Lease

INNOTRAC LEASE



THIS LEASE is made as of the 16TH DAY OF JUNE, 1999, between LOCKHEED MARTIN CORPORATION ("LANDLORD") and INNOTRAC CORPORATION ("TENANT").





WHEREAS, the premises (the "PREMISES"), as depicted on the floor plan attached hereto and incorporated herein as EXHIBIT A, is composed of approximately 87,310 rentable square feet on the ground floor of that certain building (the "BUILDING") commonly known as #5 William White, which Building contains approximately 144,341 rentable square feet and is currently part of the two-building campus approximately depicted on the site plan attached hereto and incorporated herein as EXHIBIT B and totaling 317,860 rentable square feet. The land on which such two-building campus is located and all improvements thereon are herein called the "PROJECT", and that portion of such land on which the Building is situated is herein called the "BUILDING LAND".



ACCORDINGLY, Landlord and Tenant agree:



1.0 PREMISES; COMMON AREAS. Landlord hereby leases and demises to Tenant, and Tenant leases and takes from Landlord, upon and subject to the covenants, agreements, terms, provisions and conditions of this Lease, the Premises. The Premises contains Eighty-seven Thousand Three Hundred Ten (87,310) rentable square feet of the Building and is located at #5 William White Blvd., Pueblo, Colorado. For the purposes of pro rata calculations, the Premises comprises 60% ("TENANT'S BUILDING SHARE") of the rentable square footage of the Building and 27% ("TENANT'S PROJECT SHARE") of the rentable square footage of the Project. Landlord also grants to Tenant, as an appurtenance to the Premises, the nonexclusive right to use, in accordance with and subject to the terms and conditions of this Lease and in common with Landlord and other tenants of the Building or Project, (I) common areas of the Building and other common areas located on the Building Land, including, without limitation, common lobbies, public corridors, stairways, elevators, rest rooms, entranceways, landscaped areas, sidewalks, driveways, service roads, loading facilities, surface parking lots and all other common areas and facilities located from time to time on the Building Land which Landlord from time to time designates and makes available as common areas to benefit and serve the Building or the Building Land (the "BUILDING LAND COMMON AREA"), and (II) Project driveways necessary to provide access from the Building or the Building Land to or from a public street and other Project common areas reasonably necessary for the full enjoyment of the use of the Premises by Tenant and its invitees and directly benefiting the Premises, other than Building Land Common Areas (the "PROJECT COMMON AREA"). The Building Land Common Area and the Project Common Area are collectively called the "COMMON AREA".



2.0 TERM.



2.1 COMMENCEMENT DATE. The initial term of this Lease (which initial term, together with any Option Terms, is hereinafter called the "TERM") will begin on AUGUST 1, 1999 ("COMMENCEMENT DATE") and end on SEPTEMBER 30, 2004.



2.2 PERFORMANCE OF TENANT IMPROVEMENTS. Tenant has the right to enter the Premises and the Project and, at Tenant's option, to begin construction of Tenant's improvements or the Parking Lot Expansion (as hereinafter defined), or both, beginning upon the execution of this Lease. All terms of this Lease will apply to Tenant's entry of the Premises, except for SECTIONS 4.0 AND 5.0 and any other provision of this Lease concerning the payment of Rent (as hereinafter defined); PROVIDED, HOWEVER, that from and after the date Tenant begins conducting business in or from any portion of the Premises, Tenant shall pay its share of operating expenses, as provided in SECTION 5.0, below, with respect to such portion.



2.3 RENT COMMENCEMENT. Base Rent (as hereinafter defined) will commence on OCTOBER 1, 1999 (the "RENT COMMENCEMENT DATE") and will continue throughout the Term of this Lease.



3.0 OPTIONS.



3.1 OPTION TO EXTEND. Landlord hereby grants to Tenant an option to extend the initial Lease term ("INITIAL TERM") with respect to the Premises for TWO (2) ADDITIONAL PERIODS of FIVE (5) YEARS each (each such option is hereinafter called an "OPTION", and each such additional period is hereinafter called an "OPTION TERM") upon and subject to the terms and conditions set forth in this Lease. An Option shall be exercised, if at all, by Tenant's delivery of written notice of exercise to Landlord not later ONE HUNDRED EIGHTY (180) DAYS prior to the expiration date of the Initial Term or the first Option Term, as the case may be. All of the terms of this Lease shall apply to the Option Term(s), except that annual Base Rent for each Option Term shall be $5.33 per rentable square foot for warehouse space and $6.33 per rentable square foot of office space. The Base Rent shall thereafter increase at an annual rate of THREE PERCENT (3%) on each anniversary date.



3.2 FIRST RIGHT OF EXPANSION. If at any time prior to the expiration of the Term, Landlord receives a bona fide offer for the lease of all or any portion of the Building not then leased by Tenant (the "EXPANSION SPACE"), Tenant shall have the right of first refusal to lease the Expansion Space, and Landlord shall, within FIVE (5) DAYS after receipt of same, give Tenant written notice of such offer. Tenant will then have FIFTEEN (15) DAYS from Tenant's actual receipt of such notice, to accept or reject the Expansion Space. The rent for the Expansion Space will be at the same rate as Tenant is then paying for like type space (e.g., office space, warehouse space). Expansion Space will be leased with 3/1000 parking spaces. If Tenant accepts the Expansion Space, Landlord and Tenant shall execute an amendment to this Lease to reflect additions to the Premises resulting from the exercise of the right of refusal to lease. Tenant's lease of any Expansion Space pursuant to this right of first refusal will be on all the terms and conditions set forth in this Lease except as to parking, free rent, and pro rata share.





4.0 BASE RENT. Beginning on the Rent Commencement Date, Tenant will pay base rent in monthly installments ("BASE RENT") in advance, on or before the first day of each month, in the following amounts: (I) until the expiration of the thirty-sixth month of the Term, monthly Base Rent shall be THIRTY-SIX THOUSAND FOUR HUNDRED EIGHTY-NINE AND 75/100 DOLLARS ($36,489.75) (calculated using a monthly rental rate of $0.46 for the approximately 44,982 rentable square feet of office space within the Premises and $0.38 for the approximately 42,328 rentable square feet of warehouse space within the Premises), and (II) for months thirty-seven (37) to sixty-two (62) of the Term, monthly Base Rent shall be THIRTY-EIGHT THOUSAND THREE HUNDRED FOURTEEN AND 24/100 DOLLARS ($38,314.24) (calculated using a monthly rental rate of $0.48 for the approximately 44,982 rentable square feet of office space within the Premises and $0.39 for the approximately 42,328 rentable square feet of warehouse space within the Premises).



If the Term commences on a day other than the first day of a calendar month or ends on a day other than the last day of the calendar month, then monthly rent will be appropriately prorated by Landlord based on the actual number of calendar days in such month. If the Term commences on a day other than the first day of a calendar month, then the prorated monthly rent for such month will be paid on or before the first day of the Term. Monthly rent will be paid to Landlord, without written notice or demand, and without deduction or offset, in lawful money of the United States of America at Landlord's address, or to such other address as Landlord may from time to time designate in writing.



5.0 OPERATING EXPENSES. In addition to Base Rent, beginning with the date Tenant begins to conduct business in or from any portion of the Premises, Tenant will pay Tenant's Building Share of the operating expenses for each calendar year or partial calendar year during the Term, which operating expenses shall include the Building's pro rata share (approximately 43%) of operating expenses billed with respect to the entire Project Common Area.



5.1 OPERATING EXPENSES. (A) As used in this Lease, the term "OPERATING EXPENSES" means the reasonable costs actually paid or incurred by Landlord during the Lease Term for the maintenance of the Common Areas and Premises, including without limitation real and personal property taxes and assessments; wages, salaries, and compensation of employees to the extent actually performing maintenance of the Common Areas or Premises; consulting, accounting, legal, depreciation on personal property and equipment; janitorial in the common areas, maintenance and security services; management fees and costs, and office rent or rental value of space in the Project used or furnished by Landlord as a management office; power, water, waste disposal, and other utilities; materials and supplies; maintenance and repairs; insurance obtained with respect to the Building and any other costs, charges and expenses that under general acceptable accounting principles would be regarded as a management, maintenance, and operating expense; 100% of the cost of repair to the service road, loading docks, or parking lots or any other areas of the Building or Project that exceed normal wear and tear, due to Tenant's distribution use of the Premises; cost (amortized over the useful life of such improvements, as determined in accordance with generally accepted accounting principles ("GAAP")) of any capital improvements that are made to the Common Area or the Premises by Landlord (i) for the purpose of reducing operating expenses, or (ii) after the date of this Lease that are necessary to comply with any applicable requirement of any governmental law or regulation that was not







applicable to the Common Area or the Premises as of the date of this Lease to the extent that such improvement is not required as a result of the particular use by, or any improvements constructed by or for, any other tenant or occupant of the Project; and other reasonable costs, charges and expenses that under GAAP would be regarded as operating expenses, as defined herein.



(B) Operating expenses will not include:

(1) depreciation on any portion of the Project;

(2) costs of alterations of space or other improvements made for tenants

of the Project;

(3) finders fees and real estate brokers' commissions;

(4) ground lease payments, mortgage principal or interest;

(5) capital improvements other than as may be expressly included in

subparagraph (a), above;

(6) costs of replacements of personal property and equipment for which

depreciation costs are included as an operating expense;

(7) costs of excess additional services provided to any tenant in the

Building that are directly billed to such tenants;

(8) the cost of repairs due to casualty or condemnation; (9) any cost due

to Landlord's breach of the Lease;

(10) any income, estate, inheritance, or other transfer tax and any excess

profit, franchise, or similar taxes on Landlord's business;

(11) all costs, including legal fees, relating to activities for the

solicitation and execution of leases of space in the Project; and

(12) any legal fees incurred by Landlord in enforcing its rights under

other leases for premises in the Project.



5.2 TAXES.



(A) Tenant will reimburse Landlord for the following taxes ("TAXES"), and Landlord shall pay all such Taxes to the appropriate taxing authority when due:



(1) taxes that are payable upon or measured by rent, including without

limitation, any gross revenue tax, excise tax, or value added tax

levied by the federal government or any other governmental body with

respect to the receipt of rent; and

(2) upon this transaction or any document to which Tenant is a party

creating or transferring an interest or an estate in the Premises; and

(3) Tenant's Building Share of ad valorem taxes assessed against the

Building and the Building Land.



(B) Tenant will not be obligated to pay any inheritance tax, gift tax, transfer tax, franchise tax, income tax (based upon net income), profit tax, or capital levy imposed upon Landlord.



(C) Tenant will pay promptly when due all personal property taxes on Tenant's personal property in the Premises and any other taxes required by law to be paid by Tenant that if not paid would give rise to a lien on the Premises or Tenant's interest in the Premises.





5.3 UTILITIES.



(A) Tenant agrees to pay during the term of this Lease 100% of all charges for such utilities (including without limitation water, electricity, sewage, gas, and any other utility services) used by Tenant in connection with the operation of the Premises. If any such utility services are not separately metered or billed to Tenant but rather are billed to and paid by Landlord, Tenant will pay to Landlord, within THIRTY (30) DAYS after receipt of written notice and reasonable evidence thereof from Landlord or on the first day of the following month, the cost of any such utilities submetered to the Premises or a reasonable proportionate share (based on the square footage of the Premises relative to other premises in the Building and the use of the Premises relative to the use of such other premises) of any such utilities provided to the Building and not separately submetered.



(B) Pursuant to SECTION 5.1, above, Tenant agrees to pay during the term of this Lease its pro rated charges for such utilities (including without limitation water, electricity, sewage, gas, and any other utility services) used in the Common Area.



(C) Tenant will install at its sole cost and expense telephone service to the Premises. Tenant will pay the appropriate supplier for the telephone service billed directly to Tenant.



5.4 ADDITIONAL RENT. Amounts payable by Tenant according to this SECTION 5.0 shall be deemed to be, and will be payable as, "Additional Rent", without deduction or offset (Base Rent, such Additional Rent and any other sums payable by Tenant to Landlord under this Lease are herein collectively called "RENT"). If Tenant fails to pay any amounts due according to this SECTION 5.0, Landlord will have all the rights and remedies available to it on account of Tenant's failure to pay Base Rent. Except as otherwise provided herein, Additional Rent shall be paid monthly (according to Landlord's reasonable good faith estimate) with subsequent annual reconciliation, in accordance with the following procedures:



(A) At the commencement of the Term and each subsequent anniversary date, Landlord shall give Tenant notice of its reasonable estimate of operating expenses and Taxes payable to Landlord by Tenant under SECTION 5.0 above for the calendar year in which the Term commences and for each subsequent calendar year during the Term, as the case may be. On or before the first day of each month from and after the Rent Commencement Date, Tenant shall pay to Landlord 1/12th of such estimated Additional Rent, provided that if such notice is not given on the anniversary date, Tenant shall continue to pay on the basis of the prior year's estimate until the month after such notice is given. If at any time or times such Additional Rent for the current calendar year varies from such estimate by more than 5%, Landlord may, by notice to Tenant, reasonably revise its estimate for such year to account for such increase, and subsequent payments by Tenant for such year shall be based upon such revised estimate.



(B) Within 90 DAYS after the close of each calendar year or as soon after such 90-day period as practicable, Landlord shall deliver to Tenant a statement of the actual operating expenses and Taxes for such calendar year. If on the basis of such statement Tenant owes an amount that is less than the estimated payments for such calendar year previously made by Tenant, Landlord shall refund such excess to Tenant within 30 DAYS after delivery of the statement. If on the basis





of such statement Tenant owes an amount that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within 30 DAYS after delivery of the statement.



6.0 SECURITY DEPOSIT. Tenant has deposited THIRTY-SIX THOUSAND SIX HUNDRED FORTY-TWO AND 34/100 DOLLARS ($36,642.34) with Landlord as Security Deposit for Tenant's payment of rent and performance of its other obligations under this Lease and any renewals or extensions of this Lease. If Tenant defaults in its payment of rent or performance of its other obligations under this Lease, and such default continues beyond any applicable notice and cure period, Landlord may use all or part of the Security Deposit for the payment of the amount of Rent for which payment is in such default, or for the payment of any other reasonable amount necessary for Landlord to spend by reason of Tenant's default. If Landlord so uses any portion of the Security Deposit, Tenant will restore the Security Deposit to its original amount within FIVE (5) DAYS after written demand from Landlord. The Security Deposit will not be a limitation on Landlord's damages or other rights under this Lease, or a payment of liquidated damages, or an advance payment of the Rent. Upon the expiration of the Term or earlier termination of this Lease, Landlord shall refund to Tenant any Security Deposit not used by Landlord as aforesaid. Landlord may deliver the Security Deposit to a purchaser of the Premises and be discharged from further liability with respect to it, so long as such purchaser assumes Landlord's obligations and duties with respect to the Security Deposit.



7.0 USE. The Premises will be used for business offices, distribution and warehouse and for no other purposes. Without limiting the foregoing, Landlord specifically approves Tenant's use of the Premises for a call center. The Premises will be used in a careful, safe and proper manner. The Premises will not be used for any activity or in any manner that would tend to lower the character of the Building or Project. Tenant will not use or occupy or permit the Premises to be used or occupied for any purpose or in any manner prohibited by the laws of the United States, or the State of Colorado, or the ordinances of the City of Pueblo. Tenant will not commit waste in, on or about the Premises, the Building or the Project. Tenant will conduct its business and control its employees, agents, invitees and visitors in such manner as not to create any nuisance, interfere with, annoy, or disturb any other tenant or occupant of the Building or Project or Landlord in its operation of the Building or Project. Tenant will not do anything that is prohibited by the standard form of extended coverage fire policy, or that will increase the existing rate of such insurance or cause a cancellation in Landlord's insurance.



8.0 TENANT ALTERATIONS.



8.1 GENERAL. During the Term, Tenant will not make or allow to be made any alteration, additions, or improvements to or of the Premises, the Building or the Project, or attach any fixtures or equipment to the Premises or Building, without first obtaining Landlord's written consent, which will not be unreasonably withheld. All such alterations, additions, and improvements consented to by Landlord that are required to be made as a result of the nature of Tenant's use of the Premises:





(A) Will be performed by contractors approved by Landlord, which will not be unreasonably withheld, and subject to reasonable conditions specified by Landlord.



(B) The general contractor shall carry and maintain contractor liability insurance and shall agree in writing (whether in the Contractor Agreement or otherwise) that Landlord is not responsible for payment for any labor or materials ordered by Tenant and that no lien shall be filed against the Building or the Project therefor.



(C) Tenant will be required to provide Landlord with a copy of "as built" drawings or field-marked construction drawings of the alteration, addition or improvement within 30 DAYS of completion.



(D) All work with respect to any alterations, additions or improvements will be done in a good and workmanlike manner, and diligently prosecuted to completion to the end that the Building will be a complete unit, except during the period necessarily required for such work.



8.2 COMPLIANCE WITH LAWS BY TENANT. Prior to commencing any alteration, addition or improvement Tenant must acquire all necessary building permits. All alterations, additions or improvements made by Tenant shall be made at Tenant's sole cost and expense, in accordance with this Lease and all applicable laws, codes, ordinances and all governmental regulations and all requirements of any insurer providing coverage for the Premises.



8.3 ALTERATIONS BECOME PART OF PREMISES. All alterations, additions or improvements made to the Premises by Tenant (except movable furniture, equipment and trade fixtures) shall become part of the Premises and Landlord's property immediately upon installation thereof unless Landlord requires the removal thereof prior to the termination of this Lease. Tenant shall have no obligation to remove the alterations, additions or improvements from the Premises unless requested by Landlord in writing at the time of Landlord's consent thereto, in which event Tenant shall remove such items and repair any damage caused thereby at Tenant's sole cost and expense. Notwithstanding the foregoing, Tenant shall be permitted to remove from the Premises any such alterations, additions and improvement if, at the time of their installation, Landlord and Tenant have mutually agreed that Tenant may remove the same. Any alteration, addition or improvement that Tenant is required or, at Tenant's option, permitted to remove, together with any movable furniture, equipment and trade fixtures, shall be removed at Tenant's expense prior to the termination of this Lease and Tenant shall promptly repair any damage to the Premises caused by such removal. If Tenant fails to remove any alteration, addition or improvement that Tenant is required to remove or fails to repair damage caused by such removal, Landlord shall give written notice thereof to Tenant and if Tenant shall not have removed such addition, alteration or improvement within TEN (10) DAYS following Tenant's receipt of such notice, Landlord shall have the right to undertake such action for Tenant and to collect within TEN (10) DAYS after written demand from Landlord all reasonable costs incurred in such removal or repair, together with Default Interest (defined in PARAGRAPH 24.6) from the date TEN (10) DAYS after Landlord's request.



9.0 LIENS. Tenant shall keep the Premises free and clear of all liens incurred by or resulting from acts of Tenants or any subtenant or any contractor or subcontractor of Tenant. If any such







lien is filed, Tenant shall, within TEN (10) DAYS following Tenant's receipt of notice of such lien, at its expense, cause the lien to be fully discharge by paying the obligation secured thereby or by obtaining and recording a surety bond of at least 150% of the amount of the claim plus estimated costs of interest, and in accordance with applicable law. Tenant is not authorized to act for or on behalf of Landlord for the purpose of constructing any improvements to the Premises, and neither Landlord nor Landlord's interest in the Premises shall be subject to any obligations incurred by Tenant. If any lien is filed or any action commenced affecting the title to the Premises Tenant shall upon receiving such notice immediately notify the Landlord. Tenant shall indemnify Landlord against and hold harmless Landlord, the Premises, the Building and the Project free, clear and harmless of and from all mechanics liens and claims of liens, and all other liabilities, liens, claims and demands on account of such work by or on behalf of Tenant.



10.0 PARKING LOT EXPANSION. Tenant shall construct at any time during the Term up to, at Tenant's option, an additional 300 parking spaces within the general area designated in EXHIBIT C or within another area on the Building Land reasonably acceptable to Landlord (the "PARKING LOT EXPANSION"). The Parking Lot Expansion will be performed in accordance with SECTIONS 8.0 AND 9.0 above. The initial Parking Lot Expansion work for the parking spaces initially desired by Tenant must be completed, subject to force majeure, within SIX (6) MONTHS of the execution of this Lease. Such completion will be evidenced by a certificate of occupancy issued by the City of Pueblo.



11.0 ASSIGNMENT/SUBLETTING. Tenant will not assign this sublease in whole or in part and will not sub-sublease the Sublease Premises in whole or in part without the prior written consent of Landlord, which Landlord agrees will not be unreasonably withheld. However, Landlord and Tenant acknowledge that it will be reasonable for Landlord to withhold its consent in the following instances:



(i) the sublease does not contain a reasonable security deposit

provision;

(ii) banking, financial, or other credit information and references

about the proposed assignee or subtenant sufficient to enable

Landlord to determine the financial responsibility and

character of the proposed assignee or subtenant have not been

provided to Landlord;

(iii) and in Landlord's reasonable judgment, the financial worth of

the proposed assignee or subtenant does not meet the credit

standards applied by Landlord for other tenants under

subleases for the Premises.



Landlord's consent to an assignment or sublease will not release Tenant from the payment and performance of its obligations under this Lease, but rather Tenant and assignee or subtenant will be jointly and severally liable for such payment and performance.



In the case of an assignment or subletting, 100% of any sum or economic consideration received by Tenant as a result of such subletting (after having first subtracted broker and marketing costs) will be paid to Landlord after first deducting the rental due under this lease, prorated to reflect only rental allocable to the sublet portion of the Premises, and the cost of any real estate commissions incurred in connection with such subletting, amortized over the term of the







sublease. Upon Landlord's request, Tenant will assign to Landlord all amounts to be paid to Tenant by any such subtenant or assignee and will direct such subtenant or assignee to pay the same directly to Landlord.



12.0 LANDLORD SERVICES.



12.1 LANDLORD'S REPAIR AND MAINTENANCE. Landlord will keep in good, working order and repair the Common Area, the windows in the Building, the mechanical, plumbing and electrical equipment and systems (including, without limitation, HVAC) serving the Premises and Building, and the structure, structural components and slab of the Building. Prior to the commencement of the Term, Landlord will close the opening that currently exists between Floor 1 and Floor 2 of the Building and will repair certain depressions in the Premises floor or slab such that such depressions are made level with the adjacent portions of the floor or slab.



12.2 LANDLORD'S OTHER SERVICES.



(A) Landlord will furnish the Premises with those services customarily provided in comparable office buildings in the vicinity of the Project, including without limitation: (1) electricity for lighting and the operation of office machines standard and customary for Tenant's use of the Premises, although Landlord will not be obligated to furnish more power to the Premises than is proportionally allocated to the Premises under the Building design; (2) heat and air conditioning reasonably required for the comfortable occupation of the Premises during business hours; (3) access and elevator service; (4) lighting replacement in the parking lot and other Common Areas; (5) restroom supplies; (6) window washing with reasonable frequency, as determined by Landlord; and (7) daily cl ...