Exhibit 10.3

 

FOURTH AMENDMENT TO LEASE

 

This FOURTH AMENDMENT TO LEASE (this “Fourth Amendment”) is executed effective
as of the 27 day of September 2018 between JP-CORPORATE PLACE, LP, a Texas
limited partnership (“Landlord”), and INTRUSION, INC. (“Tenant”).

 

RECITALS

 

A.

Icon 1101 E. Arapaho Owner Pool 2, LLC (the “Original Landlord”) and Tenant are
parties to that certain Lease dated as of January 12, 2004 (the “Original
Lease”), as amended by that certain First Amendment to Lease dated as of
September 1, 2009 (the “First Amendment”), by that certain Second Amendment to
Lease dated as of September 21, 2012 (the “Second Amendment”), and by that
certain Third Amendment to Lease dated March 16, 2017 (the “Third Amendment”).
The Original Lease, as amended by the First Amendment, Second Amendment and
Third Amendment, is herein referred to as the “Lease.”

 

B.

Under the terms of the Lease, Landlord leases to Tenant certain premises
consisting of approximately 22,590 rentable square feet with an address of 1101
East Arapaho Road, Suite 200, Richardson, Texas 75081, as more particularly
described in the Lease and located in the Building commonly known as Corporate
Place.

 

C.

Landlord is the successor in interest to the Original Landlord, having purchased
the Building in July 2017.

 

D.

The Term of the Lease currently expires on April 30, 2021.

 

E.

Tenant desires to extend the Term of the Lease and Landlord has agreed to such
extension on the terms and conditions contained herein.

 

NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby covenant and agree as follows:

 

AMENDMENTS

 

1.     Definitions. Except as expressly defined in this Fourth Amendment, each
defined term used in this Fourth Amendment has the same meaning given to such
term in the Lease; provided, however, in the event of a conflict, the definition
set forth in this Fourth Amendment shall control.

 

2.     Premises. Landlord currently leases to Tenant Suite 200 in the Building,
which the parties agree contains an aggregate of 22,590 rentable square feet
(the “Premises”).

 

 

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3.     Amendment to Lease. As of October 1, 2018 (the “Effective Date”), unless
otherwise set forth below, Landlord and Tenant hereby amend the Lease as
follows:

 

(a)     Fourth Extended Term. The Term of Lease as set forth in the Reference
Pages of the Lease is hereby extended for a period of forty-three (43) months
beginning on May 1, 2021 (the “Fourth Extended Term Commencement Date”) and
expiring on November 30, 2024 (the “Fourth Extended Term Termination Date”). The
portion of the Term commencing on the Fourth Extended Term Commencement Date and
ending on the Fourth Extended Term Termination Date shall be referred to herein
as the “Fourth Extended Term.”

 

(b)     Base Rent for the Premises. Beginning on the Effective Date, the
schedule of Base Rent for the Premises is hereby amended to be as follows:

 

Lease Months

Annual Rate per

Rentable Square Foot

Monthly Base

Rent

10/1/2018 – 3/31/2019 $ 0.00 + E None + E 4/1/2019 – 3/31/2020 $ 15.00    $
28,237.50  4/1/2020 – 4/30/2021 $ 15.50 $ 29,178.75  5/1/2021 – 4/30/2022 $
16.00 + E $ 30,120.00 + E 5/1/2022 – 4/30/2023 $ 16.50 + E $ 31,061.25 + E
5/1/2023 – 4/30/2024 $ 17.00 + E $ 32,002.50 + E

5/1/2024 – 11/30/2024

$ 17.00 + E

$ 32,002.50 + E

+ E means plus Tenant’s pro rata share of electricity charges.

 

(c)     Electrical Expenses. Tenant shall pay as additional rent Tenant’s Share
of an amount (the “Electrical Expenses”) equal to the sum of Tenant’s
Proportionate Share of all electrical service to the Building (“EE Additional
Rent”). Such EE Additional Rent, together with any and all other amounts payable
monthly by Tenant to Landlord pursuant to the terms of the Lease and this
Amendment, shall be hereinafter collectively referred to as the “Additional
Rent.” The Base Rent and EE Additional Rent shall be payable for the same
periods and in the same manner, time and place as the Base Rent beginning on the
Effective Date.

 

(d)     Cap on Electricity Expense. Section 6 of the Third Amendment is deleted
in its entirety.

 

(e)     Outstanding Operating Expenses. Landlord hereby waives all past due
Operating Expenses for 2017.

 

(f)     Base Year. As of the Effective Date, (a) the “Base Year Expenses” shall
be Calendar Year 2019, and (b) “Base Year (Taxes)” shall be Calendar Year 2019.

 

(g)     AC Systems. Tenant’s dedicated new AC Systems described under
Improvement to Premises shall be separately metered. Tenant agrees to maintain a
service contract with a licensed HVAC contractor to service the AC Systems on at
least a semi-annual basis. The Tenant shall be responsible for all repairs and
maintenance of the AC Systems.

 

(h)     Renewal Option. Attached as Exhibit A is a Renewal Option for the
Premises. All prior Renewal Options with respect to the Premises are null and
void.

 

 

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4.     Improvements to Premises. Tenant accepts the Premises “AS IS, WHERE IS”
and the Landlord will only be required to re-carpet the Premises using the
Landlord’s Standard Building Materials and to fund the Texas Air Systems quote
of $198,775.00 dated July 16, 2018, for turnkey installation of two (2)
dedicated Data Aire G Force Split Systems (the “AC Systems”). In this regard,
the Tenant will meet with the Landlord’s representative within twenty (20) days
after the execution of this Fourth Amendment and select carpeting from the
samples available from the Landlord’s Standard Building Materials. Landlord will
order the selected carpeting (if available) and arrange for installation. The
Tenant agrees to cooperate with Landlord and Landlord’s contractors with respect
to moving of furniture, files, computers, phones and fixtures in order to
install the carpet in the Premises. Tenant will coordinate with Landlord on
installation of AC Systems. Tenant will be responsible for any roof damage or
leaks resulting from improper installation of AC Systems by Texas Air Systems.
Texas Air Systems must provide Landlord with proof of insurance and add Landlord
as additional insured.

 

5.     Broker. Landlord acknowledges that NAI Robert Lynn represents the Tenant
in connection with the negotiation of this Fourth Amendment and will be entitled
to a real estate commission pursuant to the terms of a separate agreement.

 

6.     Defaults. Tenant hereby represents and warrants to Landlord that, as of
the date of this Fourth Amendment, Tenant is in compliance with all material
terms, covenants and conditions of the Lease and that there are no breaches or
defaults under the Lease by Landlord or Tenant, and that Tenant knows of no
events or circumstances which, given the passage of time, would constitute a
default under the Lease by either Landlord or Tenant.

 

7.     No Further Modification. Except as set forth in this Fourth Amendment,
all of the terms and provisions of the Lease shall apply with respect to the
Premises, as revised by this Fourth Amendment, and shall remain unmodified and
in full force and effect. Effective as of the date hereof, all references to the
“Lease” shall refer to the Lease as amended by this Fourth Amendment. In the
event of a conflict between the terms of this Fourth Amendment and the original
Lease, the terms of this Fourth Amendment shall control as to the subject matter
in conflict.

 

8.     Counterparts and Signatures. This Fourth Amendment may be executed in
counterparts, each of which shall be deemed an original, but such counterparts,
when taken together, shall constitute one agreement. This Fourth Amendment may
be executed by a party’s signature transmitted by facsimile (“fax”) or by
portable document format (“pdf”), and copies of this Fourth Amendment executed
and delivered by means of faxed or pdf signatures shall have the same force and
effect as copies hereof executed and delivered with original signatures. All
parties hereto may rely upon faxed or pdf signatures as if such signatures were
originals. All parties hereto agree that a fax or pdf signature page may be
introduced into evidence in any proceeding arising out of or related to this
Fourth Amendment as if it were an original signature page.

 

[Signatures are on following page.]

 

 

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EXECUTED as of the date first above written.

 

 

LANDLORD:

 

JP-CORPORATE PLACE, LP, a Texas limited partnership

   

 

 

By:

JP-CORPORATE PLACE GP, LLC,

   

a Texas limited liability company,

its sole General Partner

 

 

 

By:

/s/ Scot Florsheim

    Scot Florsheim, Manager

 

 

TENANT:

 

INTRUSION, INC., a Delaware corporation

 

 

By:     /s/ Michael L. Paxton

Name: Michael L. Paxton

Title:   Vice President and CFO

 

 

 

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EXHIBIT A

 

Renewal Option

 

Option Term. Landlord hereby grants to Tenant an option to extend the Lease Term
for a period of three (3) years (an “Option Term”), which options shall be
exercisable only by written notice (“Option Notice”) delivered by Tenant to
Landlord as provided in Section 2 below. Tenant shall not have the rights
contained in this Exhibit A if, as of the date of the Option Notice or, at
Landlord’s option, at any time between the delivery of the Option Notice and the
commencement of the Option Term, Tenant is in material default under this Lease
after any applicable notice and cure period, Tenant or an Affiliate of Tenant
does not physically occupy the entire Premises.

 

1.     Option Rent. The Rent payable by Tenant during the Option Term (“Option
Rent”) shall be equal to the fair market rent for the Premises as of the
commencement date of the Option Term. The fair market rent shall be the rental
rate, including all escalations, at which tenants, as of the commencement of the
Option Term, are leasing non-sublease, non-encumbered space comparable in size,
location and quality to the Premises for a term of three (3) years, which
comparable space is located in other similar class office buildings in the
market area of the Building in Richardson, Texas.

 

2.     Exercise of Option. The option contained in this Exhibit A shall be
exercised by Tenant, if at all, only in the following manner: (i)

 

(i)     Tenant shall deliver written notice (“Interest Notice”) to Landlord
between twelve (12) months and nine (9) months prior to the expiration of the
Lease Term, stating that Tenant is interested in exercising its option;

 

(ii)     Landlord, after receipt of the Interest Notice, shall deliver written
notice (the “Option Rent Notice”) to Tenant setting forth Landlord’s good faith
determination of the Option Rent within thirty (30) days of receipt of Interest
Notice; and

 

(iii)     If Tenant wishes to exercise such option, Tenant shall, within thirty
(30) days after Tenant’s receipt of the Option Rent Notice, exercise the option
by delivering written notice (the “Option Notice”) to Landlord and, upon and
concurrent with such exercise, Tenant may, at its option, object to the Option
Rent determined by Landlord.

 

If Tenant exercises the option to extend but objects to the Option Rent
contained in the Option Rent Notice, then the Option Rent shall be determined as
set forth in Section 3 below. Failure of Tenant to deliver the Interest Notice
to Landlord on or before the date specified in (i) above or to deliver the
Option Notice to Landlord on or before the date specified in (iii) above shall
be deemed to constitute Tenant’s failure to exercise its option to extend. If
Tenant timely and properly exercises its option to extend, the Lease Term,
subject to Section 3 below, shall be extended for the Option Term upon all of
the terms and conditions set forth in this Renewal Option, except that the Rent
shall be as indicated in the Option Rent Notice or as determined in accordance
with Section 3 below, and all references herein to the Lease Term shall include
the Option Term.

 

 

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3.     Determination of Option Rent. In the event Tenant exercises its option to
extend but objects to Landlord’s determination of the Option Rent in connection
with its exercise of the option to extend, Landlord and Tenant shall attempt to
agree in good faith upon the Option Rent. If Landlord and Tenant fail to reach
agreement within twenty (20) days following Landlord’s receipt of the Option
Notice (the “Outside Agreement Date”), then each party shall make a separate
determination of the Option Rent, within five (5) business days after the
Outside Agreement Date, and concurrently exchange such determinations and such
determinations shall be submitted to arbitration in accordance with Sections
3(i) through 3(vii) below.

 

(i)     Landlord and Tenant shall each appoint one arbitrator who shall by
profession be a real estate broker who shall have been active over the five (5)
year period ending on the date of such appointment in the leasing of comparable
office properties in the area of Richardson, Texas. The determination of the
arbitrators shall be limited solely to the issue of whether Landlord’s or
Tenant’s submitted Option Rent is the closest to the actual fair market rent, as
determined by the arbitrators, taking into account the requirements of this
Renewal Option. Each such arbitrator shall be appointed within fifteen (15)
business days after the applicable Outside Agreement Date.

 

(ii)     The two (2) arbitrators so appointed shall within five (5) business
days of the date of the appointment of the last appointed arbitrator agree upon
and appoint a third arbitrator who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial two (2) arbitrators.

 

(iii)     The three (3) arbitrators shall within five (5) business days of the
appointment of the third arbitrator reach a decision as to whether the parties
shall use Landlord’s or Tenant’s submitted Option Rent, and shall notify
Landlord and Tenant thereof. Should the three (3) arbitrators fail to reach such
decision, then the decision shall be made solely by the third such appointed
arbitrator.

 

(iv)     The decision as to the amount of the Option Rent, as made by the
arbitrators, or the third arbitrator alone as aforesaid, shall be binding upon
Landlord and Tenant.

 

(v)     If either Landlord or Tenant fails to appoint an arbitrator within
fifteen (15) business days after the applicable Outside Agreement Date, the
arbitrator appointed by one of them shall reach a decision, notify Landlord and
Tenant thereof, and such arbitrator’s decision shall be binding upon Landlord
and Tenant.

 

(vi)     If the two (2) arbitrators fail to agree upon and appoint a third
arbitrator, or both parties fail to appoint an arbitrator, then the appointment
of the third arbitrator or any arbitrator shall be dismissed and the Option Rent
to be decided shall be forthwith submitted to arbitration under the provisions
of the American Arbitration Association, but subject to the instruction set
forth in this Section 3.

 

(vii)     The cost of the third arbitrator shall be paid by Landlord and Tenant
equally, and the cost of each of Landlord’s and Tenant’s arbitrator shall be
paid by the party that engages such arbitrator.

 

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