by Landlord.  To the greatest extent permitted by law,
Tenant

 7
 

waives the service of notice of Landlord’s intention
to re-enter as provided for in any statute, or to institute legal proceedings
to that end, and also waives all right of redemption in case Tenant shall be
dispossessed by a judgment or by warrant of any court or judge.  The terms “enter,” “re-enter,” “entry” or “re-entry,”
as used in this Lease, are not restricted to their technical legal
meanings.  Any reletting of the Premises
shall be on such terms and conditions as Landlord in its sole discretion may
determine (including without limitation a term different than the remaining
Lease Term, rental concessions, alterations and repair of the Premises, lease
of less than the entire Premises to any tenant and leasing any or all other
portions of the Project before reletting the Premises).  Landlord shall not be liable, nor shall
Tenant’s obligations hereunder be diminished because of, Landlord’s failure to
relet the Premises or collect rent due in respect of such reletting.

25.           Tenant’s
Remedies/Limitation of Liability. 
Landlord shall not be in default hereunder unless Landlord fails to
perform any of its obligations hereunder within 30 days after written notice
from Tenant specifying such failure (unless such performance will, due to the
nature of the obligation, require a period of time in excess of 30 days, then
after such period of time as is reasonably necessary).  All obligations of Landlord hereunder shall
be construed as covenants, not conditions; and, except as may be otherwise
expressly provided in this Lease, Tenant may not terminate this Lease for
breach of Landlord’s obligations hereunder. 
All obligations of Landlord under this Lease will be binding upon Landlord
only during the period of its ownership of the Premises and not
thereafter.  The term “Landlord” in this
Lease shall mean only the owner, for the time being of the Premises, and in the
event of the transfer by such owner of its interest in the Premises, such owner
shall thereupon be released and discharged from all obligations of Landlord
thereafter accruing, but such obligations shall be binding during the Lease
Term upon each new owner for the duration of such owner’s ownership.  Any liability of Landlord under this Lease
shall be limited solely to its interest in the Project, and in no event shall
any personal liability be asserted against Landlord in connection with this
Lease nor shall any recourse be had to any other property or assets of Landlord.

26.           Waiver of Jury Trial.  TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL
BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING
OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

27.           Subordination.  This Lease and Tenant’s interest and rights
hereunder are and shall be subject and subordinate at all times to the lien of
any first mortgage, now existing or hereafter created on or against the Project
or the Premises, and all amendments, restatements, renewals, modifications,
consolidations, refinancing, assignments and extensions thereof, without the
necessity of any further instrument or act on the part of Tenant.  Tenant agrees, at the election of the holder
of any such mortgage, to attorn to any such holder.  Tenant agrees upon demand to execute,
acknowledge and deliver such instruments, confirming such subordination and
such instruments of attornment as shall be requested by any such holder.  Tenant hereby appoints Landlord attorney in
fact for Tenant irrevocably (such power of attorney being coupled with an
interest) to execute, acknowledge and deliver any such instrument and
instruments for and in the name of the Tenant and to cause any such instrument
to be recorded. Notwithstanding the foregoing, any such holder may at any time
subordinate its mortgage to this Lease, without Tenant’s consent, by notice in
writing to Tenant, and thereupon this Lease shall be deemed prior to such
mortgage without regard to their respective dates of execution, delivery or
recording and in that event such holder shall have the same rights with respect
to this Lease as though this Lease had been executed prior to the execution,
delivery and recording of such mortgage and had been assigned to such
holder.  The term “mortgage” whenever
used in this Lease shall be deemed to include deeds of trust, security
assignments and any other encumbrances, and any reference to the “holder” of a
mortgage shall be deemed to include the beneficiary under a deed of trust.

28.           Mechanic’s Liens.  Tenant has no express or implied authority to
create or place any lien or encumbrance of any kind upon, or in any manner to
bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from all loss, cost
or expense based on or arising out of asserted claims or liens against the
leasehold estate or against the interest of Landlord in the Premises or under
this Lease.  Tenant shall give Landlord
immediate written notice of the placing of any lien or encumbrance against the
Premises and cause such lien or encumbrance to be discharged within 30 days of
the filing or recording thereof; provided, however, Tenant may contest such
liens or encumbrances as long as such 
contest prevents foreclosure of the lien or encumbrance and Tenant
causes such lien or encumbrance to be bonded or insured over in a manner
satisfactory to Landlord within such 30 day period.

29.           Estoppel Certificates.  Tenant agrees, from time to time, within 10
days after request of Landlord, to execute and deliver to Landlord, or Landlord’s
designee, any estoppel certificate requested by Landlord, stating that this
Lease is in full force and effect, the date to which rent has been paid, that
Landlord is not in default hereunder (or specifying in detail the nature of
Landlord’s default), the termination date of this Lease and such other matters
pertaining to this Lease as may be requested by Landlord.  Tenant’s obligation to furnish each estoppel
certificate in a timely fashion is a material inducement for Landlord’s
execution of this Lease.  No cure or
grace period provided in this Lease shall apply to Tenant’s obligations to
timely deliver an estoppel certificate. 
Tenant hereby irrevocably appoints Landlord as its attorney in fact to
execute on its behalf and in its name any such estoppel certificate if Tenant
fails to execute and deliver the estoppel certificate within 10 days after
Landlord’s written request thereof.

30.           Environmental Requirements.  Except for Hazardous Material contained in
products used by Tenant in de minimis quantities for ordinary cleaning and
office purposes, Tenant shall not permit or cause any party

 8
 

to bring any Hazardous Material upon the Premises or
transport, store, use, generate, manufacture or release any Hazardous Material
in or about the Premises without Landlord’s prior written consent.  Tenant, at its sole cost and expense, shall
operate its business in the Premises in strict compliance with all
Environmental Requirements and shall remediate in a manner satisfactory to
Landlord any Hazardous Materials released on or from the Project by Tenant, its
agents, employees, contractors, subtenants or invitees.  Tenant shall complete and certify to disclosure
statements as requested by Landlord from time to time relating to Tenant’s
transportation, storage, use, generation, manufacture or release of Hazardous
Materials on the Premises.  The term “Environmental
Requirements” means all applicable present and future statutes, regulations,
ordinances, rules, codes, judgments, orders or other similar enactments of any
governmental authority or agency regulating or relating to health, safety, or
environmental conditions on, under, or about the Premises or the environment,
including without limitation, the following: 
the Comprehensive Environmental Response, Compensation and Liability
Act; the Resource Conservation and Recovery Act; and all state and local
counterparts thereto, and any regulations or policies promulgated or issued
thereunder.  The term “Hazardous
Materials” means and includes any substance, material, waste, pollutant, or
contaminant listed or defined as hazardous or toxic, under any Environmental
Requirements, asbestos and petroleum, including crude oil or any fraction
thereof, natural gas liquids, liquified natural gas, or synthetic gas usable
for fuel (or mixtures of natural gas and such synthetic gas).  As defined in Environmental Requirements,
Tenant is and shall be deemed to be the “operator” of Tenant’s “facility” and
the “owner” of all Hazardous Materials brought on the Premises by Tenant, its
agents, employees, contractors or invitees, and the wastes, by-products, or
residues generated, resulting, or produced therefrom.

Tenant
shall indemnify, defend, and hold Landlord harmless from and against any and
all losses (including, without limitation, diminution in value of the Premises
or the Project and loss of rental income from the Project), claims, demands,
actions, suits, damages (including, without limitation, punitive damages), expenses
(including, without limitation, remediation, removal, repair, corrective
action, or cleanup expenses), and costs (including, without limitation, actual
attorneys’ fees, consultant fees or expert fees and including, without
limitation, removal or management of any asbestos brought into the property or
disturbed in breach of the requirements of this Paragraph 30, regardless of
whether such removal or management is required by law) which are brought or
recoverable against, or suffered or incurred by Landlord as a result of any
release of Hazardous Materials for which Tenant is obligated to remediate as
provided above or any other breach of the requirements under this Paragraph 30
by Tenant, its agents, employees, contractors, subtenants, assignees or invitees,
regardless of whether Tenant had knowledge of such noncompliance.  The obligations of Tenant under this
Paragraph 30 shall survive any termination of this Lease.

Landlord
shall have access to, and a right to perform inspections and tests of, the
Premises to determine Tenant’s compliance with Environmental Requirements, its
obligations under this Paragraph 30, or the environmental condition of the
Premises.  Access shall be granted to
Landlord upon Landlord’s prior notice to Tenant and at such times so as to
minimize, so far as may be reasonable under the circumstances, any disturbance
to Tenant’s operations.  Such inspections
and tests shall be conducted at Landlord’s expense, unless such inspections or
tests reveal that Tenant has not complied with any Environmental Requirement,
in which case Tenant shall reimburse Landlord for the reasonable cost of such
inspection and tests.  Landlord’s receipt
of or satisfaction with any environmental assessment in no way waives any
rights that Landlord holds against Tenant.

31.           Rules and Regulations.  Tenant shall, at all times during the Lease
Term and any extension thereof, comply with all reasonable rules and
regulations at any time or from time to time established by Landlord covering
use of the Premises and the Project.  The
current rules and regulations are attached hereto.  In the event of any conflict between said
rules and regulations and other provisions of this Lease, the other terms and
provisions of this Lease shall control. 
Landlord shall not have any liability or obligation for the breach of
any rules or regulations by other tenants in the Project.

32.           Security Service.  Tenant acknowledges and agrees that, while
Landlord may patrol the Project, Landlord is not providing any security
services with respect to the Premises and that Landlord shall not be liable to
Tenant for, and Tenant waives any claim against Landlord with respect to, any
loss by theft or any other damage suffered or incurred by Tenant in connection
with any unauthorized entry into the Premises or any other breach of security
with respect to the Premises.

33.           Force Majeure.  Landlord shall not be held responsible for
delays in the performance of its obligations hereunder when caused by strikes,
lockouts, labor disputes, acts of God, inability to obtain labor or materials
or reasonable substitutes therefor, governmental restrictions, governmental
regulations, governmental controls, delay in issuance of permits, enemy or
hostile governmental action, civil commotion, fire or other casualty, and other
causes beyond the reasonable control of Landlord (“Force Majeure”).

34.           Entire Agreement.  This Lease constitutes the complete agreement
of Landlord and Tenant with respect to the subject matter hereof.  No representations, inducements, promises or
agreements, oral or written, have been made by Landlord or Tenant, or anyone
acting on behalf of Landlord or Tenant, which are not contained herein, and any
prior agreements, promises, negotiations, or representations are superseded by
this Lease.  This Lease may not be
amended except by an instrument in writing signed by both parties hereto.

35.           Severability.  If any clause or provision of this Lease is
illegal, invalid or unenforceable under present or future laws, then and in
that event, it is the intention of the parties hereto that the remainder of
this Lease shall not be affected thereby. 
It is also the intention of the parties to this Lease that in lieu of
each clause or provision of this Lease that is illegal, invalid or
unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.

 9

 

36.           Brokers.  Tenant represents and warrants that it has
dealt with no broker, agent or other person in connection with this transaction
and that no broker, agent or other person brought about this transaction, other
than the broker, if any, set forth on the first page of this Lease, and Tenant
agrees to indemnify and hold Landlord harmless from and against any claims by
any other broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction.

37.           Miscellaneous.  (a)  Any payments or
charges due from Tenant to Landlord hereunder shall be considered rent for all
purposes of this Lease.

(b)           If and when included within the term “Tenant,”
as used in this instrument, there is more than one person, firm or corporation,
each shall be jointly and severally liable for the obligations of Tenant.

(c)           All notices required or permitted to
be given under this Lease shall be in writing and shall be sent by registered
or certified mail, return receipt requested, or by a reputable national
overnight courier service, postage prepaid, or by hand delivery addressed to
the parties at their addresses below, and with a copy sent to Landlord at 14100
East 35th Place, Aurora, Colorado 80011.  
Either party may by notice given aforesaid change its address for all
subsequent notices.  Except where
otherwise expressly provided to the contrary, notice shall be deemed given upon
delivery.

(d)           Except as otherwise expressly
provided in this Lease or as otherwise required by law, Landlord retains the
absolute right to withhold any consent or approval.

(e)           At Landlord’s request from time to
time Tenant shall furnish Landlord with true and complete copies of its most
recent annual and quarterly financial statements prepared by Tenant or Tenant’s
accountants and any other financial information or summaries that Tenant
typically provides to its lenders or shareholders.

(f)            Neither this Lease nor a memorandum
of lease shall be filed by or on behalf of Tenant in any public record.  Landlord may prepare and file, and upon
request by Landlord Tenant will execute, a memorandum of lease.

(g)           The normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Lease or any exhibits or
amendments hereto.

(h)           The submission by Landlord to Tenant
of this Lease shall have no binding force or effect, shall not constitute an
option for the leasing of the Premises, nor confer any right or impose any
obligations upon either party until execution of this Lease by both parties.

(i)            Words of any gender used in this
Lease shall be held and construed to include any other gender, and words in the
singular number shall be held to include the plural, unless the context
otherwise requires.  The captions
inserted in this Lease are for convenience only and in no way define, limit or
otherwise describe the scope or intent of this Lease, or any provision hereof,
or in any way affect the interpretation of this Lease.

(j)            Any amount not paid by Tenant within
5 days after its due date in accordance with the terms of this Lease shall bear
interest from such due date until paid in full at the lesser of the highest
rate permitted by applicable law or 15 percent per year.  It is expressly the intent of Landlord and
Tenant at all times to comply with applicable law governing the maximum rate or
amount of any interest payable on or in connection with this Lease.  If
applicable law is ever judicially interpreted so as to render usurious any
interest called for under this Lease, or contracted for, charged, taken,
reserved, or received with respect to this Lease, then it is Landlord’s and
Tenant’s express intent that all excess amounts theretofore collected by
Landlord be credited on the applicable obligation (or, if the obligation has
been or would thereby be paid in full, refunded to Tenant), and the provisions
of this Lease immediately shall be deemed reformed and the amounts thereafter
collectible hereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder.

(k)           Construction and interpretation of
this Lease shall be governed by the laws of the state in which the Project is
located, excluding any principles of conflicts of laws.

(l)            Time is of the essence as to the
performance of Tenant’s obligations under this Lease.

(m)          All exhibits and addenda attached
hereto are hereby incorporated into this Lease and made a part hereof.  In the event of any conflict between such
exhibits or addenda and the terms of this Lease, such exhibits or addenda shall
control.

(n)           In
the event either party hereto initiates litigation to enforce the terms and
provisions of this Lease, the non-prevailing party in such action shall
reimburse the prevailing party for its reasonable attorney’s fees, filing fees,
and court costs.

38.           Landlord’s Lien/Security
Interest.  Tenant hereby
grants Landlord a security interest, and this Lease constitutes a security
agreement, within the meaning of and pursuant to the Uniform Commercial Code of
the state in which the Premises are situated as to all of Tenant’s property
situated in, or upon, or used in connection with the Premises (except
merchandise sold in the ordinary course of business) as security for all of
Tenant’s obligations hereunder, including, without limitation, the obligation
to pay rent.  Such personalty thus
encumbered includes

 10
 

 

specifically all trade and other fixtures for the
purpose of this Paragraph and inventory, equipment, contract rights, accounts
receivable and the proceeds thereof.  In
order to perfect such security interest, Tenant shall execute such financing
statements and file the same at Tenant’s expense at the state and county
Uniform Commercial Code filing offices as often as Landlord in its discretion
shall require; and Tenant hereby irrevocably appoints Landlord its agent for
the purpose of executing and filing such financing statements on Tenant’s
behalf as Landlord shall deem necessary.

39.           Limitation of Liability of
Trustees, Shareholders, and Officers of ProLogis.  Any obligation or liability whatsoever of
ProLogis, a Maryland real estate investment trust, which may arise at any time
under this Lease or any obligation or liability which may be incurred by it
pursuant to any other instrument, transaction, or undertaking contemplated
hereby shall not be personally binding upon, nor shall resort for the
enforcement thereof be had to the property of, its trustees, directors,
shareholders, officers, employees or agents, regardless of whether such
obligation or liability is in the nature of contract, tort, or otherwise.

IN
WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and
year first above written.

	
  TENANT:

  	
   

  	
   

  	
  LANDLORD:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Liquidity
  Services, Inc.

  	
   

  	
   

  	
  PROLOGIS DEVELOPMENT SERVICES INCORPORATED, a
  Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
  Jaime Mateus-Tique

  	
   

  	
  Name:

  	
  Charles E. Sullivan

  	
   

  
	
  Title:

  	
  President & COO

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2131 K Street
  NW, 4th Floor

  	
   

  	
   

  	
  One Capital Drive

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Suite 103

  	
   

  
	
  Washington, DC
  20037

  	
   

  	
   

  	
   

  	
  Cranbury, NJ 08512

  	
   

  
									

 

 11
 

 

Rules and
Regulations

1.                                       The
sidewalk, entries, and driveways of the Project shall not be obstructed by
Tenant, or its agents, or used by them for any purpose other than ingress and
egress to and from the Premises.

2.                                       Tenant
shall not place any objects, including antennas, outdoor furniture, etc., in
the parking areas, landscaped areas or other areas outside of its Premises, or
on the roof of the Project.

3.                                       Except
for seeing-eye dogs, no animals shall be allowed in the offices, halls, or
corridors in the Project.

4.                                       Tenant
shall not disturb the occupants of the Project or adjoining buildings by the
use of any radio or musical instrument or by the making of loud or improper
noises.

5.                                       If
Tenant desires telegraphic, telephonic or other electric connections in the
Premises, Landlord or its agent will direct the electrician as to where and how
the wires may be introduced; and, without such direction, no boring or cutting
of wires will be permitted.  Any such
installation or connection shall be made at Tenant’s expense.

6.                                       Tenant
shall not install or operate any steam or gas engine or boiler, or other
mechanical apparatus in the Premises, except as specifically approved in the
Lease.  The use of oil, gas or
inflammable liquids for heating, lighting or any other purpose is expressly
prohibited.  Explosives or other articles
deemed extra hazardous shall not be brought into the Project.

7.                                       Parking
any type of recreational vehicles is specifically prohibited on or about the
Project.  Further, parking any type of trucks,
trailers or other vehicles in the Premises is specifically prohibited.  Except for the overnight parking of operative
vehicles, no vehicle of any type shall be stored in the parking areas at any
time.  In the event that a vehicle is
disabled, it shall be removed within 48 hours. 
There shall be no “For Sale” or other advertising signs on or about any
parked vehicle.  All vehicles shall be
parked in the designated parking areas in conformity with all signs and other
markings.  All parking will be open
parking, and no reserved parking, numbering or lettering of individual spaces
will be permitted except as specified by Landlord.

8.                                       Tenant
shall maintain the Premises free from rodents, insects and other pests.

9.                                       Landlord
reserves the right to exclude or expel from the Project any person who, in the
judgment of Landlord, is intoxicated or under the influence of liquor or drugs
or who shall in any manner do any act in violation of the Rules and Regulations
of the Project.

10.                                 Tenant
shall not cause any unnecessary labor by reason of Tenant’s carelessness or
indifference in the preservation of good order and cleanliness.  Landlord shall not be responsible to Tenant
for any loss of property on the Premises, however occurring, or for any damage
done to the effects of Tenant by the janitors or any other employee or person.

11.                                 Tenant
shall give Landlord prompt notice of any defects in the water, lawn sprinkler,
sewage, gas pipes, electrical lights and fixtures, heating apparatus, or any
other service equipment affecting the Premises.

12.                                 Tenant
shall not permit storage outside the Premises, including without limitation,
outside storage of trucks and other vehicles, or dumping of waste or refuse or
permit any harmful materials to be placed in any drainage system or sanitary
system in or about the Premises.

13.                                 All
moveable trash receptacles provided by the trash disposal firm for the Premises
must be kept in the trash enclosure areas, if any, provided for that purpose.

14.                                 No
auction, public or private, will be permitted on the Premises or the Project,
except for Tenant’s online sales.

15.                                 No
awnings shall be placed over the windows in the Premises except with the prior
written consent of Landlord.

16.                                 The
Premises shall not be used for lodging, sleeping or cooking or for any immoral
or illegal purposes or for any purpose other than that specified in the
Lease.  No gaming devices shall be
operated in the Premises.

 12
 

 

17.                                 Tenant
shall ascertain from Landlord the maximum amount of electrical current which
can safely be used in the Premises, taking into account the capacity of the
electrical wiring in the Project and the Premises and the needs of other
tenants, and shall not use more than such safe capacity.  Landlord’s consent to the installation of
electric equipment shall not relieve Tenant from the obligation not to use more
electricity than such safe capacity.

18.                                 Tenant
assumes full responsibility for protecting the Premises from theft, robbery and
pilferage.

19.                                 Tenant
shall not install or operate on the Premises any machinery or mechanical
devices of a nature not directly related to Tenant’s ordinary use of the
Premises and shall keep all such machinery free of vibration, noise and air
waves which may be transmitted beyond the Premises.

 13
 

 

ADDENDUM 1

BASE RENT
ADJUSTMENTS

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED     , BETWEEN

ProLogis Development Services Incorporated

and

Liquidity Services, Inc.

Base Rent shall equal the following amounts for the
respective periods set forth below:

	
  Period

  	
   

  	
  Monthly Base Rent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  October 1, 2005 to October 31, 2005

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  November 1, 2005 to October 31, 2006

  	
   

  	
  $

  	
  18,796.46

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  November 1, 2006 to October 31, 2007

  	
   

  	
  $

  	
  19,172.39

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  November 1, 2007 to October 31, 2008

  	
   

  	
  $

  	
  19,555.84

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  November 1, 2008
  to October 31, 2009

  	
   

  	
  $

  	
  19,946.96

  	
   

  

 

 14
 

 

ADDENDUM 2

CONSTRUCTION

(TURNKEY)

ATTACHED TO AND A
PART OF THE LEASE AGREEMENT

DATED    , BETWEEN

ProLogis
Development Services Incorporated

and

Liquidity Services, Inc.

(a)   Landlord
agrees to furnish or perform at Landlord’s sole cost and expense those items of
construction and those improvements (the “Initial Improvements”) specified
below:

Construct approximately 1,200 square feet of finished office space in
accordance with the Office Floor Plan, Exhibit C, and Landlord’s Standard
Customer Workletter, attached hereto as Exhibit B.  Further, Landlord shall provide up to an
additional (48) 400-watt, metal halide fixtures in the warehouse.

Landlord may
collect a construction management fee, payable by Tenant within 30 days
following receipt of Landlord’s invoice from time to time throughout the period
of construction of the Initial Improvements, which such fee shall be calculated
based upon the scope of work of the Initial Improvements as described herein,
taking into account costs generally payable for similar services within the
market area in which the Project is located.

(b)           If Tenant shall desire any changes,
Tenant shall so advise Landlord in writing and Landlord shall determine whether
such changes can be made in a reasonable and feasible manner.  Any and all costs of reviewing any requested
changes, and any and all costs of making any changes to the Initial
Improvements which Tenant may request and which Landlord may agree to shall be
at Tenant’s sole cost and expense and shall be paid to Landlord upon demand and
before execution of the change order.

(c)           Landlord shall proceed with and
complete the construction of the Initial Improvements.  As soon as such improvements have been
Substantially Completed, Landlord shall notify Tenant in writing of the date
that the Initial Improvements were Substantially Completed.  Such date, unless an earlier date is
specified as the Commencement Date in this Lease or otherwise agreed to in
writing between Landlord and Tenant, shall be the “Commencement Date,”  unless the completion of such improvements
was delayed due to any act or omission of, or delay caused by, Tenant
including, without limitation, Tenant’s failure to approve plans, complete
submittals or obtain permits within the time periods agreed to by the parties
or as reasonably required by Landlord, in which case the Commencement Date
shall be the date such improvements would have been completed but for the
delays caused by Tenant.  The Initial
Improvements shall be deemed substantially completed (“Substantially
Completed”) when, in the opinion of the construction manager (whether an
employee or agent of Landlord or a third party construction manager) (“Construction
Manager”), the Premises are substantially completed except for punch list
items which do not prevent in any material way the use of the Premises for the
purposes for which they were intended. 
In the event Tenant, its employees, agents, or contractors cause construction
of such improvements to be delayed, the date of Substantial Completion shall be
deemed to be the date that, in the opinion of the Construction Manager,
Substantial Completion would have occurred if such delays had not taken
place.  Without limiting the foregoing,
Tenant shall be solely responsible for delays caused by Tenant’s request for
any changes in the plans, Tenant’s request for long lead items or Tenant’s
interference with the construction of the Initial Improvements, and such delays
shall not cause a deferral of the Commencement Date beyond what it otherwise
would have been.  After the Commencement
Date Tenant shall, upon demand, execute and deliver to Landlord a letter of
acceptance of delivery of the Premises. 
In the event of any dispute as to the Initial Improvements, including the
Commencement Date, the certificate of the Construction Manager shall be
conclusive absent manifest error.

(d)           The failure of Tenant to take
possession of or to occupy the Premises shall not serve to relieve Tenant of
obligations arising on the Commencement Date or delay the payment of rent by
Tenant.  Subject to applicable ordinances
and building codes governing Tenant’s right to occupy or perform in the
Premises, Tenant shall be allowed to install its tenant improvements,
machinery, equipment, fixtures, or other property on the Premises during the
final stages of completion of construction provided that Tenant does not
thereby interfere with the completion of construction or cause any labor
dispute as a result of such installations, and provided further that Tenant
does hereby agree to indemnify, defend, and hold Landlord harmless from any
loss or damage to such property, and all liability, loss, or damage arising
from any injury to the Project or the property of Landlord, its contractors,
subcontractors, or materialmen, and any death or personal injury to any person
or persons arising out of such installations, unless any such loss, damage,
liability, death, or personal injury was caused by Landlord’s negligence.  Any such occupancy or performance in the
Premises shall be in accordance with the provisions

 15
 

 

governing Tenant-Made Alterations and Trade
Fixtures in the Lease, and shall be subject to Tenant providing to Landlord
satisfactory evidence of insurance for personal injury and property damage
related to such installations and satisfactory payment arrangements with
respect to installations permitted hereunder. 
Delay in putting Tenant in possession of the Premises shall not serve to
extend the term of this Lease or to make Landlord liable for any damages
arising therefrom.

ADDENDUM 3

ONE
RENEWAL OPTION AT MARKET

ATTACHED TO AND A
PART OF THE LEASE AGREEMENT

DATED    , BETWEEN

ProLogis
Development Services Incorporated

and

Liquidity Services, Inc.

(a)   Provided
that as of the time of the giving of the Extension Notice and the Commencement
Date of the Extension Term, (x) Tenant is the Tenant originally named herein,
(y) Tenant actually occupies all of the Premises initially demised under
this Lease and any space added to the Premises, and (z) no Event of Default
exists or would exist but for the passage of time or the giving of notice, or
both; then Tenant shall have the right to extend the Lease Term for an
additional term of 4 years (such additional term is hereinafter called
the “Extension Term”) commencing on the day following the expiration of
the Lease Term (hereinafter referred to as the “Commencement Date of the
Extension Term”).  Tenant shall give
Landlord notice (hereinafter called the “Extension Notice”) of its
election to extend the term of the Lease Term at least 9 months, but not
more than 12 months, prior to the scheduled expiration date of the Lease Term.

(b)   The Base
Rent payable by Tenant to Landlord during the Extension Term shall be the
greater of (i) the Base Rent applicable to the last year of the initial Lease
term and (ii) the then prevailing market rate for comparable space in the
Project and comparable buildings in the vicinity of the Project, taking into
account the size of the Lease, the length of the renewal term, market escalations
and the credit of Tenant.  The Base Rent
shall not be reduced by reason of any costs or expenses saved by Landlord by
reason of Landlord’s not having to find a new tenant for such premises
(including, without limitation, brokerage commissions, costs of improvements,
rent concessions or lost rental income during any vacancy period).  In the event Landlord and Tenant fail to
reach an agreement on such rental rate and execute the Amendment (defined
below) at least 6 months prior to the expiration of the Lease, then
Tenant’s exercise of the renewal option shall be deemed withdrawn and the Lease
shall terminate on its original expiration date.

(c)   The
determination of Base Rent does not reduce the Tenant’s obligation to pay or
reimburse Landlord for Operating Expenses and other reimbursable items as set
forth in the Lease, and Tenant shall reimburse and pay Landlord as set forth in
the Lease with respect to such Operating Expenses and other items with respect
to the Premises during the Extension Term without regard to any cap on such
expenses set forth in the Lease.

(d)   Except for
the Base Rent as determined above, Tenant’s occupancy of the Premises during
the Extension Term shall be on the same terms and conditions as are in effect
immediately prior to the expiration of the initial Lease Term; provided,
however, Tenant shall have no further right to any allowances, credits or
abatements or any options to expand, contract, renew or extend the Lease.

(e)   If Tenant
does not give the Extension Notice within the period set forth in paragraph (a)
above, Tenant’s right to extend the Lease Term shall automatically
terminate.  Time is of the essence as to
the giving of the Extension Notice.

(f)    Landlord
shall have no obligation to refurbish or otherwise improve the Premises for the
Extension Term.  The Premises shall be
tendered on the Commencement Date of the Extension Term in “as-is” condition.

(g)   If the
Lease is extended for the Extension Term, then Landlord shall prepare and
Tenant shall execute an amendment to the Lease confirming the extension of the
Lease Term and the other provisions applicable thereto (the “Amendment”).

(h)   If Tenant
exercises its right to extend the term of the Lease for the Extension Term
pursuant to this Addendum, the term  “Lease
Term” as used in the Lease, shall be construed to include, when practicable,
the Extension Term except as provided in (d) above.

 16
 

 

ADDENDUM 4

RIGHT OF
FIRST OFFER

ATTACHED TO AND A
PART OF THE LEASE AGREEMENT

DATED    , BETWEEN

ProLogis
Development Services Incorporated

and

Liquidity Services, Inc.

(a)   “Offered
Space” shall mean The adjacent 85,893 SF unit currently occupied by Delta
Apparel.

(b)   Provided
that as of the date of the giving of Landlord’s Notice, (x) Tenant is the
Tenant originally named herein, (y) Tenant actually occupies all of the
Premises originally demised under this Lease and any premises added to the
Premises, and (z) no Event of Default or event which but for the passage of
time in the giving of notice, or both, would constitute an Event of Default has
occurred and is continuing, if at any time during the Lease Term any lease for
any portion of the Offered Space shall expire, then Landlord, before offering
such Offered Space to anyone, other than the tenant then occupying such space
(or its affiliates), shall offer to Tenant the right to include the Offered
Space within the Premises on the same terms and conditions upon which Landlord
intends to offer the Offered Space for lease.

(c)   Such offer
shall be made by Landlord to Tenant in a written notice (hereinafter called the
“First Offer Notice”) which offer shall designate the space being offered and
shall specify the terms which Landlord intends to offer with respect to any
such Offered Space.  Tenant may accept
the offer set forth in the First Offer Notice by delivering to Landlord an
unconditional acceptance (hereinafter called “Tenant’s Notice”) of such offer
within 5 business days after delivery by Landlord of the First Offer Notice to
Tenant.  Time shall be of the essence
with respect to the giving of Tenant’s Notice. 
If Tenant does not accept (or fails to timely accept) an offer made by
Landlord pursuant to the provisions of this Addendum with respect to the
Offered Space designated in the First Offer Notice, Landlord shall be under no
further obligation with respect to such space by reason of this Addendum.

(d)   Tenant must
accept all Offered Space offered by Landlord at any one time if it desires to
accept any of such Offered Space and may not exercise its right with respect to
only part of such space.  In addition, if
Landlord desires to lease more than just the Offered Space to one tenant,
Landlord may offer to Tenant pursuant to the terms hereof all such space which
Landlord desires to lease, and Tenant must exercise its rights hereunder with
respect to all such space and may not insist on receiving an offer for just the
Offered Space.

(e)   If Tenant
at any time declines any Offered Space offered by Landlord, Tenant shall be
deemed to have irrevocably waived all further rights under this Addendum, and
Landlord shall be free to lease the Offered Space to third parties including on
terms which may be less favorable to Landlord than those offered to Tenant.

 17

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