Exhibit 10.1

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT (this “Lease”) is entered into effective this 29th day of
August, 2013 (the “Effective Date”), by and between Fog Break, Ltd., a Texas
limited partnership (“Landlord”), and Insys Therapeutics, Inc., a Delaware
corporation (“Tenant”).

 

In consideration of the respective obligations contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged and confessed, Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, the Property as described herein TO HAVE AND TO HOLD the
Property for the Term, all upon the terms and conditions set forth in this
Lease.

 

 

ARTICLE I

DEFINITIONS

 

1.1     Defined Terms. In addition to other terms which are elsewhere defined in
this Lease, the following terms have the meanings set forth in this section, and
only such meanings, unless such meanings are expressly limited or expanded
elsewhere herein:

 

(a)     Additional Rent: All amounts designated as additional rent under this
Lease, including without limitation, the Insurance, Operating Expenses, and
Taxes.

 

(b)     Base Rent:      

 

Month

Per sq. foot per year

Monthly payment

Months 1 to 12

$13.25

$44,166.67*

Months 13 to 24

$13.58

$45,266.67*

Months 25 to 36

$13.92

$61,774.64

Months 37 to 48

$14.27

$63,327.88

Months 49 to 60

$14.63

$64,925.50

Months 61 to 72

$14.99

$66,523.12

Months 73 to 84

$15.37

$68,209.50

Months 85 to 96

$15.75

$69,895.88

Months 97 to 108

$16.14

$71,626.63

Months 109 to 120

$16.55

$73,446.14

 

*Note: For months 1 to 24 after the Rent Commencement Date, Base Rent on all
square footage of Building Space above 40,000 square feet shall be abated, such
that Tenant pays Base Rent based on only 40,000 square feet of Building Space,
regardless of the actual square footage in the Building. Additional Rent (as
defined directly above) will not be abated in any manner.

 

(c)     Building: That certain building located on the Property as of the
Effective Date.

 

 
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(d)     Building Space: Approximately 53,254 square feet of space within the
Building. Landlord and Tenant agree that for all purposes of this Lease, the
interior of the Building is 53,254 square feet of area exclusive of the
mezzanine areas of the warehouse which areas shall not be included in the square
footage calculations but shall be included in the premises or space which Tenant
shall lease hereunder. Both Landlord and Tenant acknowledge they have had
opportunity to measure the area of the Building. Neither Landlord nor Tenant
represents to the other that 53,254 is or will be the true and actual square
footage of the Building when the Work is completed, and both parties agree that
the actual square footage might be more or less; however, the parties have
agreed to use 53,254 as the stated square footage for the purpose of all
calculations based upon square footage pursuant to this Lease, and have further
agreed to not challenge the square footage during the term of the Lease.

 

(e)     Environmental Law or Environmental Laws: Each and every applicable
federal, state, regional, county, or municipal statute, ordinance, rule,
regulation, order, code, directive, or requirement, relating to the environment
or hazardous or flammable substances, including without limitation the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. § 6901 et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. § 9601 et seq.; the Federal Water Pollution and Control Act,
33 U.S.C. § 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et
seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; and any above-ground and
underground storage tank laws, now or hereafter existing, together with all
successor statutes, ordinances, rules, regulations, orders, directives, or
requirements now or hereafter existing.

 

(f)     Force Majeure: Prior to the Rent Commencement Date, Tenant may extend
the Rent Commencement Date by one (1) day for every two (2) days of delay
incurred by Tenant in construction of the Work due to strikes, riots, acts of
God, shortages of labor or materials, war, governmental laws or regulations,
governmental delay, utility delay, restrictions, or any other causes of any kind
whatsoever which are beyond the control of Tenant; provided that –

a.     Tenant may not extend the Rent Commencement Date by more than fourteen
(14) total days (e.g., 28 days of delay would allow a 14 day extension); and

b.     Tenant must provide Landlord with written notice of any event of Force
Majeure within seven (7) days after Tenant’s knowledge of such event.

 

(g)     Hazardous Material or Hazardous Materials: Any petroleum based products,
pesticides, paints and solvents, polychlorinated biphenyl, lead, flammables,
explosives, cyanides, DDT, acids, ammonium compounds and other chemical or
natural products, and any substance or material defined or designated a
contaminant or hazardous or toxic substance, material or waste or other similar
term, by any Environmental Law.

 

(h)     Insurance: All insurance that Landlord purchases for the Property
pursuant to this Lease. Landlord’s initial estimate of Insurance is $642.00 per
month.

 

 
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(i)     Operating Expenses: The Operating Expenses include all expenses related
to Landlord’s Maintenance Obligations as defined herein; assessments of any
property owners or similar associations affecting the Property; only those
reasonable capital expenditures for capital items designed to reduce Operating
Expenses (and which are commercially reasonable, as determined in Landlord’s
good faith judgment, but only to the extent of Landlord’s good faith
determination of the reasonable time period required to recover the cost savings
applicable thereto) or which may be required after the Effective Date of this
Lease by any governmental authority (amortized over the useful life of the
improvement as determined by generally accepted accounting principles). The term
“Operating Expense” shall not include principal and interest payments on
mortgages; payments under ground leases, depreciation or improvements which IRS
requires to be depreciated; expenses of repairing damage of the type normally
covered by fire, vandalism, flood, and commercial liability insurance; any
expense paid or reimbursed from insurance proceeds; costs of repairing damage
for which Landlord is entitled to reimbursement from others; remodeling or
repossession costs for or caused by existing lessees; leasing commissions;
expenses of marketing the Building; legal fees; structural repairs to roof,
foundation, and walls (except for Losses for which Tenant is responsible
pursuant to Section 11.1); non-arms-length payments (to affiliates of Landlord
at above market cost, etc.); other capital expenditures (and/or depreciation)
not listed above; rent loss insurance; employees, management and supervisory
salaries, travel, and per diem expenses; Landlord’s corporate and administrative
overhead; costs of complying with Environmental Laws that are specifically
allocated to Landlord under Section 5.09; costs for which Landlord has been
compensated by a management fee; reserves for bad debts; all costs incurred by
Landlord in connection with any dispute relating to Landlord’s title to and
ownership of the Building; any penalties or costs incurred by Landlord due to
the negligence of Landlord, or its agents, or any third party under Landlord’s
control; costs to correct original construction defects to the roof, foundation,
and walls; any costs, fines and the like due to Landlord’s violation of any
governmental rule or authority during the Term; costs incurred due to violation
by Landlord of any of the terms and conditions of the Existing Lease.

 

(j)     Permitted Use: Operation of administrative and sales offices; general
commercial offices; research, development, manufacturing and testing of
pharmaceutical products and drugs and related therapeutic products and related
uses thereto. No other use shall be permitted without Landlord’s prior written
consent; provided however, Landlord shall not unreasonably withhold, condition
or delay its consent and any use which is authorized under the then applicable
zoning ordinances may not be rejected by Landlord [except sexually oriented
businesses or abortion facilities, which are not allowed in any event].

 

(k)    Property: Lot 1, Block “B”, OAKMONT CENTRE, SECTION FIVE, an addition in
and to the City of Round Rock, Williamson County, Texas, according to the map or
plat thereof, recorded in Cabinet F, Slide(s) 139-142 of the Plat Records of
Williamson County, Texas.

 

(l)     Rent: Base Rent, Additional Rent, and all other sums due from Tenant to
Landlord under this Lease.

 

(m)   Rent Commencement Date: One Hundred Twenty (120) days after the Site
Delivery Date, subject to Tenant’s right to extend the Rent Commencement Date by
up to fourteen (14) days in an event of Force Majeure (as defined above).

 

 
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(n)    Site Delivery Date: The date the Existing Tenant vacates the Property
pursuant to Article IV of this Lease; but in no event later than one hundred
twenty (120) days after the Effective Date.

 

(o)    Taxes: All real property taxes assessed against the Property, the costs
and fees of challenging real property taxes, including Landlord’s margin taxes
for receipts attributable to this Lease. The term “Taxes” will exclude
Landlord’s federal income taxes or other taxes based on Landlord’s income or
revenues. Landlord’s initial estimate of Taxes is $5,410.00 per month.

 

(p)    Tenant’s Property Address: 2700 Oakmont, Round Rock, Texas 78665.

 

(q)    Tenant’s Trade Name: Insys Therapeutics, Inc.

 

(r)     Term: The period of time commencing on the Effective Date and ending on
the Term Expiration Date, as it may be extended in strict accordance with
Exhibit “B” to this Lease.

 

(s)    Term Expiration Date: One hundred twenty (120) months after the Rent
Commencement Date.

 

 

ARTICLE II

RENT / LETTER OF CREDIT / EXTENSION OPTION / ROFR

 

2.1     Rent Commencement. Rent shall accrue hereunder from the Rent
Commencement Date and shall be payable at the place designated for the delivery
of notices to Landlord. Tenant shall have the right (the “Allowance Offset
Right”) to offset against up to fifty percent (50%) of Base Rent any portion of
the Allowance owed by Landlord that is not paid by Landlord within the deadlines
set forth in Section 8 of Exhibit “C” hereto. The Allowance Offset Right must be
exercised by Tenant delivering written notice to Landlord specifying the
event(s) justifying the offset in reasonable detail within ninety (90) days
after the date that Landlord’s payment of the Allowance is due pursuant to
Section 8 of Exhibit “C” hereto; failure to timely send the written notice shall
result in forfeiture of the Allowance Offset Right. Except for the Allowance
Offset Right, Rent is payable without demand, offset, or reduction. Except for
the Allowance Offset Right, Tenant’s obligation to pay Rent is not dependent on
the condition of the Property or the performance by Landlord of its obligations
hereunder. Promptly upon the written request of Landlord or Tenant, each party
shall each execute and deliver to the other a letter confirming the Rent
Commencement Date and the Term Expiration Date.

 

2.2     Base Rent. Tenant shall pay Base Rent to Landlord in monthly
installments in the amounts specified in Article I above. The first such monthly
installment shall be due and payable on or before the Rent Commencement Date,
and subsequent installments shall be due and payable on or before the first day
of each succeeding calendar month during the Term. If the Term commences on a
date other than the first day of a calendar month, the amount of Rent due from
Tenant shall be proportionately adjusted based on that remaining portion of the
calendar month during which this Lease is in effect.

 

 
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2.3     Additional Rent. In addition to the Base Rent, Tenant shall pay
Additional Rent to Landlord in monthly installments, which shall be due on the
same day as Base Rent. Additional Rent shall include Operating Expenses, Taxes
and Insurance as herein described. In no event may Landlord charge more
Operating Expenses than it actually incurred. If any expenses relating to the
Building, though paid in one year, relate to more than one calendar year, such
expenses shall be proportionately allocated among such related calendar years
for the period for which the expense is attributable.

 

2.4     Audit Rights. Tenant, at Tenant’s sole cost and expense, shall have the
right upon fifteen (15) days’ prior written notice to Landlord (a “ Review
Notice”), to be given only within one hundred twenty (120) days after Tenant
receives Landlord’s determination of Tenant’s actual ultimate liability for any
Additional Rent charges under this Lease for any particular year, to review
Landlord’s books and records relating to such determination for such year with
respect to any specific charge or charges disputed in writing by Tenant, subject
to the following terms and provisions: (a) no review shall be conducted at any
time that an Event of Default exists; (b) any review shall be conducted only by
accountants employed by Tenant on an hourly or fixed fee basis, and not on a
contingency fee basis; and (c) Tenant shall not review Landlord’s books and
records relating to a specific Additional Rent Charge more than one (1) time for
any year. Tenant acknowledges that Tenant’s right to review Landlord’s books and
records with respect to Additional Rent for the preceding year is for the
exclusive purpose of determining whether Landlord has complied with the terms of
this Lease with respect to Additional Rent. Tenant shall have sixty (60) days
after Tenant’s Review Notice to complete Tenant’s review of Landlord’s books and
records concerning Additional Rent charges at Landlord’s accounting office.
During its review, Tenant agrees to request, in writing, all pertinent documents
relating to the review. If in Landlord’s possession or control, Landlord will
provide such documents to Tenant within ten (10) days after Landlord’s receipt
of Tenant’s written request and Tenant shall not remove such records from
Landlord’s accounting office, but Tenant shall have the right to make copies of
the relevant documents at Tenant’s sole cost and expense. Tenant shall deliver
to Landlord a copy of the results of such review within fifteen (15) days after
receipt by Tenant. The nature and content of any review are strictly
confidential. Tenant shall not disclose the confidential information obtained
from the review to any other person or entity, except to Tenant’s accountants,
consultants, and attorneys or as required by court order. In the event Tenant’s
review shall disclose that Landlord has overstated Tenant’s actual liability for
Additional Rent charges under this Lease for such year by three percent (3%) or
more and Tenant has paid such overstated amounts, then Landlord shall promptly
pay for the reasonable costs of the review, not to exceed $7,500.00, and shall
credit the amount of overpayment against the Rent next due from Tenant (or
return the overpayment to Tenant if discovered after the expiration or
termination of the Term).

 

2.5     Delinquent Rent. If any payment of Rent is not received by Landlord
within five (5) business days after such payment is due and payable, Tenant will
pay Landlord a late charge equal to five percent (5%) of the payment due.  In
addition, Tenant will pay Landlord $50 for each check that is tendered as
payment for Rent and returned by the institution on which it is drawn for any
reason.

 

 
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2.6     Letter of Credit. Tenant shall tender to Landlord a Letter of Credit in
accordance with the terms set forth in Exhibit “A” to this Lease. The Letter of
Credit shall not be construed as a security deposit but shall be subject to the
terms provided herein.

 

2.7     Extension Option. Tenant shall have the right to extend the Term of this
Lease in accordance with the terms set forth in Exhibit “B” to this Lease.

 

2.8     Right of First Refusal. Landlord hereby grants to Tenant a right of
first refusal (“ROFR”) to purchase or lease the Property under the following
terms and conditions:

 

(a)     The “ROFR Term” shall commence on the Effective Date, and shall
automatically expire on the earlier of (i) six (6) months prior to the
expiration of the Term as may be extended hereunder; (ii) termination of this
Lease; (iii) Landlord’s sale or lease of the Property after sending Tenant a
ROFR Notice in accordance with this Lease (and Tenant not exercising its ROFR in
accordance with this Lease); or (iv) Tenant exercising its ROFR rights and then
subsequently terminating the purchase or lease contract, failing to execute the
purchase or lease contract, or failing to close its purchase or lease at no
fault of Landlord. The ROFR shall not apply during any period of an uncured
Event of Default under this Lease.

 

(b)     In the event Landlord receives a bona fide offer from an unaffiliated
third party for the purchase the Property, or ground lease the Property for a
term longer than the Term, Landlord shall give Tenant written notice (“ROFR
Notice”) of such offer. The ROFR Notice shall include, at a minimum, the
proposed price, the terms of payment, whether for cash or credit, and if on
credit the proposed term and interest rate, as well as any and all other
consideration being received or paid in connection with such proposed
transaction, feasibility period allowed, the earnest money required, closing
date, title and survey matters, and any and all other material terms,
conditions, and details of the offer. The ROFR Notice shall also be accompanied
by a true and correct copy of the agreement of sale, ground lease or letter of
intent describing the transaction.

 

(c)     Upon receipt of the ROFR Notice with respect to such offer, Tenant shall
have the right and option, exercisable by written notice to Landlord at any time
during a period of five (5) business days after the date of said ROFR Notice, to
elect to purchase or lease the Property on the same terms and conditions as set
out in the ROFR Notice. If Tenant does not deliver written notice of its
election to purchase or lease the Property to Landlord within the five (5)
business day period, Tenant shall be deemed conclusively to have elected not to
exercise the ROFR, thereby allowing Landlord to sell or lease the Property free
of any right of Tenant hereunder in substantial accordance with the terms of the
ROFR Notice. For purposes of this Section 2.8, a sale will be in “substantial
accordance with the terms of the ROFR Notice” if such sale is a bona fide third
party sale without any material change in the terms and conditions from those
set forth in the ROFR Notice (without limiting the generality of the foregoing,
a deviation of a deadline by up to ten (10) days, or a monetary term by up to
one percent (1%), shall conclusively be deemed not “material” for purposes of
this sentence).

 

 
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(d)     In the event that Tenant fails to exercise any of its rights as strictly
set forth herein and Landlord closes or is imminent in closing the sale or lease
to a bona fide arm’s length purchaser or lessee as provided above, Tenant shall,
within five (5) business days of a written request from Landlord, deliver to
Landlord any reasonable document required by Landlord or a title insurance
company to verify termination of the ROFR.

 

(e)     In the event that Landlord fails to close the sale of the Property to
the prospective purchaser in substantial accordance with the terms of the ROFR
Notice, then this ROFR shall be reinstated on the terms set forth in this
Section 2.8.

 

(f)     The ROFR rights are expressly made and accepted subject to any and all
validly existing encumbrances, conditions, restrictions, and governmental
regulations relating to the Property; provided however, this provision shall not
preclude any right to object to title or survey matters under the contract for
the sale of the Property.

 

(g)     Landlord and Tenant shall promptly execute a memorandum of this Lease,
in recordable form, describing Tenant’s ROFR rights.

 

 

ARTICLE III

LANDLORD’S AND TENANT’S LIMITED WARRANTIES; AS-IS; DISCLAIMERS

 

3.1     Landlord’s Warranties. Landlord hereby makes the following limited
warranties in connection with this Lease, which are Landlord’s sole warranties
in connection with this Lease:

 

(a)     Ownership. Landlord owns fee title to the Property, subject to the
Existing Lease (defined in Article IV below) and all encumbrances of record that
apply to the Property. Landlord has the right under the Existing Lease to
terminate such lease upon sending 90 days’ written notice of termination to the
Existing Tenant; provided that Landlord may not exercise the termination right
so as to cause the Existing Tenant to vacate the Property during the period from
December 1 through January 31 (such move out date would be extended to February
1).

 

(b)     Authority. The person signing this Lease on behalf of Landlord is fully
authorized to execute this Lease and bind Landlord to the terms of this Lease.

 

(c)     ADA and Compliance. To Landlord’s current, actual knowledge, without
investigation, the Building and Property are in compliance with the Americans
with Disabilities Act of January 26, 2002, the Texas Architectural Barriers Act
and the Texas Accessibility Standards, and Landlord has not received any written
notice alleging noncompliance with such laws.

 

(d)     Environmental. Landlord has not received any written notice alleging
violation of any Environmental Law on the Property.

 

 
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(e)     Roof Warranty. Landlord has provided Tenant with a document dated July
1, 2008 from B & C Exteriors to Fog Break Enterprises relating to the roof on
the Building. Landlord makes no representations as to whether such document
establishes a roof warranty, or whether any roof warranty is in place; provided,
however, that Landlord represents that Landlord has not received any written
notice from B & C Exteriors denying the existence of a roof warranty on the
Building.

 

3.2     Tenant’s Warranties. Tenant hereby makes the following warranties in
connection with this Lease:

 

(a)     Authority. The person signing this Lease on behalf of Tenant is fully
authorized to execute this Lease and bind Tenant to the terms of this Lease.

 

3.3     As-Is; No Warranties; Disclaimers. Except as required under Section
6.1(c), as a material part of the consideration for this Lease, Landlord and
Tenant agree that Tenant is leasing the Property “AS-IS” with any and all latent
and patent defects and that there is NO WARRANTY by Landlord that the Property
is fit for a particular purpose.  Tenant acknowledges that it is not relying
upon the accuracy or completeness of any representation, brochure, rendering,
promise, statement, or other assertion or information with respect to the
Property made or furnished by or on behalf of, or otherwise attributed to,
Landlord or any of its agents, employees, or representatives, any and all such
reliance being hereby expressly and unequivocally disclaimed, but is relying
solely and exclusively upon its own experience and its independent judgment,
evaluation, and examination of the Property.  Tenant has inspected the Property
to its full satisfaction. Tenant further unequivocally disclaims (i) the
existence of any duty to disclose on the part of Landlord or any of its agents,
employees, or representatives and (ii) any reliance by Tenant on the silence or
any alleged non-disclosure of Landlord or any of its agents, employees, or
representatives.  Tenant takes the Property under the express understanding that
there are NO EXPRESS OR IMPLIED WARRANTIES (except for the limited warranties
contained in Section 3.1 above and 6.1(c)). Tenant expressly warrants and
represents that no promise or agreement which is not herein expressed has been
made to it and HEREBY DISCLAIMS ANY RELIANCE upon any such alleged promise or
agreement.  This Lease constitutes the entire agreement between the parties. 
This provision was freely negotiated and played an important part in the
bargaining process for this Lease.  Except for Landlord’s representations set
forth in Section 3.1, Tenant has agreed to disclaim reliance on Landlord and to
accept the Property “as-is” with full awareness that the Property’s prior uses
or other matters could affect its condition, value, suitability, or fitness; and
Tenant confirms that Tenant is hereby assuming all risk associated therewith.
Tenant acknowledges that it has sought and has relied upon the advice of its own
legal counsel concerning this provision.  Provisions of this paragraph shall
survive termination or expiration of this Lease.

 

 
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3.4     Feasibility Period. Notwithstanding anything in this Lease to the
contrary, Tenant shall have a “Feasibility Period” until 3:00 p.m. CST on
Wednesday, August 28, 2013, in which to investigate and inspect the Property to
determine whether or not the Property is suitable for Tenant’s intended use, and
Landlord agrees to cooperate with Tenant (at no material cost to Landlord) in
connection with the investigation and inspection. Among the factors to be
considered by Tenant are the zoning and other restrictions on the use of the
Property, the condition of soils and improvements, the extent and type of
governmental approvals necessary and/or restrictions applicable to the use the
Property, the availability and costs of utilities, the condition of the
Building, the location and suitability of the configuration of the Property for
Tenant’s use, drainage, environmental conditions, and the economic feasibility
of the Property as well as any other matters that may affect Tenant’s use and/or
enjoyment of the Property. Tenant and Tenant’s agents shall have the right of
reasonable access to the Property during the Feasibility Period (upon reasonable
advance notice to Landlord) for the purpose of conducting its investigations and
inspections, and shall have the right to conduct tests and obtain soil and core
samples; provided, however, that Tenant shall not materially interfere with the
business operations of the Existing Tenant. In the event Tenant in Tenant’s sole
discretion determines the Property is not suitable for Tenant’s intended use,
Tenant shall the right to terminate this Lease under this Section 3.4 by
delivering written notice of its election to terminate this Lease to Landlord
prior to the expiration of the Feasibility Period, whereupon the parties shall
have no further obligations hereunder, except for those provisions that
expressly survive termination. Notwithstanding the notice provisions of Article
XIII, before the expiration of the Feasibility Period Tenant’s termination
notice must be either (i) actually received by Landlord (no deemed delivery);
(ii) actually received by Landlord’s attorney, Patrick E. Hudson (no deemed
delivery); or (iii) refused by either Landlord and Landlord’s attorney. The
parties acknowledge that the intent of the prior sentence is to give Landlord
actual notice of a termination (not constructive, imputed, or deemed notice), so
that Landlord can determine if it is obligated to terminate the Existing Lease.

 

 

ARTICLE IV

EXISTING TENANT / SITE DELIVERY / OPERATING EXPENSES

 

4.1     Existing Tenant. As of the Effective Date, Landlord is leasing the
Property to Kimmjae Distributors, Inc., a Texas corporation (“Existing Tenant”),
pursuant to a written lease (the “Existing Lease”). Within ninety (90) days
after the Effective Date (the “Existing Tenant Move-Out Date”), Landlord shall
terminate the Existing Lease, cause the Existing Tenant to vacate the Property,
and leave the Building in broom clean condition. Except during the Feasibility
Period, Tenant shall not enter the Property without Landlord’s prior express
approval prior to the Existing Tenant vacating the Property. In the event that
the Existing Tenant has not vacated the Property by:

 

(a)     the Existing Tenant Move-Out Date, then on the Rent Commencement Date,
Rent shall be abated by one (1) day for each day of delay between the Existing
Tenant Move-Out Date and the date that the Existing Tenant vacates the Property,
but not more than sixty (60) days in any event;

 

(b)     sixty (60) days after the Existing Tenant Move-Out Date, then Tenant
shall have the right to terminate this Lease by providing written notice of
termination to Landlord.

 

 
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4.2     Site Delivery. Landlord shall deliver possession of the Property to
Tenant on the Site Delivery Date; whereupon Tenant may enter upon and take
possession of the Property (subject to Tenant providing proof of required
insurance in accordance with Article X ).

 

4.3     Payment of Operating Expenses. Commencing on the Rent Commencement Date,
as Additional Rent hereunder Tenant shall pay to Landlord the Operating Expenses
for the Property. Operating Expenses shall be paid within thirty (30) days after
Tenant’s receipt of a statement of Operating Expenses from Landlord, which
statement from Landlord shall show the detail of and basis for the charges
incurred by Landlord and not be delivered to Tenant more frequently than a
quarterly basis. Operating Expenses payable hereunder for years in which the
Term begins and ends shall be prorated to correspond to that portion of said
year occurring within the Term. The obligations of this Section shall survive
the termination or expiration of this Lease.

 

 

ARTICLE V

USE AND CARE OF PROPERTY

 

5.1     Tenant’s Work. Commencing on the Site Delivery Date, Tenant may commence
the Work in accordance with the provisions of Exhibit “C” of this Lease.

 

5.2     Permitted Use; Trade Name. The Property may be used and occupied only
for the Permitted Use and for no other purpose without the prior written consent
of Landlord, in its sole discretion. Tenant shall operate under Tenant’s Trade
Name, and no other trade name without the prior written consent of Landlord, in
its reasonable discretion.

 

5.3     Compliance with Laws. Tenant shall, in all respects, comply with all
applicable laws, orders, regulations, or ordinances promulgated by any federal,
state, or local government affecting the use, occupation, safety, and
cleanliness of the Property. Tenant shall procure and maintain, at its own
expense, any permits, licenses, and approvals required for the transaction of
business in the Property (and shall provide a copy of the same to Landlord
promptly upon request). Tenant shall comply with all reasonable requirements
from time to time imposed by Landlord’s fire and extended coverage insurance
carriers that are directly related to Tenant’s type of business.

 

5.4     Duty to Notify. Commencing on the Effective Date, Landlord and Tenant
shall, within ten (10) days of receipt, provide the other with a copy of any
written notice it receives (a) of the violation or alleged violation of any law
(including any Environmental Law) affecting the Property or Tenant’s business on
the Property; or (b) challenging the legal right of ownership or possession of
the Property or alleging a default by Landlord under any mortgage or under any
ground lease.

 

5.5     Quiet Possession. Landlord hereby covenants and agrees that if no Event
of Default is in effect, Tenant will, subject to the terms of this Lease, have
the peaceable and quiet enjoyment and possession of the Property.

 

 
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5.6     Landlord’s Right of Entry; Access Devices. Subject to Tenant’s third
party and visitor access requirements (which may include sign-in sheets, visitor
badges, accompaniment by Tenant’s employees in certain restricted areas),
Landlord and its agents, representatives, contractors, repairmen and employees
shall have the right to enter upon the Property at any reasonable time with at
least twenty-four (24) hours’ prior written or verbal notice to Tenant (except
that prior notice is not required in the case of (d)) for the purposes of (a)
inspecting the Property; (b) confirming Tenant’s compliance with this Lease; (c)
performing Landlord’s obligations set forth in Section 6.1 below; (d) enforcing
Landlord’s remedies upon an Event of Default; (e) showing the Property to
prospective purchasers or lenders; or (f) showing the Property to prospective
lessees in the last nine (9) months of the Lease Term. Tenant shall provide
Landlord and its representatives and employees (who are identified by Landlord
prior to providing) with a copy of any keys or access devices needed to enter
the Property and the Building and improvements therein. Landlord shall be
responsible for all parties entering the Property at the request of or on behalf
of Landlord. Tenant is not required to provide keys to any secured files or
controlled substances.

 

5.7     Rules. Tenant agrees to be bound by the terms of the Rules and
Regulations of the Property attached hereto and made a part hereof for all
purposes as Exhibit “D”.

 

5.8     Continuous Operation. Tenant shall not at any time leave the Property
vacant, but after initially opening for business on the Property, shall in good
faith continuously through the Term of this Lease conduct the Permitted Use in
the Property.

 

5.9     Hazardous Materials - Landlord. Landlord hereby covenants to Tenant that
(a) Landlord shall not allow the release of any Hazardous Materials on, onto, or
from the Property by the Existing Tenant; and (b) Landlord shall indemnify and
hold Tenant, its directors, officers, stockholders, partners, joint venturers,
employees, agents, attorneys, consultants, contractors and its successors and
assigns, harmless from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges, judgments, administrative orders,
remediation requirements, enforcement actions of any kind, and all costs and
expenses (including, but not limited to, reasonable attorneys’ fees and
expenses), arising out of any release of Hazardous Materials or violation of
Environmental Law(s) by the Existing Tenant, regardless of whether the release
or violation occurred before or after the Effective Date of this Lease. This
provision shall survive the expiration or termination of this Lease with respect
to any claims arising pursuant to this Section.

 

5.10     Hazardous Materials - Tenant. Tenant hereby represents, warrants, and
covenants to Landlord that:

 

(a)     Tenant shall not allow the release of any Hazardous Material on, onto,
or from the Property that could result in a violation of any Environmental Law
or in the creation of liability or obligations, including, without limitation,
notification, deed recordation, or remediation, under any Environmental Law.

 

(b)     Tenant further agrees not to handle, use, or otherwise manage any
Hazardous Material in violation of any Environmental Laws.

 

 
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(c)     If Tenant is in breach of any of its agreements set forth in this
section, Tenant, at its sole expense, shall take all action required, including
environmental cleanup of the Property, to comply with the covenants herein or
applicable legal requirements and, in any event, shall take all action deemed
necessary under all applicable Environmental Laws.

 

(d)     Except as provide in Section 5.09 above, Tenant shall indemnify and hold
Landlord, its directors, officers, stockholders, partners, joint venturers,
employees, agents, attorneys, consultants, contractors and its successors and
assigns, harmless from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges, judgments, administrative orders,
remediation requirements, enforcement actions of any kind, and all costs and
expenses incurred in connection therewith (including, but not limited to,
reasonable attorneys’ fees and expenses), arising out of any breach by Tenant of
its obligations under this Section 5.10. This provision shall survive the
expiration or termination of this Lease with respect to any claims arising
pursuant to this Section.

 

(e)     Tenant shall promptly provide Landlord with a copy of (i) all
correspondence with any governmental authority relating to the environmental
condition of the Property or compliance with Environmental Laws on the Property,
and (ii) reports and studies of the environmental condition of the Property
prepared by or on behalf of Tenant.

 

(f)     At the expiration or earlier termination of this Lease, Tenant shall
provide Landlord with any site closure letter, no further action letter, or any
similar letter required by any Environmental Law to close out any permit or
approval granted to Tenant or the Property in connection with Tenant’s
operations at the Property. This provision shall survive the expiration or
termination of this Lease.

 

5.11     Signs. Tenant may, at Tenant’s sole cost and expense, install and have
the exclusive use of signage on the Property and Building as part of the Work
pursuant to the provisions of Exhibit “C” of this Lease. In the event that
Tenant installs a monument sign on the Property, the costs of such sign may be
paid from the External Improvement Allowance; no other costs of signage may be
paid from any Allowances.

 

5.12     Security. Any and all security features for the Property are the sole
responsibility of Tenant. All property kept, stored, or maintained within the
Property by Tenant shall be at Tenant’s sole risk.

 

5.13     Utilities. Tenant shall promptly pay all charges for utilities used by
it on the Property. Landlord shall not be liable to Tenant for any interruption
in utility services, except to the extent such interruption was caused by
Landlord’s (a) failure to comply with Landlord’s express obligations under this
Lease; or (b) gross negligence or intentional misconduct.

 

5.14     Mechanics’ and Materialmen’s Liens. If any mechanics’ or materialmen’s
liens shall at any time be filed against the Property, or any part thereof by
reason of any work, labor, services, materials, or equipment furnished to or for
Tenant, Tenant, within fifteen (15) days after notice of the filing thereof
shall cause the same to be discharged of record; provided, however, Tenant shall
be entitled upon written notice to Landlord to contest in good faith and with
due diligence, any such liens, provided the same have been properly bonded
pursuant to the relevant provisions of applicable law. Nothing herein shall be
deemed or construed in any way as constituting the consent or the request of
Landlord express or implied, to any contractor, subcontractor, laborer or
materialmen for the performance of any labor or the furnishing of any materials
for any improvement, alteration or repair of the Property or any part thereof,
nor as giving the Tenant any right, power, or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Property or any part
thereof.

 

 
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ARTICLE VI

MAINTENANCE, SERVICES AND REPAIR OF PROPERTY

 

6.1     Landlord’s Maintenance Obligations. Landlord, as it sole and complete
maintenance obligations under this Lease, shall maintain the Property as follows
(collectively “Landlord’s Maintenance Obligations”):

 

(a)     Building Structure. Landlord shall maintain and repair in working order
the exterior and support walls, the foundation and floor slabs, roof, roof
structure, flashings, gutters, downspouts, load bearing and structural elements
of the Building. Any capital improvements, additions, replacements or upgrades
to the exterior and support walls, the foundation and floor slabs and roof of
the Building shall not be Operating Expenses and shall be Landlord’s
responsibility.

 

(b)     Utility Lines. Landlord shall maintain and repair in good working order
those utility pipes and lines located on the exterior of the Property to the
point of entry into the Building (and those located in the floor slab).

 

(c)     HVAC. The maintenance obligations under this Section 6.1(c) shall be
performed at Landlord’s sole cost and expense, and are not Operating Expenses.
Within sixty (60) days after the Site Delivery Date, Landlord shall cause to be
completed those HVAC repairs described in a certain one-page proposal from Cool
Services, Inc. dated August 6, 2013, which proposal has been reviewed by
Landlord and Tenant. For a period of one (1) year after the Rent Commencement
Date, Landlord shall maintain and repair in good working order the heating,
ventilation, and air conditioning equipment serving the Building.

 

(d)     Parking Areas. Landlord shall maintain and periodically resurface and
restripe the parking and drive areas on the Property.

 

Except as expressly provided in this Section 6.1, and Article XII (Casualty
Loss), and Article XIII (Eminent Domain), Landlord will have no obligation to
maintain or repair any portion of the Property.

 

 
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Except as expressly provided in Article XII (Casualty Loss) and Article XIII
(Eminent Domain), Landlord will have no obligation to maintain or repair the
Work, Trade Fixtures, or any Alterations.

 

Tenant shall provide Landlord with written notice of any maintenance or repair
requests (that are part of Landlord’s Maintenance Obligations), whereupon
Landlord shall have a reasonable amount of time to commence the maintenance or
repair (not to exceed 24 hours in an emergency posing imminent danger to the
health or safety of occupants of the Building [in such instance oral notice will
be sufficient]; and not to exceed two (2) business days for a HVAC repair
(during the first 12 months for which Landlord is responsible) or utility
interruption [in such instances oral notice will be sufficient]). Landlord shall
not be responsible for delays in performing emergency, HVAC, or utility repairs
when Landlord to the extent that Landlord is prevented from entering the
relevant portions of the Property by Tenant (i.e. – because of Tenant’s visitor
access requirements) so long as Landlord gives Tenant prompt notice that
Landlord is being delayed. Once completion of maintenance of repair is
commenced, Landlord shall diligently pursue completion thereof. Landlord’s
Maintenance Obligations may be performed by Landlord and its agents,
representatives, contractors, repairmen and employees. The costs of performing
Landlord’s Maintenance Obligations (except those in Section 6.1(c)) shall
constitute “Operating Expenses” as defined and limited in Article I. In the
event Landlord fails to make such repair or maintenance after a second written
notice to Landlord, and a reasonable amount of time has lapsed, Tenant may, but
shall not be obligated to perform such repair or provide such maintenance.

 

6.2     Tenant’s Maintenance Obligations. Except for Landlord’s Maintenance
Obligations (as defined in Section 6.1), Tenant shall maintain and repair in
working order the entirety of the Property at Tenant’s sole cost and expense,
including without limitation, Work, Alterations, sprinkler and fire suppression
systems, parking areas, sidewalks, access areas, landscaping, utility lines,
signage, storefronts, plate glass windows, doors, door closure devices, window
and door frames, moldings, locks and hardware, electric bulbs, tubes and tube
castings. Tenant shall be responsible for its janitorial services, landscaping,
pest control, and trash removal.

 

Subject to Landlord’s one (1) year obligation to maintain the HVAC Equipment
pursuant to the preceding Section, maintenance of the HVAC Equipment shall be
Tenant’s sole responsibility throughout the Term. Promptly upon expiration of
Landlord’s one (1) year obligation to maintain the HVAC Equipment, Tenant shall
enter into a maintenance contract for the HVAC Equipment, which shall include
regular replacement of air filters (at intervals not to exceed ninety (90)
days), and shall provide a copy of the maintenance contract to Landlord within
five (5) days of written request.

 

Should Tenant fail to repair or maintain any item and, as a result of Tenant’s
failure, damage occurs within the Property or Building, then Tenant shall make
all repairs necessary to repair such damage.  If any repairs required to be made
by Tenant hereunder are not made (or commenced for those repairs requiring
additional time to make) within ten (10) days after written notice delivered to
Tenant by Landlord and such repairs can reasonably be made within such 10 day
period or in the case of those repairs requiring additional time, Tenant has
failed to diligently prosecute the repair after such 10 days, Landlord may, at
its option, make such repairs without liability to Tenant for any loss or damage
which may result to its business, or the business of its subtenants, by reason
of such repairs, and Tenant shall pay to Landlord immediately upon demand as
Additional Rent hereunder the cost of such repairs plus fifteen percent (15%) of
the amount thereof and failure to timely do so shall constitute an Event of
Default. 

 

 
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ARTICLE VII

ALTERATIONS

 

7.1     Alterations. Except for the Work performed in accordance with the
provisions of Exhibit “C” of this Lease, Tenant shall not make any alterations,
additions, or improvements to the Property or Building (collectively
“Alterations”) without the prior written consent of Landlord, which shall not be
unreasonably withheld. The term “Alterations” shall exclude nonstructural
alterations, additions, or improvements with an aggregate cost of less than
$25,000.00 that do not materially affect Landlord’s Maintenance Obligations. It
shall be reasonable for Landlord to withhold consent to a proposed Alteration if
the proposed Alteration would (i) be structural or affect the structural
integrity of the Building; (ii) materially and negatively impair the value of
the Property; or (iii) materially increase Landlord’s Maintenance Obligations.
Notwithstanding the foregoing, if Tenant makes any Alterations in violation of
this Lease, Landlord may require Tenant to restore the portion of the Building
or Property affected by such Alterations to the condition that existed prior to
the Alteration.

 

7.2     Tenant’s Construction Work. In no event shall any Alterations be
commenced within the Property without Landlord’s prior written approval (which
shall not be unreasonably withheld, conditioned or delayed) of plans and
specifications for the Alterations. Whenever Tenant proposes any Alterations
within the Property, it shall first furnish to Landlord plans and specifications
in such detail as Landlord may request covering all such Alterations. Landlord
may require the following from Tenant: (i) reasonable modifications to Tenant’s
proposed plans and specifications; (ii) copies of governmental permits and
certificates for the Alterations; (iii) certificates of insurance from Tenant
and its contractors and subcontractors with coverages satisfactory to Landlord;
and (iv) such other reasonable material as Landlord may require. All fixtures
installed by Tenant shall be new. All Alterations shall be performed in a good
and workmanlike manner, in compliance with all governmental requirements and
Environmental Laws. All costs of such Alterations shall be paid promptly so as
to prevent the assertion of any liens for labor or materials. TENANT SHALL
INDEMNIFY LANDLORD AND HOLD IT HARMLESS against any loss, liability or damage
resulting from Alterations or liens filed in connection therewith, and Tenant
shall, if requested by Landlord, furnish bond or other security satisfactory to
Landlord against any such loss, liability, or damage.

 

7.3     Roof Penetrations. If necessary to preserve any existing roof warranty
on the roof covering the Building, Tenant shall use the contractor who installed
the roof to make any penetrations in the roof, and Tenant shall promptly pay
such contractor the costs of making such penetrations. Tenant may not penetrate
any part of the roof on the Building in manner that invalidates a warranty on
such roof (if any).

 

 
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ARTICLE VIII

LANDLORD’S AND TENANT’S PROPERTY

 

8.1     Landlord’s Property. All fixtures, machinery, equipment, improvements,
and appurtenances attached or affixed to the Property or Building, where the
removal of such attachment or affixed improvement would cause irreparable damage
to the Property or Building, at the commencement of, or during the Term, whether
or not placed there by or at the expense of Tenant, shall become and remain a
part of the Property or Building; shall be deemed the property of Landlord (the
“Landlord’s Property”), without compensation or credit to Tenant; and shall not
be removed by Tenant at the Term Expiration Date unless (i) such item(s)
constitute(s) a Trade Fixture (as defined in Section 8.2 below); or (ii)
Landlord, in its sole discretion, requires in writing at the time of approval of
the plans for such item(s) removal of all or some of such item(s) by Tenant, at
Tenant’s cost and expense. Tenant shall not be required to remove any fixtures,
machinery, equipment, improvements or appurtenances existing as of the Existing
Tenant Move Out Date. In no event shall Tenant remove any of the following
materials or equipment without Landlord’s prior written consent (which consent
may be given or withheld in Landlord’s sole discretion): any cabling, power
wiring or power panels, lighting or lighting fixtures, wall or window coverings,
carpets or other floor coverings, heaters, air conditioners or any other HVAC
Equipment, fencing or security gates, or other similar building operating
equipment and decorations.

 

8.2     Tenant’s Property. For purposes of this Lease, a “Trade Fixture” means
machinery or equipment that is added by Tenant after the Effective Date, used in
Tenant’s business, and can be removed from the Building or Property without
irreparable defacing or causing damage to the Property or Building. At or before
the Term Expiration Date, or the date of any earlier termination, Tenant, at its
expense, shall remove from the Property all of Tenant’s personal property and
Trade Fixtures, and any items that Landlord requires be removed pursuant to
Section 8.1, and Tenant shall repair (to Landlord’s reasonable satisfaction) any
damage to the Property or the Building resulting from such removal. Any other
items of Tenant’s personal property or Trade Fixtures that remain on the
Property after the Term Expiration Date, or following an earlier termination
date, may, at the option of Landlord, be retained by Landlord as its property,
or be disposed of by Landlord, in Landlord’s sole and absolute discretion and
without accountability, at Tenant’s expense. Notwithstanding the foregoing, at
any time an Event of Default by Tenant is in effect, Tenant may not remove from
the Property items encumbered by Landlord’s lien pursuant to Section 8.3 without
the prior express written consent of Landlord unless such removal is the removal
or repossession or sale by a superior lien or security interest holder of Tenant
as allowed under Section 8.3, which shall require no consent by or notification
to Landlord.

 

 
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8.3     Landlord’s Lien. LANDLORD SHALL HAVE AND TENANT HEREBY GRANTS TO
LANDLORD A CONTINUING SECURITY INTEREST FOR ALL RENT AND OTHER SUMS OF MONEY
BECOMING DUE HEREUNDER FROM TENANT, upon all personal property, machinery,
fixtures, furniture, equipment (including Trade Fixtures) situated on the
Property, whether currently owned or hereafter acquired.  Products of collateral
are also covered by the foregoing security interest.  Upon an Event of Default
under this Lease, Landlord shall have, in addition to any other remedies
provided in this Lease or by law, all rights and remedies under the Uniform
Commercial Code, including without limitation the right to sell the property
described in this paragraph at public or private sale upon five (5) days’ notice
to Tenant. Tenant hereby agrees to execute such other commercially reasonable
instruments necessary or desirable, in Landlord’s discretion, to perfect the
security interest hereby created.  Any statutory lien for rent is not hereby
waived, the express contractual lien herein granted being in addition and
supplementary thereto.  On the Effective Date, Tenant shall execute a UCC-1
financing statement reflecting Landlord’s lien, and commercially reasonable
documentation for Landlord to file notice of its lien on the Official Public
Records of Williamson County, Texas. Landlord and Tenant agree that this Lease
and security agreement serves as a financing statement and that a copy or
photographic or other reproduction of this portion of this Lease may be filed of
record by Landlord and have the same force and effect as the original.  This
security agreement and financing statement also covers fixtures located at the
Property, and may be filed for record in the real estate records.  The proceeds
of the sale of such property shall be applied by Landlord toward the reasonable
costs and expenses of the sale, including attorney’s fees, and then toward the
payment of all sums then due by Tenant to Landlord under the terms of this
Lease. Any excess remaining shall be paid to Tenant or other person entitled
hereto by law. Landlord hereby subordinates its statutory lien as well as its
security interest granted to it in this Section 8.3 to all “purchase money
security interest” as defined in the Texas Business and Commerce Code, to the
liens and security interests of any lender, particularly JPMorgan Chase
providing working lines of credit and the Letter of Credit and to all
sellers/lessors under lease-purchase agreements, whether any of same are now
existing or arise in the future. Landlord agrees to take all actions and execute
all commercially-reasonable documents necessary or appropriate to evidence
and/or effectuate such subordination.

  

 

ARTICLE IX

TAXES

 

9.1     Tax Payment. Commencing on the Rent Commencement Date, as Additional
Rent hereunder (payable at the same time or times as Base Rent), Tenant shall
pay to Landlord the Taxes (based upon Landlord’s estimates). Landlord may in
good faith revise its estimate of the Taxes from time to time, whereupon Tenant
shall pay the revised estimate. Taxes payable hereunder for years in which the
Term begins and ends shall be prorated to correspond to that portion of said
year occurring within the Term. Taxes shall be adjusted based upon receipt of
the actual bills therefor, and the obligations of this Article IX shall survive
the termination or expiration of this Lease. Landlord agrees to pay timely all
Taxes prior to the incurrence or assessment of any interest, fees or penalties.

 

9.2     Reconciliation. Landlord shall provide Tenant within ten (10) days of
Landlord’s receipt thereof, the Notice of Appraised Value and the actual Tax
Statements from the taxing authorities. If the aggregate amount of estimated
Taxes actually paid by Tenant during any year is less than Tenant’s actual
ultimate liability for Taxes for that particular year, Tenant shall pay the
deficiency within thirty (30) days of Landlord’s written demand therefor. If the
aggregate amount of estimated Taxes actually paid by Tenant during a given year
exceeds Tenant’s actual liability for such year, the excess shall be credited
against the Rent next due from Tenant, except that in the event that such excess
is paid by Tenant during the final year of the Term, then upon the expiration of
the Term, Landlord shall pay, without demand therefor, to Tenant the
then-applicable excess promptly after determination thereof.

 

 
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9.3     Personal Property Tax. Tenant shall pay any taxes imposed against the
personal property contained within the Property.

 

9.4     Intentionally Omitted.

 

9.5     Contesting Taxes. Landlord and Tenant shall each have the right to
contest the value of the Property as assessed by any taxing authority; provided,
that Tenant’s right to contest the value for a given tax year will trump
Landlord’s right to contest the value for such year only if Tenant notifies
Landlord of Tenant’s commitment to contest the value via written notice
delivered to Landlord within fifteen (15) days after Tenant’s receipt of the
Notice of Appraised Value for the applicable tax year. Tenant shall bear any
costs incurred in connection with such contest. Any costs incurred by Landlord
in connection with such contest shall be included within the term “Taxes” for
purposes of this Lease. In any event, regardless of whether the cost of contest
was based on a contingency fee, Tenant shall receive all benefits and tax
savings recovered by the protest.

 

 

ARTICLE X

INSURANCE

 

10.1     General Insurance Requirements for Tenant. During the Term of this
Lease, Tenant shall at all times be required to maintain, at Tenant’s sole cost
and expense, the following four (4) policies of insurance: (a) personal property
insurance; (b) general liability insurance; (c) workers’ compensation insurance;
(d) pollution legal liability insurance; and (e) business income and extra
expense insurance, all as described below. During the Term of this Lease,
Landlord may require Tenant, at Landlord’s expense, to obtain additional
insurance coverage reasonably required by Landlord’s lender, if applicable.

 

10.2     Tenant’s Personal Property Insurance. Tenant shall at all times during
the Term of this Lease keep the interior of the Property and all of Tenant’s
personal property, Trade Fixtures, equipment, inventory, and fixtures contained
in the Property insured against loss, damage, and destruction, for the full
insurable value thereof. Landlord shall not be liable to Tenant in any manner
for any loss or damage to any of Tenant’s property, including, by way of
description and not limitation, fixtures, equipment, or inventory which may be
occasioned by any casualty of any nature including, by way of description and
not limitation, fire, wind, tornado, rain, flood, or act of God, unless any such
loss or damage is caused by the negligence or willful misconduct of Landlord.

 

10.3     Tenant’s Liability Insurance. At all times during the Term of this
Lease, Tenant shall maintain in full force and effect a comprehensive general
liability insurance policy, including personal injury and property damage, in an
amount not less than $2,000,000.00 for each occurrence, and $5,000,000.00 in the
aggregate.

 

 
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10.4     Tenant’s Workers’ Compensation Insurance. At all times during the Term
of this Lease, Tenant shall maintain workers’ compensation insurance per the
applicable state statutes covering all employees of Tenant.

 

10.5     Tenant’s Pollution Legal Liability Insurance. Tenant shall at all times
during the Term of this Lease maintain pollution legal liability insurance
specific to this Property in an amount not less than $1,000,000.00.

 

10.6     Business Income and Extra Expense. Tenant shall at all times during the
Term of this Lease maintain business income and extra expense coverage for no
less than six (6) months of income and expenses.

 

10.7     Policy Requirements. All of Tenant’s insurance policies required under
Section 10.1 of this Lease shall: (a) be issued by an insurance company with a
Best rating of A or better and otherwise reasonably acceptable to Landlord and
licensed to do business in the State of Texas; (b) name Landlord (and its
lender, if applicable) and Landlord’s property manager (if applicable) as
additional insureds; (c) provide that said insurance shall not be cancelled or
materially modified unless thirty (30) days’ prior written notice shall have
been given to Landlord; (d) provide for deductible amounts that are not in
excess of $5,000.00; and (e) provide coverage for the indemnity obligations of
Tenant under this Lease.

 

All of Landlord’s insurance policies required under Section 10.8 of this Lease
shall: (a) be issued by an insurance company with a Best rating of A or better
and otherwise reasonably acceptable to Landlord and licensed to do business in
the State of Texas; (b) name Tenant as an additional insured; (c) provide that
said insurance shall not be cancelled or materially modified unless thirty (30)
days’ prior written notice shall have been given to Tenant; (d) provide for
deductible amounts that are not in excess of $5,000.00; and (e) provide coverage
for the indemnity obligations of Landlord under this Lease.

 

Each party shall furnish to the other certificates evidencing such insurance
prior to the Site Delivery Date, and from time to time upon the request of a
party, and copies of all renewals thereof shall be delivered to the other at
least thirty (30) days prior to the applicable expiration date of the insurance
policy. Tenant shall give prompt notice to Landlord of any known death, bodily
injury, personal injury, or property damage occurring in and about the Property.

 

10.8     Landlord’s Insurance. Landlord shall maintain a commercial general
liability coverage policy and a fire and extended coverage policy of insurance
on the Property in an amount determined by Landlord, in its reasonable
discretion. Landlord may also carry at its own expense any other insurance that
Landlord reasonably believes is proper to protect its investment in the Building
and Property. The cost of Landlord’s coverage obtained pursuant to the first
sentence of this Section 10.8 will be part of the “Insurance” as defined in
Article I.

 

10.9     Payment of Insurance. Commencing on the Rent Commencement Date, as
Additional Rent hereunder (payable at the same time or times as Base Rent),
Tenant shall pay to Landlord the Insurance for the Property (based upon
Landlord’s estimates). Landlord may reasonably revise its estimate of the
Insurance from time to time, whereupon Tenant shall pay the revised estimate.
Insurance payable hereunder for years in which the Term begins and ends shall be
prorated to correspond to that portion of said year occurring within the Term.
Insurance shall be adjusted based upon receipt of the actual bills therefor, and
the obligations of this Article X shall survive the termination or expiration of
this Lease.

 

 
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10.10     Reconciliation. If the aggregate amount of estimated Insurance
actually paid by Tenant during any year is less than Tenant’s actual ultimate
liability for Insurance for that particular year, Tenant shall pay the
deficiency within thirty (30) days of Landlord’s written demand therefor. If the
aggregate amount of estimated Insurance actually paid by Tenant during a given
year exceeds Tenant’s actual liability for such year, the excess shall be
credited against the Rent next due from Tenant, except that in the event that
such excess is paid by Tenant during the final year of the Term, then upon the
expiration of the Term, Landlord shall pay Tenant the then-applicable excess
promptly after determination thereof.

 

10.11     Waiver of Subrogation. All fire and extended coverage insurance,
builder insurance, and other insurance carried either by Landlord or Tenant
covering losses arising out of destruction or damage to the Property or its
contents or to other portions of the Property shall exercise reasonably
commercial efforts to obtain policies which provide for a waiver of subrogation
against Landlord and Tenant on the part of the insurance carrier. To the extent
that Landlord and Tenant may legally so agree, it is agreed and understood that
where either party hereto may sustain a loss or damage against which loss or
damage such party is protected by existing policy or policies of insurance, the
party hereto sustaining such loss or damage or protected waives its rights, if
any, of recovery against the other party hereto to the extent and amount that
such loss is covered by the claimant’s insurance.

 

10.12     Tenant’s Contractors. Before any of Tenant’s construction commences,
Tenant must deliver to Landlord certificates of insurance, from insurers and in
a form reasonably acceptable to Landlord, evidencing that any general contractor
maintains the following insurance:

 

(a)     workers’ compensation insurance in an amount not less than $500,000 per
occurrence;

 

(b)     comprehensive general liability insurance including personal injury and
property damage in an amount not less than $1,000,000 per occurrence and
$2,000,000 in the aggregate; and

 

(c)     builder’s “all risk” insurance in an amount not less than $2,000,000 per
occurrence.

 

 
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ARTICLE XI

INDEMNITY

 

11.1     Tenant’s Indemnity. Landlord (and its employees, owners, agents and
representatives) shall not be liable to Tenant or to Tenant’s employees, agents,
or visitors, or to any person or entity whomsoever, for injury to person or
damage to or loss of property on or about the Property (a) caused by the acts,
omissions, or negligence of Tenant, its officers, partners, employees, agents,
subtenants, licensees, concessionaires, visitors, or any other person entering
the Property under the express or implied invitation of Tenant; (b) arising out
of the conduct on or management or use of the Property by Tenant and the conduct
of its business thereon; (c) arising out of any breach or default by Tenant in
the performance of its obligations hereunder; (d) caused by any accident,
injury, or damage caused by Tenant or its employees, representatives, agents,
contractors, visitors, or invitees, occurring in, at or upon the Property; (e)
arising out of any actions necessary to protect Landlord’s interest under this
Lease in a bankruptcy proceeding of Tenant or other proceeding of Tenant under
the Bankruptcy Code; (f) relating to the creation or existence of any Hazardous
Materials in, at, on, or under the Property, if and to the extent brought to the
Property or caused by Tenant or any party within Tenant’s control; and (g)
arising out of any violation or alleged violation by Tenant of any law, and
TENANT HEREBY AGREES TO INDEMNIFY LANDLORD, Landlord’s agents, representatives,
and employees and hold them harmless from any loss, expense, claims, actions,
demands, judgments, damages, penalties, fines, liabilities, losses of every kind
and nature, suits, administrative proceedings, costs and fees, including,
without limitation, reasonable attorneys’ and consultants’ fees and expenses,
and the costs of cleanup, remediation, removal, and restoration, arising out of
such damage or injury (including without limitation any court costs and
attorneys’ fees) (collectively, “Losses”). The provisions of this Section 11.1
shall survive the termination of this Lease with respect to any Losses occurring
prior to such termination.

 

11.2     Landlord’s Indemnity. Subject to Sections 3.3 and 11.3, Tenant (and its
employees, shareholders, officers, directors, agents and representatives) shall
not be liable to Landlord or to Landlord’s employees, agents or visitors, or to
any person or entity whomsoever, for injury to person or damage to or loss of
property on or about the Property actually suffered or incurred by Tenant or any
third person (a) as the result of the negligence or intentional misconduct of
Landlord, its officers, partners, employees, agents, contractors, licensees,
concessionaires, visitors, or any other person entering the Property under the
express or implied invitation of Landlord, (b) caused by any accident, injury,
or damage caused by Landlord, Landlord’s employees or owners occurring in, at or
upon the Property or Building; (c) arising out of any actions necessary to
protect Tenant’s interest under this Lease in a bankruptcy proceeding of
Landlord or other proceeding of Landlord under the Bankruptcy Code; (d) arising
out of a violation of Landlord’s covenants contained in Section 5.9 or Section
6.1(c) above; and (e) arising out of any violation or alleged violation by
Landlord of any law by Landlord and LANDLORD HEREBY AGREES TO INDEMNIFY TENANT,
Tenant’s agents, representatives, and employees and hold them harmless from any
loss, expense, claim, or action arising out of such damage or injury (including
without limitation any court costs and attorneys’ fees). The provisions of this
Section 11.2 shall survive the termination of this Lease with respect to any
claims or liability occurring prior to such termination.

 

 
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11.3     Waiver of Liability. Landlord shall not be liable for any injury to
persons or property arising from any repairs, maintenance, alteration, or
improvement in or to any portion of the Property, including the Property, or any
personal property located therein, UNLESS LANDLORD (OR LANDLORD’S AGENTS,
EMPLOYEES, OR CONTRACTORS) IS NEGLIGENT IN PERFORMING SUCH REPAIRS, MAINTENANCE,
ALTERATIONS, OR IMPROVEMENTS, AND TO THE EXTENT SUCH NEGLIGENCE IS THE CAUSE OF
THE LOSS OR DAMAGE. Any liability of Landlord for injury to property pursuant to
the preceding sentence shall be limited to the cost of such repairs,
maintenance, alterations, or improvements.

 

 

ARTICLE XII

CASUALTY LOSS

 

12.1     Landlord’s and Tenant’s Right to Terminate or Rebuild. Tenant shall
give immediate written notice to Landlord of any damage caused to the Property
by fire or other casualty. In the event that, as a result of Tenant’s failure to
promptly notify Landlord pursuant to the preceding sentence, Landlord’s
insurance coverage is compromised or adversely affected, then Tenant is and
shall be responsible for the payment to Landlord of any insurance proceeds that
Landlord’s insurer fails or refuses to pay to Landlord as a result of the
delayed notification. If Landlord or Tenant does not elect to terminate this
Lease as hereinafter provided, and subject to the requirements of the lender
with a deed of trust covering the Property (including such lender’s option to
apply insurance proceeds toward outstanding indebtedness secured by the deed of
trust), Landlord shall proceed with reasonable diligence and at its sole cost
and expense to rebuild and repair the Property, but Landlord shall not be
obligated to expend for such rebuilding, and repair any amount in excess of the
insurance proceeds recovered (or should have been recovered but for Landlord’s
failure to carry insurance required under Section 10.8) by Landlord as a result
of such loss plus any deductible.

 

If more than twenty percent (20%) of the Property is destroyed or rendered
untenable by a casualty, or if Landlord’s lender declines to allow Landlord to
rebuild, then Landlord or Tenant may elect to terminate this Lease by providing
the other with written notice of termination within sixty (60) days after
Tenant’s notice to Landlord of the occurrence of such casualty. Tenant will have
no right to terminate this Lease pursuant to the preceding sentence if the
casualty event is due to Losses for which Tenant is responsible pursuant to
Section 11.1.

 

If less than twenty percent (20%) of the Property is destroyed or rendered
untenable by a casualty, and less than three (3) years are remaining on the Term
(excluding unexercised options or renewals), then in such event Landlord or
Tenant may elect to terminate this Lease by providing written notice to the
other of such election within sixty (60) days after Tenant’s notice to Landlord
of the occurrence of such casualty. Tenant will have no right to terminate this
Lease pursuant to the preceding sentence if the casualty event is due to Losses
for which Tenant is responsible pursuant to Section 11.1.

 

12.2     Rent Reduction. Tenant agrees that it will continue operation of its
business within the Property to the extent practicable, in Tenant’s reasonable
discretion. During the period from the occurrence of the casualty until repairs
are completed, provided that any damage to the Property is not caused by, or is
not the result of acts or omissions by, Tenant, then Base Rent shall be reduced
to such extent as may be fair and reasonable based upon the portion of the
Property actually used by Tenant. To the extent any one of the components of
Additional Rent is reduced as a result of such casualty, then the Additional
Rent hereunder shall reduce accordingly.

 

 
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ARTICLE XIII

EMINENT DOMAIN

 

13.1     Major Taking. If (a) more than ten percent (10%) of the Property; or
(b) such lesser portion of the Property as will render the balance remaining
after such taking unsuitable for the conduct of Tenant’s business; or (c) so
much of the parking lot that Tenant’s business cannot meet parking requirements
should be taken for any public or quasi-public use under any governmental law,
ordinance, or regulation or by right of eminent domain or by purchase under
threat thereof, then Tenant may terminate this Lease by providing written notice
of termination within sixty (60) days after the taking, and the Rent shall be
abated during the unexpired portion of this Lease, effective on the date
physical possession is taken by the condemning authority.

 

13.2     Minor Taking. Except as hereinabove provided in Section 13.1, if less
than ten percent (10%) of the Property should be taken for any public or
quasi-public use under any governmental law, ordinance, or regulation, or by
right of eminent domain, or by purchase under threat thereof, this Lease shall
not terminate; however, the Rent payable hereunder during the unexpired portion
of this Lease shall be reduced in proportion to the area of the Property (but
not parking) taken, effective on the date physical possession is taken by the
condemning authority.

 

13.3     Restoration. If this Lease is not terminated following a partial
condemnation, Landlord shall make all necessary repairs or alterations necessary
to make the Property an architectural whole, but Landlord shall not be obligated
to expend for such repairs and alterations in the event that less than one (1)
year is remaining on the Term (excluding unexercised options or renewals).

 

13.4     Condemnation Award. All compensation awarded for any taking (or the
proceeds of sale under threat thereof) whether for the whole or a part of the
Property, shall be the property of Landlord whether such award is compensation
for damage to Landlord’s or Tenant’s interest in the Property, and Tenant hereby
assigns all of this interest in any such award to Landlord; provided, however,
Landlord shall have no interest in any award made to Tenant for loss of
business, the unamortized cost of Tenant’s improvements for which Tenant paid,
moving expenses, or for taking of Tenant’s Trade Fixtures and personal property
within the Property if a separate award for such items is made to Tenant.

 

 
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ARTICLE XIV

ASSIGNMENT AND SUBLETTING

 

14.1     Assignment by Tenant. Except as otherwise provided below for Permitted
Transfers, Tenant shall not (a) assign (whether directly or indirectly) or in
any manner transfer or assign this Lease or any estate or interest therein; (b)
allow this Lease to be assigned, in whole or in part, by operation of law; (c)
mortgage or pledge the Lease; or (d) sublet the Property or any part thereof
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed. Any purported assignment,
mortgage, transfer, pledge, or sublease made without the prior written consent
of Landlord shall be absolutely null and void. Tenant agrees to reimburse
Landlord for Landlord’s reasonable attorney’s fees incurred in conjunction with
the processing and documentation of any such requested consent which shall not
exceed $1,500.00. Tenant shall also pay to Landlord a $1,000.00 administrative
fee per sublease or assignment request. Consent by Landlord to one or more
assignments or sublettings shall not operate as a waiver of Landlord’s rights as
to any subsequent assignments or sublettings. Notwithstanding any assignment or
subletting to which Landlord may consent, Tenant shall at all times remain fully
responsible and liable for the payment of the Rent herein specified and for
compliance with all of its other obligations under this Lease. No assignment of
this Lease shall be effective and valid unless and until the assignee executes
and delivers to Landlord any and all documentation reasonably required by
Landlord in order to evidence assignee’s assumption of all obligations of Tenant
hereunder. Regardless of whether or not an assignee or sublessee executes and
delivers any such documentation to Landlord, any assignee or sublessee shall be
deemed to have automatically attorned to Landlord in the event of any
termination of this Lease. The term “sublet” shall be deemed to include the
granting of licenses, concessions, and any other rights of occupancy of any
portion of the Property.

 

Notwithstanding anything herein to the contrary, Tenant may sublet or rent (or
permit the use or occupancy thereof) the Property or the Building, or any part
thereof, or assign this Lease without the prior written consent of or prior
notice to Landlord: (i) to an entity or person that has purchased substantially
all of the assets of Tenant; (ii) to a subsidiary, affiliate, entity or person
that directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with Tenant and has a tangible net
worth equal to or greater than the net worth of Tenant at the time of the
transfer; (iii) to a surviving entity after merger, consolidation,
non-bankruptcy reorganization (if the surviving entity has a net worth as
provided in (ii) above), or governmental action (collectively, a “Permitted
Transfer” and each such entity or person, a “Permitted Transferee”). For this
Section 14.1, “control” (and its derivatives) means the possession, directly or
indirectly, or as trustee or executor, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting equity interests, as trustee or executor, by contract or credit
arrangements or otherwise. Tenant shall provide Landlord with notice of any
Permitted Transfer and in the case of a non-bankruptcy reorganization the
evidence of the net worth of the intended transferee, and updated insurance
policies, within seven (7) days after any Permitted Transfer. Landlord shall
look solely to the Permitted Transferee for the performance of Tenant’s
obligations hereunder and Tenant, if not the surviving Permitted Transferee,
shall be released. In the event of a Permitted Transfer and Tenant is not the
surviving Permitted Transferee, Tenant shall within thirty (30) days of the
effective date of the Permitted Transfer replace or substitute or cause the
Permitted Transferee to issue a replacement Letter of Credit in compliance with
the terms hereof effective the date of the Permitted Transfer.

 

 
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14.2     Assignment by Landlord. In the event of the transfer and assignment by
Landlord of its interest in the Property, Landlord shall thereby be released
from any further responsibility hereunder accruing after the date of such
transfer, and Tenant agrees to look solely to such successor in interest of
Landlord for performance of such obligations accruing after the date of such
transfer.

 

14.3     Profits on Assignment. Exclusive of any Permitted Transfer, any amounts
by which the rent or other charges paid by any assignee, transferee, or
sublessee for its occupancy of the Property exceeds the amount of Rent and other
charges payable hereunder, after deducting any assignment or sublease expenses
of architectural fees, contractor fees, finish out allowance, rent abatements,
legal fees and brokerage fees, shall be divided equally between Landlord and
Tenant.

 

 

ARTICLE XV

DEFAULTS AND REMEDIES

 

15.1     Tenant Default. Tenant shall be deemed in default hereof in the
following events (each an “Event of Default”):

 

(a)     Tenant defaults in the payment of Rent by more than ten (10) days
following the receipt of written notice of such violation, provided that
Landlord shall not be required to provide Tenant with more than two (2) notices
of a violation in any calendar year;

 

(b)     Tenant remains in violation of any other of the covenants performable by
Tenant hereunder after the expiration of thirty (30) days following the receipt
of written notice of such violation, provided that Landlord shall not be
required to provide Tenant with more than two (2) notices of the same violation
in any calendar year; provided however, if such violation by its nature cannot
be cured within such thirty (30) day period, Tenant shall not be in default
hereunder so long as Tenant commences curative action within such thirty (30)
day period, diligently and continuously pursues the curative action and fully
cures the violation within ninety (90) days after Landlord gives such written
notice to Tenant;

 

(c)     Tenant files a voluntary petition in bankruptcy, is adjudged bankrupt,
or is placed in or subjected to receivership and such receivership is not
dismissed within 60 days of its filing, or makes an assignment for benefit of
creditors;

 

(d)     Tenant falsifies or materially misrepresents any information required to
be furnished to Landlord pursuant to the terms of this Lease; or

 

(e)     Tenant violates any applicable governmental laws, ordinances, or
regulations on the Property.

 

 
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15.2     Landlord’s Remedies.

 

(a)     Re-entry. Upon the occurrence of an Event of Default, Landlord may
immediately re-enter the Property by summary proceedings, or by force, or
otherwise, without being liable for prosecution therefor; interrupt or cause
interruption of utility services to the Property, prevent Tenant from entering
the Property, take possession of the Property and remove all persons therefrom;
alter all locks and other security devices on the Property without terminating
this Lease; and may elect either to terminate this Lease or relet the Property
as agent for Tenant or otherwise, and receive the Rent therefor, applying the
same to Tenant’s obligations. Upon the re-entering of the Property, Landlord may
remove all or any part of the personal property of Tenant remaining on the
Property and store the same at Tenant’s expense. If said personal property
remaining on the Property is not claimed by Tenant within ten (10) days after
such entry, such property may, at the option of Landlord, be deemed to have been
abandoned, and in such case, such items may be retained by Landlord as its
property or be disposed of by Landlord, in Landlord’s sole and absolute
discretion and without accountability, at Tenant’s expense. Tenant shall be
obligated to return all keys and access devices to the Property to Landlord upon
Landlord’s re-entering of the Property. No alteration of locks or other security
devices and no removal or other exercise of dominion by Landlord over the
property of Tenant or others at the Property shall be deemed unauthorized or
constitute a conversion, Tenant hereby consenting, after any Event of Default,
to the aforesaid exercise of dominion over Tenant’s property within the
Property. ALL CLAIMS FOR DAMAGES BY REASON OF SUCH RE-ENTRY AND/OR REPOSSESSION
AND/OR ALTERATIONS OF LOCKS OR OTHER SECURITY DEVICES ARE HEREBY WAIVED.

 

(b)     Termination. Notwithstanding any such reletting without termination,
Landlord may at any time thereafter terminate this Lease for any breach or
default.

 

(c)     Damages. Upon an Event of Default, Landlord shall be entitled to all
non-duplicative damages available at law or in equity. Without limiting the
preceding sentence, upon default by Tenant, Landlord shall be entitled to
recover the following, all of which shall be immediately due and payable by
Tenant to Landlord:

 

i.      all costs of retaking the Property and storing Tenant’s property;

 

ii.     the present value calculated at an interest rate of 6% of the excess, if
any, of the total Rent for the remainder of the Term over the then reasonable
fair market rent value of the Property for the remainder of the Term;

 

iii.    in lieu of ii above, any deficiency that may arise by reason of any
reletting of the Property;

 

iv.    the costs of any unamortized commissions paid by Landlord in connection
with this Lease (commissions to be amortized over 10 years, starting on the Rent
Commencement Date);

 

 
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v.     the costs of any unamortized Allowance paid by Landlord for Tenant
(Allowance to be amortized over 10 years, starting on the Rent Commencement
Date);

 

vi.    any free Rent, Rent abatement, or reduced Rent provided by Landlord to
Tenant (to be amortized over 10 years, starting on the Rent Commencement Date),
including without limitation the Rent abatement provided in the definition of
Base Rent in Article I;

 

vii.   all actual damages uncured by Landlord, including without limitation,
costs to repair the Property to the condition required by this Lease; and

 

viii.     interest on any sums owed from Tenant to Landlord, payable at ten
percent (10%) per annum on outstanding sums.

 

(d)     Cure. Landlord, at any time after Tenant commits an Event of Default,
shall have the further right (but not obligation) to cure the Event of Default
at Tenant’s cost, plus an administrative fee of ten percent (10%) of such cost.
If Landlord at any time, by reason of Tenant’s Event of Default, pays any sum,
the sum paid by Landlord shall be due immediately from Tenant to Landlord upon
presentation of all paid invoices by Landlord.

 

(e)     No Election of Remedies. Pursuit of any of the remedies herein shall not
preclude any of the other remedies or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture of any of
the terms, provisions, and covenants herein contained. Forbearance by Landlord
to enforce one or more of the remedies herein provided upon an Event of Default
shall not be deemed or construed to constitute a waiver of such termination of
this Lease or the deficiency arising by reason of any reletting of the Property
by Landlord as above provided, allowance shall be made for the expense of repair
(to the condition required by Section 8.2 this Lease) and repossession and shall
be added to the Rent herein provided for the period from the date of an Event of
Default until the end of the Term of this Lease.

 

15.3     Mitigation of Damages. With respect to the laws of the State of Texas
which require that Landlord use reasonable efforts to relet the Property, it is
understood and agreed that:

 

(a)     Landlord may decline to incur out-of-pocket costs to relet the Property,
other than customary marketing expenses, leasing commissions and legal fees for
the negotiation of a lease with a new tenant;

 

(b)     Landlord may decline to relet the Property at rental rates at below Rent
that would otherwise be payable under this Lease;

 

(c)     Before reletting the Property to a prospective tenant, Landlord may
require the prospective tenant to demonstrate the same financial wherewithal
that Landlord would require as a condition to leasing the Property to a
prospective tenant;

 

 
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(d)     Landlord may decline to relet only a portion of the Property if a
prospective tenant is actively pursuing the entire Property or if such portion
is less than 80% of the Property; and

 

(e)     Landlord may in good faith decline to relet the Property to a
prospective tenant, the nature of whose business may have an adverse impact upon
the manner in which the Property is operated or with the high reputation of the
Property even though in each of said circumstances such prospective tenant may
have a good credit rating.

 

15.4     Landlord’s Default. In the event of any default by Landlord, Tenant’s
sole and exclusive remedy shall be an action for damages (TENANT HEREBY WAIVING
THE BENEFIT OF ANY LAWS GRANTING TENANT A LIEN UPON THE PROPERTY OF LANDLORD
AND/OR UPON THE RENT DUE LANDLORD), but prior to any such action, Tenant shall
give Landlord (and Landlord’s lender pursuant to Section 17.5) written notice
specifying such default with particularity, and Landlord shall have thirty (30)
days in which to cure any such default. Tenant shall have no remedy or cause of
action by reason of any default unless Landlord fails to cure the default within
the thirty (30) day period. Notwithstanding the foregoing, if Landlord fails to
make a repair of an emergency condition posing imminent danger to the health or
safety of occupants of the Building within the time required under Section 6.1,
Tenant may, but is not obligated to, proceed with the cure itself. All
obligations of Landlord hereunder shall be construed as covenants, not
conditions, and all such obligations shall be binding upon Landlord only during
the period of its ownership of the Property and not thereafter.

 

15.5     Attorney’s Fees. If, on account of any breach or default by either
party of its obligations hereunder, it shall become necessary for the other
party to employ an attorney to enforce or defend any of such other party’s
rights or remedies in this Lease, the prevailing party shall be entitled to
recover any reasonable attorney’s fees, costs of litigation, and court costs
incurred.

 

 

ARTICLE XVI

MOVE OUT / HOLDING OVER

 

16.1     Moving Out. At the expiration of the Term, Tenant will surrender the
Property to Landlord in substantially the same condition as when received,
except for approved Work and Alterations, and subject to normal wear and tear
and casualty damage in the case of a casualty. For purposes of this Section
16.1, “normal wear and tear” means deterioration that occurs without negligence,
carelessness, accident, or abuse. Tenant may remove its personal property and
Trade Fixtures pursuant to Section 8.2, but shall leave all of Landlord’s
Property in accordance with Section 8.1. Tenant shall cause the Property and
Building to be in the following condition:

 

(a)     All lighting is to be placed into good working order. This includes
replacement of bulbs, ballasts, and lenses as needed.

 

 
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(b)     HVAC systems shall be in good working order, including the necessary
replacement of any parts to return the systems to a well-maintained condition.
This includes, but is not limited to, filters, coils, thermostats, warehouse
heaters, and exhaust fans. Upon move out, Landlord may have an exit inspection
performed by a certified mechanical contractor to determine the condition of the
HVAC system.

 

(c)     All holes in the walls shall be filled and sealed prior to move-out.

 

(d)     All exterior windows with cracks or breakage shall be replaced.

 

(e)     Cracks occurring after the Rent Commencement Date in concrete and
asphalt shall be acceptable as long as they are ordinary wear and tear, and are
not the result of misuse.

 

(f)     There shall be no protrusion of anchors from the warehouse floor and all
holes shall be appropriately patched. If machinery / equipment is removed, the
electrical lines shall be properly terminated at the nearest junction box.

 

(g)     All mechanical and electrical systems shall be left in a safe condition
that confirms to code. Bare wires and dangerous installations shall be corrected
to Landlord’s reasonable satisfaction.

 

(h)     All trash shall be placed in the receptacles on the Property.

 

(i)     All signs of Tenant shall be removed and Tenant shall repair any damage
to the Building or Property caused by, or resulting from, such removal,
including filling and sealing any holes.

 

16.2     Holding Over. In the event Tenant remains in possession of the Property
after the expiration of this Lease, then Tenant shall be deemed to be occupying
said Property as a tenant from month to month at a rent equal to one hundred
fifty percent (150%) of the Base Rent herein provided, and otherwise subject to
all the conditions, provisions, and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy; and in no event shall there be
any renewal of this Lease by operation of law. Tenant’s holdover shall render
Tenant liable for any damages proximately caused thereby which exceed the
holdover rent paid by Tenant.

 

 
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ARTICLE XVII

SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATE

 

17.1     Subordination. Subject to the receipt of the SNDA, as defined herein,
by Tenant, this Lease is and shall always be subordinate to any mortgage or
mortgages (and any replacements, renewals, extensions, modifications,
consolidations, or recasting thereof, including, without limitation, any
security interest under the Uniform Commercial Code or other types of security
that may be given in addition to such liens, whether referred to therein or
otherwise) which now or shall at any time be placed upon Property or any part
thereof, by Landlord, Landlord’s predecessors or its successors and assigns.
Tenant, upon Landlord’s request, shall execute and deliver any instrument which
Landlord deems necessary to effect the subordination of this Lease to any such
mortgage or mortgages.

 

On or before Monday, August 26, 2013, Landlord shall use commercially reasonable
efforts to cause PlainsCapital Bank (“Lender”) to deliver to Tenant a
subordination, non-disturbance and attornment agreement (“SNDA”) in form
acceptable to Lender and Tenant. In the event that Landlord fails to provide the
SNDA by Monday, August 26, 2013, Landlord will not be in default, and Tenant’s
sole remedy will be to terminate this Lease during the Feasibility Period in
accordance with Section 3.4 above.

 

17.2     Attornment. In the event any proceedings are brought for foreclosure,
or in the event of the exercise of the power of sale under any mortgage or deed
of trust made by Landlord covering the Property, Tenant shall attorn to the
purchaser upon any such foreclosure or sale, and recognize such purchaser as the
Landlord under this Lease. The Letter of Credit shall be transferred without the
joinder of Landlord and expense to Tenant to any successor to the Property.

 

17.3     Estoppel Certificate. Within ten (10) days after request therefor by
Landlord, Tenant shall provide Landlord with an estoppel certificate in
recordable form. The estoppel certificate shall certify to any proposed
mortgagee or purchaser, or to Landlord, that this Lease is unmodified and in
full force and effect (or, if there have been modifications, that the same is in
full force and effect as modified, and stating the modifications), that there
are no defenses or offsets thereto (or stating those claimed by Tenant) and the
dates to which Rent and other charges have been paid.

 

17.4     Further Cooperation. Tenant, upon written request of any party in
interest which request shall not occur more than twice in any 12 month period,
shall execute promptly such instruments or certificates to carry out the intent
of Sections 17.1 - 17.3 above as shall be reasonably requested by Landlord. If
Tenant has not executed the same five (5) days after a second written request by
Landlord to execute such instrument(s), then such party shall have the full
legal authority to execute and deliver such instrument or certificate in the
name of Tenant.

 

17.5     Copies of Default Notices. At any time when the holder of an
outstanding mortgage, deed of trust, or other lien covering Landlord’s interest
in the Property has given Tenant written notice of its interest in this Lease,
Tenant may not exercise any remedies for default by Landlord hereunder unless
and until the holder of the indebtedness secured by such mortgage, deed of
trust, or other lien shall have received notice of such default and a reasonable
time for curing such default shall thereafter have elapsed; provided however,
such holder’s time to cure shall run simultaneously with Landlord’s time to cure
(except as may be agreed between Tenant and such holder).

 

 
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ARTICLE XVIII

NOTICES

 

Wherever any notice is required or permitted hereunder, such notice shall be in
writing. Any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered, regardless of whether actually received, if it
was or not when deposited in the United States Mail, postage prepaid, certified
mail, return receipt requested, addressed to the parties hereto at the
respective addresses set out below, or at such other addresses as they have
theretofore specified by written notice delivered in accordance herewith.

 

Landlord’s address for notices:                         2527 Jarratt Avenue

Austin, TX 78703

 

Tenant’s address for notices:                            Insys Therapeutics,
Inc.

Director of Operations

811 Paloma Drive, Suite C

Round Rock, TX 78665

 

With a copy to:

Insys Therapeutics, Inc.

Chief Financial Officer

444 South Ellis Street

Chandler, AZ 85224

 

 

ARTICLE XIX

MISCELLANEOUS

 

19.1     Relationship of Parties. Nothing herein contained shall be deemed or
construed by the parties hereto, nor by any third party, as creating the
relationship of principal and agent, fiduciary, or of partnership or of joint
venture between the parties hereto, it being understood and agreed that neither
the method of computation of Rent, nor any other provision contained herein, nor
any acts of the parties hereto, shall be deemed to create any relationship other
than Landlord and Tenant. Whenever herein the singular number is used, the same
shall include the plural, and words of any gender shall include each other
gender.

 

19.2     Captions. The captions used in this Lease are for convenience only and
do not in any way limit or amplify the terms and provisions hereof.

 

 
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19.3     Waivers. One or more waivers of any covenant, term, or condition of
this Lease by either party shall not be construed as a waiver of a subsequent
breach of the same covenant, term, or condition. The consent or approval by
either party to or of any act by the other party requiring such consent or
approval shall not be deemed to waive or render unnecessary consent to approval
of any subsequent similar act.

 

19.4     Brokers. Each party hereby warrants and represents to the other party
that it has not dealt with any broker in the negotiation of this Lease except
Oxford Alliance Services, LLC (“Broker”). Landlord agrees to pay to Broker all
commissions required to be paid in connection with the negotiation, execution,
and performance of this Lease, pursuant to a separate written agreement with
Broker. Each party hereby agrees to indemnify and hold harmless the other party
from and against any other commissions or finder’s fees due by virtue of the
negotiation, execution, and performance of this Lease, the obligation or
asserted claim for which arises from actions taken or claimed to be taken by the
indemnifying party.

 

19.5     Limitation of Landlord’s Liability.  Except as expressly provided in
this Lease, Landlord shall not be liable to Tenant for any loss, injury, or
damage to Tenant or to any other person, or to its or their property,
irrespective of the cause of such injury, damage, or loss. Further, except as a
result of the negligence, bad faith or intentional misconduct of Landlord,
Landlord shall not be liable to Tenant (a) for any damage caused by other
tenants or persons in, upon, or about the Property; (b) for damage caused by
operations in construction of any public or quasi-public work; (c) with respect
to matters for which Landlord is liable, for damages purportedly arising out of
any loss of use of the Property or any equipment or facilities thereon by Tenant
or any person claiming through or under Tenant; (d) for any defect in the
Property; (e) for injury or damage to person or property caused by fire, or
theft, or resulting from the operation of heating or air conditioning or
lighting apparatus, or from falling plaster, or from steam, gas, electricity,
water, rain, snow, ice, or dampness, that may leak or flow from any part of the
Property, or from the pipes, appliances or plumbing work of the same. Anything
contained in the Lease to the contrary notwithstanding, Tenant shall look only
to Landlord’s estate and interest in the Property (or the proceeds thereof) and
in the proceeds from any insurance policies covering Landlord or Landlord’s
managers for the satisfaction of Tenant’s remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by Landlord
in the event of any default by Landlord under this Lease, and no other property
or assets of Landlord or its partners or principals, disclosed or undisclosed,
shall be subject to levy, execution, 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 or occupancy of
the Property, regardless of whether Landlord’s liability to Tenant is due to
Landlord’s negligence or strict liability. 

 

19.6     Waiver of Portions of Texas Deceptive Trade Practices Act.  TENANT
HEREBY WAIVES ALL ITS RIGHTS TO RECEIVE TREBLE OR ENHANCED DAMAGES UNDER THE
TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, Section 17.41 et.
seq. of the Texas Business and Commerce Code (the “DTPA”), a law that gives
consumers special rights and protections.  After consultation with an attorney
of Tenant’s own selection, Tenant voluntarily consents to this waiver.

 

 
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19.7     Governing Law; Venue; Severability. The laws of the State of Texas
shall govern the interpretation, validity, performance, and enforcement of this
Lease. Venue shall be proper only in courts of appropriate jurisdiction located
in Williamson County, Texas. If any provision of this Lease should be held to be
invalid or unenforceable, the validity and enforceability of the remaining
provisions of this Lease shall not be affected thereby.

 

19.8     Binding Effect. The terms, provisions, and covenants contained in this
Lease shall apply to, inure to the benefit of, and be binding upon the parties
hereto and their respective successors and assigns, subject to Section 14.1
regarding assignment.

 

19.9     Time of the Essence. Time shall be of the essence with respect to the
performance by the parties of their respective obligations hereunder; provided,
however, that if the time for performance of any obligation under the Lease
falls on a Saturday, Sunday, or holiday, such time shall be extended to the next
succeeding business day.

 

19.10    Remedies Cumulative.  The various rights, powers, elections and
remedies of the parties hereto shall be considered as cumulative, and no one of
them is exclusive of the others, or exclusive of any right or priority allowed
by law, and no right shall be exhausted by being exercised on one or more
occasions.

 

19.11    Authority.  Each party represents, warrants, and covenants to the other
that such party has full power and authority to execute and enter into this
Lease and all requisite actions for the approval of such execution and the
performance hereunder by such party have been duly taken.  Upon execution by
both parties, this Lease and all of its terms, covenants, and conditions shall
be fully binding on each party for all purposes.

 

19.12    Counterparts.  This Lease may be executed in any number of counterparts
(including by facsimile or other electronic media) which, taken together, shall
constitute one and the same instrument.

 

19.13    Exhibits. There are attached to this Lease the following Exhibits,
which Exhibits shall be considered a part of this Lease for all material
purposes:

 

Exhibit “A” – Letter of Credit

Exhibit “A-1” – Form of Letter of Credit

Exhibit “B” – Extension Option

Exhibit “C” – Tenant’s Work

Exhibit “D” – Rules and Regulations

 

19.14     Final Agreement. This Lease contains the entire agreement between the
parties, and no agreement, representation, or inducement shall be effective to
change, modify, or terminate this Lease in whole or in part unless such
agreement, representation, or inducement is reduced to writing and signed by
both parties hereto.

 

[Signature Page Follows]

 

 
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EXECUTED on the dates set forth below TO BE EFFECTIVE on the date set forth on
page 1 of this Lease.

 

LANDLORD:

 

FOG BREAK, LTD.,

a Texas limited partnership

 

By:     Hi Rise Holdings, LLC,

a Texas limited liability company,

its general partner

 

By:    /s/ James Windham                            

James Windham, Member

 

 

Date:       8/29/13                                            

 

 

TENANT:

 

INSYS THERAPEUTICS, INC.,

a Delaware corporation

 

By:    /s/ Michael Babich                             

 

Name:     Michael Babich                             

 

Title:       President & CEO                             

 

Date:      August 28, 2013                              

 

 
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EXHIBIT “A”

LETTER OF CREDIT

 

Within ten (10) days after the Effective Date of the Lease, Tenant shall deliver
to Landlord for all damages of Landlord allowed under Section 15.2(c) of the
Lease after any Event of Default by Tenant under the Lease, an irrevocable and
unconditional negotiable clean standby letter of credit (the “Letter of
Credit”), in the form attached hereto as Exhibit “A-1”, containing the terms
required herein, payable within Williamson or Travis County, Texas, running in
favor of Landlord and issued by Bank of America, JPMorgan Chase Bank, or Wells
Fargo Bank (as applicable, the “Bank”). The Letter of Credit shall be in the
amount of $400,000.00 from the Effective Date through month 36 of the Term;
$267,000.00 from month 37 of the Term through month 72 of the Term; and
$131,000.00 from month 72 of the Term through thirty (30) days after month 120
of the Term (each amount as adjusted, the “Letter of Credit Amount”). Tenant
shall provide to Landlord the original Letter of Credit by the deadline set
forth above. Landlord may not make a presentation or draw under the Letter of
Credit unless an Event of Default has occurred. The Letter of Credit shall
(i) be “callable” at sight, irrevocable and unconditional; (ii) be maintained in
effect, whether through automatic renewal or extension, at all times through
thirty (30) days after month 120 of the Term, and Tenant shall deliver an
original new Letter of Credit or certificate of renewal or extension to Landlord
at least ten (10) business days prior to the expiration of the Letter of Credit
then held by Landlord, without any action whatsoever on the part of Landlord;
(iii) be fully assignable by Landlord, its successors and assigns; (iv) permit
partial draws and multiple presentations and drawings. Landlord shall have the
right to draw down an amount up to the face amount of the Letter of Credit if
any of the following shall have occurred or be applicable: (1) an Event of
Default, or (2) the Bank has notified Landlord that the Letter of Credit will
not be renewed or extended through thirty (30) days after month 120 of the Term.
The Letter of Credit will be honored by the Bank regardless of whether Tenant
disputes Landlord’s rights to draw upon the Letter of Credit (Tenant reserves
all rights to pursue legal claims against Landlord if Landlord draws upon the
Letter of Credit in violation of this Lease). Within thirty (30) days after the
expiration or earlier termination of the Lease and provided Tenant has fully
complied with all of its obligations under the Lease, Landlord shall promptly
return the Letter of Credit to Tenant.

 

(a)     Transfer of Letter of Credit. The Letter of Credit shall also provide
that Landlord, its successors and assigns, may, at any time and with notice to
Tenant (no notice will be required if such notice would be prohibited by the
automatic stay in bankruptcy) but without first obtaining Tenant’s consent
thereto and at no cost to Tenant, transfer (one or more times) all of its
interest in and to the Letter of Credit to another party, person, or entity in
connection with a sale, foreclosure, transfer, or financing of Landlord’s
interest in the Property; provided, however, if such transfer of Landlord’s
interest in and to the Letter of Credit is made in connection with a financing,
such transfer may be made separate from or as a part of the assignment by
Landlord of its rights and interests in and to the Lease. In the event of a
transfer of Landlord’s interest in the Property, Landlord shall transfer the
Letter of Credit, in whole, to the transferee and thereupon Landlord shall,
without any further agreement between the parties, be released by Tenant from
all liability therefor, and it is agreed that the provisions hereof shall apply
to every transfer or assignment of the said Letter of Credit to a new landlord.
In connection with any such transfer of the Letter of Credit by Landlord, Tenant
shall, at Tenant’s sole cost and expense, execute and submit to the Bank such
applications, documents, and instruments as may be necessary to effectuate such
transfer, and Landlord shall be responsible for paying the Bank’s transfer and
processing fees in connection therewith.

 

 
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(b)     Deficiencies; Expiration. If, as a result of any drawing by Landlord on
the Letter of Credit, the amount of the Letter of Credit shall be less than the
Letter of Credit Amount, Tenant shall, within five (5) days thereafter, provide
Landlord with additional letter(s) of credit in an amount equal to the
deficiency, and any such additional letter(s) of credit shall comply with all of
the provisions of this section, and if Tenant fails to comply with the
foregoing, notwithstanding anything to the contrary contained in the Lease to
the contrary, the same shall constitute an incurable Event of Default by Tenant.
Tenant further covenants and warrants that it will neither assign nor encumber
the Letter of Credit or any part thereof and that neither Landlord nor its
successors or assigns will be bound by any such assignment, encumbrance,
attempted assignment, or attempted encumbrance. Without limiting the generality
of the foregoing, if the Letter of Credit expires earlier than the expiration of
the Term, Landlord will accept a renewal thereof (such renewal letter of credit
to be in effect and delivered to Landlord not later than thirty (30) days prior
to the expiration of the Letter of Credit), which shall be irrevocable and
automatically renewable as above provided through thirty (30) days after month
120 of the Term upon the same terms as the expiring Letter of Credit or such
other terms as may be acceptable to Landlord in its sole discretion. However, if
the Letter of Credit is not timely renewed, or if Tenant fails to maintain the
Letter of Credit in the Letter of Credit Amount and in accordance with the terms
set forth in this section, Landlord shall have the right to present the Letter
of Credit to the Bank in accordance with the terms of this section, and the
proceeds of the Letter of Credit may be applied by Landlord against all damages
of Landlord allowed under Section 15.2(c) after an Event of Default under the
Lease. Any unused proceeds shall constitute the property of Landlord and need
not be segregated from Landlord’s other assets. Landlord agrees to pay to Tenant
within thirty (30) days after the expiration of the Term the amount of any
proceeds of the Letter of Credit received by Landlord and not applied against
obligations of Tenant that were not paid when due; provided, however, that if
prior to the expiration of the Term a voluntary petition is filed by Tenant, or
an involuntary petition is filed against Tenant by any of Tenant’s creditors,
under the Bankruptcy Code, then Landlord shall not be obligated to make such
payment in the amount of the unused Letter of Credit proceeds until either all
preference issues relating to payments under the Lease have been resolved in
such bankruptcy or reorganization case or such bankruptcy or reorganization case
has been dismissed, in each case pursuant to a final court order not subject to
appeal or any stay pending appeal.

 

(c)     Draw Procedure. The draw procedure shall be a provided in Exhibit A-1.

 

(d)     Letter of Credit is Not a Security Deposit. Landlord and Tenant
acknowledge and agree that in no event or circumstance shall the Letter of
Credit or any renewal thereof or substitute therefor or any proceeds thereof be
deemed to be or treated as a “security deposit.” The Letter of Credit is not
intended to serve as a security deposit and any and all laws, rules, and
regulations applicable to security deposits in the commercial context (“Security
Deposit Laws”) shall have no applicability or relevancy thereto and waive any
and all rights, duties, and obligations either party may now or, in the future,
will have relating to or arising from the Security Deposit Laws. Landlord and
Tenant specifically intend for the Letter of Credit to be excluded from any
bankruptcy estate of Tenant.

 

 
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Exhibit “A-1”

Form of Letter of Credit

 

 
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EXHIBIT “B”

EXTENSION OPTION

 

Note: Unless specified otherwise in this Exhibit, capitalized terms shall have
the meanings ascribed to them in the Lease.

 

Provided that an Event of Default is not in effect at the time of election, or
at the commencement of the Extension Term, then Tenant shall have the option
(each, an “Extension Option”) to extend the Term of this Lease for two
(2) additional successive periods of five (5) years each (each, an “Extension
Term”) on the same terms and conditions provided in the Lease, except as
follows:

 

1.     The Base Rent payable for each month during each such Extension Term
shall be ninety-five percent (95%) of the then-prevailing Renewal Rental Rate
(as defined herein); and

 

2.     The number of Tenant’s Extension Options shall be reduced by the
Extension Option then being exercised and any Extension Options previously
exercised.

 

Tenant shall exercise an Extension Option by delivering written notice to
Landlord on or before the date which is at least two hundred seventy (270) days,
but no more than three hundred sixty-five (365) days, prior to the then-current
Term Expiration Date.

 

Tenant shall have no further Extension Options unless expressly granted by
Landlord in writing.

 

 
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For purposes hereof, the “Renewal Rental Rate” (herein so called) shall mean the
amount equal to the then-prevailing rental rate payable by extension tenants
having a credit standing substantially similar to that of Tenant, for premises
of equivalent age, quality, accessibility, size, utility, and location as the
Property, including any additions thereto, located within the immediate market
area of the Property and leased for an extension term approximately equal to the
subject Extension Term and taking into considerations finish-out allowances,
abatements, incentives, and other concessions. If Tenant timely notifies
Landlord of its election to exercise an Extension Option, Landlord shall, within
the next thirty (30) days immediately following Landlord’s receipt of Tenant’s
notification, notify Tenant in writing of Landlord’s determination of the
Renewal Rental Rate for the Extension Term and Tenant shall, within the next
fifteen (15) days immediately following Tenant’s receipt of Landlord’s
determination of such Renewal Rental Rate, notify Landlord in writing of
Tenant’s acceptance or rejection of Landlord’s determination of such Renewal
Rental Rate. If Tenant timely notifies Landlord of Tenant’s acceptance of
Landlord’s determination of such Renewal Rental Rate, the Lease shall be
extended as provided herein and Landlord and Tenant shall enter into an
amendment to the Lease to reflect the extension of the Term of the Lease and
change in Base Rent in accordance with this Exhibit. If (i) Tenant timely
notifies Landlord in writing of Tenant’s rejection of Landlord’s determination
of such Renewal Rental Rate, or (ii) Tenant does not notify Landlord in writing
of Tenant’s acceptance or rejection of Landlord’s determination of such Renewal
Rental Rate within the aforesaid fifteen (15) day period, then, in either such
event, the parties will then attempt, within the next fifteen (15) days
following either (a) Landlord’s receipt of Tenant’s notice of rejection of
Landlord’s determination or (b) expiration of the aforesaid fifteen (15) day
period without notification from Tenant of acceptance or rejection of Landlord’s
determination, as the case may be, to agree upon the Renewal Rental Rate. If
Landlord and Tenant are able to agree upon the Renewal Rental Rate during such
fifteen (15) day period, then the Lease shall be extended as provided herein and
Landlord and Tenant shall enter into an amendment to the Lease to reflect the
extension of the Term of the Lease and change in Base Rent in accordance with
this Exhibit; but if Landlord and Tenant are unable to so agree upon the Renewal
Rental Rate within such fifteen (15) day period, then Landlord and Tenant shall
each appoint an independent real estate appraiser who has been a member of the
Appraisal Institute of America (MAI) for at least five (5) years prior to such
date and each of which shall then have at least ten (10) years’ commercial real
estate appraisal experience in Travis or Williamson County, Texas (together with
the third Appraiser described below, each individually being herein called an
“Appraiser” and all being herein collectively called the “Appraisers”), and such
two (2) Appraisers appointed by Landlord and Tenant shall then, within ten (10)
days after their designation, select an independent third Appraiser with like
qualifications (the date that such third Appraiser is selected being herein
called the “Designation Date”); provided, that Landlord and Tenant shall then
each promptly (but in any event within five (5) business days after the
selection of the third Appraiser) provide all three (3) such Appraisers with
written notice of the Renewal Rental Rate determined and proposed by each such
party, accompanied by any backup information, calculations, and analysis that
each such party may elect to submit in support of its proposed Renewal Rental
Rate. The aforesaid three (3) Appraisers shall then determine, by a majority
decision made within fifteen (15) business days after the Designation Date, the
Renewal Rental Rate for the applicable Extension Term, which shall be either the
Renewal Rental Rate proposed by Landlord or the Renewal Rental Rate proposed by
Tenant, and such determination shall be binding upon Landlord and Tenant.
Landlord and Tenant shall then enter into an amendment to the Lease to reflect
the extension of the Term of the Lease and change in Base Rent in accordance
with this Exhibit. In the event that Appraisers are required pursuant to this
paragraph, each of Landlord and Tenant shall bear and pay the fees of the
Appraiser that such party has appointed, and Landlord and Tenant shall equally
share and pay (in such equal shares) the fees of the third Appraiser. It is
agreed that no such Appraiser shall be a person or party that is then
representing or adverse to either Landlord or Tenant in any transaction or
proposed transaction at such time of appointment pursuant hereto, nor shall any
such Appraiser have any other relationship to either Landlord or Tenant at such
time that would reasonably be considered to be a conflict of interest or to
cause such Appraiser to not be impartial. If the two (2) Appraisers appointed by
Landlord and Tenant cannot agree on a third Appraiser as provided above, then
the third Appraiser may be appointed, upon application thereto submitted by
either Landlord or Tenant, by the American Arbitration Association.

 

 
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So long as the Renewal Rental Rate is determined taking this into consideration,
Landlord shall not be required to undertake any work or improvements or to
provide to Tenant any allowances or other tenant inducements in connection with
the Extension Term. Tenant’s rights under this Exhibit shall terminate if
(i) the Lease or Tenant’s right to possession of the Property is terminated;
(ii) except for Permitted Transfers, Tenant assigns any of its interest in the
Lease or sublets more than twenty percent (20%) of the Building; or (iii) Tenant
fails to timely exercise its option under this Exhibit, time being of the
essence with respect to Tenant’s exercise thereof. Notwithstanding anything to
the contrary set forth in this Exhibit, except for assignees or transferees of
Permitted Transfers, it is hereby agreed that no assignee or other transferee of
any of Tenant’s interests in the Lease, nor any sublessee or other transferee of
any of the Property, may exercise any of Tenant’s Extension Options granted
pursuant to this Exhibit.

 

 
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EXHIBIT “C”

TENANT’S WORK

 

This Exhibit sets forth the rights and obligations of Landlord and Tenant with
respect to construction of the Work (defined below). Capitalized terms used
herein, unless otherwise defined in this Exhibit, shall have the meanings
ascribed to such terms in the Lease.

 

1.     Work. Tenant’s improvement work to be constructed on the Property as
shown in the Final Plans shall be hereinafter referred to as the “Work”. Tenant
intends to perform both “internal Work” (finish out improvements inside the
Building) and “external Work” (finish out improvements to the outside of the
Building or outside of the Building). In the event that Tenant hires different
contractors to perform the internal Work and external Work, Tenant shall obtain
Landlord’s approval of the Final Plans, Contractor, and Contract for each of the
internal Work and external Work, pursuant to the procedures below, and the
“Work” shall refer to both the internal Work and external Work. Notwithstanding
the foregoing to the contrary, Landlord hereby approves DPR, Flynn Construction,
Inc., Austin Commercial and Rogers-O’Brien as Contractors for the Work.

 

2.     Initial Plans and Final Plans; Working Drawings; Supplemental Materials.

 

(a)     Initial Plans and Final Plans. Landlord has received Tenant’s test-fit
plans and has approved Page Southerland Page as Tenant’s architect. Tenant shall
cause initial plans for the Work (the “Initial Plans”) to be prepared and shall
submit the Initial Plans to Landlord within 90 days following the Effective Date
of the Lease. Landlord shall have 10 days following receipt of the Initial Plans
to review and provide any reasonable comments Landlord may have to Tenant in
connection therewith and failure to timely do so, shall be deemed an approval by
Landlord so long as Tenant’s submission of Initial Plans to Landlord prominently
includes, in all capitalized bolded letters, the words “FAILURE TO TIMELY
RESPOND SHALL RESULT IN DEEMED APPROVAL”. In the event Landlord requires any
reasonable changes or modifications to the Initial Plans, Tenant shall cause the
Initial Plans to be revised and shall resubmit the revised Initial Plans to
Landlord for approval, which approval shall not be unreasonably withheld or
delayed. Failure by Landlord to approve or reject revised Initial Plans within
five (5) business days, shall be deemed an approval by Landlord so long as
Tenant’s submission of the revised Initial Plans to Landlord prominently
includes, in all capitalized bolded letters, the words “FAILURE TO TIMELY
RESPOND SHALL RESULT IN DEEMED APPROVAL”. The same time five (5) business day
period and notice clause set forth in the preceding sentence shall apply to
Landlord’s review of and comment in connection with the subsequent revised
Initial Plans. The foregoing procedure shall be repeated until the Initial Plans
have been mutually approved by Landlord and Tenant. No Work shall commence on
the Property until Landlord gives its final written approval of the revised
Initial Plans (the “Final Plans”), which approval shall not be unreasonably
withheld, conditioned or delayed.

 

(b)     Landlord’s Approval.

 

i.     Landlord will not be deemed to have acted unreasonably under the terms of
this Exhibit if it withholds its approval of the Initial Plans or the Final
Plans, because, in Landlord’s reasonable opinion, the Work, as described in any
such item: (A) would materially and adversely affect any or all of the Building
systems, the structure of the Building, and either or both of the safety of the
Building and its occupants; (B) would materially increase the cost of operating
the Building; (C) would violate any laws; (D) contains or uses Hazardous
Materials; (E) would materially and adversely affect the appearance of the
Building; or (F) is prohibited by any deed of trust or other instrument
encumbering the Property. The foregoing reasons, however, shall not be the only
reasons for which Landlord may withhold its approval, whether or not such other
reasons are similar or dissimilar to the foregoing.

 

 
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ii.     Except for those approved herein, Landlord shall have the right to
review and approve Tenant’s proposed contractor for the Work, and the approved
contractor may be referred to herein as the “Contractor”. Landlord shall also
have the right to review and approve the Contractor’s proposed contract for
performance of the Work, and the approved Contract may be referred to herein as
the “Contract”. Landlord’s approval of the Contractor or Contract shall not be
unreasonably withheld, conditioned or delayed and failure to respond within 10
days of delivery thereof to Landlord shall be deemed an approval by Landlord so
long as Tenant’s submission of the proposed Contract to Landlord prominently
includes, in all capitalized bolded letters, the words “FAILURE TO TIMELY
RESPOND SHALL RESULT IN DEEMED APPROVAL”.

 

iii.     Neither the approval by Landlord of the Work or the Final Plans, nor
Landlord’s approval of the Contractor or Contract, nor any supervision or
monitoring by Landlord of the Work shall constitute a warranty by Landlord to
Tenant of the adequacy of the Work for Tenant’s intended use of the Property or
compliance with applicable laws. Tenant shall be solely responsible for ensuring
that the Work is performed in accordance with the Final Plans and all applicable
laws, and Landlord shall have no responsibility or liability therefor.

 

3.     Commencement of Tenant’s Work. Tenant shall only permit Work to be
performed for which Tenant, Contractor, and/or Tenant’s architect have obtained
all appropriate and necessary permits and shall not permit any Work to commence
for which a permit is required without first obtaining any and all necessary
permits. Tenant shall give to Landlord not less than three (3) days prior to the
date on which the Work will commence the following items, all in form and
substance reasonably acceptable to Landlord:

 

(a)     a detailed description of and schedule for the Work;

 

(b)     the names and addresses of all contractors, and subcontractors, and
material suppliers if known at such time and all other representatives of Tenant
who or which will be entering the Property on behalf of Tenant to perform the
Work or will be supplying materials for such Work;

 

(c)     copies of the executed Contract;

 

(d)     copies of plans and specifications pertaining to the Work;

 

 
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(e)     copies of all licenses and permits required in connection with the
performance of the Work; and

 

(f)     certificates of insurance (in amounts satisfactory to Landlord and with
the parties identified in, or required by, the Lease named as additional
insureds) and instruments of indemnification against all losses, which may arise
in connection with the Work.

 

Any entry into and occupancy of the Property by Tenant, Contractor, or Tenant’s
architect shall be deemed to be subject to all of the terms, covenants,
conditions, and provisions of the Lease, excluding only the covenant to pay
Rent. Except as a result of Landlord’s negligence or willful misconduct,
Landlord shall not be liable for any injury or death to any person or persons,
loss or damage which may occur to any of the Work made in or about the Property
or to property placed therein during the period the Work is being performed, the
same being at Tenant’s sole risk and liability. Except in connection with
Landlord’s negligence or willful misconduct, Tenant agrees to indemnify, defend,
and hold harmless Landlord from and against all losses, which may be brought or
made against Landlord, or which Landlord may pay or incur due to or in
connection with the Work.

 

In no event shall Landlord pay for, or be responsible for in any other way, any
amount in excess of the Allowances or any Allowance work performed that is not
first approved in writing by Landlord.

 

4.     TENANT HEREBY AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS LANDLORD
FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND EXPENSES) INCURRED BY OR
ASSERTED AGAINST LANDLORD BY REASON OF OR IN CONNECTION WITH ANY VIOLATION OF
LAWS ARISING FROM OR OUT OF ANY PLANS, INFORMATION, OR DESIGN FURNISHED BY OR
FOR TENANT (OR THE LACK OF COMPLETE AND ACCURATE INFORMATION SO FURNISHED) WITH
RESPECT TO THE WORK, ANY TENANT IMPROVEMENTS, OR OTHER ALTERATIONS OR ADDITIONS
MADE BY OR AT THE REQUEST OF TENANT TO THE PROPERTY, AND TENANT SHALL BE SOLELY
LIABLE TO CORRECT ANY SUCH VIOLATIONS AS PROMPTLY AS IS PRACTICABLE. THE
INDEMNIFICATION OBLIGATIONS OF TENANT AS SET FORTH IN THE IMMEDIATELY PRECEDING
SENTENCE SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THE LEASE.

 

5.     Substantial Completion. Tenant shall cause the Work to be completed in a
good and workmanlike manner using new materials. Tenant is solely responsible
for causing the Work to be Substantially Complete, and Landlord has no
responsibility therefor. The Work shall be deemed to be “Substantially Complete”
for all purposes under this Exhibit and the Lease as of the date Contractor
issues a written certificate to Landlord and Tenant, certifying that the Work
has been substantially completed (i.e., completed except for “punch-list” items)
in compliance with the Final Plans, and when the City of Round Rock has issued a
certificate of occupancy for the Building (to the extent required by law).
Tenant agrees to use reasonable diligence to complete all “punch-list items”
listed in the aforesaid contractor certificate promptly after Substantial
Completion.

 

 
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6.     Cost of the Work. For purposes of this Exhibit, the term “Cost of the
Work” shall mean and include any and all costs and expenses of the Work,
including, without limitation, the cost to prepare and revise the Initial Plans,
the Final Plans, the fees and expenses of a space planner, Contractor and
architect, all permit and inspection fees, construction management and
supervision fees, taxes on materials and labor, amounts paid to contractors,
subcontractors, and suppliers, architects’ fees, engineering costs, premiums for
insurance, utilities, equipment rental, demolition, labor, materials, and any
other development costs related to the Work. The Cost of the Work does not
include, and Landlord may not charge Tenant for any review, management,
supervision, or similar fee in connection with Tenant’s Work. Nothing in the
definition of the Cost of Work shall be construed as modifying Landlord and
Tenant’s respective (a) indemnity obligations under Article XI of this Lease;
(b) environmental obligations under Sections 5.9 or 5.10; or (c) maintenance and
repair obligations under Sections 6.1 and 6.2.

 

7.     Allowances. Provided that Tenant spends at least the amount of the
Allowances on Costs of Work (excluding costs of equipment specific to Tenant’s
business), Landlord shall reimburse Tenant for the actual Cost of the Work in an
amount not to exceed the following (collectively, the “Allowances”):

 

(a)     $1,917,144.00 for internal Work (the “Internal Improvement Allowance”),
such amount being $36.00 per square foot of Building Space;

 

(b)     $275,000.00 for external Work (the “External Improvement Allowance”);
and

 

(c)     $2,662.70 for a preliminary test-fit of a floor plan for the Building
(the “Test-Fit Allowance”), such amount being $0.05 per square foot of Building
Space.

 

Tenant shall pay for the entire Cost of the Work in excess of the respective
Allowances. Tenant shall not be entitled to any credit, abatement, or payment
from Landlord in the event that the amount of the Cost of the Work exceeds any
Allowance. Tenant may not use surplus funds in one Allowance to be credited to
another Allowance (e.g., savings in the Internal Improvement Allowance may not
be applied to the External Improvement Allowance). The Allowances shall in no
event be utilized toward payment of Rent, and any unused portions of the
Allowances shall represent a savings to Landlord.

 

8.     Payment. Landlord shall pay the Allowances as set forth below; provided,
however, that Landlord has no obligation to pay any Allowance when an Event of
Default exists.

 

(a)     Internal Improvement Allowance. Provided that Landlord has received no
notice of lien that remains unresolved, Landlord shall disburse the Internal
Improvement Allowance to Tenant within thirty-three (33) days after Tenant
certifies in writing to Landlord that all Work is Substantially Complete in
accordance with the Final Plans, accompanied by (i) Contractor’s written
certificate to Landlord that the Work is Substantially Completed; (ii)
reasonable proof that Tenant has paid for all Costs of the Work; (iii) a copy of
all certificates of occupancy from the City of Round Rock; and (iv) lien waivers
and releases from all of the contractors, subcontractors, and suppliers for all
Work (not just the internal Work).

 

 
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(b)     External Improvement Allowance. Provided that Landlord has received no
notice of lien that remains unresolved, Landlord shall disburse the External
Improvement Allowance to Tenant within thirty-three (33) days after Tenant
certifies in writing to Landlord that all Work is Substantially Complete,
accompanied by (i) Contractor’s written certificate to Landlord that the Work is
Substantially Completed; (ii) reasonable proof that Tenant has paid for all
Costs of the Work; and (iii) lien waivers and releases from all of the
contractors, subcontractors, and suppliers for all Work (not just the external
Work).

 

(c)     Test-Fit Allowance. Landlord shall disburse the Test-Fit Allowance to
Tenant on the Effective Date.

 

All of the Allowances must be drawn on or utilized in connection with the Work
within two (2) years following the Site Delivery Date – any portion of the
Allowances not used on or before two (2) years following the Site Delivery Date
shall be forfeited and Tenant shall not be entitled to any payment therefor.

 

 
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EXHIBIT “D”

Rules and Regulations for the Property

 

Tenant agrees to comply with, abide, and be bound by the following Rules and
Regulations for the use of the Property:

 

(a)     Tenant and its employees shall not do the following without Landlord’s
prior written consent:

 

i.      Except as allowed under the Permitted Use, vend, peddle, or solicit
orders for the sale or distribution of any merchandise, device, service,
periodical, book, pamphlet, or other matter whatsoever.

 

ii.     Exhibit any sign, placard, banner, notice, or other written material,
except as specifically approved in writing by Landlord.

 

iii.    Solicit signatures on any petition or for any other purpose, disseminate
any information in connection therewith, or distribute any circular, booklet,
handbill, placard, or any other material that has no relationship to any purpose
for which the Property was built or is being used.

 

iv.    Solicit membership in any organization, group, or association, or solicit
contributions for any purpose which has no relationship to the Property.

 

v.     Parade, rally, picket, demonstrate, or engage in any conduct that might
tend to create a disturbance on the Property, attract attention to the Property,
or harass or annoy neighbors so as to be detrimental to the interest of
Landlord.

 

vi.    Throw, discard, or deposit any paper, glass, or extraneous matter of any
kind, except in designated receptacles, or create litter hazards of any kind.

 

vii.   Use any sound-making device of any kind or create and produce in any
manner noise or sound that is annoying, unpleasant, or distasteful to any
business, property owner, or neighbor in the vicinity of the Property.

 

viii.  Make or emit any odor that is annoying, unpleasant, or distasteful to any
business, property owner, or neighbor in the vicinity of the Property.

 

ix.     Deface, damage, or demolish any sign, light standard or fixture,
landscaping material, or other improvement within the Property, except as
expressly approved in writing by Landlord.

 

(b)     Tenant shall not bring any animals (except seeing-eye and other service
provider dogs) onto the Property.

 

 
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(c)     Tenant shall not make any use of the Property which involves
unreasonable danger of injury to any person.

 

(d)     Tenant shall provide Landlord with the name of a designated employee to
represent Tenant in all matters pertaining to fire or security regulations.

 

(e)     The Property shall not be used or permitted to be used for residential,
lodging, or sleeping purposes or for the storage of personal effects or property
not required for business purposes.

 

(f)     No person shall use any roadway, sidewalk, or walkway, except as a means
of egress or ingress to any floor area and automobile parking areas within the
Property, or adjacent public streets. Such use shall be in an orderly manner,
and in accordance with the directional and other signs and guides. No sidewalks
or walkways shall be used for any other use than pedestrian travel.

 

(g)     All motor vehicles shall be parked in an orderly manner within the
painted lines defining the individual parking space.

 

(h)     Landlord shall have the right to remove or exclude from or to restrain
(or take legal action to do so) any unauthorized person from, or from coming
upon, the Property, or any portion thereof, and to prohibit, abate, and recover
damages arising from any unauthorized act, whether or not such act is in express
violation of the Rules and Regulations set forth herein.

 

 

 

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