EXHIBIT 10.28
9800 RICHMOND
LEASE AGREEMENT
FRAYDUN REALTY CO.,
a New York Limited Partnership,
Landlord
to
FRANKLIN BANK, S.S.B.,
a Texas state savings bank
Tenant

 

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TABLE OF CONTENTS
FOR OFFICE BUILDING LEASE

                  Page ARTICLE 1  
Leased Premises
  4    
 
    ARTICLE 2  
Term
  4    
 
    ARTICLE 3  
Use
  6    
 
    ARTICLE 4  
Rent
  6    
 
    ARTICLE 5  
Services Provided by Landlord
  7    
 
    ARTICLE 6  
Quiet Enjoyment
  9    
 
    ARTICLE 7  
Repairs and Maintenance
  9    
 
    ARTICLE 8  
Adjustment of Base Rental
  10    
 
    ARTICLE 9  
Alterations and Improvements
  12    
 
    ARTICLE 10  
Assignment and Subletting
  13    
 
    ARTICLE 11  
Compliance with Laws
  15    
 
    ARTICLE 12  
Fire or Other Casualty
  15    
 
    ARTICLE 13  
Eminent Domain
  16    
 
    ARTICLE 14  
Indemnity
  16    
 
    ARTICLE 15  
Waiver of Subrogation
  17    
 
    ARTICLE 16  
Subordination
  17    
 
    ARTICLE 17  
Access by Landlord
  18    
 
    ARTICLE 18  
Landlord’s Lien — Deleted prior to execution
  18    
 
    ARTICLE 19  
Defaults and Remedies
  18    
 
    ARTICLE 20  
Nonwaiver
  21    
 
    ARTICLE 21  
Holding Over
  21    
 
    ARTICLE 22  
Notice
  21    
 
    ARTICLE 23  
Limitation of Landlord’s Liability
  22    
 
    ARTICLE 24  
Parking
  22    
 
    ARTICLE 25  
Estoppel Certificate
  22    
 
    ARTICLE 26  
Attorneys’ Fees and Jury Trial
  23    
 
    ARTICLE 27  
Administrative Charge for Late Payment
  23    
 
    ARTICLE 28  
Relocation and Substitution of Premises — Deleted prior to execution
  23    
 
    ARTICLE 29  
Miscellaneous
  23    
 
    ARTICLE 30  
Special Provisions
  27

 

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LEASE AGREEMENT
     THIS LEASE AGREEMENT (the “Lease”) is made and entered into as of the 26th
day of August, 2005, by and between FRAYDUN REALTY CO., a New York Limited
Partnership (hereinafter called “Landlord”) and FRANKLIN BANK, S.S.B., a Texas
state savings bank (hereinafter called “Tenant” whether one or more).
WITNESSETH:
     1. Leased Premises
          1.1. Subject to and upon the terms, provisions and conditions
hereinafter, set forth, Landlord hereby leases to Tenant and Tenant takes and
leases from Landlord approximately 44,046 square feet of net rentable area
(“NRA”) being the entire sixth (6th) floor (Suite 600), the entire seventh (7th)
floor (Suite 700), and a portion of the fifth (5th) floor, being 1610 square
feet of NRA (Suite 575 to be known as the “Storage Space” under the terms set
forth in the Addendum to the Lease) of the building located at 9800 Richmond
Avenue in Houston, Harris County, Texas currently known as 9800 RICHMOND (herein
after called the “Building”). The Building is situated on that certain tract of
land described on Exhibit “A” attached hereto and made a part hereof for all
purposes. The term “Building” includes related driveways, parking areas and
facilities and similar improvements. The area hereby leased in the Building is
hereafter called the “Leased Premises” and is shown outlined on the floor plan
drawing which is attached hereto marked Exhibit “B” and made a part hereof for
all purposes. The rentable area contained within the Leased Premises shall be
deemed for all purposes, to be the number of square feet set forth hereinabove.
     The NRA was calculated using a modified BOMA ANSI Z.65.1 1980 revised 1989
standards measuring from glass line to corridor side of the corridor wall and
from center line of demising wall to center line of demising wall, to tenant
side of walls of restrooms, stairs, mechanical and electrical rooms (restrooms
are not included in the usable area of a full floor tenant).
     2. Term
          2.1. September 1, 2005, and terminates on the last day of the month of
the seventy-eighth (78th) month anniversary of the date of Substantial
Completion (as hereinafter defined) of the Finish Out Work as defined in Exhibit
“C”, or on such date as the Term of this Lease shall sooner cease and terminate
as hereinafter provided. The definition of (or references to) the “Term” of this
Lease shall include the initial Term as set out above, Renewal Terms (as defined
in the Addendum attached hereto) and other renewals and/or extensions thereof.
Promptly following the Commencement Date, Landlord and Tenant shall, upon
request of Landlord or Tenant (and not otherwise) enter into a supplementary
agreement in recordable form setting the Commencement Date of this Lease, but
the failure of Landlord and Tenant to execute such supplementary agreement shall
have no effect whatsoever on Landlord’s and Tenant’s obligations hereunder.
          2.2. After the Commencement Date and until the Finish Out Work in
Suite 700 is Substantially Complete, Tenant shall occupy Suite 600. Tenant
agrees to vacate portions of Suite 600 upon Substantial Completion of Suite 700
in order to permit Landlord to complete the Finish Out Work in Suite 600 in
stages and in a timely manner. The Leased Premises shall be completed and
prepared for Tenant’s occupancy in the manner, and subject to the terms,
conditions and covenants set forth in Exhibit “C” which is attached hereto and
made a part hereof for all purposes. The installations, facilities, materials
and work to be furnished, installed and performed in the Leased Premises by
Landlord or pursuant to contracts executed by Landlord are hereinafter (and in
Exhibit “C”) referred to as “Finish Out Work.” All other installations
facilities, materials, construction and work which may be undertaken by or at
the request of Tenant or for the account of Tenant to prepare, equip, decorate
and furnish the Leased Premises for Tenant’s occupancy, are hereinafter (and in
Exhibit “C”) called “Tenant’s Finish Work.” Any approval by Landlord or
Landlord’s architects and/or engineers of any of Tenant’s drawings, plans and
specifications which are prepared in connection with any construction of
improvements in the Leased Premises shall not in any way be construed or operate
to bind

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Landlord or to constitute a representation or warranty of Landlord as to the
adequacy or sufficiency of such drawings, plans and specifications or the
improvements to which they relate, for any use, purpose, or condition, but such
approval shall merely be the consent of Landlord as may be required hereunder in
connection with Tenant’s construction or improvements in the Leased Premises in
accordance with such drawings, plans and specifications.
          2.2.1. In connection with Finish Out Work and/or Tenant’s Finish Work,
Landlord and Tenant further covenant as follows:
               2.2.1.1. The Leased Premises shall be deemed ready for occupancy
on the date that is three (3) days after the Finish Out Work in the Leased
Premises (both Suite 600 and Suite 700 but excluding the Storage Space) shall
have been Substantially Completed as certified to Tenant by Landlord, and
Tenant’s architect, and receipt of the final signature by the COH inspector,
allowing Tenant to occupy the Leased Premises; and it shall be so deemed,
notwithstanding the fact that minor or insubstantial details of construction,
mechanical adjustment or decoration remain to be performed, the noncompletion of
which do not materially interfere with Tenant’s use of the Leased Premises
(“Substantial Completion”).
               2.2.1.2. If the Substantial Completion of the Finish Out Work in
the Leased Premises shall be delayed due to any act or omission of Tenant or any
of its employees, agents or contractors, or any failure to plan or execute
Tenant’s Finish Work diligently and expeditiously, the Leased Premises shall be
deemed ready for occupancy on the date when they would have been ready but for
such delay. Landlord shall notify Tenant in writing within five (5) days of any
such delay caused by Tenant.
               2.2.1.3. If and when Tenant actually occupies the entire Leased
Premises for Tenant’s permitted use excluding the Growth Space (as hereinafter
defined), it shall be conclusively presumed that the same were in satisfactory
condition (subject to “punch list” items and latent defects) as of the date of
such occupancy, unless, within ten (10) days after such date Tenant shall give
Landlord written notice specifying with particularity the respects in which the
Leased Premises were not in satisfactory condition. After taking possession of
the Leased Premises, any such notice from Tenant shall in no manner whatsoever
relieve Tenant from the payment of rent, or allow a delay in the payment of rent
by Tenant, or otherwise excuse Tenant from performance of its obligations under
this Lease.
          2.3. The effective date of this Lease shall be the date of execution
of this Lease by Landlord.
          2.4. Notwithstanding the fact that the “Commencement Date” of this
Lease shall be a date subsequent to the effective date of this Lease, Landlord
and Tenant intend and agree that each shall have vested rights immediately upon
execution of this Lease and it is intended that this Lease shall be fully
binding upon the parties hereto and shall be in full force and effect from and
after execution hereof by both Tenant and Landlord.
          2.5. Tenant covenants and agrees to pay Landlord a Security Deposit in
the amount of TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($25,000.00), upon
execution of this Lease to be held by Landlord to secure performance of Tenant’s
obligations under this Lease. Upon the occurrence of any Event of Default
(hereinafter described) by Tenant under this Lease, Landlord may, from time to
time and without prejudice to any other remedy, apply said Security Deposit to
the extent necessary to pay any arrears of Base Rental or any other damages,
injury, expense or liability caused to Landlord by such Event of Default.
Landlord shall, subject to the terms of this Lease, return to Tenant any
remaining balance of such Security Deposit within thirty (30) days after the
termination of this Lease. The Security Deposit shall not be considered an
advance payment of Base Rental or a measure of Landlord’s damages in case of
default by Tenant. If at any time during the Term hereof, the Security Deposit,
or any portion thereof, is applied by Landlord as provided by the terms of this
Lease, Tenant shall, not later than ten (10) days after written notice from
Landlord, restore the Security Deposit to its original amount as set out in the
first sentence of this Article 2.5. In addition to the foregoing, Tenant shall
forfeit the Security Deposit to Landlord should Tenant enter into any type of
bankruptcy proceeding. It is intended that this paragraph and the provisions
herein contained shall

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supersede and be paramount to any conflicting provisions of the Texas Property
Code, as well as any statute governing the rights of landlords regarding the
return and retention of security deposits. Tenant herein voluntarily and
knowingly waives any and all statutory provisions regarding the return and
retention of security deposits. This paragraph shall control.
     3. Use
          3.1. The Leased Premises are to be used and occupied by Tenant solely
for the purpose of general and executive offices, and the Tenant shall not use
the Leased Premises for any other purpose without the express prior written
consent of Landlord, which consent shall not be unreasonably withheld,
conditioned or delayed.
     4. Rent
          4.1. As rental for the use and occupancy of the Leased Premises
(hereinafter sometimes called “Base Rental”) Tenant shall pay (and hereby agrees
to pay) to Landlord, at the Building office (or at such other address as
designated by Landlord), in advance, without demand, deduction, set-off or
abatement (except as expressly provided for in this Lease), the sums described
in Article 4.1.1. below, payable on the first day of each calendar month for
each and every month during the Term of this Lease, in lawful money of the
United States of America, the first such payment of Base Rental to be due and
payable for the month of September, 2005 on or before September 1, 2005, in the
amount of Twenty-seven Thousand Thirty-five and 17/100 ($27,035.17) which
includes the Storage Rental, and subsequent installments of Base and Storage
Rental shall be due and payable, in advance, on the first day of each month
thereafter in accordance with the Base Rental Schedule for the remainder of the
Term of this Lease. If the Commencement Date or the date of Substantial
Completion of the Finish Out Work is not the first day of a calendar month, or
the Lease terminates on a day other than the last day of a calendar month,
Tenant will pay a pro rata part of such monthly amount as rental for the first
or last partial month, as the case may be. Tenant shall also pay to Landlord all
other sums of money as shall become due from and payable by Tenant to Landlord
under the terms of this Lease (“Additional Rent”). Subject to notice and cure
periods as expressly provided for in Article 19.1.1 of this Lease, Landlord
shall have the same remedies for default for the payment of Additional Rent as
are available to Landlord in the case of a default in the payment of Base
Rental.
               4.1.1. Base Rental Schedule will be as follows:

              Rental Rate per NRA     Time Period   per Annum   Monthly Rental
09/01/05 — Substantial Completion
  $14.00 per NRA/annum   $25,693.50
 
  (calculated on 22,023 NRA)   (This amount shall not
 
      vary and is fixed until
 
      Substantial Completion)

              Rental Rate per NRA     Time Period   per Annum   Monthly Rental
Payment
Substantial Completion through Month 7
  ABATED   ABATED  
Months 08 — 18
  $15.00 per NRA/annum*   $48,807.50 per month
 
  (calculated on 39,046 NRA)    
Months 19 — 54
  $15.00 per NRA/annum   $55,057.50 per month
 
  (calculated on 44,046 NRA)    
Months 55 — 78
  $15.50 per NRA/annum   $56,892.75 per month
 
  (calculated on 44,046 NRA)     Storage Rental (as hereinafter defined in the
Addendum)
09/01/05 — Expiration Date
  $10.00 per NRA/annum   $  1,341.67 per month

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*   The 39,046 square feet of NRA represents the entire Leased Premises of
44,046 NRA less 5,000 square feet of space to be known as the “Growth Space”.

          4.2. Any payment of Base Rental received after the fifth (5th)
business day of the month, or any payment of Additional Rent, or any other sums
due to Landlord hereunder received later than ten (10) days after the due date,
shall he considered a late payment, and such amounts shall bear interest from
the due date until paid at the lesser of: (1) twelve percent (12%) per annum; or
(2) two percent (2%) below the highest nonusurious interest rate permitted by
applicable law. Any such interest shall be payable as Additional Rent hereunder
and shall be payable to Landlord immediately on demand.
     5. Services Provided by Landlord
          5.1. Subject to the terms of this Lease, Landlord agrees to furnish to
Tenant:
               5.1.1. Air conditioning and heating in season, Monday through
Friday from 8:00 a.m to 6:00 p.m. and Saturday from 9:00 a.m. to 1:00 p.m. will
be at such temperatures as are considered to be standard (72—74 degrees
Fahrenheit excluding the Storage Space which shall range between 72 — 78 degrees
Fahrenheit) for comparable class buildings in the Westchase submarket, and
Landlord will commence air conditioning and heating services in a timely manner
to achieve the standard temperatures during the required times; provided,
however, Tenant herein agrees to monitor its Saturday morning usage and to the
extend Tenant finds that Tenant is not occupying the Leased Premises most
Saturday mornings, Tenant shall notify Landlord and both shall work together to
arrange all or a portion of the Leased Premises with air conditioning and
heating services during normal business hours of the Building on Saturdays 10 be
provided upon written request of Tenant made in accordance with the rules and
regulations for the Building. Landlord will provide service on Saturday
afternoons, Sundays, and Holidays (defined below), only upon written request of
Tenant (at least 24 hours in advance), who shall bear the cost thereof (as
reasonably determined by Landlord which is currently billed at $25.00 per hour
per floor). Holidays recognized are New Years Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. In the event that any
Holiday shall be observed on a day other than the actual day on which such
Holiday occurs, then the day which such Holiday is observed shall constitute the
Holiday under this Lease.
               5.1.2. Water at those points of general supply provided on the
floor on which the Leased Premises are located.
               5.1.3. Janitor service on a five (5) day week basis at a level of
quality comparable to comparable class office buildings in the Westchase
submarket (excluding the Storage Space) in accordance with Exhibit “J” attached
hereto and made a part hereof; provided however, if Landlord notifies Tenant at
the time of Landlord’s approval of the Final Plans that Tenant’s floor covering
or other improvements in the Leased Premises requires a level of cleaning in
excess of that provided in comparable class office buildings in the Westchase
submarket, Tenant shall pay any additional cleaning costs attributable thereto
as Additional Rent hereunder.
               5.1.4. Building standard fluorescent bulb and ballast replacement
in all areas and all incandescent bulb replacement in public areas, restrooms,
parking areas and stairwells, including replacement of burned out, broken, or
otherwise non-functioning bulbs.
               5.1.5. Electrical facilities to furnish sufficient power for
personal computers and other machines of similar low electrical consumption,
including electricity required for duplicating equipment; but not including
special lighting in excess of Building standard, or any other item of electrical
equipment, the electrical power requirement of which singly consumes more than
0.25 kilowatts per hour at rated capacity or requires a voltage other than 120
volts single phase; and provided further that if any installation of said
electrical

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equipment requires additional air conditioning capacity above that provided by
the Building’s standard system, then the additional air conditioning
installation and operating costs shall be the sole obligation of Tenant. Tenant
shall pay to Landlord, as Additional Rent and billed monthly such charges as may
be separately metered (the cost of any such meter and its installation to be
borne by Tenant) or as Landlord’s engineer may compute fur any electrical
service in excess of that stated above.
               5.1.6. Tenant shall pay Additional Rent provided for in this
Subarticle 5.1 not later than ten (10) days after presentation of a descriptive
invoice therefor by Landlord, and Tenant’s failure to timely pay such amount
shall subject Tenant to default provisions and late payment charges under this
Lease.
          5.2. Failure by Landlord to furnish these defined services, or any
cessation or interruption thereof, shall not render Landlord liable in any
respect for damages to either persons or property, unless caused by the
negligence or willful misconduct of Landlord; its agents, employees or
contractors. Should any of the equipment or machinery break down, or for any
cause cease to function properly, Landlord shall use reasonable diligence to
restore such service.
               5.2.1. Notwithstanding the provisions of Article 5.2 and
excluding the Storage Space, in the event Landlord fails to provide any of the
services described herein (through no fault of Tenant, Tenant’s agents,
representatives, successors, assigns, shareholders, employees, contractors,
directors or officers), and such failure (i) is the result of conditions within
Landlord’s control, (ii) renders the Leased Premises untenantable (i.e., Tenant
cannot reasonably conduct its business therein), and (iii) continues for more
than five (5) consecutive business days after written notice from Tenant, then
the Tenant’s sole and exclusive remedy shall be to have all rent abated
proportionately as to that portion of the Leased Premises rendered untenantable
for permitted use under the Lease until such services are restored or the Leased
Premises are otherwise rendered tenantable again. Notwithstanding any provisions
to the contrary elsewhere in the Lease, if such services are not restored to the
entire Leased Premises after twenty (20) consecutive days, for any reason
whatsoever excepting those items covered by Article 12 of this Lease, Tenant
shall have the right to terminate this Lease as Tenant’s sole and exclusive
remedy upon written notice to Landlord at any time after the twenty (20) day
period but prior to the restoration of service (but not thereafter). The term
“untenantable” as used herein shall mean that, as a result of the continuous
(for the periods set out hereinabove) failure or interruption of such utility
services; Tenant is unable to use the Leased Premises for the purpose for which
it was intended.
          5.3. Should Tenant desire any additional services beyond those
described in Subarticle 5.1 above, or desire rendition of such services outside
the normal limes such services are provided by Landlord, then Landlord may (at
Landlord’s option), upon reasonable advance notice from Tenant to Landlord,
furnish such services and Tenant agrees to pay Landlord such charges as may be
agreed upon between Landlord and Tenant, but in no event at a charge more than
Landlord’s actual cost, plus five percent (5%) thereof as overhead for the
additional services; provided, it being agreed that the cost to Landlord of such
additional services shall be excluded from the “Basic Cost” as that lerm is
defined in Article 8 of this Lease.
          5.4. Landlord shall furnish Tenant, at Landlord’s cost, up to one
hundred eighty (180) 24-hour access cards and up to one hundred eighty
(180) keys (whichever is applicable) for each corridor door entering the Leased
Premises. Access cards shall be coded as to allow elevator access as directed by
Tenant to the Leased Premises. Additional keys will be furnished at a charge of
$5.00 each and additional 24-hour access cards shall be furnished at a cost of
$15.00 each. Request for additional keys or access cards shall be on a written
order signed by Tenant or Tenant’s duly authorized representative. All
keys/cards shall remain the property of Landlord. Replacement of lost, stolen,
or broken access cards will be at a cost of $15.00 per card. Except for Excluded
Areas as provided in the Final Plans, no additional locks shall be allowed on
any door of the Leased Premises without the express written permission of
Landlord first received, and Tenant shall not make or permit to be made any
duplicated keys. Upon termination of this Lease, Tenant shall deliver to
Landlord all keys/cards to the Leased Premises and shall give to Landlord a full
explanation of any combinations for all locks for safes,

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and vault doors, if any, in the Leased Premises. Failure to return cards will
result in a debit from the security deposit to cover the lost items.
          5.5. Landlord, at Landlord’s cost, shall provide and install the
initial door signage for the entry door to the Leased Premises; all such letters
and numerals shall be in Building’s standard graphics, provided, however, at
Tenant’s cost, Tenant may design and install upgraded signage in the Leased
Premises with Landlord’s prior reasonable approval. Landlord, at Landlord’s
cost, shall also provide and install the initial listing for Tenant’s business
on the Building directory board.
          5.6. All installations now or hereafter placed on the Leased Premises
in excess of the Buildout Allowance (as defined in Exhibit “C”) shall be for
Tenant’s account and at Tenant’s cost (and Tenant shall pay all ad valorem taxes
and increases in insurance thereon), which costs shall be payable by Tenant to
Landlord as Additional Rent hereunder promptly on being invoiced therefor;
provided, however, Tenant shall have the right to review the supporting data for
such invoices. Failure by Tenant to pay such invoice in full within thirty
(30) days after receipt of a statement therefor shall constitute an Event of
Default by Tenant hereunder, giving rise to all remedies available to Landlord
under this Lease and at law for nonpayment of rent.
     6. Quiet Enjoyment
          6.1. Provided Tenant complies with its covenants, duties, agreements
and obligations hereunder, Tenant shall quietly have, hold and enjoy the Leased
Premises subject to the terms and provisions of this Lease.
     7. Repairs and Maintenance
          7.1. Landlord shall, at Landlord’s expense (except as may be otherwise
provided for herein) make the necessary repairs of damage to the Building’s and
the Parking Garage’s elevators, corridors, lobby, roof, foundation, exterior
curtain wall and all other structural members of the Building and the Parking
Garage, and all equipment, machinery, ductwork, conduit, wires, blowers,
thermostats, and other devices used to provide the services described in
Article 5 and other Landlord provided services referred to herein, unless any
such damage (excluding ordinary wear and tear) is caused by the acts or
omissions of Tenant, its agents, employees, representatives or invitees, in
which event Tenant agrees to pay the costs of such repairs. Tenant will promptly
give Landlord written notice of any damage requiring repair by Landlord as
provided above.
          7.2. Tenant shall not injure the Leased Premises or the Building, but
Tenant shall maintain and keep the Leased Premises in a clean, attractive
condition, and in good repair, excepting only damage caused by Landlord or to be
repaired by Landlord us provided for above Upon termination of this Lease,
Tenant will surrender and deliver the Leased Premises to Landlord in the same
condition in which they existed on the Commencement Date of the Lease, excepting
only ordinary wear and tear and damage arising from any cause not required to be
repaired by Tenant.
               7.2.1. Tenant will not permit any mechanic’s lien or liens to be
placed upon the Leased Premises or the Building or improvements thereon during
the Lease Term caused by or resulting from any work performed, materials
furnished or obligation incurred by or at the request of Tenant (exclusive of
Finish Out Work, which shall be the responsibility of Landlord), and in the case
of the filing of any such lien Tenant will promptly pay or ''bond around” same.
If default in payment thereof shall continue lor thirty (30) days after written
notice thereof from Landlord to Tenant, unless Tenant “bonds around” or
otherwise provides reasonable protection to Landlord, in Landlord’s judgment,
against any foreclosure of any such lien. Landlord shall have the right and
privilege at Landlord’s option of paying the same or any portion thereof without
inquiry as to the validity thereof, and any amounts so paid, including expenses
and interest, shall be so much additional indebtedness hereunder due by Tenant
to Landlord and shall be repaid to Landlord immediately on rendition of a bill
therefor.

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     8. Adjustment of Base Rental
          8.1. The Base Rental provided for herein includes the Basic Cost (as
that term is hereafter defined) for the calendar year 2005 grossed up to 95%
occupancy. The Basic Cost for the calendar year set out in the preceding
sentence is herein called the “Basic Year Cost.”
          8.2. The term “Basic Cost,” as used herein, shall mean all Operating
Expenses incurred and/or paid with respect to ownership, maintenance and
operation of the Building. All operating expenses shall be determined in
accordance with generally accepted accounting principles applicable to the real
estate industry. The term “Operating Expenses” as used herein shall mean all
expenses, costs and disbursements (not including specific costs billable to and
payable by specific tenants, nor rental commissions) of every kind and nature
which Landlord shall pay or become obligated to pay because of, or in connection
with, the ownership, maintenance and operation of the Building, including, but
not limited to, the following:
               8.2.1. Wages and salaries of all employees directly engaged in
the operation and maintenance of the Building up to the level of Building
Manager, or access control to and from the Building, including taxes, insurance,
and benefits relating thereto.
               8.2.2. All supplies, tools, equipment, and material used in
operation and maintenance of the Building.
               8.2.3. Management fees (not to exceed four (4%) of the Building’s
gross receipts) relating to management of the Building.
               8.2.4. Costs of all utilities for the Building, including but not
limited to, costs of water and power, heating, lighting, air conditioning, and
ventilating for the Building.
               8.2.5. Costs of all maintenance, cleaning, janitorial, and
service agreements relating to the Building and all equipment and systems
therein (including, without limitation, elevator maintenance and security); and
costs of window cleaning.
               8.2.6. Costs of all insurance relating to the Building including
but not limited to, the cost of casualty and liability insurance and rent
insurance (not to exceed twelve [12] months) and insurance covering Landlord’s
personal property used in connection therewith including the cost of any
deductibles.
               8.2.7. All taxes and assessments and other governmental charges
whether federal, stale, county or municipal and whether they be by taxing
districts or authorities presently taxing the Leased Premises or by others
subsequently created or otherwise, and any other taxes and improvement
assessments attributable to the Building (and the parcel of land on which it is
erected) or its operation, excluding, however, federal and state taxes on
Landlord’s income. It is agreed and understood that Tenant will be responsible
for all taxes on its personal property and on the value of leasehold
improvements to the extent that the same exceed the Buildout Allowance.
Notwithstanding anything contained in this Article 8 to the contrary, Tenant’s
portion of Tenant’s Basic Year Cost only as to the property tax component shall
be the higher of (i) calendar year 2005, or (ii) calendar year 2006 if the Slate
of Texas legislature enacts a school finance bill which affects school taxes.
               8.2.8. All costs of repairs, replacements, improvements and
general maintenance which are appropriate for the continued operation of the
Building as a comparable class office building in the Westchase submarket.
               8.2.9. The amortized portion of the cost of capital expenditures
made to the Building by reason of the laws and requirements of any public
authorities or the requirements, of any insurance companies or bodies which
become effective after the date hereof.
               8.2.10. If Landlord shall purchase any item of capital equipment
or make any capital expenditure designed to result in savings or reductions in
Operating Expenses

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amortized over the life of such equipment in accordance with generally accepted
accounting principles consistently applied, then the amortized portion of the
cost thereof shall be included in Operating Expenses but only to the extent of
the actual cost savings. The amortized portion of the costs of any such capital
equipment or capital expenditures are to be included in Operating Expenses (for
each year during the Term of this Lease) on a straight line basis, to the extent
that such items are amortized over such period of time as reasonably can be
estimated as the time in which such savings or reductions in Operating Expenses
are expected to equal Landlord’s costs for such capital equipment or capital
expenditure, with an interest factor equal to the prime interest rate then
quoted in The Wall Street Journal, plus one percent (1%), at the time of
Landlord’s having incurred said costs. If Landlord shall lease any such item of
capital equipment designed to result in savings and reductions in Operating
Expenses, then the rentals and other costs paid or incurred in connection with
such leasing shall be included in Operating Expenses for the year in which they
were incurred but only to the extent of the actual cost savings.
          8.3. At the end of each calendar year during the Term of this Lease,
Landlord shall compute the Basic Cost (calculated as herein provided) for such
calendar year or portion thereof and shall furnish such computation to Tenant.
The Base Year Cost shall then be subtracted from the actual Basic Cost for the
applicable year, and the remainder shall be multiplied by the Tenant’s
proportionate share, the product of such multiplication being herein called the
“Escalation Payment.” Tenant shall thereupon be obligated to pay to Landlord
such Escalation Payment as Additional Rent within thirty (30) days after
Landlord shall have submitted to Tenant a bill or invoice therefore accompanied
by a reasonable itemization of all such Basic Costs.
          8.4. After Landlord has determined and submitted to Tenant a bill or
invoice for the Escalation Payment due as provided for under Subarticle 8.3
above, adjusted not more frequently than once each calendar year, Landlord shall
have the right to make a good faith estimate of the Escalation Payment
thereafter to be due and payable by Tenant for any calendar year or part thereof
during the Term, and Tenant shall pay to Landlord, on the first day of each
calendar month thereafter, together with the payment of Base Rental, an amount
equal to the estimated Escalation Payment for such calendar year (or part
thereof) divided by the number of months therein. Any amounts paid based on any
such estimate shall be subject to adjustment as herein provided when the actual
amounts constituting Tenant’s Escalation Payment are available for each calendar
year. In the event of such billing or invoicing procedure by Landlord, then
Tenant shall be bound and obligated (and hereby agrees) to pay such indicated
amounts contemporaneously with each required payment of rental hereunder, on the
first day of each calendar month, monthly in advance, for each and every month
in the Term of this Lease in lawful money of the United States of America.
          8.5. Within one hundred fifty days (150) days after the end of each
calendar year, Landlord shall perform such computations as are necessary to
determine the Escalation Payment properly payable by Tenant under this
Article 8, whereupon, if Tenant shall have overpaid pursuant to the monthly
estimates referred to above, Landlord shall refund to Tenant within thirty
(30) days the amount of the excess (less any sums due and owing by Tenant to
Landlord); but if Tenant shall have underpaid, Landlord shall invoice Tenant for
the amount of the underpayment and such underpayment shall be paid by Tenant to
Landlord within thirty (30) days thereafter.
          8.6. Each calendar year an adjustment shall be made in computing the
Basic Cost for such year so that Basic Cost shall be computed for such year as
though the Building had been 95 percent occupied during the entirety of such
year and as though 95 percent of the Building had been provided with Building
standard services during the entirety of such year. If the occupancy level in
the Building for any calendar year equals or exceeds 95 percent, there shall be
no such upward adjustment but the actual costs shall he used to determine Basic
Cost for such year. The Basic Year Cost shall also be grossed up to 95% as
described in this Article 8.6.
          8.7. Whenever the term “Tenant’s share” or “Tenant’s proportionate
share” is used herein, it shall be deemed (and it is agreed by Tenant) that such
share or proportion is 12.58 percent on the Commencement Date until Substantial
Completion of the Finish Out Work which

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will then be 25.17 percent, provided, however, such share shall be adjusted
accordingly if said Leased Premises are hereafter expanded or reduced. The
storage space shall not be included in the calculation of “Tenant’s Share”. For
the purposes hereof the NRA of the Building is deemed to be 175,000.
          8.8. See Exhibit “II” attached to this Lease for Exclusions to
Operating Expenses.
          8.9. Tenant shall have the right, during business hours, upon
reasonable prior notice, and within two (2) months after receipt of the annual
Basic Cost reconciliation, to notify Landlord of Tenant’s intent to inspect
Landlord’s books and records relating to Operating Expenses and/or have such
books and records audited at Tenant’s expense by a certified public accountant
or other party designated by Tenant; provided, however., in no event will
Landlord be obligated to permit any such inspection or audit to be performed by
a consultant or firm that is compensated by Tenant on a contingent fee or
percentage of recovery basis. If any audit discloses a discrepancy of more than
five percent (5%) in the amount of Tenant’s operating expense payment for any
calendar year, the reasonable cost of the audit, shall be paid for by Landlord.
Such inspection or audit must be performed no later than sixty (60) days
following Tenant’s notice to Landlord of intent to audit. This audit right, if
exercised by Tenant, shall in no way relieve Tenant from submitting payment to
Landlord for the Escalation Payment when due in accordance with Article 8.3 of
this Lease subject to adjustment, if any, due to results of such audit.
          8.10. Notwithstanding anything contained herein to the contrary, the
Basic Cost in any calendar year for all controllable expenses will be capped at
105% of the previous year’s Basic Cost. Controllable expenses include all
Operating Expenses except real estate taxes, insurance and utilities.
          8.11. Notwithstanding anything contained herein to the contrary,
Tenant will not be charged with an Escalation Payment for the first seven
(7) months after the date of Substantial Completion.
     9. Alterations and Improvements
          9.1. Tenant will make no alteration, change, improvement, repair,
replacement or addition to the Leased Premises without the prior written consent
of Landlord which consent shall not be unreasonably withheld or delayed. If
Landlord grants such prior written consent, then the work to be done in
connection therewith shall be done at Tenant’s sole cost and expense, but by
Landlord’s contractors or other qualified contractors reasonably approved in
advance, in writing, by Landlord and in a manner and upon terms and conditions
and at a time reasonably satisfactory to Landlord. In any instance where
Landlord grants such consent, Landlord may grant such consent contingent and
conditioned upon Tenant’s contractors, laborers, materialmen and others
furnishing labor or materials for Tenant’s job working in harmony and not
interfering with any labor utilized by Landlord, Landlord’s contractors or
mechanics or by any other tenant or such tenant’s contractors or mechanics; and
if at any time such entry by one or more persons furnishing labor or materials
for Tenant’s work shall cause disharmony or interference, the consent granted by
Landlord to Tenant may be withdrawn immediately upon notice to Tenant.
Notwithstanding anything contained herein to the contrary, Tenant may make
non-structural cosmetic improvements to the Leased Premises that do not include
any changes, additions, or effect the structural, HVAC, electrical or plumbing
without prior Landlord written approval as long as the cost of such
non-structural cosmetic improvements do not exceed $100,000.00 in any
twenty-four (24) consecutive month period. Tenant agrees to notify Landlord in
writing as to any non-structural cosmetic improvements to be made by Tenant.
          9.2. Any and all permitted alterations, additions, improvements, or
changes (when made to the Leased Premises by Tenant) shall become property of
Landlord at the expiration of the Lease Term and shall be surrendered to
Landlord upon termination of this Lease by lapse of time or otherwise; provided,
however, this clause shall not apply to moveable equipment or furniture owned by
Tenant. Tenant hereby expressly waives all rights to any

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payment or compensation for any alterations, changes or improvements to the
Leased Premises. Notwithstanding the provision that such alterations,
improvements and changes will remain in the Leased Premises upon termination of
this Lease, if Landlord so requests in writing or if it is expressly stated in
Exhibit “C” to the Lease, Tenant, shall prior to termination of this Lease,
Tenant shall remove any and all alterations, cabling, fixtures and property
placed or installed by Tenant in the Leased Premises and will repair any damages
caused by such removal.
          9.3. Tenant may remove its trade fixtures, moveable office furniture,
and equipment not attached to the Building provided;
               9.3.1. Such removal is made not later than ten (10) days
following termination of this Lease.
               9.3.2. Tenant is not in default beyond any applicable cure period
of any obligation or covenant of this Lease at the lime of such removal.
               9.3.3. Tenant shall promptly repair all damage caused by such
removal.
          9.4. If any property not belonging to Landlord remains at the Leased
Premises after ten (10) days after expiration of the Term of this Lease, Tenant
hereby authorizes Landlord to make such disposition of such property as Landlord
may desire without liability for compensation or damages to Tenant in the event
that such property is property of Tenant; and in the event that such property is
the property of someone other than Tenant, Tenant agrees to expressly indemnify,
defend and hold Landlord harmless from any and all claims, damages, suits,
liability, loss and expenses in connection therewith or incident to any such
removal, exercise or dominion over and/or disposition of such property by
Landlord.
     10. Assignment and Subletting
          10.1. Tenant may assign this Lease or sublet the Leased Premises or
any part thereof to an Affiliate (as defined below) of Tenant, without the prior
consent of Landlord as long as Tenant remains liable under the Lease; provided,
however, Tenant shall give Landlord written notice (which shall specify the
assignee or sublessee, the duration of said assignment or sublease, the date
same to occur, the exact location of the space affected thereby and the rentals
on a square foot basis to be charged thereunder) of such assignment or sublease
within ten (10) days of such assignment or sublease. As used herein, (a) the
term “Affiliate” means any entity controlled by, under common control with, or
which controls, Tenant, and (b) the term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of the entity referred to, whether through ownership of
voting securities, by contract or otherwise, and the terms “controlling” and
“controls” have meanings correlative to the foregoing.
          10.2. In the event Tenant should desire to assign this Lease or sublet
the Leased Premises or any part thereof or allow same to be used or occupied by
anyone other than an Affiliate of Tenant, Tenant shall give Landlord written
notice (which shall specify the duration of said desired sublease or assignment,
the date same is expected to occur, the exact location of the space affected
thereby and the proposed rentals on a square footage basis chargeable
thereunder) of such desire at least thirty (30) days in advance of the date on
which Tenant desires to make such assignment or sublease or allow such a use or
occupancy. Landlord shall then have a period of fifteen (15) days following
receipt of such notice within which to notify Tenant in writing that Landlord
elects:
               (a) in the event such assignee or sublease fails to meet the
conditions set forth in Subarticle 10.2(d) below, to refuse to permit Tenant to
assign this Lease or sublet such space, and in such case this Lease shall
continue in full force and effect in accordance with the terms and conditions
hereof; or
               (b) to terminate this Lease as to the space so affected as of the
date so specified by Tenant in which event Tenant shall be relieved of all
obligations hereunder as to

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such space arising from and after such date; however, in the event Landlord
elects this option (b), Tenant shall have ten (10) days following Landlord’s
notice to rescind its assignment/sublease request; or
               (c) deleted prior to execution.
               (d) to permit Tenant to assign this Lease or sublet such space
for the duration specified in such notice, subject to Landlord’s subsequent
written approval of the proposed assignee or sublessee, which approval shall not
be unreasonably withheld or delayed if (i) the proposed assignee is a
respectable party (as determined reasonably by Landlord) (ii) the nature,
financial stability and character of the proposed assignee or sublessee, its
business and activities and intended use of the Leased Premises are in
Landlord’s reasonable judgment consistent with the standards of the Building and
the floor or floors on which the Leased Premises are located, (iii) neither the
proposed assignee or sublessee (nor any party which, directly or indirectly,
controls or is controlled by or us under common control with the proposed
assignee or sublessee) is currently a tenant in the Building unless Landlord
cannot accommodate their space needs, or any partners, associates, officers,
directors, shareholders, affiliates, or employees of any current tenant in the
Building unless Landlord cannot accommodate their space needs, (iv) the form and
substance of the proposed sublease or instrument of assignment is acceptable to
Landlord (which acceptance by Landlord shall not be unreasonably withheld) and
is expressly subject to all of the terms and provisions of this Lease and to any
matters to which this Lease is subject, (v) the proposed occupancy would not
materially increase the office cleaning requirements or impose an extra burden
upon the services to be supplied by Landlord to Tenant hereunder, (vi) Tenant
enters into a written agreement with Landlord whereby it is agreed that fifty
percent (50%) of the profit realized by Tenant as a result of said sublease or
assignment and any and all sums and other considerations of whatsoever nature
paid to Tenant by the assignee or sublessee for or by reason of such assignment
or sublease, including, but not limited to, sums paid for the sale of Tenant’s
fixtures, leasehold improvements, equipment, furniture, furnishings or other
personal property (that is, after deducting and giving Tenant credit for
Tenant’s reasonable costs directly associated therewith, including reasonable
brokerage fees and the reasonable cost or remodeling or otherwise improving the
Leased Premises for said assignee or sublessee but excluding any free rentals or
the like offered to any such sublessee or assignee) shall be payable to Landlord
as it accrues as Additional Rent hereunder, and (vii) the granting of such
consent will not constitute a default under any other agreement to which
Landlord is a party or by which Landlord is bound.
          10.3. No assignment or subletting by Tenant shall be effective unless
Tenant shall execute, have acknowledged and deliver to Landlord, and cause each
sublessee or assignee to execute, have acknowledged and deliver to Landlord, an
instrument in form and substance acceptable to Landlord in which (i) such
assignee adopts this Lease and assumes and agrees to perform jointly and
severally with Tenant, all of the obligations of Tenant under this Lease, as to
the space transferred to it, (ii) intentionally omitted -(iii) Tenant
subordinates to Landlord’s statutory lien, contract lien and security interest
any liens, security interests to other rights which Tenant may claim with
respect to any property of such sublessee or assignee, (iv) Tenant and such
sublessee or assignee agree to provide to Landlord, at their expense, direct
access from a public corridor in the Building to the transferred space, (v) such
sublessee or assignee agrees to use and occupy the transferred space solely for
the purpose specified in Article 3.1 of the Lease and otherwise in strict
accordance with this Lease and (vi) Tenant acknowledges and agrees that,
notwithstanding such subletting or assignment, Tenant remains directly and
primarily liable for the performance of all obligations of Tenant hereunder
(including, without limitation, the obligation to pay Base Rental and Additional
Rent hereunder), and Landlord shall be permitted to enforce this Lease against
Tenant or such sublessee or assignee, or both, without prior demand upon or
proceeding in any way against any other person. Tenant agrees to pay to Landlord
an Assignment Fee or Sublet Fee, if any, and reasonable attorneys’ fees incurred
by Landlord in connection with any approved sublease or assignment, and any
agreements or documents related thereto, such fees to be capped at $750.00 per
assignment or sublease.
          10.4. No consent by Landlord or an assignment or sublease shall be
deemed in

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any manner to be a consent to a use not permitted under Article 3.1 of this
Lease. Any consent by Landlord to a particular assignment or sublease shall not
constitute Landlord’s consent to any other or subsequent assignment or sublease,
and any proposed sublease or assignment by any assignee or sublessee shall be
subject to the provisions of this Article 10 as if it were a proposed sublease
or assignment by Tenant. The prohibition against an assignment or sublease
described in this Article 10 shall be deemed to include a prohibition against
Tenant’s mortgaging or otherwise encumbering its leasehold estate.
          10.5. In any situation in which Landlord consents to an assignment or
sublease hereunder, Tenant shall promptly deliver to Landlord a fully executed
copy of the final sublease agreement or assignment instrument and all ancillary
agreements relating thereto.
          10.6. Provided Landlord’s assignee expressly assumes all obligations
under this Lease for the Lease Term (including any renewals thereof), Landlord
shall have me right to transfer and assign, in whole or in part, all of its
rights and obligations hereunder and in the Building and Leased Premises, and in
such event and upon such transfer, no further liability or obligation shall
thereafter accrue against Landlord
hereunder.
     11. Compliance With Laws
          11.1. Tenant, at its own cost and expense, shall comply with all
federal, state, municipal and other laws, ordinances, rules, and regulations
applicable to the Leased Premises and the business conducted herein by Tenant
(including specifically, without limitation, any temperature control
restrictions, or environmental requirements) unless such compliance is
Landlord’s responsibility as expressly stated herein; and Tenant shall not
engage in any activity which would cause Landlord’s fire and extended coverage
insurance to be canceled or the rate therefor to be increased (or, at Landlord’s
option, Tenant will pay such increase on demand). Further, Tenant shall not
commit any act which is a nuisance or annoyance to Landlord or to other tenants,
or which might, in the reasonable judgment of Landlord, appreciably damage
Landlord’s goodwill or reputation or tend to injure or depreciate the Building,
and Tenant will not commit or permit waste in the Leased Premises or the
Building and will comply with all rules and regulations applicable to the
Building from time to time promulgated by Landlord. The initial Rules and
Regulations of the Building are attached hereto as Exhibit “D” and made a part
hereof for all purposes and such Rules and Regulations shall be uniformly
applied to all tenants in the Building. Tenant hereby agrees to notify Tenant’s
employees of the Rules and Regulations of the Building. Tenant will not paint,
erect or display, any advertisement, placard, or lettering which is visible in
the corridors or in the lobby of the Building or from the exterior of the
Building without Landlord’s express prior written approval.
          11.2. Landlord represents to the best of its knowledge that the
Building is in compliance with all federal, state, municipal and other laws,
rules, regulations and ordinances as of the date hereof. If the Building is
determined not to be in compliance, Landlord shall be responsible for all costs
and expenses arising in connection with such non-compliance and in making
modifications and improvements to bring the Building into compliance, and all
such costs and expenses, if any, incurred or to be incurred to comply with any
federal, state, municipal or other law, rule, regulation or ordinance in effect
as of January 1, 2005 shall not be included as Operating Expenses.
     12. Fire Or Other Casually
          12.1. If at any time during the Term of this Lease, the Leased
Premises or any portion of the Building or the Parking Garage shall be damaged
or destroyed by fire or other casually, then Landlord shall have the election to
terminate this Lease or to repair and reconstruct the Leased Premises, the
Building, and/or the Parking Garage to the condition in which they existed
immediately prior to such damage or destruction and Landlord shall give Tenant
notice of such election within sixty (60) days from the date of such damage or
destruction. Should Landlord fail, for any reason other than Tenant delays or
another casualty at the Building, to repair the damage caused by such casualty
within 180 days after the date of election to repair and the damage was not
caused by the negligence or willful misconduct of Tenant, then, at any time

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after the 180 day period but prior to the completion of the repair of such
damage (but not thereafter), Tenant shall have the right and as its sole remedy,
at Tenant’s election, to terminate this Lease as of the date of such written
notice to Landlord.
          12.2. In any of the circumstances provided for in Article 12.1 above,
Base Rental and Additional Rent shall abate proportionately during the period
and to the extent that the Leased Premises are unfit for use by Tenant in the
ordinary conduct of its business. If Landlord has elected to repair and restore
the Leased Premises, this Lease shall continue in full force and effect and such
repairs will be made within a reasonable time thereafter, subject to delays
arising from shortages of labor or material, acts of God, war, terrorism or
other conditions beyond Landlord’s reasonable control. In the event this Lease
is terminated as herein permitted, Landlord shall refund to Tenant any prepaid
rent (unaccrued as of the date of damage or destruction) less any sum then owing
to Landlord by Tenant. If Landlord has elected to repair and restore the Leased
Premises and such repair and restoration is Substantially Completed within such
180-day period, then the Lease Term shall be extended by a period of time equal
to the period of repair and restoration, and during which Tenant was unable to
occupy the entire Leased Premises and conduct its business therein, provided all
Base Rental and Additional Rent was abated during the time of repair.
     13. Eminent Domain
          13.1. If any part of the Leased Premises, the Building, a material
portion of the Parking Garage, or access to any of the foregoing, shall be taken
by the exercise of the power of eminent domain during the Term of this Lease, at
any time within sixty (60) days thereafter, Landlord or Tenant may elect to
terminate this Lease or to continue the same in effect If neither Landlord nor
Tenant elects to continue this Lease as herein provided, the rental shall be
reduced in proportion to the area of the Leased Premises so taken and Landlord
shall repair any damage to the extent possible to the Leased Premises, the
Building, the Parking Garage and/or access to any of the foregoing resulting
from such taking. Landlord shall be entitled to receive the entire award or
payment in connection therewith, except that. Tenant shall have the right to
file any separate claim available to Tenant for any taking of Tenant’s personal
property and fixtures belonging to Tenant and removable by Tenant upon
expiration of the Term, and for moving expenses (so long as such claim does not
diminish the award available to Landlord or any mortgagee, and such claim is
payable separately to Tenant). If this Lease should be terminated under any
provision of this Article 13.1, rental shall be payable to the date that
possession is taken by the condemning authority, and Landlord will refund to the
Tenant any prepaid unaccrued rent less any sum then owing by Tenant to Landlord.
     14. Indemnify and Insurance
          14.1. EXCEPT FOR INJURY, DEATH, OR PROPERTY DAMAGE RESULTING FROM THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD, TENANT AGREES TO EXPRESSLY
INDEMNIFY AND SAVE LANDLORD HARMLESS FROM ALL CLAIMS (INCLUDING COSTS AND
EXPENSES OF DEFENDING AGAINST SUCH CLAIMS, WHICH SHALL INCLUDE, BUT SHALL NOT BE
LIMITED TO, LANDLORD’S ATTORNEYS’ FEES AND RELATED COSTS) ARISING OR ALLEGED TO
ARISE FROM ANY ACT OR OMISSION OF TENANT OR TENANT’S AGENTS, EMPLOYEES,
CONTRACTORS, OR INVITEES.
          14.2. TENANT AGREES THAT LANDLORD SHALL NOT BE RESPONSIBLE OR LIABLE
TO TENANT, ITS EMPLOYEES, AGENTS, CUSTOMERS OR INVITEES FOR BODILY INJURY (FATAL
OR NONFATAL) OR PROPERTY DAMAGE OCCASIONED BY THE ACTS OR OMISSIONS OF ANY OTHER
TENANT OR SUCH OTHER TENANT’S EMPLOYEES, AGENTS, CONTRACTORS, CUSTOMERS, OR
INVITEES WITHIN THE BUILDING.
          14.3. Tenant shall, at its sole cost and expense, procure and maintain
throughout the Term of this Lease, a policy of commercial general liability
insurance form CG 0001 or its equivalent, insuring Landlord as an additional
insured, against any and all liability for injury to

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or death of a person or persons and for damage to or destruction of property
occasioned by or arising out of or in connection with the use or occupancy of
the Leased Premises or by the condition of the Leased Premises.
               14.3.1. Such policy shall contain a blanket contractual liability
endorsement (including the contractual liability of Tenant to indemnify and
defend Landlord) and shall contain combined single limits of liability for
bodily injury and property damage as follows:
$2,000,000 General Aggregate (per location)
$2,000,000 Products & Completed Operations Aggregate
$1,000,000 Personal and Advertising Injury
$1,000,000 Each Occurrence
$1,000,000 Fire Legal Liability
$5,000,000, Excess Liability, following form of the commercial liability policy
term,
including follow form fire legal liability and aggregate limits.
               14.3.2. Said insurance shall be written by an insurance company
or companies reasonably satisfactory to Landlord and licensed to do business in
the state of Texas, with the Landlord named as an additional insured. Tenant
shall obtain a written obligation on the part of the insurance company issuing
such policy to notify Landlord at least ten (10) business days prior to
cancellation, non-renewal or material change, or modification, change or
alteration, of such insurance. Such policy or duly executed certificates of
insurance relating thereto including all of the above insurance requirements,
shall be promptly delivered to Landlord and renewals thereof shall be delivered
to Landlord at least ten (10) business days prior to the expiration of the term
of such policy. If Tenant shall fail to comply with the foregoing requirements,
or any of them, Landlord may, but shall not have the obligation to, obtain such
insurance for Tenant and Tenant shall pay to Landlord, upon demand, the premium
cost thereof as Additional Rent hereunder.
          14.4. Landlord agrees to carry “Causes of Loss Special” property
insurance covering the Building and the Parking Garage-and on a replacement cost
basis and Commercial General Liability in amounts at least equal to those
required of Tenant in Subarticle 14.3.1 above and in the same form.
     15. Waiver of Subrogation
          15.1. In the event that either Landlord or Tenant sustains a loss by
reason of fire or other casualty which is a type of risk covered or required to
be covered hereunder by such party’s property insurance and such fire or
casualty is caused in whole or in part by acts or omissions of the other party,
its agents, servants, or employees, then the party sustaining such loss agrees
that to the extent that the party sustaining such loss is compensated for such
loss by its aforesaid insurance proceeds, the party sustaining such loss shall
have no right of recovery against the other party, or the agents, servants, or
employees of the other party; and no third party shall have any right of
recovery by way of subrogation or assignment or otherwise.
     16. Subordination
          16.1. This Lease is and shall be subject and subordinate to all ground
or underlying leases which may now or hereafter affect the real property of
which the Leased Premises is a part, and to all deeds of trust and mortgages
which may now or hereafter affect any such leases or such real property, and to
all renewals, modifications, replacements, and extensions thereof. Tenant agrees
that any such ground lessor or any mortgagee and/or beneficiary of any deed of
trust or other lien shall have the right at any time to subordinate such ground
lease, mortgage, deed of trust or other lien to this Lease on such terms and
subject to such conditions as they shall deem appropriate, in their sole
discretion. Tenant further agrees that upon a conveyance of the property of
which the Leased Premises form a part, by foreclosure, power of sale or deed in
lieu thereof, it will attorn to the successor owner of such property as landlord
under this Lease. Upon demand, Tenant agrees 10 execute any further instruments
subordinating this Lease or evidencing its attornment as Landlord, or any ground

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lessor or mortgagee or beneficiary of any deed of trust affecting the Leased
Premises or any successor owner of the land described on Exhibit “A” may
request; provided, however, no such subordination and attornment agreement by
Tenant, whether in writing or self-operative, shall be effective or binding upon
Tenant or any assignee or sublessee from Tenant unless Landlord, any ground
lessor, any mortgagee, any beneficiary of any deed of trust covering the land
described on Exhibit “A” or any part thereof or any of the Building, or any
successor to any of the foregoing (by foreclosure, power of sale, deed in lieu,
or otherwise) executes a recordable non- disturbance agreement in a form
reasonably satisfactory to Tenant agreeing not to disturb Tenant’s or Tenant’s
sublessees’ and/or assignees’ possession of the Leased Premises or any part
thereof so long as no Event of Default hereunder remains uncured beyond any
grace or cure periods provided herein. The provisions of this Article 16 shall
be self-operative and no further instrument of subordination shall be required.
     17. Access By Landlord
          17.1. Except as expressly provided for below for the specific areas
(the “Excluded Areas”) designated on the Final Plans, Landlord, its agents,
representatives and employees shall have access to and the right to enter upon
the Leased Premises with prior notice to Tenant, if possible, (except in the
case of emergencies or Tenant requested services) at any reasonable time to
examine the condition thereof, to make any repairs or alterations required to be
made by Landlord hereunder, to show the Leased Premises to prospective
purchasers or tenants (during the last 12 months of the Term), and for any other
purpose deemed reasonable by Landlord. Landlord shall use reasonable efforts not
to unreasonably interfere with the daily operation of Tenant’s business with
regard to Landlord access as described in this Article 17.1. Neither Landlord
nor Landlord’s agents, representatives, employees, or contractors shall have
access to the Excluded Areas unless accompanied by a duly authorized
representative of Tenant. Landlord shall not be responsible for any delay in
maintaining the Leased Premises due to lack of access to the Excluded Areas.
Tenant hereby indemnifies, defends and holds harmless Landlord, its successors,
assigns, agents, representatives, employees, tenants, or contractors from any
injury or damage (i) which occurs in the Excluded Areas; or (ii) to the Excluded
Areas. Also, Tenant hereby releases and forever discharges Landlord, Landlord’s
successors, assigns, agents, representatives, contractors and employees from all
injury and damage, (i) sustained by Tenant in the Excluded Areas; or (ii) to the
Excluded Areas.
     18. Landlord’s Lien — Deleted prior to execution.
     19. Default and Remedies
          19.1. Each of the following occurrences shall be an “Event of
Default”:
                    19.1.1. Tenant’s failure to pay Rent within ten (10) days
after Landlord has delivered written notice to Tenant that the same is due:
however, an Event of Default shall occur hereunder without any obligation of
Landlord to give any notice if Landlord has given Tenant written notice under
this Article 19.1.1. on more than two (2) occasion during the twelve (12) month
interval preceding such failure by Tenant;
                    19.1.2. Tenant fails to provide any estoppel certificate as
called for in this. Lease and such failure shall continue for ten (10) days
after written notice thereof from Landlord to Tenant;
                    19.1.3. Tenant’s failure to perform, comply with, or observe
any other agreement or obligation of Tenant under this Lease and the continuance
of such failure for a period of more than thirty (30) days after Landlord has
delivered to Tenant written notice thereof; provided, however, Tenant shall not
be considered in default under this Lease if such curative action cannot be
completed within such thirty (30) day period, and Tenant has commenced efforts
to cure within such thirty (30) day period and is diligently and in good faith
continuously pursuing the cure of such default; however, in no event shall such
curative period exceed ninety (90) days; and

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                19.1.4. The filing of a petition by or against Tenant (i) in any
bankruptcy or other insolvency proceeding; (ii) seeking any relief under any
State or federal debtor relief law; (iii) for the appointment of a liquidator or
receiver for all or substantially all of Tenant’s property or for Tenant’s
interest in this Lease; or (iv) for the reorganization or modification of
Tenant’s capital structure; however, if such a petition is filed against Tenant,
then such filing shall not be an Event of Default unless Tenant fails to have
the proceedings initiated by such petition dismissed within ninety (90) days
after the filing thereof.
          19.2. Upon the occurrence of any one or more of such Events of
Default, as Landlord’s exclusive remedies, in lieu of all other remedies,
Landlord shall have the option to pursue any one or more of the following
remedies, or any other remedy set forth in this Lease, without further notice or
demand whatsoever (except as expressly required by the terms off this Lease) and
Tenant shall be responsible for Landlord’s reasonable attorneys’ fees in
connection with the following:
                19.2.1. Terminate this Lease in which event Tenant shall
immediately surrender the Leased Premises to Landlord, and if Tenant fails to do
so, Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rental, pursuant to a writ of possession issued by a
court of competent jurisdiction (only if the Leased Premises is not abandoned by
Tenant), enter upon and take possession of the Leased Premises and expel or
remove Tenant and any other person who may be occupying the Leased Premises or
any part thereof, by any lawful means.
                19.2.2. Terminate Tenant’s right of possession, without
terminating this Lease, and, pursuant to a writ of possession issued by a court
of competent jurisdiction (only if the Leased Premises is not abandoned by
Tenant), enter upon and take possession of the Leased Premises and expel or
remove Tenant and any other person who may be occupying the Leased Premises or
any part thereof.
                19.2.3. Peaceably enter upon the Leased Premises, other than the
Excluded Areas, and do whatever Tenant is obligated to do under the terms of
this Lease, and Tenant agrees to reimburse Landlord on demand for any reasonable
expenses which Landlord may incur, thus affecting compliance with Tenant’s
obligations under this Lease, and Tenant further agrees that Landlord shall not
be liable for any damages resulting to Tenant from such action, unless caused by
Landlord’s willful misconduct.
                19.2.4. Exercise by Landlord of any one or more remedies
hereunder granted shall not be deemed to be an acceptance of surrender of the
Leased Premises, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant.
          19.3. Upon termination of Tenant’s right to possess the Leased
Premises, Landlord shall, to the extent required by applicable law, use
reasonable efforts to mitigate Landlord’s damages by reletting the Leased
Premises. Landlord shall not be deemed to have failed to relet if Landlord
refuses to lease the Leased Premises to a prospective new tenant who is (i) an
Affiliate, parent or subsidiary of Tenant, (ii) is not acceptable to Landlord’s
mortgagee, (iii) requires uneconomical improvements to the Leased Premises to be
made at Landlord’s cost, or (iv) unwilling to accept lease terms then reasonably
proposed by Landlord, including, changing the use of the business conducted in
the Leased Premises.
          19.4. It is expressly agreed that Landlord shall not change, alter
and/or modify the door locks on entry doors of the Leased Premises or exclude
Tenant or its officers, principals, agents, employees, representatives and
invitees from the Leased Premises or any portion thereof, other than by order of
a court of competent jurisdiction. It is intended that this paragraph, and the
provisions herein contained, shall supersede and be paramount to any conflicting
provisions of the Texas Property Code, as well as any successor statute
governing the rights of landlords to change locks of commercial tenants.
          19.5. In the event Landlord elects to terminate this Lease by reason
of an Event

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of Default, then notwithstanding such termination, Tenant shall be liable for
and shall pay to Landlord, at the address specified for notice to Landlord
herein, the sum of all rental and other indebtedness accrued to date of such
termination, plus, as damages, an amount equal to the net present value using a
discount rate of six percent (6%) of the difference between (1) the total rental
due plus Tenant’s Escalation Payments hereunder for the remaining portion of the
Lease Term (had such Term not been terminated by Landlord prior to the date of
expiration stated in Article 2), and (2) the reasonable market value of the
Leased Premises for such period.
          19.6. In the event that Landlord elects to repossess the Leased
Premises without terminating this Lease, then Tenant shall be liable for and
shall pay to Landlord at the address specified for notice to Landlord herein all
rental and other indebtedness accrued to the date of such repossession, plus
rental required to be paid by Tenant to Landlord during the remainder of the
Lease Term until the date of expiration of the Term as stated in Article 2
hereof, diminished by any net sums thereafter received by Landlord through
reletting the Leased Premises during said period (after deducting reasonable
expenses incurred by Landlord as provided in Article 19.6 thereof). In no event
shall Tenant be entitled to any excess of any rental obtained by reletting over
and above the rental herein reserved.
          19.7. In case of any Event of Default or breach by Tenant, Tenant
shall also be liable for and shall pay to Landlord, at the address specified for
notice to Landlord herein, in addition to any sum provided to be paid above,
reasonable broker’s fees incurred by Landlord in connection with reletting the
whole or any part of the Leased Premises; the reasonable costs of removing and
storing Tenant’s or other occupant’s property; the reasonable costs of
repairing, altering, remodeling or otherwise putting the Leased Premises into
condition acceptable to a new tenant or tenants, and all reasonable expenses
incurred by Landlord in enforcing or defending Landlord’s rights and/or remedies
hereunder including reasonable attorneys’ fees incurred by Landlord.
          19.8. If Tenant should fail to make any payment or cure any default
hereunder within the time expressly permitted herein, Landlord, without being
under any obligation to do so and without thereby waiving such default, may make
such payment and/or remedy such other default for the account of Tenant (and
enter the Leased Premises for such purpose other than the Excluded Areas), and
thereupon Tenant shall be obligated to, and hereby agrees, to pay Landlord, upon
demand, all reasonable costs, expenses and disbursements (including reasonable
attorneys’ fees) incurred by Landlord in taking such remedial action.
          19.9. Except as otherwise expressly provided for in Article 5.2.1
hereof, in the event of any default by Landlord, Tenant’s exclusive remedy shall
be an action for damages (Tenant hereby waiving the benefit of any laws granting
it a lien upon the property of Landlord, the Building and/or upon rent due
Landlord), but prior to any such action Tenant will give Landlord written notice
specifying such default with particularity, and Landlord shall thereupon have
thirty (30) days in which to cure any default; provided, however, Landlord shall
not be considered in default under this Lease if such curative action cannot be
completed within such thirty (30) day period, and Landlord has commenced efforts
to cure within such period and is diligently pursuing the cure of such default.
All obligations of Landlord hereunder will be construed as covenants, not
conditions; and all such obligations will be binding upon Landlord only during
the period of its ownership and possession of the Building and not thereafter.
          19.10. In the event that Landlord shall have taken possession of the
Leased Premises pursuant to the authority herein granted, then Landlord shall
also have the right to remove from the Leased Premises (without the necessity of
obtaining a distress warrant, writ of sequestration or other legal process) all
or any portion of such furniture, fixtures, equipment and other property located
thereon and place same in storage at any premises within the county in which the
Leased Premises is located; and in such event, Tenant shall be liable to
Landlord for all reasonable costs incurred by Landlord in connection with such
removal and storage. Landlord shall also have the right to relinquish possession
of all or any portion of such furniture, fixtures, equipment and other property
to any person (“Claimant”) claiming to be entitled to possession thereof who
presents to Landlord a copy of any instrument represented to Landlord by
Claimant to have been executed by Tenant (or any predecessor of Tenant) granting
Claimant the right to

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take possession of such furniture, fixtures, equipment or other property,
without the necessity on the part of Landlord to inquire into the authenticity
of said instrument’s copy or Tenant’s or Tenant’s predecessor’s signature
thereon and without the necessity of Landlord’s making any nature of
investigation or inquiring as to the validity of the factual or legal basis upon
which Claimant purports to act; and Tenant agrees to indemnity, defend and hold
Landlord harmless from all cost, expense, loss, damage and liability incident to
Landlord’s relinquishment of possession of all or any portion of such furniture,
fixtures, equipment or other property to Claimant.
          19.11. Notwithstanding any other provisions of the Lease, Landlord’s
exercise of Landlord’s remedies for any default by Tenant shall be subject to
all state and federal banking rules and regulations. Tenant herein represents
and warrants to Landlord that Tenant’s business conducted at the Leased Premises
is governed by state and federal banking rules and regulations.
     20. Nonwaiver
          20.1. Neither acceptance of rent by Landlord nor failure by Landlord
to complain of any action, nonaction or default of Tenant shall constitute a
waiver of any of Landlord’s rights hereunder. Waiver by Landlord of any right
for any default of Tenant shall not constitute a waiver of any default of any
right for either a subsequent default of the same obligation or any other
default.
          20.2. Failure by Tenant to complain of any action, nonaction or
default of Landlord shall not constitute a waiver of any of Tenant’s rights
hereunder. Waiver by Tenant of any right for any default of Landlord shall not
constitute a waiver of any default of any right for either a subsequent default
of the same obligation or any other default.
     21. Holding Over
          21.1. If Tenant should remain in possession of the Leased Premises
after the expiration or termination of the Term of this Lease, without the
execution by Landlord and Tenant of a new Lease, then Tenant shall be deemed to
be occupying the Leased Premises as a tenant-at-sufferance, subject to all the
covenants and obligations of this Lease and at a daily rental of one and
one-half (1.5) times the per day rental provided hereunder (and which is
applicable for the month preceding the month in which the date of expiration or
termination occurs), computed on the basis of a thirty (30) day month.
     22. Notice
          22.1. Any notice which may or shall be given under the terms of this
Lease shall be in writing and shall be either delivered by personal delivery
with a signature from the recipient evidencing receipt, reputable courier
service or sent by United States Registered or Certified Mail, postage prepaid,
with return receipt requested, if for the Landlord, to the address indicated
below, or if for Tenant, to the Leased Premises unless otherwise indicated
below. Such addresses may be changed from time to time by either party by giving
notice in the manner provided above. Notice shall be deemed given three (3) days
after postmarked (if sent by mail) or day of receipt (if by personal delivery or
courier).

     
If to Landlord (Notices Only):
  Fraydun Realty Co.
 
  c/o BMS Management, Inc.
 
  4265 San Felipe, Suite 750
 
  Houston, Texas 77027
 
  Phone: (713) 621-3222
 
  Facsimile: (713) 621-1025
 
   
If to Landlord (Rental Only):
  Fraydun Realty Co.
 
  150 East 58th Street, 28th Floor
New York, NY 10155

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If to Tenant:
  Franklin Bank, SSB
 
  ATTEN: Glenn Mealey
 
  9800 Richmond, Suite 680
 
  Houston, TX 77042
 
  Phone: 713-339-8910
 
  Facsimile: 713-339-8917
 
   
With a copy to:
  Brill & Johnson, P.L.L.C.
 
  ATTEN: Robert J. Brill, Esq.
 
  1360 Post Oak Blvd., Suite 1750
 
  Houston, TX 77056
 
  Phone: 713-629-1234
 
  Facsimile: 713-627-1415

     23. Limitation of Landlord’s Liability
          23.1. Tenant agrees to look solely to Landlord’s estate and interest
in the land, the Parking Garage, and Building [or the (ground) lease of the
Building, if applicable] and the Leased Premises, for the satisfaction of any
right or remedy of Tenant or the collection of any judgment (or other judicial
process) requiring the payment of money by Landlord, in the event of any
liability by Landlord; and no other property or assets of Landlord (or the
partners or members thereof if Landlord is other than an individual or
corporation) shall be subject to levy, execution or attachment or other
enforcement procedure for the satisfaction of Tenant’s remedies under or with
respect to this Lease, the relationship of Landlord and Tenant hereunder, or
Tenant’s use and occupancy of the Leased Premises or the Building, or any other
liability of Landlord to Tenant. The term “Landlord” as used in this Lease means
only the owner, or the mortgagee in possession, for the time being of the land
and the Building (or the owner of any lease of the Building or the land upon
which it is situated and the Building) so that in the event of any transfer of
title to the land and Building or said lease, or in the event of a lease of the
Building or of the land and Building, upon notification to Tenant of such
transfer of lease, provided the transferee complies with the requirements set
forth in Article 10.6 of this Lease, the said transferor Landlord shall be and
hereby is entirely (freed and relieved of any and all covenants, obligations and
liabilities of Landlord thereafter accruing hereunder and it shall be deemed and
construed as a covenant running with the land without further agreement between
the parties or their successors in interest, or between the parties or any
transferee of title to the land and Building (or any applicable ground lease, or
any lease of the Building) that the transferee or the lessee has assumed and
agreed to carry out any and all such covenants, obligations, and liabilities of
Landlord hereunder.
     24. Parking
          24.1. Parking shall be provided as set out in Exhibit “E” which is
attached hereto and made a part hereof for all purposes.
     25. Estoppel Certificate
          25.1. At Landlord’s request, Tenant shall execute, acknowledge and
deliver to Landlord (or any third party designated by Landlord), within ten
(10) business days after such request, a statement in writing certifying that
this Lease is unmodified and in full force and effect (or if there has been any
modifications, that the same is in full force and effect, as modified, and
stating with particularity the nature of each modification) and the dates to
which rent and other charges may have been paid in advance and such other
factual matters as may be reasonably requested by any prospective purchaser,
assignee or lender of the Building and/or the land on which it is situated, it
being intended that any such statement delivered pursuant to this Article 25 may
be relied upon by any prospective purchaser, assignee or encumbrancer of the
Building and/or the Leased Premises named in such estoppel statement. Any such
statement shall contain, in addition to matters set forth above, and upon the
designation by Landlord, the following:
                         25.1.1. Any rent deposits, security deposits, or
advance rentals paid.

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                         25.1.2. The fact that no default exists hereunder by
either Landlord or Tenant, or if any default is claimed, specify the nature of
such default.
     26. Attorneys’ Fees and Jury Trial
          26.1. In the event of any litigation between the parties, the
prevailing party shall be entitled to obtain, as part of the judgment, all
reasonable attorneys’ and consultants’ fees, costs and expenses incurred in
connection with such litigation, except as may be limited by applicable Law. In
addition to the foregoing, Landlord shall be entitled to reimbursement from
Tenant of its reasonable attorneys’ fees incurred by Landlord in any Tenant
bankruptcy proceeding including, but not limited to reasonable attorneys’ fees
incurred by Landlord in connection with the rejection or assumption of this
Lease by Tenant. In the interest of obtaining a speedier and less costly hearing
of any dispute, the parties hereby each irrevocably waive the right to trial by
jury.
     27. Administrative Charge for Late Payment
          27.1. Any payment of Base Rental received by Landlord after the fifth
(5th) business day of the month shall be considered a late payment, and an
administrative charge of $50.00 (per late payment) shall become due and payable
to Landlord on demand, to compensate Landlord for the cost, time, and
inconvenience of collecting late rents, which administrative charge shall be
deemed as Additional Rent due hereunder. The date the payment is received, in
good and sufficient funds, shall be considered the effective date for purposes
of determining the administrative charge. Any payments made by check shall be
considered late should such check not be paid upon first presentation to
Tenant’s indicated bank. Acceptance by Landlord of late rent and administrative
charges due therefor shall not constitute a waiver of Landlord’s rights and
remedies available in connection with any subsequent failure of Tenant to pay
the Base Rental (or any Additional Rents due hereunder) or to make any other
payment due Landlord hereunder in the manner or time provided for herein.
Landlord shall have the same remedies for default for the payment of Additional
Rent as are available to Landlord in the case of a default in payment of Base
Rental.
     28. Relocation and Substitution of Premises — Deleted prior to execution
     29. Miscellaneous
          29.1. In any circumstance where Landlord is permitted to enter upon
the Leased Premises during the Lease Term, whether for the purpose of curing any
default of Tenant, repairing damage resulting from fire or other casualty or an
eminent domain taking or is otherwise permitted hereunder or by law to go upon
the Leased Premises, no such entry shall constitute an eviction or disturbance
of Tenant’s use and possession of the Leased Premises or a breach by Landlord of
any of its obligations hereunder or render Landlord liable for damages for loss
of business or otherwise (other than damages caused by Landlord’s negligence or
willful misconduct) or entitle Tenant to be relieved from any of its obligations
hereunder or grant Tenant any right of set-off or recoupment or other remedy;
and in connection with any such entry incident to performance of repairs,
replacements, maintenance or construction, all of the aforesaid provisions shall
be applicable notwithstanding that Landlord may elect to take building materials
in, to or upon the Leased Premises that may be required or utilized in
connection with such entry by Landlord.
          29.2. Landlord or Tenant may restrain or enjoin any breach or
threatened breach of any covenant, duty, or obligation of the other party herein
contained without the necessity of proving the inadequacy of any legal remedy or
irreparable harm. The remedies of Landlord and Tenant hereunder shall be deemed
cumulative and no remedy of either party, whether exercised or not, shall be
deemed to be in exclusion of any other.
          29.3. Except as may he otherwise herein expressly provided, in all
circumstances under this Lease where prior consent or permission of one party
(“first party”) is required before the other party (“second party) is authorized
to take any particular type of action, the

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matter of whether to grant such consent or permission shall be within the
reasonable judgment and discretion of the first party.
          29.4. In all instances where Tenant is required hereunder to pay any
sum or Landlord or Tenant is required to do any act at a particular indicated
time or within an indicated period, except as expressly otherwise provided
herein, it is understood that time is of the essence.
          29.5. The obligation of Tenant to pay all rent and other sums
hereunder provided to be paid by Tenant and the obligation of Tenant to perform
Tenant’s other covenants and duties hereunder constitute independent,
unconditional obligations to be performed at all times provided for hereunder,
save and except only when an abatement thereof or reduction therein is
hereinabove expressly provided for and not otherwise. Tenant waives and
relinquishes all rights which Tenant might have to claim any nature of lien
against or withhold, or deduct from or offset against any rent and other sums
provided hereunder to be paid Landlord by Tenant. Tenant waives and relinquishes
any right to assert, either as a claim or as a defense that Landlord is bound to
perform or is liable for the nonperformance on any implied covenant or implied
duty of Landlord not expressly herein set forth.
          29. 6. Under no circumstances whatsoever shall Landlord or Tenant ever
be liable for consequential damages or special damages.
          29.7. Tenant agrees that no food, soft drinks, or other vending
machine will be installed within the Leased Premises without the written
reasonable consent of Landlord first received. Tenant’s existing vending
machines as of the Commencement Date are hereby deemed approved.
          29.8. All monetary obligations of Landlord and Tenant (including,
without limitation, any monetary obligation of Landlord or Tenant for damages
for any breach of the respective covenants, duties or obligations of Landlord or
Tenant hereunder) are performable exclusively in Houston, Harris Count, Texas.
          29.9. If any provision of this Lease shall ever be held to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provision of the Lease, but such other provisions shall continue in full force
and effect; AND IN THE EVENT OF ANY LITIGATION BETWEEN THE PARTIES, TEXAS LAW
SHALL APPLY AND VENUE SHALL BE IN HARRIS COUNTY, TEXAS.
          29.10. Without the prior written consent of Tenant, provided the
Leased Premises consist of at least 44,046 square feet of NRA, Tenant has not
abandoned the Leased Premises for more than one hundred twenty (120) days, and
Tenant is not in default of the Lease, Landlord shall not have the right to
change the name of the Building, and shall not permit any signage on the
exterior shell of the Building (with the exception of the address of the
Building) other than Tenant’s Building Identification rights as provided in the
Addendum.
          29.11. Nothing herein contained shall be deemed or construed by the
parties hereto, or by any third party, as creating the relationship of principal
and agent or of a partnership or joint venture between the parties hereto, it
being understood and agreed that neither the provisions hereof nor the acts of
the parties shall be deemed to create any relationship between the parties
hereto other than the relationship of Landlord and Tenant.
          29.12. TENANT HEREBY ACKNOWLEDGES THAT LANDLORD HAS NOT MADE AND DOES
NOT MAKE WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, NOT SPECIFICALLY
SET FORTH IN THIS LEASE, WHETHER WITH RESPECT TO THE PHYSICAL CONDITION OF THE
LEASED PREMISES OR THE BUILDING OR ANY OTHER MATTER WHATSOEVER, TO THE MAXIMUM
EXTENT PERMITTED BY LAW, LANDLORD DISCLAIMS ANY SUCH WARRANTIES, SPECIFICALLY
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF SUITABILITY.

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          29.13. If there be more than one person or entity named as “Tenant” in
this Lease, the obligations imposed upon Tenant shall he joint and several. If
there shall be any Guarantor(s) of Tenant’s obligations hereunder, the
obligations hereunder imposed upon Tenant shall be joint and several obligations
of Tenant and such Guarantor(s); and Landlord need not first proceed against
Tenant hereunder before proceeding against any such Guarantor(s) nor shall any
such Guarantor(s) be released from its, or their, guarantee, for any reason
whatsoever.
          29.14. This Lease and any work letter, exhibits and/or addenda
attached hereto constitute the entire agreements between Landlord and Tenant. No
prior written or prior contemporaneous oral promises or representations shall be
binding.
          29.15. This Lease shall not be amended, changed or extended except by
written instrument signed by Landlord and Tenant.
          29.16. The provisions of this Lease shall be binding upon and inure to
the benefit of the heirs, executors, administrators, successors and permitted
assigns of the parties hereto, provided however this provision shall in no way
whatsoever alter the provisions herein (Article 10) regarding assignment and
subletting by Tenant.
          29.17. Paragraph captions herein are for convenience only, and shall
neither limit or amplify the provisions of this Lease.
          29.18. If any guaranty of this Lease by a third party approved by
Landlord is required by Landlord, such designated third party guaranty shall be
of the form and substance of Exhibit “F” attached hereto and made a part hereof
for all purposes. Landlord may terminate this Lease at any time after Landlord
requests such guaranty to be delivered by Tenant until Landlord receives such
guaranty fully executed by the third party guarantors designated by Landlord. If
there be more than one Tenant, the obligations hereunder imposed upon Tenant
shall be joint and several. If there be a guarantor of Tenant’s obligations
hereunder, the obligations hereunder imposed upon Tenant shall be the joint and
several obligations of Tenant and such guarantor and Landlord need not first
proceed against Tenant before proceeding against such guarantor nor shall any
such guarantor be released form its guaranty for any reason whatsoever,
including without limitation, in case of any amendments hereto, waivers hereof
or failure to give such guarantor any notices hereunder.
          29.19. The parties hereto acknowledge that the parties and their
respective attorneys have reviewed this Lease and each party negotiated the
terms hereof and that 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 hereto or any amendments
hereof.
          29.20. DTPA WAIVER. As a material consideration for Landlord’s
entering into this Lease, Tenant acknowledges and agrees as follows:
                29.20.1 IT IS THE UNDERSTANDING AND INTENTION OF THE PARTIES
THAT TENANT’S RIGHTS AND REMEDIES WITH RESPECT TO THE TRANSACTIONS PROVIDED FOR
AND CONTEMPLATED IN THIS LEASE (COLLECTIVELY, THIS “TRANSACTION”) AND WITH
RESPECT TO ALL ACTS OR PRACTICES OF LANDLORD, PAST, PRESENT, OR FUTURE, IN
CONNECTION WITH THIS TRANSACTION, ARE AND SHALL BE GOVERNED BY LEGAL PRINCIPLES
OTHER THAN THE TEXAS DECEPTIVE TRADE PRACTICES — CONSUMER PROTECTION ACT (THE
“DTPA”). ACCORDINGLY, TENANT HEREBY (A) AGREES THAT UNDER ARTICLE 17.49 (F) OF
THE DTPA THIS TRANSACTION IS NOT GOVERNED BY THE DTPA AND (B) CERTIFIES,
REPRESENTS AND WARRANTS TO LANDLORD THAT (I) TENANT HAS BEEN REPRESENTED BY
LEGAL COUNSEL IN CONNECTION WITH THIS TRANSACTION WHO HAS NOT BEEN DIRECTLY OR
INDIRECTLY IDENTIFIED, SUGGESTED OR SELECTED BY LANDLORD AND TENANT HAS
CONFERRED WITH TENANT’S COUNSEL CONCERNING ALL ELEMENTS OF THIS LEASE
(INCLUDING, WITHOUT LIMITATION, THIS ARTICLE

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29.20) AND THIS TRANSACTION AND (II) THE LEASED PREMISES WILL NOT BE OCCUPIED BY
TENANT AS TENANT’S FAMILY RESIDENCE. TENANT EXPRESSLY RECOGNIZES THAT THE TOTAL
CONSIDERATION AS AGREED TO BY LANDLORD HAS BEEN PREDICATED UPON THE
INAPPLICABILITY OF THE DTPA TO THIS TRANSACTION AND THAT LANDLORD, IN
DETERMINING TO PROCEED WITH THE ENTERING INTO OF THIS LEASE, HAS EXPRESSLY
RELIED ON THE INAPPLICABILITY OF THE DTPA TO THIS TRANSACTION.
          29.21. The term “Hazardous Substances”, as used in this Lease shall
mean pollutants, contaminates, toxic or hazardous wastes, or any other
substances (specifically including, without limitation, friable asbestos and
asbestos containing materials), the removal, encapsulation, or treatment of
which is required or the use of which is restricted, prohibited or penalized by
any “Environmental Law, which term shall mean any federal, state or local law or
ordinance relating to pollution or protection of the environment. Tenant hereby
agrees that (i) no activity will be conducted on the Leased Premises that will
produce any Hazardous Substances except for such activities that are part of the
ordinary course of Tenant’s business (the “Permitted Activities”), provided such
Permitted Activities are conducted in accordance with all Environmental Law and
have been approved in advance in writing by Landlord; (ii) the Lease Premises
will not be used in any manner for the storage of any Hazardous Substances
except for the temporary storage of such materials that are used in the ordinary
course of Tenant’s business (the “Permitted Materials”), provided such Permitted
Materials are properly stored in a manner and location meeting all Environmental
Laws and approved in advance in writing by Landlord; (iii) Tenant will not
permit any Hazardous Substances to be brought onto the Leased Premises, except
in strict compliance with applicable laws, and if so brought or found located
thereon, the same shall be immediately removed, with proper disposal, and all
required clean-up procedures shall be diligently undertaken pursuant to all
Environmental Laws. If at any time during or after the Term of the Lease, the
Leased Premises are found to be so contaminated or subject to said conditions
due to the actions or inactions of Tenant, Tenant agrees to indemnify, defend
and hold Landlord harmless from all claims, demands, actions, liabilities,
costs, expenses, damages and obligations of any nature arising from or as a
result of the use of the Leased Premises by Tenant. The foregoing
indemnification shall survive the termination or expiration of this Lease.
          29.22. The submission and negotiation of this Lease shall not be
deemed an offer to enter into a binding lease by Landlord, but merely
solicitation of such an offer by Tenant; and this Lease shall not be deemed a
binding lease unless and until this Lease is fully executed by both Landlord and
Tenant.
          29.23. This Lease and any Addendums and Exhibits attached hereto have
been mutually negotiated by Landlord and Tenant, and any ambiguity shall not be
interpreted in favor of either party.
          29.24. Except with respect to any sums payable by either party
hereunder (including Base Rental and Additional Rent), whenever a period of time
is herein prescribed for action to be taken by either party, such party shall
not be liable or responsible for, and there shall be excluded from the
computation for any such period of time, any delays due to strikes, riots, acts
of God, shortages of labor or materials, war, terrorism, governmental laws,
regulations or restrictions or any other causes of any kind whatsoever which are
beyond the reasonable control of such party.
          29.25. It is agreed and understood that mold spores are present
essentially everywhere. Each party acknowledges and understands that mold can
grow in any moist location, including within the Leased Premises. Each party
acknowledges the necessity of good housekeeping, ventilation, and moisture
control (especially in kitchens, bathrooms, beneath cabinets and around outside
walls) for mold prevention. Tenant agrees to immediately notify Landlord if
Tenant observes mold/mildew and/or moisture conditions (from any source,
including leaks), and allow Landlord to evaluate and make recommendations and/or
take appropriate corrective action including the “Excluded Areas”. Each party
relieves the other, party from any liability for any personal injury or damages
to properly related to moisture or the growth of or occurrence of mold or mildew
on or in the Building, the Parking Garage, and/or the

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Leased Premises caused by such party’s action or inaction unless such liability
is caused by the negligence or willful misconduct of either party.
          29.26. To best of Landlord’s Knowledge, there are no Hazardous
Substances or mold harmful for human contact in the Building. In the event
Hazardous Substances or mold harmful for human contact are found in the Leased
Premises or structural partitions of the Building, and the presence of such
Hazardous Substances or mold harmful for human contact were not due to any act
of Tenant, Tenant’s agent, employees, representatives or contractors, Landlord
shall be responsible for all costs incurred with the removal of such Hazardous
Substances or mold harmful for human contact if such removal is required by
Environmental Law. Landlord’s actual knowledge shall be defined as the actual
knowledge of Philip Schneidau in his capacity as President of BMS Management,
Inc. and Richard Mellas in his capacity as Building manager (“Landlord
Knowledge”). If at any time during or after the Term of the Lease, the Leased
Premises are found to be so contaminated or subject to said conditions due to
the actions or inactions of Landlord, Landlord agrees to indemnify, defend and
hold Tenant harmless from all claims, demands, actions, liabilities, costs,
expenses, damages and obligations of any nature arising from or as a result of
Landlord’s indemnity obligations pursuant to this Article 29.26 shall survive
the termination of this Lease.
          29.27. deleted prior to execution.
          29.28. Tenant agrees that at all times during the term of this Lease,
the ratio of all persons occupying the Leased Premises at any time shall not
exceed one person for every 150 net rentable square feet within the Leased
Premises. In the event the occupancy rate within the Leased Premises shall
exceed one person for every 150 net rentable square feet, the same shall
constitute a default by Tenant under the terms of this Lease. Notwithstanding
the foregoing and Tenant acknowledges that any floor which has more than one
person for every 200 net rentable square feet is considered “Excess Density”.
Tenant agrees that in the case of Excess Density, if necessary, Landlord shall
provide written notice to Tenant containing a description of any mechanical,
electrical, or plumbing problems which Landlord believes in its reasonable
judgment, should be corrected due to the Excess Density. Such written notice
shall also set forth Landlord’s plan of correction for such mechanical,
electrical or plumbing problems along with an estimate of the cost to correct
such problems, Within thirty (30) days following the receipt of such notice,
Tenant shall either approve and agree to pay for the costs of correction for any
such mechanical, electrical or plumbing problems or reduce the occupancy of the
Leased Premises to eliminate any Excess Density.
          29.29. Landlord and Tenant are knowledgeable and experienced in
commercial transactions and agree the provisions of this Lease for determining
charges, amounts and Additional Rent payable by Tenant are commercially
reasonable and valid even though such methods may not state the precise
mathematical formula for determining such charges. ACCORDINGLY, TENANT
VOLUNTARILY AND KNOWINGLY WAIVES ALL RIGHTS AND BENEFITS OF TENANT UNDER ARTICLE
93.012 OF THE TEXAS PROPERTY CODE, AS ENACTED BY HOUSE BILL 2186, 77TH
LEGISLATURE, AS SUCH ARTICLE NOW EXISTS OR AS MAY RE HEREAFTER AMENDED OR
SUCCEEDED.
     30. Special Provisions
          30.1. For certain special provision, and other terms, provisions and
conditions of this Lease, see the Addendum, which is attached hereto and
incorporated herein by reference and made a part hereof for all purposes.
          30.2. In the event of any conflict between the Lease and the
Building’s Rules and Regulations, the Lease shall prevail.
          30.3. The signatory of the Tenant and Landlord each herein represents
and warrants that he is duly authorized and empowered to execute and deliver
this Lease. Without the foregoing representation and warranty, Landlord and
Tenant would not have entered into this Lease.

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EXECUTED on this 29 day of August, 2005.

          LANDLORD:    
 
        FRAYDUN REALTY CO., A New York Limited Partnership    
 
       
BY:
       
 
 
 
   
 
        TITLE: AUTHORIZED AGENT FOR THE PARTNERSHIP    
 
       
TENANT:
       
 
        FRANKLIN BANK, S.S.B., a Texas state savings bank    
 
       
BY:
       
 
 
 
   
 
       
NAME:
       
 
 
 
   
 
       
TITLE:
       
 
 
 
   

Signature Page for Lease dated August 26, 2005
by and between Fraydun Realty Co. (“Landlord”)
and Franklin Bank, S.S.B. (“Tenant”).

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