**EXHIBIT 10.7**

 

 

**LEASE**

 

**CALWEST INDUSTRIAL HOLDINGS TEXAS, L.P.,**

 

**Landlord,**

 

**and**

 

**INTRUSION INC.,**

 

**Tenant**

 

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**TABLE OF CONTENTS**

 
| 1.  |   | USE AND RESTRICTIONS ON USE.             |   |
|-----|--------|------------------------------------------|--------|
| 2.  |   | TERM.                                    |   |
| 3.  |   | RENT.                                    |   |
| 4.  |   | RENT  ADJUSTMENTS.                       |   |
| 5.  |   | SECURITY  DEPOSIT                        |   |
| 6.  |   | ALTERATIONS.                             |   |
| 7.  |   | REPAIR.                                  |   |
| 8.  |   | LIENS                                    |   |
| 9.  |   | ASSIGNMENT AND SUBLETTING.               |   |
| 10. |   | INDEMNIFICATION                          |   |
| 11. |   | INSURANCE.                               |   |
| 12. |   | WAIVER  OF SUBROGATION                   |   |
| 13. |   | SERVICES  AND UTILITIES.                 |   |
| 14. |   | HOLDING OVER                             |   |
| 15. |   | SUBORDINATION                            |   |
| 16. |   | RULES  AND REGULATIONS                   |   |
| 17. |   | REENTRY  BY LANDLORD.                    |   |
| 18. |   | DEFAULT.                                 |   |
| 19. |   | REMEDIES.                                |   |
| 20. |   | TENANT’S  BANKRUPTCY OR INSOLVENCY. |   |
| 21. |   | QUIET ENJOYMENT                          |   |
| 22. |   | CASUALTY                                 |   |
| 23. |   | EMINENT DOMAIN                           |   |
| 24. |   | SALE BY  LANDLORD                        |   |
| 25. |   | ESTOPPEL  CERTIFICATES                   |   |
| 26. |   | SURRENDER  OF PREMISES.                  |   |
| 27. |   | NOTICES                                  |   |
| 28. |   | TAXES  PAYABLE BY TENANT                 |   |
| 29. |   | RELOCATION  OF TENANT                    |   |
| 30. |   | DEFINED TERMS AND HEADINGS               |   |
| 31. |   | TENANT’S  AUTHORITY                 |   |
| 32. |   | FINANCIAL  STATEMENTS AND CREDIT REPORTS |   |
| 33. |   | COMMISSIONS                              |   |
| 34. |   | TIME AND  APPLICABLE LAW                 |   |
| 35. |   | SUCCESSORS  AND ASSIGNS                  |   |

 

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| 36.                                                 |   | ENTIRE  AGREEMENT                        |   |
|-----------------------------------------------------|--------|------------------------------------------|--------|
| 37.                                                 |   | EXAMINATION  NOT OPTION                  |   |
| 38.                                                 |   | RECORDATION                              |   |
| 39.                                                 |   | TENANT  REPRESENATION                    |   |
| 40.                                                 |   | LIMITATION OF  LANDLORD’S LIABILITY |   |
| EXHIBIT A – FLOOR PLAN  DEPICTING THE PREMISES |   |
| EXHIBIT A-1 – SITE PLAN                        |   |
| EXHIBIT B – INITIAL  ALTERATIONS               |   |
| EXHIBIT C – COMMENCEMENT  DATE MEMORANDUM      |   |
| EXHIBIT D – RULES AND  REGULATIONS             |   |
| EXHIBIT E – RENEWAL OPTION                     |   |

 

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**GROSS (BY) OFFICELEASE**

** **

**REFERENCE PAGES**

 
| BUILDING:                                                |   | 1101 East Arapaho Road  Richardson, Texas, 75081                                                                   |
|----------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------|
|                                                     |   |                                                                                                               |
| LANDLORD:                                                |   | CALWEST INDUSTRIAL HOLDINGS TEXAS,  L.P., a Delaware limited partnership                                           |
|                                                     |   |                                                                                                               |
| LANDLORD’S ADDRESS:                                 |   | 1406 Halsey Way, Suite 110  Carrollton, TX 75007                                                                   |
|                                                     |   |                                                                                                               |
| ADDRESS FOR  RENT PAYMENT:                               |   | CalWest  Industrial Holdings Texas, L.P.  P.O. Box 847973  Dallas, Texas 75284                                     |
|                                                     |   |                                                                                                               |
| LEASE REFERENCE DATE:                                    |   | January 12, 2004                                                                                                   |
|                                                     |   |                                                                                                               |
| TENANT:                                                  |   | INTRUSION INC., a Delaware  corporation  (successor-in-interest to Optical Data Systems, Inc.)                     |
|                                                     |   |                                                                                                               |
| TENANT’S NOTICE ADDRESS:                            |   | 1101 East Arapaho Road  Richardson, Texas 75081                                                                    |
|                                                     |   |                                                                                                               |
| PREMISES ADDRESS:                                        |   | 1101 East Arapaho Road  Richardson, Texas 75081(for outline of Premises see Exhibit A)                             |
|                                                     |   |                                                                                                               |
| PREMISES  RENTABLE AREA:                                 |   | Approximately  32,834 sq. ft. (for outline of Premises see Exhibit A)                                              |
|                                                     |   |                                                                                                               |
| USE:                                                     |   | General office use                                                                                                 |
|                                                     |   |                                                                                                               |
| COMMENCEMENT DATE:                                       |   | February 1, 2004                                                                                                   |
|                                                     |   |                                                                                                               |
| TERM OF LEASE:                                           |   | Approximately six (6) years, one (1) month beginning on the  Commencement Date and ending on the Termination Date. |
|                                                     |   |                                                                                                               |
| TERMINATION DATE:                                        |   | February 28, 2010                                                                                                  |
|                                                     |   |                                                                                                               |
| ANNUAL RENT  and MONTHLY INSTALLMENT OF RENT(Article 3): |   |                                                                                                               |

 
| **Period** |   | **Rentable  Square  Footage** |   | **Annual  Rent  Per Square Foot** |   | **Annual  Rent** |   | **Monthly  Installment of  Rent** |   |
|------------|--------|-------------------------------|--------|-----------------------------------|--------|------------------|--------|-----------------------------------|--------|
| **from**   |   | **through**                   |   |                              |   |             |   |
|       |   |                          |   |                              |   |             |   |                              |   |   |   |
| 2/1/04     |   | 1/31/06                       |   | 32,834                            |   | $                | 11.00  |                              | $      | 361,174.00 |   | $ | 30,097.83 |   |
| 2/1/06     |   | 1/31/08                       |   | 32,834                            |   | $                | 11.50  |                              | $      | 377,591.00 |   | $ | 31,465.92 |   |
| 2/1/08     |   | 1/31/09                       |   | 32,834                            |   | $                | 12.00  |                              | $      | 454,008.00 |   | $ | 32,834.00 |   |
| 2/1/09     |   | 2/28/10                       |   | 32,834                            |   | $                | 12.50  |                              | $      | 410,425.00 |   | $ | 34,202.08 |   |

 

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| BASE YEAR (EXPENSES):              |   | January 1, 2003  to December 31, 2003 ($4.26 per square foot)                                                                                                                         |
|------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                               |   |                                                                                                                                                                                  |
| BASE YEAR (TAXES):                 |   | Taxes for  January 1, 2003 to December 31, 2003 ($1.03 per square foot)                                                                                                               |
|                               |   |                                                                                                                                                                                  |
| HVAC EXPENSES:                     |   | $1,238.18  per month                                                                                                                                                                  |
|                               |   |                                                                                                                                                                                  |
| TENANT’S PROPORTIONATE SHARE: |   | 35.75%  (based on a fraction, the numerator of which is the Premises Rentable Area  and the denominator of which is the square footage of the Building, which is  91,851 square feet) |
|                               |   |                                                                                                                                                                                  |
| SECURITY DEPOSIT:                  |   | $35,250.00  (currently held by Landlord)                                                                                                                                              |
|                               |   |                                                                                                                                                                                  |
| ASSIGNMENT/SUBLETTING FEE:         |   | $1,500.00                                                                                                                                                                             |
|                               |   |                                                                                                                                                                                  |
| REAL ESTATE BROKER DUE COMMISSION: |   | N/A                                                                                                                                                                                   |
|                               |   |                                                                                                                                                                                  |
| TENANT’S SIC CODE:            |   | 3660                                                                                                                                                                                  |
|                               |   |                                                                                                                                                                                  |
| BUILDING BUSINESS HOURS:           |   | 8:00 a.m. –  6:00 p.m., Monday through Friday, excluding holidays                                                                                                                |
|                               |   |                                                                                                                                                                                  |
| AMORTIZATION RATE:                 |   | N/A                                                                                                                                                                                   |

 

The Reference Pages information is incorporated intoand made a part of the Lease.  In theevent of any conflict between any Reference Pages information and the Lease,the Lease shall control.  This Leaseincludes Exhibits A through E, all of which are made a part of thisLease. 

 
| **LANDLORD:**                                                            |                                                                                              |                                                                    | **TENANT:**                |
|--------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|----------------------------|
|                                                                     |                                                                                              |                                                                    |                       |   |
| CALWEST INDUSTRIAL HOLDINGS TEXAS, L.P.,  a Delaware limited partnership |                                                                                              | INTRUSION INC., a Delaware corporation                                  |
|                                                                     |                                                                                              |                                                                    |
| By:                                                                      |   CALWEST TEXAS, LLC, a Delaware limited  liability company  Its:  General Partner |                                                                    |                       |
|                                                                     |                                                                                              |                                                                    |                       |
|                                                                     | By:                                                                                               | RREEF Management Company, a Delaware  corporation, its Property Manager |                       |   |
|                                                                     |                                                                                              |                                                                    |                       |   |
|                                                                     | By:                                                                                               |                                                                    | /s/ CYNTHIA A. PRENDERGAST |   |   | By: |   | /s/ G. WARD PAXTON |
|                                                                     |                                                                                              |                                                                    |                       |   |   |   |   |
|                                                                     |                                                                                              | Name:                                                                   |                       | Cynthia A. Prendergast |   |   |   | Name: |   | G. Ward Paxton |
|                                                                     |                                                                                              |                                                                    |                       |   |   |   |   |
|                                                                     |                                                                                              | Title:                                                                  |                       | District Manager |   |   |   | Title: |   | Chief Executive Officer |
|                                                                     |                                                                                              |                                                                    |                       |   |   |   |   |   |
| Dated:                                                                   |                             | March 23, 2004                                                          |                       |   |   | Dated: |   | March 16, 2004 |
|                                                                          |                                                                                                   |                                                                         |                            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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**LEASE**

 

This Leaserestates and affirms that certain Lease dated September 12, 1989, as amended bySupplemental Lease Agreement dated March 7, 1995 by and between Landlord’spredecessor, G.D.A.F. ASSOCIATES, and Tenant’s predecessor, OPTICAL DATASYSTEMS, INC. (hereinafter collectively referred to as the “**Original Lease**”).  By this Lease Landlord leases to Tenant andTenant leases from Landlord the Premises in the Building as set forth anddescribed on the Reference Pages.  ThePremises are depicted on the floor plan attached hereto as Exhibit A,and the Building is depicted on the site plan attached hereto as Exhibit A-1.  The Reference Pages, including all termsdefined thereon, are incorporated as part of this Lease.

 

1.             **USE AND RESTRICTIONS ON USE**.

 

1.1           The Premises are to be used solelyfor general office purposes.  Tenantshall not do or permit anything to be done in or about the Premises which willin any way obstruct or interfere with the rights of other tenants or occupantsof the Building or injure, annoy, or disturb them, or allow the Premises to beused for any improper, immoral, unlawful, or objectionable purpose, or commitany waste.  Tenant shall not do, permitor suffer in, on, or about the Premises the sale of any alcoholic liquorwithout the written consent of Landlord first obtained.  Tenant shall comply with all governmentallaws, ordinances and regulations applicable to the use of the Premises and itsoccupancy and shall promptly comply with all governmental orders and directionsfor the correction, prevention and abatement of any violations in the Buildingor appurtenant land, caused or permitted by, or resulting from the specific useby, Tenant, or in or upon, or in connection with, the Premises, all at Tenant’ssole expense.  Tenant shall not do orpermit anything to be done on or about the Premises or bring or keep anythinginto the Premises which will in any way increase the rate of, invalidate orprevent the procuring of any insurance protecting against loss or damage to theBuilding or any of its contents by fire or other casualty or against liabilityfor damage to property or injury to persons in or about the Building or anypart thereof.

 

1.2           Tenant shall not,and shall not direct, suffer or permit any of its agents, contractors,employees, licensees or invitees (collectively, the “Tenant Entities”) to atany time handle, use, manufacture, store or dispose of in or about the Premisesor the Building any (collectively “Hazardous Materials”) flammables,explosives, radioactive materials, hazardous wastes or materials, toxic wastesor materials, or other similar substances, petroleum products or derivatives orany substance subject to regulation by or under any federal, state and locallaws and ordinances relating to the protection of the environment or thekeeping, use or disposition of environmentally hazardous materials, substances,or wastes, presently in effect or hereafter adopted, all amendments to any ofthem, and all rules and regulations issued pursuant to any of such laws orordinances (collectively “Environmental Laws”), nor shall Tenant suffer orpermit any Hazardous Materials to be used in any manner not fully in compliancewith all Environmental Laws, in the Premises or the Building and appurtenantland or allow the environment to become contaminated with any HazardousMaterials.  Notwithstanding theforegoing, Tenant may handle, store, use or dispose of products containing smallquantities of Hazardous Materials (such as aerosol cans containinginsecticides, toner for copiers, paints, paint remover and the like) to theextent customary and necessary for the use of the Premises for general officepurposes; provided that Tenant shall always handle, store, use, and dispose ofany such Hazardous Materials in a safe and lawful manner and never allow suchHazardous Materials to contaminate the Premises, Building and appurtenant landor the environment.  TENANT SHALLPROTECT, DEFEND, INDEMNIFY AND HOLD EACH AND ALL OF THE LANDLORD ENTITIES (ASDEFINED IN ARTICLE 30) HARMLESS FROM AND AGAINST ANY AND ALL LOSS, CLAIMS,LIABILITY (INCLUDING, WITHOUT LIMITATION, ANY STRICT LIABILITY) OR COSTS(INCLUDING COURT COSTS AND ATTORNEY’S FEES) INCURRED BY REASON OF ANY ACTUAL ORASSERTED FAILURE OF TENANT TO FULLY COMPLY WITH ALL APPLICABLE ENVIRONMENTALLAWS, OR THE PRESENCE, HANDLING, USE OR DISPOSITION IN OR FROM THE PREMISES OFANY HAZARDOUS MATERIALS BY TENANT OR ANY TENANT ENTITY (EVEN THOUGH PERMISSIBLEUNDER ALL APPLICABLE ENVIRONMENTAL LAWS OR THE PROVISIONS OF THIS LEASE), OR BYREASON OF ANY ACTUAL OR ASSERTED FAILURE OF TENANT TO KEEP, OBSERVE, OR PERFORMANY PROVISION OF THIS SECTION 1.2.

 

1.3           Tenant and theTenant Entities will be entitled to the non-exclusive use of the common areasof the Building as they exist from time to time during the Term, including theparking facilities, subject to Landlord’s rules and regulations regarding suchuse.  However, in no event will Tenantor the Tenant Entities park more vehicles in the parking facilities thanTenant’s Proportionate Share of the total parking spaces available for commonuse.  The foregoing shall not be deemedto provide Tenant with an exclusive right to any parking spaces or any guarantyof the availability of any particular parking spaces or any specific number ofparking spaces.

 

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2.             **TERM**.

 

2.1           The Term of thisLease shall begin on the Commencement Date as shown on the Reference Pages andshall terminate on the Termination Date as shown on the Reference Pages, unlesssooner terminated by the provisions of this Lease.

 

2.2           Tenant agrees thatin the event of the inability of Landlord to deliver possession of the Premiseson the Commencement Date for any reason, Landlord shall not be liable for anydamage resulting from such inability. No such failure to give possession on the Commencement Date shall affectthe any obligations of Tenant under this Lease, including the payment of anyrent due under this Lease.

 

2.3           In the eventLandlord permits Tenant, or any agent, employee or contractor of Tenant, toenter, use or occupy the Premises prior to the Commencement Date, such entry,use or occupancy shall be subject to all the provisions of this Lease otherthan the payment of rent, including, without limitation, Tenant’s compliancewith the insurance requirements of Article 11. Said early possession shall not advance the Termination Date.

 

3.             **RENT**.

 

3.1           Tenant agrees to payto Landlord the Annual Rent in effect from time to time by paying the MonthlyInstallment of Rent then in effect on or before the first day of each fullcalendar month during the Term, except that the first full month’s rent shallbe paid upon the execution of this Lease. The Monthly Installment of Rent in effect at any time shall beone-twelfth (1/12) of the Annual Rent in effect at such time.  Rent for any period during the Term which isless than a full month shall be a prorated portion of the Monthly Installment ofRent based upon the number of days in such month.  Said rent shall be paid to Landlord, without deduction or offsetand without notice or demand, at the Rent Payment Address, as set forth on theReference Pages, or to such other person or at such other place as Landlord mayfrom time to time designate in writing. If an Event of Default occurs, Landlord may require by notice to Tenantthat all subsequent rent payments be made by an automatic payment from Tenant’sbank account to Landlord’s account, without cost to Landlord.  Tenant must implement such automatic paymentsystem prior to the next scheduled rent payment or within ten (10) days afterLandlord’s notice, whichever is later. Unless specified in this Lease to the contrary, all amounts and sums payableby Tenant to Landlord pursuant to this Lease shall be deemed additional rent.

 

3.2           Tenant recognizesthat late payment of any rent or other sum due under this Lease will result inadministrative expense to Landlord, the extent of which additional expense isextremely difficult and economically impractical to ascertain.  Tenant therefore agrees that if rent or anyother sum is not paid within ten (10) days of when due and payable pursuant tothis Lease, a late charge shall be imposed in an amount equal to the greaterof:  (a) Fifty Dollars ($50.00), or (b)six percent (6%) of the unpaid rent or other payment.  The amount of the late charge to be paid by Tenant shall bereassessed and added to Tenant’s obligation for each successive month untilpaid.  The provisions of this Section3.2 in no way relieve Tenant of the obligation to pay rent or other payments onor before the date on which they are due, nor do the terms of this Section 3.2in any way affect Landlord’s remedies pursuant to Article 19 of this Lease inthe event said rent or other payment is unpaid after date due.

 

4.             **RENT ADJUSTMENTS**.

 

4.1           For the purpose ofthis Article 4, the following terms are defined as follows:

 

4.1.1        **Lease Year:**  Each fiscal year (as determined by Landlordfrom time to time) falling partly or wholly within the Term.

 

4.1.2        **Expenses:**  All costs of operation, maintenance, repair,replacement and management of the Building (including the amount of any creditswhich Landlord may grant to particular tenants of the Building in lieu ofproviding any standard services or paying any standard costs described in thisSection 4.1.2 for similar tenants), as determined in accordance with generallyaccepted accounting principles, including the following costs by way ofillustration, but not limitation: water and sewer charges; insurance charges ofor relating to all insurance policies and endorsements deemed by Landlord to bereasonably necessary or desirable and relating in any manner to the protection,preservation, or operation of the Building or any part thereof; utility costs,including, but not limited to, the cost of heat and air conditioning, light,power, steam, gas; waste disposal; the cost of janitorial services; the cost ofsecurity and alarm services (including any central station signaling system);costs of cleaning, repairing, replacing and maintaining the common areas,including parking and landscaping, window cleaning costs; labor costs; costsand expenses of managing the Building including management fees; air

 

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conditioning maintenance costs; elevatormaintenance fees and supplies; material costs; equipment costs including thecost of maintenance, repair and service agreements and rental and leasingcosts; purchase costs of equipment; current rental and leasing costs of itemswhich would be capital items if purchased; tool costs; licenses, permits andinspection fees; wages and salaries; employee benefits and payroll taxes;accounting and legal fees; any sales, use or service taxes incurred inconnection therewith.  In addition,Landlord shall be entitled to recover, as additional rent (which, along withany other capital expenditures constituting Expenses, Landlord may eitherinclude in Expenses or cause to be billed to Tenant along with Expenses andTaxes but as a separate item), Tenant’s Proportionate Share of: (i) anallocable portion of the cost of capital improvement items which are reasonablycalculated to reduce operating expenses; (ii) the cost of fire sprinklersand suppression systems and other life safety systems; and (iii) othercapital expenses which are required under any governmental laws, regulations orordinances which were not applicable to the Building at the time it wasconstructed; but the costs described in this sentence shall be amortized overthe reasonable life of such expenditures in accordance with such reasonablelife and amortization schedules as shall be determined by Landlord inaccordance with generally accepted accounting principles, with interest on theunamortized amount at one percent (1%) in excess of the Wall Street Journalprime lending rate announced from time to time.  Expenses shall not include depreciation or amortization of theBuilding or equipment in the Building except as provided herein, loan principalpayments, costs of alterations of tenants’ premises, leasing commissions,interest expenses on long-term borrowings or advertising costs.

 

4.1.3        **Taxes:**  Real estate taxes and any other taxes,charges and assessments which are levied with respect to the Building or theland appurtenant to the Building, or with respect to any improvements, fixturesand equipment or other property of Landlord, real or personal, located in theBuilding and used in connection with the operation of the Building and saidland, any payments to any ground lessor in reimbursement of tax payments madeby such lessor; and all fees, expenses and costs incurred by Landlord ininvestigating, protesting, contesting or in any way seeking to reduce or avoidincrease in any assessments, levies or the tax rate pertaining to any Taxes tobe paid by Landlord in any Lease Year. Taxes shall not include any corporate franchise, or estate, inheritanceor net income tax, or tax imposed upon any transfer by Landlord of its interestin this Lease or the Building or any taxes to be paid by Tenant pursuant toArticle 28.

 

4.2           If in any LeaseYear, (i) Expenses paid or incurred shall exceed Expenses paid or incurred inthe Base Year (Expenses) and/or (ii) Taxes paid or incurred by Landlord in anyLease Year shall exceed the amount of such Taxes which became due and payablein the Base Year (Taxes), Tenant shall pay as additional rent for such LeaseYear Tenant’s Proportionate Share of such excess.  In addition, Tenant shall pay as additional rent the HVACExpenses (as defined in Exhibit B attached hereto) in the amount shown on theReference Pages.

 

4.3           The annualdetermination of Expenses shall be made by Landlord and shall be binding uponLandlord and Tenant, subject to the provisions of this Section 4.3.  During the Term, Tenant may review, atTenant’s sole cost and expense, the books and records supporting suchdetermination in an office of Landlord, or Landlord’s agent, during normalbusiness hours, upon giving Landlord five (5) days advance written noticewithin sixty (60) days after receipt of such determination, but in no eventmore often than once in any one (1) year period, subject to execution of aconfidentiality agreement acceptable to Landlord, and provided that if Tenant utilizesan independent accountant to perform such review it shall be one of nationalstanding which is reasonably acceptable to Landlord, is not compensated on acontingency basis and is also subject to such confidentiality agreement.  If Tenant fails to object to Landlord’sdetermination of Expenses within ninety (90) days after receipt, or if any suchobjection fails to state with specificity the reason for the objection, Tenantshall be deemed to have approved such determination and shall have no further rightto object to or contest such determination. In the event that during all or anyportion of any Lease Year or Base Year, the Building is not fully rented andoccupied Landlord shall make an appropriate adjustment in occupancy-relatedExpenses for such year for the purpose of avoiding distortion of the amount ofsuch Expenses to be attributed to Tenant by reason of variation in totaloccupancy of the Building, by employing consistent and sound accounting andmanagement principles to determine Expenses that would have been paid orincurred by Landlord had the Building been at least ninety-five percent (95%)rented and occupied, and the amount so determined shall be deemed to have beenExpenses for such Lease Year.

 

4.4           Prior to the actualdetermination thereof for a Lease Year, Landlord may from time to time estimateTenant’s liability for Expenses and/or Taxes under Section 4.2, Article 6 andArticle 28 for the Lease Year or portion thereof.  Landlord will give Tenant written notification of the amount ofsuch estimate and Tenant agrees that it will pay, by increase of its MonthlyInstallments of Rent due in such Lease Year, additional rent in the amount ofsuch estimate.  Any such increased rateof Monthly Installments of Rent pursuant to this Section 4.4 shall remain ineffect until further written notification to Tenant pursuant hereto.

 

4.5           When the abovementioned actual determination of Tenant’s liability for Expenses and/or Taxesis made for any Lease Year and when Tenant is so notified in writing, then:

 

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4.5.1        If the totaladditional rent Tenant actually paid pursuant to Section 4.3 on account ofExpenses and/or Taxes for the Lease Year is less than Tenant’s liability forExpenses and/or Taxes, then Tenant shall pay such deficiency to Landlord asadditional rent in one lump sum within thirty (30) days of receipt ofLandlord’s bill therefore; and

 

4.5.2        If the totaladditional rent Tenant actually paid pursuant to Section 4.3 on account ofExpenses and/or Taxes for the Lease Year is more than Tenant’s liability forExpenses and/or Taxes, then Landlord shall credit the difference against thethen next due payments to be made by Tenant under this Article 4, or, ifthe Lease has terminated, refund the difference in cash.  Tenant shall not be entitled to a credit byreason of actual Expenses and/or Taxes in any Lease Year being less thanExpenses and/or Taxes in the Base Year (Expenses and/or Taxes).

 

4.6           If the CommencementDate is other than January 1 or if the Termination Date is other than December31, Tenant’s liability for Expenses and Taxes for the Lease Year in which saidDate occurs shall be prorated based upon a three hundred sixty-five (365) dayyear.

 

5.             **SECURITY DEPOSIT****.**  Tenant shall deposit the Security Deposit with Landlord upon theexecution of this Lease.  Said sum shallbe held by Landlord as security for the faithful performance by Tenant of allthe terms, covenants and conditions of this Lease to be kept and performed byTenant and not as an advance rental deposit or as a measure of Landlord’sdamage in case of Tenant’s default.  IfTenant defaults with respect to any provision of this Lease, Landlord may useany part of the Security Deposit for the payment of any rent or any other sumin default, or for the payment of any amount which Landlord may spend or becomeobligated to spend by reason of Tenant’s default, or to compensate Landlord forany other loss or damage which Landlord may suffer by reason of Tenant’sdefault.  If any portion is so used,Tenant shall within five (5) days after written demand therefore, deposit withLandlord an amount sufficient to restore the Security Deposit to its originalamount and Tenant’s failure to do so shall be a material breach of this Lease.  Except to such extent, if any, as shall berequired by law, Landlord shall not be required to keep the Security Depositseparate from its general funds, and Tenant shall not be entitled to intereston such deposit.  If Tenant shall fullyand faithfully perform every provision of this Lease to be performed by it, theSecurity Deposit or any balance thereof shall be returned to Tenant at suchtime after termination of this Lease when Landlord shall have determined thatall of Tenant’s obligations under this Lease have been fulfilled.

 

6.             **ALTERATIONS**.

 

6.1           Except for those, ifany, specifically provided for in Exhibit B to this Lease, Tenant shallnot make or suffer to be made any alterations, additions, or improvements,including, but not limited to, the attachment of any fixtures or equipment in,on, or to the Premises or any part thereof or the making of any improvements asrequired by Article 7, without the prior written consent of Landlord.  When applying for such consent, Tenantshall, if requested by Landlord, furnish complete plans and specifications forsuch alterations, additions and improvements. Landlord’s consent shall not beunreasonably withheld with respect to alterations which (i) are not structuralin nature, (ii) are not visible from the exterior of the Building, (iii) do notaffect or require modification of the Building’s electrical, mechanical,plumbing, HVAC or other systems, and (iv) in aggregate do not cost more than$5.00 per rentable square foot of that portion of the Premises affected by the alterationsin question.

 

6.2           In the eventLandlord consents to the making of any such alteration, addition or improvementby Tenant, the same shall be made by using either Landlord’s contractor or acontractor reasonably approved by Landlord, in either event at Tenant’s solecost and expense.  If Tenant shallemploy any contractor other than Landlord’s contractor and such othercontractor or any subcontractor of such other contractor shall employ anynon-union labor or supplier, Tenant shall be responsible for and hold Landlordharmless from any and all delays, damages and extra costs suffered by Landlordas a result of any dispute with any labor unions concerning the wage, hours,terms or conditions of the employment of any such labor.  In any event Landlord may charge Tenant aconstruction management fee not to exceed five percent (5%) of the cost of suchwork to cover its overhead as it relates to such proposed work, plusthird-party costs actually incurred by Landlord in connection with the proposedwork and the design thereof, with all such amounts being due five (5) daysafter Landlord’s demand.

 

6.3           All alterations,additions or improvements proposed by Tenant shall be constructed in accordancewith all government laws, ordinances, rules and regulations, using Buildingstandard materials where applicable, and Tenant shall, prior to construction,provide the additional insurance required under Article 11 in such case, andalso all such assurances to Landlord as Landlord shall reasonably require toassure payment of the costs thereof, including but not limited to, notices ofnon-responsibility, waivers of lien, surety company performance bonds andfunded construction escrows and to protect Landlord and the Building andappurtenant land against any loss from any mechanic’s, materialmen’s or otherliens.  Tenant shall pay in addition toany sums due pursuant to Article 4, any increase in real estate taxesattributable to any such alteration,

 

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addition or improvement for so long, duringthe Term, as such increase is ascertainable; at Landlord’s election said sumsshall be paid in the same way as sums due under Article 4.  Landlord may, as a condition to its consentto any particular alterations or improvements, require Tenant to deposit withLandlord the amount reasonably estimated by Landlord as sufficient to cover thecost of removing such alterations or improvements and restoring the Premises,to the extent required under Section 26.2

 

7.             **REPAIR.**

 

7.1           Landlord shall haveno obligation to alter, remodel, improve, repair, decorate or paint thePremises, except as specified in Exhibit B if attached to this Lease andexcept that Landlord shall repair and maintain the structural portions of theBuilding, including the basic plumbing, air conditioning, heating andelectrical systems installed or furnished by Landlord.  By taking possession of the Premises, Tenantaccepts them as being in good order, condition and repair and in the conditionin which Landlord is obligated to deliver them, except as set forth in thepunch list to be delivered pursuant to Section 2.1.  It is hereby understood and agreed that no representationsrespecting the condition of the Premises or the Building have been made byLandlord to Tenant, except as specifically set forth in this Lease.

 

7.2           Tenant shall, at alltimes during the Term, keep the Premises in good condition and repair exceptingdamage by fire, or other casualty, and in compliance with all applicablegovernmental laws, ordinances and regulations, promptly complying with allgovernmental orders and directives for the correction, prevention and abatementof any violations or nuisances in or upon, or connected with, the Premises, allat Tenant’s sole expense.

 

7.3           Landlord shall not beliable for any failure to make any repairs or to perform any maintenance unlesssuch failure shall persist for an unreasonable time after written notice of theneed of such repairs or maintenance is given to Landlord by Tenant.

 

7.4           Except as providedin Article 22, there shall be no abatement of rent and no liability of Landlordby reason of any injury to or interference with Tenant’s business arising fromthe making of any repairs, alterations or improvements in or to any portion ofthe Building or the Premises or to fixtures, appurtenances and equipment in theBuilding.  Except to the extent, if any,prohibited by law, Tenant waives the right to make repairs at Landlord’sexpense under any law, statute or ordinance now or hereafter in effect.

 

8.             **LIENS.**  Tenantshall keep the Premises, the Building and appurtenant land and Tenant’sleasehold interest in the Premises free from any liens arising out of anyservices, work or materials performed, furnished, or contracted for by Tenant,or obligations incurred by Tenant.  Inthe event that Tenant fails, within ten (10) days following the imposition ofany such lien, to either cause the same to be released of record or provideLandlord with insurance against the same issued by a major title insurancecompany or such other protection against the same as Landlord shall accept(such failure to constitute an Event of Default), Landlord shall have the rightto cause the same to be released by such means as it shall deem proper,including payment of the claim giving rise to such lien.  All such sums paid by Landlord and allexpenses incurred by it in connection therewith shall be payable to it byTenant within five (5) days Landlord’s demand.

 

9.             **ASSIGNMENT AND SUBLETTING**.

 

9.1           Tenant shall nothave the right to assign or pledge this Lease or to sublet the whole or anypart of the Premises whether voluntarily or by operation of law, or permit theuse or occupancy of the Premises by anyone other than Tenant, and shall notmake, suffer or permit such assignment, subleasing or occupancy without theprior written consent of Landlord, such consent not to be unreasonablywithheld, and said restrictions shall be binding upon any and all assignees ofthe Lease and subtenants of the Premises. In the event Tenant desires to sublet, or permit such occupancy of, thePremises, or any portion thereof, or assign this Lease, Tenant shall givewritten notice thereof to Landlord at least sixty (60) days but no more thanone hundred twenty (120) days prior to the proposed commencement date of suchsubletting or assignment, which notice shall set forth the name of the proposedsubtenant or assignee, the relevant terms of any sublease or assignment andcopies of financial reports and other relevant financial information of theproposed subtenant or assignee.

 

9.2           Notwithstanding anyassignment or subletting, permitted or otherwise, Tenant shall at all timesremain directly, primarily and fully responsible and liable for the payment ofthe rent specified in this Lease and for compliance with all of its otherobligations under the terms, provisions and covenants of this Lease.  Upon the occurrence of an Event of Default,if the Premises or any part of them are then assigned or sublet, Landlord, inaddition to any other remedies provided in this Lease or provided by law, may,at its option, collect directly from such assignee or subtenant all rents dueand becoming due to Tenant under such assignment or sublease and apply suchrent against any sums due to Landlord from

 

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Tenant under this Lease, and no suchcollection shall be construed to constitute a novation or release of Tenantfrom the further performance of Tenant’s obligations under this Lease.

 

9.3           In addition toLandlord’s right to approve of any subtenant or assignee, Landlord shall havethe option, in its sole discretion, in the event of any proposed subletting orassignment, to terminate this Lease, or in the case of a proposed subletting ofless than the entire Premises, to recapture the portion of the Premises to besublet, as of the date the subletting or assignment is to be effective.  The option shall be exercised, if at all, byLandlord giving Tenant written notice given by Landlord to Tenant within thirty(30) days following Landlord’s receipt of Tenant’s written notice as requiredabove.  However, if Tenant notifiesLandlord, within five (5) days after receipt of Landlord’s termination notice,that Tenant is rescinding its proposed assignment or sublease, the terminationnotice shall be void and the Lease shall continue in full force andeffect.  If this Lease shall beterminated with respect to the entire Premises pursuant to this Section, theTerm of this Lease shall end on the date stated in Tenant’s notice as theeffective date of the sublease or assignment as if that date had beenoriginally fixed in this Lease for the expiration of the Term.  If Landlord recaptures under this Sectiononly a portion of the Premises, the rent to be paid from time to time duringthe unexpired Term shall abate proportionately based on the proportion by whichthe approximate square footage of the remaining portion of the Premises shallbe less than that of the Premises as of the date immediately prior to suchrecapture.  Tenant shall, at Tenant’sown cost and expense, discharge in full any outstanding commission obligationwhich may be due and owing as a result of any proposed assignment orsubletting, whether or not the Premises are recaptured pursuant to this Section9.3 and rented by Landlord to the proposed tenant or any other tenant.

 

9.4           In the event thatTenant sells, sublets, assigns or transfers this Lease, Tenant shall pay toLandlord as additional rent an amount equal to one hundred percent (100%) ofany Increased Rent (as defined below), less the Costs Component (as definedbelow), when and as such Increased Rent is received by Tenant.  As used in this Section, “Increased Rent”shall mean the excess of (i) all rent and other consideration which Tenant isentitled to receive by reason of any sale, sublease, assignment or othertransfer of this Lease, over (ii) the rent otherwise payable by Tenant underthis Lease at such time.  For purposesof the foregoing, any consideration received by Tenant in form other than cashshall be valued at its fair market value as determined by Landlord in goodfaith.  The “Costs Component” is thatamount which, if paid monthly, would fully amortize on a straight-line basis,over the entire period for which Tenant is to receive Increased Rent, thereasonable costs incurred by Tenant for leasing commissions and tenantimprovements in connection with such sublease, assignment or other transfer.

 

9.5           Notwithstanding anyother provision hereof, it shall be considered reasonable for Landlord towithhold its consent to any assignment of this Lease or sublease of any portionof the Premises if at the time of either Tenant’s notice of the proposedassignment or sublease or the proposed commencement date thereof, there shallexist any uncured default of Tenant or matter which will become a default ofTenant with passage of time unless cured, or if the proposed assignee orsublessee is an entity:  (a) with whichLandlord is already in negotiation; (b) is already an occupant of the Buildingunless Landlord is unable to provide the amount of space required by suchoccupant; (c) is a governmental agency; (d) is incompatible with the characterof occupancy of the Building; (e) with which the payment for the sublease orassignment is determined in whole or in part based upon its net income orprofits; or (f) would subject the Premises to a use which would:  (i) involve increased personnel or wear uponthe Building; (ii)  violate any exclusive right granted to anothertenant of the Building; (iii) require any addition to or modification of thePremises or the Building in order to comply with building code or othergovernmental requirements; or, (iv) involve a violation of Section1.2.  Tenant expressly agrees that forthe purposes of any statutory or other requirement of reasonableness on thepart of Landlord, Landlord’s refusal to consent to any assignment or subleasefor any of the reasons described in this Section 9.5, shall be conclusivelydeemed to be reasonable.

 

9.6           Upon any request toassign or sublet, Tenant will pay to Landlord the Assignment/Subletting Feeplus, on demand, a sum equal to all of Landlord’s costs, including reasonableattorney’s fees, incurred in investigating and considering any proposed orpurported assignment or pledge of this Lease or sublease of any of the Premises,regardless of whether Landlord shall consent to, refuse consent, or determinethat Landlord’s consent is not required for, such assignment, pledge orsublease.  Any purported sale,assignment, mortgage, transfer of this Lease or subletting, which does notcomply, with the provisions of this Article 9 shall be void.

 

9.7           If Tenant is acorporation, limited liability company, partnership or trust, any transfer ortransfers of or change or changes within any twelve (12) month period in thenumber of the outstanding voting shares of the corporation or limited liabilitycompany, the general partnership interests in the partnership or the identityof the persons or entities controlling the activities of such partnership ortrust resulting in the persons or entities owning or controlling a majority ofsuch shares, partnership interests or activities of such partnership or trustat the beginning of such period no longer having such ownership or controlshall be regarded as equivalent to an assignment of this Lease to the personsor entities acquiring

 

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such ownership or control and shall besubject to all the provisions of this Article 9 to the same extent and for allintents and purposes as though such an assignment.

 

10.           **INDEMNIFICATION****.**  NONE OF THE LANDLORD ENTITIES SHALL BE LIABLE AND TENANT HEREBYWAIVES ALL CLAIMS AGAINST THEM FOR ANY DAMAGE TO ANY PROPERTY OR ANY INJURY TOANY PERSON IN OR ABOUT THE PREMISES OR THE BUILDING BY OR FROM ANY CAUSEWHATSOEVER (INCLUDING WITHOUT LIMITING THE FOREGOING, RAIN OR WATER LEAKAGE OFANY CHARACTER FROM THE ROOF, WINDOWS, WALLS, BASEMENT, PIPES, PLUMBING WORKS ORAPPLIANCES, THE BUILDING NOT BEING IN GOOD CONDITION OR REPAIR, GAS, FIRE, OIL,ELECTRICITY OR THEFT), EXCEPT TO THE EXTENT CAUSED BY OR ARISING FROM THE GROSSNEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ITS AGENTS, EMPLOYEES ORCONTRACTORS.  TENANT SHALL PROTECT,DEFEND, INDEMNIFY AND HOLD THE LANDLORD ENTITIES HARMLESS FROM AND AGAINST ANYAND ALL LOSS, CLAIMS, LIABILITY OR COSTS (INCLUDING COURT COSTS AND ATTORNEY’SFEES) INCURRED BY REASON OF (A) ANY DAMAGE TO ANY PROPERTY (INCLUDING BUT NOTLIMITED TO PROPERTY OF ANY LANDLORD ENTITY) OR ANY INJURY (INCLUDING BUT NOTLIMITED TO DEATH) TO ANY PERSON OCCURRING IN, ON OR ABOUT THE PREMISES OR THEBUILDING TO THE EXTENT THAT SUCH INJURY OR DAMAGE SHALL BE CAUSED BY OR ARISEFROM ANY ACTUAL OR ALLEGED ACT, NEGLECT, FAULT, OR OMISSION BY OR OF TENANT ORANY TENANT ENTITY TO MEET ANY STANDARDS IMPOSED BY ANY DUTY WITH RESPECT TO THEINJURY OR DAMAGE; (B) THE CONDUCT OR MANAGEMENT OF ANY WORK OR THING WHATSOEVERDONE BY THE TENANT IN OR ABOUT THE PREMISES OR FROM TRANSACTIONS OF THE TENANTCONCERNING THE PREMISES; (C) TENANT’S FAILURE TO COMPLY WITH ANY AND ALLGOVERNMENTAL LAWS, ORDINANCES AND REGULATIONS APPLICABLE TO THE CONDITION ORUSE OF THE PREMISES OR ITS OCCUPANCY; OR (D) ANY BREACH OR DEFAULT ON THE PARTOF TENANT IN THE PERFORMANCE OF ANY COVENANT OR AGREEMENT ON THE PART OF THETENANT TO BE PERFORMED PURSUANT TO THIS LEASE, **IN EACH CASE EVEN THOUGH CAUSED ORALLEGED TO BE CAUSED BY THE NEGLIGENCE OR FAULT OF LANDLORD OR ITS AGENTS, EMPLOYEES OR CONTRACTORS(OTHER THAN A LOSS ARISING FROM THE GROSS NEGLIGENCE OF LANDLORD OR ITS AGENTS, EMPLOYEES OR CONTRACTORS), AND EVENTHOUGH ANY SUCH CLAIM, CAUSE OF ACTION, OR SUIT IS BASED UPON OR ALLEGED TO BEBASED UPON THE STRICT LIABILITY OF LANDLORD OR ITS AGENTS, EMPLOYEES OR CONTRACTORS.  THIS INDEMNITY IS INTENDED TO INDEMNIFYLANDLORD AND ITS AGENTS, EMPLOYEES ORCONTRACTORS AGAINST THE CONSEQUENCES OF THEIR OWN NEGLIGENCE OR FAULT ASPROVIDED ABOVE WHEN LANDLORD OR ITS AGENTS, EMPLOYEES OR CONTRACTORS ARE JOINTLY, COMPARATIVELY,CONTRIBUTIVELY, OR CONCURRENTLY NEGLIGENT WITH TENANT**.  THE PROVISIONS OF THIS ARTICLE SHALL SURVIVETHE TERMINATION OF THIS LEASE WITH RESPECT TO ANY CLAIMS OR LIABILITY ACCRUINGPRIOR TO SUCH TERMINATION.

 

11.           **INSURANCE**.

 

11.1         Tenant shall keep inforce throughout the Term: (a) a Commercial General Liability insurance policyor policies to protect the Landlord Entities against any liability to thepublic or to any invitee of Tenant or a Landlord Entity incidental to the useof or resulting from any accident occurring in or upon the Premises with alimit of not less than $1,000,000 per occurrence and not less than $2,000,000in the annual aggregate, or such larger amount as Landlord may prudentlyrequire from time to time, covering bodily injury and property damage liabilityand $1,000,000 products/completed operations aggregate; (b) Business AutoLiability covering owned, non-owned and hired vehicles with a limit of not lessthan $1,000,000 per accident; (c) insurance protecting against liability underWorker’s Compensation Laws with limits at least as required by statute; (d)Employers Liability with limits of $1,000,000 each accident, $1,000,000 diseasepolicy limit, $1,000,000 disease—each employee; (e) All Risk or Special Formcoverage protecting Tenant against loss of or damage to Tenant’s alterations,additions, improvements, carpeting, floor coverings, panelings, decorations,fixtures, inventory and other business personal property situated in or aboutthe Premises to the full replacement value of the property so insured,(f) Business Interruption Insurance for 100% of the 12 months actual losssustained, and (g) Excess Liability in the amount of $5,000,000.

 

11.2         The aforesaidpolicies shall (a) be provided at Tenant’s expense; (b) name the LandlordEntities as additional insureds (General Liability) and loss payee(Property—Special Form); (c) be issued by an insurance company with a minimumBest’s rating of “A:VII” during the Term; and (d) provide that said insuranceshall not be canceled unless thirty (30) days prior written notice (ten daysfor non-payment of premium) shall have been given to Landlord; a certificate ofLiability insurance on ACORD Form 25 and a certificate of Property insurance onACORD Form 27 shall be delivered to Landlord by Tenant upon the CommencementDate and at least thirty (30) days prior to each renewal of said insurance.

 

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11.3         Whenever Tenant shallundertake any alterations, additions or improvements in, to or about thePremises (“Work”) the aforesaid insurance protection must extend to and includeinjuries to persons and damage to property arising in connection with suchWork, without limitation including liability under any applicable structuralwork act, and such other insurance as Landlord shall require; and the policiesof or certificates evidencing such insurance must be delivered to Landlordprior to the commencement of any such Work.

 

12.           **WAIVER OF SUBROGATION****.**  So long as their respective insurers sopermit, Tenant and Landlord hereby mutually waive their respective rights ofrecovery against each other for any loss insured by fire, extended coverage,All Risks or other insurance now or hereafter existing for the benefit of therespective party but only to the extent of the net insurance proceeds payableunder such policies.  Each party shallobtain any special endorsements required by their insurer to evidencecompliance with the aforementioned waiver.

 

13.           **SERVICES AND UTILITIES**.

 

13.1         Provided Tenant shallnot be in default under this Lease, and subject to the other provisions of thisLease, Landlord agrees to furnish to the Premises during Building BusinessHours (specified on the Reference Pages) on generally recognized business days(but exclusive in any event of Sundays and national and local legal holidays),the following services and utilities subject to the rules and regulations ofthe Building prescribed from time to time: (a) water suitable for normal office use of the Premises; (b)electricity and heat and air conditioning required in Landlord’s judgment forthe use and occupation of the Premises during Building Business Hours; (c)cleaning and janitorial service; (d) elevator service by nonattended automaticelevators, if applicable; and, (e) equipment to bring to the Premiseselectricity for lighting, convenience outlets and other normal office use.  In the absence of Landlord’s grossnegligence or willful misconduct, Landlord shall not be liable for, and Tenantshall not be entitled to, any abatement or reduction of rental by reason ofLandlord’s failure to furnish any of the foregoing, unless such failure shallpersist for an unreasonable time after written notice of such failure is givento Landlord by Tenant and provided further that Landlord shall not be liablewhen such failure is caused by accident, breakage, repairs, labor disputes ofany character, energy usage restrictions or by any other cause, similar ordissimilar, beyond the reasonable control of Landlord.  Landlord shall use reasonable efforts toremedy any interruption in the furnishing of services and utilities.

 

13.2         Should Tenant requireany additional work or service, as described above, including servicesfurnished outside ordinary business hours specified above, except forelectricity and heat and air conditioning charges, Landlord may, on terms to beagreed, upon reasonable advance notice by Tenant, furnish such additionalservice and Tenant agrees to pay Landlord such charges as may be agreed upon,including any tax imposed thereon, but in no event at a charge less thanLandlord’s actual cost plus overhead for such additional service and, whereappropriate, a reasonable allowance for depreciation of any systems being usedto provide such service.

 

13.3         Whereverheat-generating machines or equipment are used by Tenant in the Premises whichaffect the temperature otherwise maintained by the air conditioning system orTenant allows occupancy of the Premises by more persons than the heating andair conditioning system is designed to accommodate, in either event whetherwith or without Landlord’s approval, Landlord reserves the right to installsupplementary heating and/or air conditioning units in or for the benefit ofthe Premises and the cost thereof, including the cost of installation and thecost of operations and maintenance, shall be paid by Tenant to Landlord withinfive (5) days of Landlord’s demand.

 

13.4         Tenant will not,without the written consent of Landlord, use any apparatus or device in thePremises, including but not limited to, electronic data processing machines andmachines using current in excess of 2000 watts and/or 20 amps or 120 volts,which will in any way increase the amount of electricity or water usuallyfurnished or supplied for use of the Premises for normal office use, norconnect with electric current, except through existing electrical outlets inthe Premises, or water pipes, any apparatus or device for the purposes of usingelectrical current or water.  If Tenantshall require water or electric current in excess of that usually furnished orsupplied for use of the Premises as normal office use, Tenant shall procure theprior written consent of Landlord for the use thereof, which Landlord mayrefuse, and if Landlord does consent, Landlord may cause a water meter orelectric current meter to be installed so as to measure the amount of such excesswater and electric current.  The cost ofany such meters shall be paid for by Tenant. Tenant agrees to pay to Landlord within five (5) days of Landlord’sdemand , the cost of all such excess water and electric current consumed (asshown by said meters, if any, or, if none, as reasonably estimated by Landlord)at the rates charged for such services by the local public utility or agency,as the case may be, furnishing the same, plus any additional expense incurredin keeping account of the water and electric current so consumed.

 

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13.5         Tenant will not,without the written consent of Landlord, contract with a utility provider toservice the Premises with any utility, including, but not limited to,telecommunications, electricity, water, sewer or gas, which is not previouslyproviding such service to other tenants in the Building.  Subject to Landlord’s reasonable rules andregulations and the provisions of Articles 6 and 26, Tenant shall be entitledto the use of wiring (“Communications Wiring”) from the existingtelecommunications nexus in the Building to the Premises, sufficient for normalgeneral office use of the Premises. Tenant shall not install any additional Communications Wiring, norremove any Communications Wiring, without in each instance obtaining the priorwritten consent of Landlord, which consent may be withheld in Landlord’s soleand absolute discretion.  Landlord’sshall in no event be liable for disruption in any service obtained by Tenant pursuantto this paragraph.

 

14.           **HOLDING OVER****.** Tenant shall pay Landlord for each day Tenant retains possession of thePremises or part of them after termination of this Lease by lapse of time orotherwise at the rate (“Holdover Rate”) which shall be One Hundred FiftyPercent (150%) of the greater of (a) the amount of the Annual Rent for the lastperiod prior to the date of such termination plus all Rent Adjustments underArticle 4; and (b) the then market rental value of the Premises as determinedby Landlord assuming a new lease of the Premises of the then usual duration andother terms, in either case, prorated on a daily basis, and also pay alldamages sustained by Landlord by reason of such retention.  If Landlord gives notice to Tenant ofLandlord’s election to such effect, such holding over shall constitute renewalof this Lease for a period from month to month or one (1) year, whichever shallbe specified in such notice, in either case at the Holdover Rate, but if theLandlord does not so elect, no such renewal shall result notwithstandingacceptance by Landlord of any sums due hereunder after such termination; andinstead, a tenancy at sufferance at the Holdover Rate shall be deemed to havebeen created.  In any event, noprovision of this Article 14 shall be deemed to waive Landlord’s right ofreentry or any other right under this Lease or at law.

 

15.           **SUBORDINATION****.**  Without the necessity of any additional document being executedby Tenant for the purpose of effecting a subordination, this Lease shall besubject and subordinate at all times to ground or underlying leases and to thelien of any mortgages or deeds of trust now or hereafter placed on, against oraffecting the Building, Landlord’s interest or estate in the Building, or anyground or underlying lease; provided, however, that if the lessor, mortgagee,trustee, or holder of any such mortgage or deed of trust elects to haveTenant’s interest in this Lease be superior to any such instrument, then, bynotice to Tenant, this Lease shall be deemed superior, whether this Lease wasexecuted before or after said instrument. Notwithstanding the foregoing, Tenant covenants and agrees to executeand deliver within ten (10) days of Landlord’s request such further instrumentsevidencing such subordination or superiority of this Lease as may be requiredby Landlord.

 

16.           **RULES AND REGULATIONS****.**  Tenant shall faithfully observe and complywith all the rules and regulations as set forth in Exhibit D to thisLease and all reasonable and non-discriminatory modifications of and additionsto them from time to time put into effect by Landlord.  Landlord shall not be responsible to Tenantfor the non-performance by any other tenant or occupant of the Building of anysuch rules and regulations.

 

17.           **REENTRY BY LANDLORD**.

 

17.1         Landlord reserves andshall at all times have the right to re-enter the Premises to inspect the same,to supply janitor service and any other service to be provided by Landlord toTenant under this Lease, to show said Premises to prospective purchasers,mortgagees or tenants, and to alter, improve or repair the Premises and anyportion of the Building, without abatement of rent, and may for that purposeerect, use and maintain scaffolding, pipes, conduits and other necessarystructures and open any wall, ceiling or floor in and through the Building andPremises where reasonably required by the character of the work to beperformed, provided entrance to the Premises shall not be blocked thereby, andfurther provided that the business of Tenant shall not be interfered withunreasonably. Landlord shall have the right at any time to change thearrangement and/or locations of entrances, or passageways, doors and doorways,and corridors, windows, elevators, stairs, toilets or other public parts of theBuilding and to change the name, number or designation by which the Building iscommonly known.  In the event thatLandlord damages any portion of any wall or wall covering, ceiling, or floor orfloor covering within the Premises, Landlord shall repair or replace thedamaged portion to match the original as nearly as commercially reasonable butshall not be required to repair or replace more than the portion actuallydamaged. Tenant hereby waives any claim for damages for any injury orinconvenience to or interference with Tenant’s business, any loss of occupancyor quiet enjoyment of the Premises, and any other loss occasioned by any actionof Landlord authorized by this Article 17.

 

17.2         For each of theaforesaid purposes, Landlord shall at all times have and retain a key withwhich to unlock all of the doors in the Premises, excluding Tenant’s vaults andsafes or special security areas (designated in advance), and Landlord shallhave the right to use any and all means which Landlord may deem proper to opensaid doors in an emergency to obtain entry to any portion of the Premises.  As to any portion to which access cannot behad by means of a key or keys in

 

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Landlord’s possession, Landlord is authorizedto gain access by such means as Landlord shall elect and the cost of repairingany damage occurring in doing so shall be borne by Tenant and paid to Landlordwithin five (5) days of Landlord’s demand.

 

18.           **DEFAULT**.

 

18.1         Except as otherwiseprovided in Article 20, the following events shall be deemed to be Events ofDefault under this Lease:

 

18.1.1      Tenant shall fail topay when due any sum of money becoming due to be paid to Landlord under thisLease, whether such sum be any installment of the rent reserved by this Lease,any other amount treated as additional rent under this Lease, or any otherpayment or reimbursement to Landlord required by this Lease, whether or nottreated as additional rent under this Lease, and such failure shall continuefor a period of five (5) days after written notice that such payment wasnot made when due, but if any such notice shall be given, for the twelve (12)month period commencing with the date of such notice, the failure to pay withinfive (5) days after due any additional sum of money becoming due to be paid toLandlord under this Lease during such period shall be an Event of Default,without notice.

 

18.1.2      Tenant shall fail tocomply with any term, provision or covenant of this Lease which is not providedfor in another Section of this Article and shall not cure such failure withintwenty (20) days (forthwith, if the failure involves a hazardous condition)after written notice of such failure to Tenant provided, however, that suchfailure shall not be an event of default if such failure could not reasonablybe cured during such twenty (20) day period, Tenant has commenced the curewithin such twenty (20) day period and thereafter is diligently pursuing suchcure to completion, but the total aggregate cure period shall not exceed ninety(90) days.

 

18.1.3      Tenant shall fail tovacate the Premises immediately upon termination of this Lease, by lapse oftime or otherwise, or upon termination of Tenant’s right to possession only.

 

18.1.4      Tenant shall becomeinsolvent, admit in writing its inability to pay its debts generally as theybecome due, file a petition in bankruptcy or a petition to take advantage ofany insolvency statute, make an assignment for the benefit of creditors, make atransfer in fraud of creditors, apply for or consent to the appointment of areceiver of itself or of the whole or any substantial part of its property, orfile a petition or answer seeking reorganization or arrangement under thefederal bankruptcy laws, as now in effect or hereafter amended, or any otherapplicable law or statute of the United States or any state thereof.

 

18.1.5      A court of competentjurisdiction shall enter an order, judgment or decree adjudicating Tenantbankrupt, or appointing a receiver of Tenant, or of the whole or anysubstantial part of its property, without the consent of Tenant, or approving apetition filed against Tenant seeking reorganization or arrangement of Tenantunder the bankruptcy laws of the United States, as now in effect or hereafteramended, or any state thereof, and such order, judgment or decree shall not bevacated or set aside or stayed within sixty (60) days from the date of entrythereof.

 

19.           **REMEDIES**.

 

19.1         Except as otherwiseprovided in Article 20, upon the occurrence of any of the Events of Defaultdescribed or referred to in Article 18, Landlord shall have the option topursue any one or more of the following remedies without any notice or demandwhatsoever, concurrently or consecutively and not alternatively:

 

19.1.1      Landlord may, at itselection, terminate this Lease or terminate Tenant’s right to possession only,without terminating the Lease.

 

19.1.2      Upon any terminationof this Lease, whether by lapse of time or otherwise, or upon any terminationof Tenant’s right to possession without termination of the Lease, Tenant shallsurrender possession and vacate the Premises immediately, and deliverpossession thereof to Landlord, and Tenant hereby grants to Landlord full andfree license to enter into and upon the Premises in such event and to repossessLandlord of the Premises as of Landlord’s former estate and to expel or removeTenant and any others who may be occupying or be within the Premises and toremove Tenant’s signs and other evidence of tenancy and all other property ofTenant therefrom without being deemed in any manner guilty of trespass,eviction or forcible entry or detainer, and without incurring any liability forany damage resulting therefrom, Tenant waiving any right to claim damages forsuch re-entry and expulsion, and without relinquishing Landlord’s right to rentor any other right given to Landlord under this Lease or by operation of law.

 

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19.1.3      Upon any terminationof this Lease, whether by lapse of time or otherwise, Landlord shall beentitled to recover as damages, all rent, including any amounts treated asadditional rent under this Lease, and other sums due and payable by Tenant onthe date of termination, plus as liquidated damages and not as a penalty, anamount equal to the sum of:  (a) anamount equal to the then present value of the rent reserved in this Lease forthe residue of the stated Term of this Lease including any amounts treated asadditional rent under this Lease and all other sums provided in this Lease tobe paid by Tenant, minus the fair rental value of the Premises for suchresidue; (b) the value of the time and expense necessary to obtain areplacement tenant or tenants, and the estimated expenses described in Section19.1.4 relating to recovery of the Premises, preparation for reletting and forreletting itself; and (c) the cost of performing any other covenants whichwould have otherwise been performed by Tenant.

 

19.1.4      Upon any terminationof Tenant’s right to possession only without termination of the Lease:

 

19.1.4.1  Neither suchtermination of Tenant’s right to possession nor Landlord’s taking and holdingpossession thereof as provided in Section 19.1.2 shall terminate the Lease orrelease Tenant, in whole or in part, from any obligation, including Tenant’s obligationto pay the rent, including any amounts treated as additional rent, under thisLease for the full Term, and if Landlord so elects Tenant shall continue to payto Landlord the entire amount of the rent as and when it becomes due, includingany amounts treated as additional rent under this Lease, for the remainder ofthe Term plus any other sums provided in this Lease to be paid by Tenant forthe remainder of the Term.

 

19.1.4.2  Landlord shall usecommercially reasonable efforts to relet the Premises or portions thereof tothe extent required by applicable law. Landlord and Tenant agree that nevertheless Landlord shall at most berequired to use only the same efforts Landlord then uses to lease premises in theBuilding generally and that in any case that Landlord shall not be required togive any preference or priority to the showing or leasing of the Premises orportions thereof over any other space that Landlord may be leasing or haveavailable and may place a suitable prospective tenant in any such other spaceregardless of when such other space becomes available and that Landlord shallhave the right to relet the Premises for a greater or lesser term than thatremaining under this Lease, the right to relet only a portion of the Premises,or a portion of the Premises or the entire Premises as a part of a larger area,and the right to change the character or use of the Premises.  In connection with or in preparation for anyreletting, Landlord may, but shall not be required to, make repairs, alterationsand additions in or to the Premises and redecorate the same to the extentLandlord deems necessary or desirable, and Tenant shall pay the cost thereof,together with Landlord’s expenses of reletting, including, without limitation,any commission incurred by Landlord, within five (5) days of Landlord’sdemand.  Landlord shall not be requiredto observe any instruction given by Tenant about any reletting or accept anytenant offered by Tenant unless such offered tenant has a credit-worthinessacceptable to Landlord and leases the entire Premises upon terms and conditionsincluding a rate of rent (after giving effect to all expenditures by Landlordfor tenant improvements, broker’s commissions and other leasing costs) all noless favorable to Landlord than as called for in this Lease, nor shall Landlordbe required to make or permit any assignment or sublease for more than thecurrent term or which Landlord would not be required to permit under theprovisions of Article 9.

 

19.1.4.3  Until such time asLandlord shall elect to terminate the Lease and shall thereupon be entitled torecover the amounts specified in such case in Section 19.1.3, Tenant shall payto Landlord upon demand the full amount of all rent, including any amountstreated as additional rent under this Lease and other sums reserved in thisLease for the remaining Term, together with the costs of repairs, alterations,additions, redecorating and Landlord’s expenses of reletting and the collectionof the rent accruing therefrom (including reasonable attorney’s fees andbroker’s commissions), as the same shall then be due or become due from time totime, less only such consideration as Landlord may have received from anyreletting of the Premises; and Tenant agrees that Landlord may file suits fromtime to time to recover any sums falling due under this Article 19 as theybecome due.  Any proceeds of relettingby Landlord in excess of the amount then owed by Tenant to Landlord from timeto time shall be credited against Tenant’s future obligations under this Leasebut shall not otherwise be refunded to Tenant or inure to Tenant’s benefit.

 

19.2         Upon the occurrenceof an Event of Default, Landlord may (but shall not be obligated to) cure suchdefault at Tenant’s sole expense. Without limiting the generality of the foregoing, Landlord may, atLandlord’s option, enter into and upon the Premises if Landlord determines inits sole discretion that Tenant is not acting within a commercially reasonabletime to maintain, repair or replace anything for which Tenant is responsibleunder this Lease or to otherwise effect compliance with its obligations underthis Lease and correct the same, without being deemed in any manner guilty oftrespass, eviction or forcible entry and detainer and without incurring any liabilityfor any damage or interruption of Tenant’s business resulting therefrom andTenant agrees to reimburse Landlord within five (5) days of Landlord’s demandas additional rent, for any expenses which Landlord may incur in thus effectingcompliance with Tenant’s obligations under this Lease, plus interest from thedate of expenditure by Landlord at the Wall Street Journal prime rate.

 

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19.3         Tenant understandsand agrees that in entering into this Lease, Landlord is relying upon receiptof all the Annual and Monthly Installments of Rent to become due with respectto all the Premises originally leased hereunder over the full Initial Term ofthis Lease for amortization, including interest at the Amortization Rate.  For purposes hereof, the “Concession Amount”shall be defined as the aggregate of all amounts forgone or expended byLandlord as free rent under the lease, under Exhibit B hereof forconstruction allowances (excluding therefrom any amounts expended by Landlordfor Landlord’s Work, as defined in Exhibit B), and for brokers’commissions payable by reason of this Lease. Accordingly, Tenant agrees that if this Lease or Tenant’s right topossession of the Premises leased hereunder shall be terminated as of any date(“Default Termination Date”) prior to the expiration of the full Initial Termhereof by reason of a default of Tenant, there shall be due and owing toLandlord as of the day prior to the Default Termination Date, as rent inaddition to all other amounts owed by Tenant as of such Date, the amount(“Unamortized Amount”) of the Concession Amount determined as set forth below;provided, however, that in the event that such amounts are recovered byLandlord pursuant to any other provision of this Article 19, Landlord agreesthat it shall not attempt to recover such amounts pursuant to thisParagraph 19.3.  For the purposeshereof, the Unamortized Amount shall be determined in the same manner as theremaining principal balance of a mortgage with interest at the AmortizationRate payable in level payments over the same length of time as from theeffectuation of the Concession concerned to the end of the full Initial Term ofthis Lease would be determined.  The foregoingprovisions shall also apply to and upon any reduction of space in the Premises,as though such reduction were a termination for Tenant’s default, except that(i) the Unamortized Amount shall be reduced by any amounts paid by Tenant toLandlord to effectuate such reduction and (ii) the manner of application shallbe that the Unamortized Amount shall first be determined as though for a fulltermination as of the Effective Date of the elimination of the portion, butthen the amount so determined shall be multiplied by the fraction of which thenumerator is the rentable square footage of the eliminated portion and thedenominator is the rentable square footage of the Premises originally leasedhereunder; and the amount thus obtained shall be the Unamortized Amount.

 

19.4         If, on account of anybreach or default by Tenant in Tenant’s obligations under the terms andconditions of this Lease, it shall become necessary or appropriate for Landlordto employ or consult with an attorney or collection agency concerning or toenforce or defend any of Landlord’s rights or remedies arising under this Leaseor to collect any sums due from Tenant, Tenant agrees to pay all costs and feesso incurred by Landlord, including, without limitation, reasonable attorneys’fees and costs.  **TENANT EXPRESSLY WAIVES ANY RIGHT TO:(A) TRIAL BY JURY; AND (B)** **SERVICE OF ANY NOTICE REQUIRED BY ANY PRESENT ORFUTURE LAW OR ORDINANCE APPLICABLE TO LANDLORDS OR TENANTS BUT NOT REQUIRED BYTHE TERMS OF THIS LEASE.**

 

19.5         Pursuit of any of theforegoing remedies shall not preclude pursuit of any of the other remediesprovided in this Lease or any other remedies provided by law (all such remediesbeing cumulative), nor shall pursuit of any remedy provided in this Leaseconstitute a forfeiture or waiver of any rent due to Landlord under this Leaseor of any damages accruing to Landlord by reason of the violation of any of theterms, provisions and covenants contained in this Lease.

 

19.6         No act or thing doneby Landlord or its agents during the Term shall be deemed a termination of thisLease or an acceptance of the surrender of the Premises, and no agreement toterminate this Lease or accept a surrender of said Premises shall be valid,unless in writing signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms,provisions and covenants contained in this Lease shall be deemed or construedto constitute a waiver of any other violation or breach of any of the terms,provisions and covenants contained in this Lease.  Landlord’s acceptance of the payment of rental or other paymentsafter the occurrence of an Event of Default shall not be construed as a waiverof such Default, unless Landlord so notifies Tenant in writing.  Forbearance by Landlord in enforcing one ormore of the remedies provided in this Lease upon an Event of Default shall notbe deemed or construed to constitute a waiver of such Default or of Landlord’sright to enforce any such remedies with respect to such Default or anysubsequent Default.

 

19.7         To secure the paymentof all rentals and other sums of money becoming due from Tenant under thisLease, Landlord shall have and Tenant grants to Landlord a first lien upon theleasehold interest of Tenant under this Lease, which lien may be enforced inequity, and a continuing security interest upon all goods, wares, equipment,fixtures, furniture, inventory, accounts, contract rights, chattel paper andother personal property of Tenant situated on the Premises, and such propertyshall not be removed therefrom without the consent of Landlord until all arrearagesin rent as well as any and all other sums of money then due to Landlord underthis Lease shall first have been paid and discharged.  Upon the occurrence of an Event of Default, Landlord shall have,in addition to any other remedies provided in this Lease or by law, all rightsand remedies under the Uniform Commercial Code, including without limitationthe right to sell the property described in this Section 19.7 at public orprivate sale upon five (5) days’ notice to Tenant.

 

19.8         Any and all propertywhich may be removed from the Premises by Landlord pursuant to the authority ofthis Lease or of law, to which Tenant is or may be entitled, may be handled,removed and/or stored, as the case may be, by or at the direction of Landlordbut at the risk, cost and expense of Tenant, and Landlord shall in no event beresponsible for the

 

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value, preservation or safekeepingthereof.  Tenant shall pay to Landlord,upon demand, any and all expenses incurred in such removal and all storagecharges against such property so long as the same shall be in Landlord’spossession or under Landlord’s control. Any such property of Tenant not retaken by Tenant from storage withinthirty (30) days after removal from the Premises shall, at Landlord’s option,be deemed conveyed by Tenant to Landlord under this Lease as by a bill of salewithout further payment or credit by Landlord to Tenant.

 

19.9         If more than one (1)Event of Default occurs during the Term or any renewal thereof, Tenant’srenewal options, expansion options, purchase options and rights of first offerand/or refusal, if any are provided for in this Lease, shall be null and void.

 

20.           **TENANT’S BANKRUPTCY****ORINSOLVENCY**.

 

20.1         If at any time andfor so long as Tenant shall be subjected to the provisions of the United StatesBankruptcy Code or other law of the United States or any state thereof for theprotection of debtors as in effect at such time (each a “Debtor’s Law”):

 

20.1.1      Tenant, Tenant asdebtor-in-possession, and any trustee or receiver of Tenant’s assets (each a“Tenant’s Representative”) shall have no greater right to assume or assign thisLease or any interest in this Lease, or to sublease any of the Premises thanaccorded to Tenant in Article 9, except to the extent Landlord shall berequired to permit such assumption, assignment or sublease by the provisions ofsuch Debtor’s Law.  Without limitationof the generality of the foregoing, any right of any Tenant’s Representative toassume or assign this Lease or to sublease any of the Premises shall be subjectto the conditions that:

 

20.1.1.1  Such Debtor’s Lawshall provide to Tenant’s Representative a right of assumption of this Leasewhich Tenant’s Representative shall have timely exercised and Tenant’sRepresentative shall have fully cured any default of Tenant under this Lease.

 

20.1.1.2  Tenant’sRepresentative or the proposed assignee, as the case shall be, shall havedeposited with Landlord as security for the timely payment of rent an amount equalto the larger of: (a) three (3) months’ rent and other monetarycharges accruing under this Lease; and (b) any sum specified in Article 5; andshall have provided Landlord with adequate other assurance of the futureperformance of the obligations of the Tenant under this Lease.  Without limitation, such assurances shallinclude, at least, in the case of assumption of this Lease, demonstration tothe satisfaction of the Landlord that Tenant’s Representative has and willcontinue to have sufficient unencumbered assets after the payment of allsecured obligations and administrative expenses to assure Landlord thatTenant’s Representative will have sufficient funds to fulfill the obligationsof Tenant under this Lease; and, in the case of assignment, submission ofcurrent financial statements of the proposed assignee, audited by anindependent certified public accountant reasonably acceptable to Landlord andshowing a net worth and working capital in amounts determined by Landlord to besufficient to assure the future performance by such assignee of all of theTenant’s obligations under this Lease.

 

20.1.1.3  The assumption or anycontemplated assignment of this Lease or subleasing any part of the Premises,as shall be the case, will not breach any provision in any other lease,mortgage, financing agreement or other agreement by which Landlord is bound.

 

20.1.1.4  Landlord shall have,or would have had absent the Debtor’s Law, no right under Article 9 to refuseconsent to the proposed assignment or sublease by reason of the identity ornature of the proposed assignee or sublessee or the proposed use of thePremises concerned.

 

21.           **QUIET ENJOYMENT****.**  Landlord represents and warrants that it has full right andauthority to enter into this Lease and that Tenant, while paying the rental andperforming its other covenants and agreements contained in this Lease, shallpeaceably and quietly have, hold and enjoy the Premises for the Term withouthindrance or molestation from Landlord subject to the terms and provisions ofthis Lease.  Landlord shall not beliable for any interference or disturbance by other tenants or third persons,nor shall Tenant be released from any of the obligations of this Lease becauseof such interference or disturbance.

 

22.           **CASUALTY**

 

22.1         In the event thePremises or the Building are damaged by fire or other cause and in Landlord’sreasonable estimation such damage can be materially restored within one hundredeighty (180) days, Landlord shall forthwith repair the

 

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same and this Lease shall remain in fullforce and effect, except that Tenant shall be entitled to a proportionateabatement in rent from the date of such damage.  Such abatement of rent shall be made pro rata in accordance withthe extent to which the damage and the making of such repairs shall interferewith the use and occupancy by Tenant of the Premises from time to time.  Within forty-five (45) days from the date ofsuch damage, Landlord shall notify Tenant, in writing, of Landlord’s reasonableestimation of the length of time within which material restoration can be made,and Landlord’s determination shall be binding on Tenant.  For purposes of this Lease, the Building orPremises shall be deemed “materially restored” if they are in such condition aswould not prevent or materially interfere with Tenant’s use of the Premises forthe purpose for which it was being used immediately before such damage.

 

22.2         If such repairscannot, in Landlord’s reasonable estimation, be made within one hundred eighty(180) days, Landlord and Tenant shall each have the option of giving the other,at any time within ninety (90) days after such damage, notice terminating thisLease as of the date of such damage.  Inthe event of the giving of such notice, this Lease shall expire and allinterest of the Tenant in the Premises shall terminate as of the date of suchdamage as if such date had been originally fixed in this Lease for theexpiration of the Term.  In the eventthat neither Landlord nor Tenant exercises its option to terminate this Lease,then Landlord shall repair or restore such damage, this Lease continuing infull force and effect, and the rent hereunder shall be proportionately abatedas provided in Section 22.1.

 

22.3         Landlord shall not berequired to repair or replace any damage or loss by or from fire or other causeto any panelings, decorations, partitions, additions, railings, ceilings, floorcoverings, office fixtures or any other property or improvements installed onthe Premises by, or belonging to, Tenant. Any insurance, which may be carried, by Landlord or Tenant against lossor damage to the Building or Premises shall be for the sole benefit of theparty carrying such insurance and under its sole control.

 

22.4         In the event that Landlordshould fail to complete such repairs and material restoration within sixty (60)days after the date estimated by Landlord therefore as extended by this Section22.4, Tenant may at its option and as its sole remedy terminate this Lease bydelivering written notice to Landlord, within fifteen (15) days after theexpiration of said period of time, whereupon the Lease shall end on the date ofsuch notice or such later date fixed in such notice as if the date of suchnotice was the date originally fixed in this Lease for the expiration of theTerm; provided, however, that if construction is delayed because of changes,deletions or additions in construction requested by Tenant, strikes, lockouts,casualties, Acts of God, war, material or labor shortages, governmentregulation or control or other causes beyond the reasonable control ofLandlord, the period for restoration, repair or rebuilding shall be extendedfor the amount of time Landlord is so delayed.

 

22.5         Notwithstandinganything to the contrary contained in this Article:  (a) Landlord shall not have any obligation whatsoever to repair,reconstruct, or restore the Premises when the damages resulting from anycasualty covered by the provisions of this Article 22 occur during the lasttwelve (12) months of the Term or any extension thereof, but if Landlorddetermines not to repair such damages Landlord shall notify Tenant and if suchdamages shall render any material portion of the Premises untenantable Tenantshall have the right to terminate this Lease by notice to Landlord withinfifteen (15) days after receipt of Landlord’s notice; and (b) in the event theholder of any indebtedness secured by a mortgage or deed of trust covering thePremises or Building requires that any insurance proceeds be applied to suchindebtedness, then Landlord shall have the right to terminate this Lease bydelivering written notice of termination to Tenant within fifteen (15) daysafter such requirement is made by any such holder, whereupon this Lease shallend on the date of such damage as if the date of such damage were the dateoriginally fixed in this Lease for the expiration of the Term.

 

22.6         In the event of anydamage or destruction to the Building or Premises by any peril covered by theprovisions of this Article 22, it shall be Tenant’s responsibility to properlysecure the Premises and upon notice from Landlord to remove forthwith, at itssole cost and expense, such portion of all of the property belonging to Tenantor its licensees from such portion or all of the Building or Premises asLandlord shall request.

 

23.           **EMINENT DOMAIN****.**  If all or any substantial part of the Premises shall be taken orappropriated by any public or quasi-public authority under the power of eminentdomain, or conveyance in lieu of such appropriation, either party to this Leaseshall have the right, at its option, of giving the other, at any time withinthirty (30) days after such taking, notice terminating this Lease, except thatTenant may only terminate this Lease by reason of taking or appropriation, ifsuch taking or appropriation shall be so substantial as to materially interferewith Tenant’s use and occupancy of the Premises.  If neither party to this Lease shall so elect to terminate thisLease, the rental thereafter to be paid shall be adjusted on a fair andequitable basis under the circumstances. In addition to the rights of Landlord above, if any substantial part ofthe Building shall be taken or appropriated by any public or quasi-public authorityunder the power of eminent domain or conveyance in lieu thereof, and regardlessof whether the Premises or any part thereof are so taken or appropriated,Landlord shall have the right, at its sole option, to terminate thisLease.  Landlord shall be entitled toany and all income, rent, award, or any interest

 

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whatsoever in or upon any such sum, which maybe paid or made in connection with any such public or quasi-public use orpurpose, and Tenant hereby assigns to Landlord any interest it may have in orclaim to all or any part of such sums, other than any separate award which maybe made with respect to Tenant’s trade fixtures and moving expenses; Tenantshall make no claim for the value of any unexpired Term.

 

24.           **SALE BY LANDLORD****.**  In event of a sale or conveyance by Landlord of the Building, thesame shall operate to release Landlord from any future liability upon any ofthe covenants or conditions, expressed or implied, contained in this Lease infavor of Tenant, and in such event Tenant agrees to look solely to theresponsibility of the successor in interest of Landlord in and to thisLease.  Except as set forth in thisArticle 24, this Lease shall not be affected by any such sale and Tenant agreesto attorn to the purchaser or assignee. If any security has been given by Tenant to secure the faithfulperformance of any of the covenants of this Lease, Landlord may transfer ordeliver said security, as such, to Landlord’s successor in interest and thereuponLandlord shall be discharged from any further liability with regard to saidsecurity.

 

25.           **ESTOPPEL CERTIFICATES****.**  Within ten (10) days following any writtenrequest which Landlord may make from time to time, Tenant shall execute anddeliver to Landlord or mortgagee or prospective mortgagee a sworn statementcertifying:  (a) the date ofcommencement of this Lease; (b) the fact that this Lease is unmodified and infull force and effect (or, if there have been modifications to this Lease, thatthis Lease is in full force and effect, as modified, and stating the date andnature of such modifications); (c) the date to which the rent and other sumspayable under this Lease have been paid; (d) the fact that there are no currentdefaults under this Lease by either Landlord or Tenant except as specified inTenant’s statement; and (e) such other matters as may be requested byLandlord.  Landlord and Tenant intendthat any statement delivered pursuant to this Article 25 may be relied upon byany mortgagee, beneficiary or purchaser, and Tenant shall be liable for allloss, cost or expense resulting from the failure of any sale or funding of anyloan caused by any material misstatement contained in such estoppelcertificate.  Tenant irrevocably agreesthat if Tenant fails to execute and deliver such certificate within such ten(10) day period Landlord or Landlord’s beneficiary or agent may execute anddeliver such certificate on Tenant’s behalf, and that such certificate shall befully binding on Tenant.

 

26.           **SURRENDER OF PREMISES**.

 

26.1         Tenant shall arrangeto meet Landlord for two (2) joint inspections of the Premises, the first tooccur at least thirty (30) days (but no more than sixty (60) days) before thelast day of the Term, and the second to occur not later than forty-eight (48)hours after Tenant has vacated the Premises. In the event of Tenant’s failure to arrange such joint inspectionsand/or participate in either such inspection, Landlord’s inspection at or afterTenant’s vacating the Premises shall be conclusively deemed correct forpurposes of determining Tenant’s responsibility for repairs and restoration.

 

26.2         All alterations,additions, and improvements in, on, or to the Premises made or installed by orfor Tenant, including carpeting (collectively, “Alterations”), shall be andremain the property of Tenant during the Term. Upon the expiration or sooner termination of the Term, all Alterationsshall become a part of the realty and shall belong to Landlord withoutcompensation, and title shall pass to Landlord under this Lease as by a bill ofsale.  At the end of the Term or anyrenewal of the Term or other sooner termination of this Lease, Tenant willpeaceably deliver up to Landlord possession of the Premises, together with allAlterations by whomsoever made, in the same conditions received or firstinstalled, broom clean and free of all debris, excepting only ordinary wear andtear and damage by fire or other casualty. Notwithstanding the foregoing, if Landlord elects by notice given toTenant at least ten (10) days prior to expiration of the Term, Tenant shall, atTenant’s sole cost, remove any Alterations, including carpeting, so designatedby Landlord’s notice, and repair any damage caused by such removal.  Tenant must, at Tenant’s sole cost, removeupon termination of this Lease, any and all of Tenant’s furniture, furnishings,movable partitions of less than full height from floor to ceiling and othertrade fixtures and personal property (collectively, “Personalty”).  Personalty not so removed shall be deemedabandoned by the Tenant and title to the same shall thereupon pass to Landlordunder this Lease as by a bill of sale, but Tenant shall remain responsible forthe cost of removal and disposal of such Personalty, as well as any damagecaused by such removal.  In lieu ofrequiring Tenant to remove Alterations and Personalty and repair the Premisesas aforesaid, Landlord may, by written notice to Tenant delivered at leastthirty (30) days before the Termination Date, require Tenant to pay toLandlord, as additional rent hereunder, the cost of such removal and repair inan amount reasonably estimated by Landlord.

 

26.3         All obligations ofTenant under this Lease not fully performed as of the expiration or earliertermination of the Term shall survive the expiration or earlier termination ofthe Term Upon the expiration or earlier termination of the Term, Tenant shallpay to Landlord the amount, as estimated by Landlord, necessary to repair andrestore the Premises as provided in this Lease and/or to discharge Tenant’sobligation for unpaid amounts due or to become due to Landlord.  All such amounts shall be used and held byLandlord for payment of such obligations of Tenant, with Tenant being liablefor any additional costs upon demand by Landlord, or with any excess to bereturned to Tenant after all such obligations have been

 

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determined and satisfied.  Any otherwise unused Security Deposit shallbe credited against the amount payable by Tenant under this Lease.

 

27.           **NOTICES****.** Any notice or document required or permitted to be delivered under thisLease shall be addressed to the intended recipient, by fully prepaid registeredor certified United States Mail return receipt requested, or by reputableindependent contract delivery service furnishing a written record of attemptedor actual delivery, and shall be deemed to be delivered when tendered fordelivery to the addressee at its address set forth on the Reference Pages, orat such other address as it has then last specified by written notice deliveredin accordance with this Article 27, or if to Tenant at either its aforesaidaddress or its last known registered office or home of a general partner orindividual owner, whether or not actually accepted or received by theaddressee.  Any such notice or documentmay also be personally delivered if a receipt is signed by and received from,the individual, if any, named in Tenant’s Notice Address.

 

28.           **TAXES PAYABLE BY TENANT****.**  In addition to rent and other charges to bepaid by Tenant under this Lease, Tenant shall reimburse to Landlord, upondemand, any and all taxes payable by Landlord (other than net income taxes)whether or not now customary or within the contemplation of the parties to thisLease:  (a) upon, allocable to, ormeasured by or on the gross or net rent payable under this Lease, includingwithout limitation any gross income tax or excise tax levied by the State, anypolitical subdivision thereof, or the Federal Government with respect to thereceipt of such rent; (b) upon or with respect to the possession, leasing,operation, management, maintenance, alteration, repair, use or occupancy of thePremises or any portion thereof, including any sales, use or service taximposed as a result thereof; (c) upon or measured by the Tenant’s grossreceipts or payroll or the value of Tenant’s equipment, furniture, fixtures andother personal property of Tenant or leasehold improvements, alterations oradditions located in the Premises; or (d) upon this transaction or any documentto which Tenant is a party creating or transferring any interest of Tenant inthis Lease or the Premises.  In additionto the foregoing, Tenant agrees to pay, before delinquency, any and all taxeslevied or assessed against Tenant and which become payable during the termhereof upon Tenant’s equipment, furniture, fixtures and other personal propertyof Tenant located in the Premises.

 

29.           **RELOCATION OF TENANT****.**  Intentionally deleted.

 

30.           **DEFINED TERMS AND HEADINGS****.**  The Article headings shown in this Lease arefor convenience of reference and shall in no way define, increase, limit ordescribe the scope or intent of any provision of this Lease.  Any indemnification or insurance of Landlordshall apply to and inure to the benefit of all the following “LandlordEntities”, being Landlord, Landlord’s investment manager, and the trustees,boards of directors, officers, general partners, beneficiaries, stockholders,employees and agents of each of them. Any option granted to Landlord shall also include or be exercisable byLandlord’s trustee, beneficiary, agents and employees, as the case may be.  In any case where this Lease is signed bymore than one person, the obligations under this Lease shall be joint andseveral.  The terms “Tenant” and“Landlord” or any pronoun used in place thereof shall indicate and include themasculine or feminine, the singular or plural number, individuals, firms orcorporations, and their and each of their respective successors, executors,administrators and permitted assigns, according to the context hereof.  The term “rentable area” shall mean therentable area of the Premises or the Building as calculated by the Landlord onthe basis of the plans and specifications of the Building including aproportionate share of any common areas. Tenant hereby accepts and agrees to be bound by the figures for therentable square footage of the Premises and Tenant’s Proportionate Share shownon the Reference Pages; however, Landlord may adjust either or both figures ifthere is manifest error, addition or subtraction to the Building or anybusiness park or complex of which the Building is a part, remeasurement orother circumstance reasonably justifying adjustment.  The term “Building” refers to the structure in which the Premisesare located and the common areas (parking lots, sidewalks, landscaping, etc.)appurtenant thereto.  If the Building ispart of a larger complex of structures, the term “Building” may include theentire complex, where appropriate (such as shared Expenses or Taxes) andsubject to Landlord’s reasonable discretion.

 

31.           **TENANT’S AUTHORITY****.**  If Tenant signs as a corporation, partnership, trust or otherlegal entity each of the persons executing this Lease on behalf of Tenantrepresents and warrants that Tenant has been and is qualified to do business inthe state in which the Building is located, that the entity has full right andauthority to enter into this Lease, and that all persons signing on behalf ofthe entity were authorized to do so by appropriate actions. Tenant agrees todeliver to Landlord, simultaneously with the delivery of this Lease, acorporate resolution, proof of due authorization by partners, opinion ofcounsel or other appropriate documentation reasonably acceptable to Landlordevidencing the due authorization of Tenant to enter into this Lease.

 

32.           **FINANCIAL STATEMENTS AND CREDIT REPORTS****.**  At Landlord’s request, Tenant shall deliverto Landlord a copy, certified by an officer of Tenant as being a true andcorrect copy, of Tenant’s most recent audited financial statement, or, ifunaudited, certified by Tenant’s chief financial officer as being true,complete and correct in all material

 

16

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respects.  Tenant hereby authorizes Landlord to obtainone or more credit reports on Tenant at any time, and shall execute suchfurther authorizations as Landlord may reasonably require in order to obtain acredit report.

 

33.           **COMMISSIONS****.** Each of the parties represents and warrants to the other that it has notdealt with any broker or finder in connection with this Lease, except asdescribed on the Reference Pages.

 

34.           **TIME AND APPLICABLE****LAW.**  Time is of the essence of this Lease and allof its provisions.  This Lease shall inall respects be governed by the laws of the state in which the Building islocated.

 

35.           **SUCCESSORS AND ASSIGNS****.**  Subject to the provisions of Article 9, theterms, covenants and conditions contained in this Lease shall be binding uponand inure to the benefit of the heirs, successors, executors, administratorsand assigns of the parties to this Lease.

 

36.           **ENTIRE AGREEMENT****.**  This Lease, together with its exhibits, contains all agreementsof the parties to this Lease and supersedes any previous negotiations.  There have been no representations made bythe Landlord or any of its representatives or understandings made between theparties other than those set forth in this Lease and its exhibits.  This Lease may not be modified except by awritten instrument duly executed by the parties to this Lease.

 

37.           **EXAMINATION NOT OPTION****.**  Submission of this Lease shall not be deemedto be a reservation of the Premises. Landlord shall not be bound by this Lease until it has received a copyof this Lease duly executed by Tenant and has delivered to Tenant a copy ofthis Lease duly executed by Landlord, and until such delivery Landlord reservesthe right to exhibit and lease the Premises to other prospective tenants.  Notwithstanding anything contained in thisLease to the contrary, Landlord may withhold delivery of possession of thePremises from Tenant until such time as Tenant has paid to Landlord anysecurity deposit required by Article 5, the first month’s rent as set forth inArticle 3 and any sum owed pursuant to this Lease.

 

38.           **RECORDATION****.** Tenant shall not record or register this Lease or a short formmemorandum hereof without the prior written consent of Landlord, and then shallpay all charges and taxes incident such recording or registration.

 

39.           **TENANT REPRESENTATION****. **Tenanthereby represents and warrants that it is successor-in-interest by merger toOptical Data Systems, Inc., and Optical Data Systems, Inc. is no longer a legalentity in existence as of the date of this Lease.  Tenant hereby acknowledges that in the event that the foregoingrepresentation is untrue, this Lease shall become null and void and theOriginal Lease shall be reinstated.  Ifthe Original Lease is reinstated pursuant to this Section 39, the term of theOriginal Lease shall be extended to expire on the Termination Date of thisLease.

 

40.           **LIMITATION OF****LANDLORD’S LIABILITY.**  Redress for any claim against Landlord underthis Lease shall be limited to and enforceable only against and to the extentof Landlord’s interest in the Building. The obligations of Landlord under this Lease are not intended to be andshall not be personally binding on, nor shall any resort be had to the privateproperties of, any of its or its investment manager’s trustees, directors,officers, partners, beneficiaries, members, stockholders, employees, or agents,and in no case shall Landlord be liable to Tenant hereunder for any lostprofits, damage to business, or any form of special, indirect or consequentialdamages. 

 

 
| **LANDLORD:**                                                            |                                                                                                               |                                                                    | **TENANT:**                |
|--------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|----------------------------|
|                                                                     |                                                                                                               |                                                                    |                       |   |
| CALWEST INDUSTRIAL HOLDINGS TEXAS, L.P.,  a Delaware limited partnership |                                                                                                               | INTRUSION  INC., a Delaware corporation                                 |
|                                                                     |                                                                                                               |                                                                    |
| By:                                                                      |    CALWEST TEXAS, LLC, a Delaware limited  liability company                                        |                                                                    |                       |
|                                                                     | Its:                                                                                                               | General Partner                                                         |                       |   |
|                                                                     | By:                                                                                                                | RREEF Management Company, a Delaware  corporation, its Property Manager |                       |   |
|                                                                     |                                                                                                               |                                                                    |                       |   |
|                                                                     | By:                                                                                                                |                                                                    | /s/ CYNTHIA A. PRENDERGAST |   |   | By: |   | /s/ G. WARD PAXTON |
|                                                                     |                                                                                                               |                                                                    |                       |   |   |   |   |
|                                                                     |                                                                                                               | Name:                                                                   |                       | Cynthia A. Prendergast |   |   |   | Name: |   | G. Ward Paxton |
|                                                                     |                                                                                                               |                                                                    |                       |   |   |   |   |
|                                                                     |                                                                                                               | Title:                                                                  |                       | District Manager |   |   |   | Title: |   | Chief Executive Officer |
|                                                                     |                                                                                                               |                                                                    |                       |   |   |   |   |   |
| Dated:                                                                   |                     | March 23                                                 | , 2004                     |   |   | Dated: |   | March 16 | , 2004 |
|                                                                          |                                                                                                                    |                                                                         |                            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

17

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**EXHIBIT A****– FLOOR PLAN DEPICTING THE PREMISES**

 

**attached to and made a part of Lease bearingthe**

**Lease Reference Date of January 12, 2004between**

**CALWEST INDUSTRIAL HOLDINGS TEXAS, L.P., asLandlord and**

**INTRUSION INC., asTenant**

 

Exhibits A is intended only to show the general layoutof the Premises as of the beginning of the Term of this Lease.  It does not in any way supersede any ofLandlord’s rights set forth in Article 17 with respect to arrangements and/orlocations of public parts of the Building and changes in such arrangementsand/or locations.  It is not to bescaled; any measurements or distances shown should be taken as approximate.

 

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**EXHIBITA-1****– SITE PLAN**

 

**attached to and made a part of Lease bearingthe**

**Lease Reference Date of January 12, 2004between**

**CALWEST INDUSTRIAL HOLDINGS TEXAS, L.P., asLandlord and**

**INTRUSION INC., asTenant**

 

Exhibits A-1 is intended only to show the generallayout of the Premises as of the beginning of the Term of this Lease.  It does not in any way supersede any ofLandlord’s rights set forth in Article 17 with respect to arrangements and/orlocations of public parts of the Building and changes in such arrangementsand/or locations.  It is not to bescaled; any measurements or distances shown should be taken as approximate.

 

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**EXHIBITB****– INITIALALTERATIONS**

 

**attached to and made a part of Lease bearingthe**

**Lease Reference Date of January 12, 2004between**

**CALWEST INDUSTRIAL HOLDINGS TEXAS, L.P., asLandlord and**

**INTRUSION INC., asTenant**

** **

Tenant shall take the Premises in its “as-is” condition, except forcertain Leasehold Improvements to be completed by Landlord, at Landlord’s costand expenses, as set forth below.

 

Tenant hereby acknowledges and agrees that Tenant is responsible forthe cost of replacement of the HVAC units pursuant to Exhibit C of the OriginalLease.  Landlord is in the process ofreplacing the HVAC units.  Landlord andTenant hereby acknowledge and agree that (a) Tenant’s share of the total costof such replacement is $325,763.22 and (b) after applying a credit to Tenant inthe amount of $102,890.79 (representing overpaid CAM charges for 2001 and2002), Tenant owes $222,872.43 to Landlord for HVAC replacement.               Landlord hereby agrees toamortize Tenant’s portion of the cost of such units over fifteen (15) years,and Tenant will be responsible for making monthly payments only during the termof the remainder of the current lease or any extension thereof; therefore,commencing February 1, 2004, and continuing throughout the term of the Leaseand any extension thereof, Tenant hereby agrees to pay to Landlord $1,238.18per month (“HVAC Expenses”). Landlord and Tenant hereby covenant and agree to (a) cooperate with eachother and any contractors performing such HVAC replacement and (b) use theirbest efforts to facilitate the completion of such HVAC installation.

 

Landlordand Tenant further agree that Landlord shall promptly complete the HVACinstallation at the Building and Tenant shall cooperate, including, withoutlimitation, allowing Landlord reasonable access to Tenant’s telecommunicationsroom.  Landlord agrees to timely replaceall missing or damaged ceiling tiles in the Premises after completion of theHVAC installation and further agrees to leave all affected areas of theBuilding and the Premises in clean condition with all debris, trash and dirtremoved. Upon completion of Phase I of the HVAC installation and subsequentclean-up related thereto, Tenant shall have a period of 45 days in which tomove from its existing space to its new Premises and shall complete suchrelocation without such 45-day period.

 

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**EXHIBITC****– COMMENCEMENTDATE MEMORANDUM**

 

**attached to and made a part of Lease bearingthe**

**Lease Reference Date of January 12, 2004between**

**CALWEST INDUSTRIAL HOLDINGS TEXAS, L.P., asLandlord and**

**INTRUSION INC., asTenant**

 

**COMMENCEMENT DATEMEMORANDUM**

 

INTENTIONALLY DELETED

 

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**EXHIBITD****– RULES ANDREGULATIONS**

 

**attached to and made a part of Lease bearingthe**

**Lease Reference Date of January 12, 2004between**

**CALWEST INDUSTRIAL HOLDINGS TEXAS, L.P., asLandlord and**

**INTRUSION INC., asTenant**

 

1.             No sign, placard, picture,advertisement, name or notice shall be installed or displayed on any part ofthe outside or inside of the Building without the prior written consent of theLandlord, which shall not be unreasonably withheld.  Landlord shall have the right to remove, at Tenant’s expense andwithout notice, any sign installed or displayed in violation of this rule.  Notwithstanding the foregoing, Landlordhereby consents to the sign currently located on the Building; provided,however, that Landlord may require that Tenant immediately remove such sign inthe event that another tenant enters into a lease with Landlord covering anyportion of the Building.  All approvedsigns or lettering on doors and walls shall be printed, painted, affixed orinscribed at Tenant’s expense by a vendor designated or approved byLandlord.  In addition, Landlordreserves the right to change from time to time the format of the signs orlettering and to require previously approved signs or lettering to beappropriately altered.

 

2.             If Landlord objects in writing toany curtains, blinds, shades or screens attached to or hung in or used inconnection with any window or door of the Premises, Tenant shall immediatelydiscontinue such use.  No awning shallbe permitted on any part of the Premises. Tenant shall not place anything or allow anything to be placed againstor near any glass partitions or doors or windows which may appear unsightly, inthe opinion of Landlord, from outside the Premises.

 

3.             Tenant shall not obstruct anysidewalks, halls, passages, exits, entrances, elevators, or stairways of theBuilding. No tenant and no employee or invitee of any tenant shall go upon theroof of the Building.

 

4.             Any directory of the Building, ifprovided, will be exclusively for the display of the name and location oftenants only and Landlord reserves the right to exclude any other names.Landlord reserves the right to charge for Tenant’s directory listing.

 

5.             All cleaning and janitorialservices for the Building and the Premises shall be provided exclusivelythrough Landlord.  Tenant shall notcause any unnecessary labor by carelessness or indifference to the good order andcleanliness of the Premises.  Landlordshall not in any way be responsible to any Tenant for any loss of property onthe Premises, however occurring, or for any damage to any Tenant’s property bythe janitor or any other employee or any other person.

 

6.             The toilet rooms, toilets, urinals,wash bowls and other apparatus shall not be used for any purpose other thanthat for which they were constructed. No foreign substance of any kind whatsoever shall be thrown into any ofthem, and the expense of any breakage, stoppage or damage resulting from theviolation of this rule shall be borne by the Tenant who, or whose employees orinvitees, shall have caused it.

 

7.             Tenant shall store all its trashand garbage within its Premises.  Tenantshall not place in any trash box or receptacle any material, which cannot bedisposed of in the ordinary and customary manner of trash and garbagedisposal.  All garbage and refusedisposal shall be made in accordance with directions issued from time to timeby Landlord. Tenant will comply with any and all recycling proceduresdesignated by Landlord.

 

8.             Landlord will furnish Tenant two(2) keys free of charge to each door in the Premises that has a passagewaylock.  Landlord may charge Tenant areasonable amount for any additional keys, and Tenant shall not make or havemade additional keys on its own. Tenant shall not alter any lock or install anew or additional lock or bolt on any door of its Premises.  Tenant, upon the termination of its tenancy,shall deliver to Landlord the keys of all doors which have been furnished toTenant, and in the event of loss of any keys so furnished, shall pay Landlordtherefore.

 

9.             If Tenant requires telephone, data,burglar alarm or similar service, the cost of purchasing, installing andmaintaining such service shall be borne solely by Tenant.  No boring or cutting for wires will beallowed without the prior written consent of Landlord.

 

10.           No equipment, materials, furniture,packages, bulk supplies, merchandise or other property will be received in theBuilding or carried in the elevators except between such hours and in suchelevators as may be designated by Landlord. The persons employed to move such equipment or materials in or out ofthe Building must be acceptable to Landlord.

 

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11.           Tenant shall not place a load uponany floor, which exceeds the load per square foot, which such floor wasdesigned to carry and which is allowed by law. Heavy objects shall stand on such platforms as determined by Landlord tobe necessary to properly distribute the weight.  Business machines and mechanical equipment belonging to Tenantwhich cause noise or vibration that may be transmitted to the structure of theBuilding or to any space in the Building to such a degree as to be objectionableto Landlord or to any tenants shall be placed and maintained by Tenant, atTenant’s expense, on vibration eliminators or other devices sufficient toeliminate the noise or vibration. Landlord will not be responsible for loss ofor damage to any such equipment or other property from any cause, and alldamage done to the Building by maintaining or moving such equipment or otherproperty shall be repaired at the expense of Tenant.

 

12.           Landlord shall in all cases retainthe right to control and prevent access to the Building of all persons whosepresence in the judgment of Landlord would be prejudicial to the safety,character, reputation or interests of the Building and its tenants, providedthat nothing contained in this rule shall be construed to prevent such accessto persons with whom any tenant normally deals in the ordinary course of itsbusiness, unless such persons are engaged in illegal activities.  Landlord reserves the right to exclude fromthe Building between the hours of 6 p.m. and 7 a.m. the following day, or suchother hours as may be established from time to time by Landlord, and on Sundaysand legal holidays, any person unless that person is known to the person oremployee in charge of the Building and has a pass or is properly identified.  Tenant shall be responsible for all personsfor whom it requests passes and shall be liable to Landlord for all acts ofsuch persons.  Landlord shall not beliable for damages for any error with regard to the admission to or exclusionfrom the Building of any person.

 

13.           Tenant shall not use any method ofheating or air conditioning other than that supplied or approved in writing byLandlord.

 

14.           Tenant shall not waste electricity,water or air conditioning.  Tenant shallkeep corridor doors closed. Tenant shall close and lock the doors of itsPremises and entirely shut off all water faucets or other water apparatusbefore Tenant and its employees leave the Premises.  Tenant shall be responsible for any damage or injuries sustainedby other tenants or occupants of the Building or by Landlord for noncompliancewith this rule.

 

15.           Tenant shall not install any radio ortelevision antenna, satellite dish, loudspeaker or other device on the roof orexterior walls of the Building without Landlord’s prior written consent, whichconsent may be withheld in Landlord’s sole discretion, and which consent may inany event be conditioned upon Tenant’s execution of Landlord’s standard form oflicense agreement.  Tenant shall beresponsible for any interference caused by such installation.

 

16.           Tenant shall not mark, drive nails,screw or drill into the partitions, woodwork, plaster, or drywall (except forpictures, tackboards and similar office uses) or in any way deface thePremises.  Tenant shall not cut or boreholes for wires.  Tenant shall not affixany floor covering to the floor of the Premises in any manner except asapproved by Landlord.  Tenant shallrepair any damage resulting from noncompliance with this rule.

 

17.           Tenant shall not install, maintain oroperate upon the Premises any vending machine without Landlord’s prior writtenconsent, except that Tenant may install food and drink vending machines solelyfor the convenience of its employees.

 

18.           No cooking shall be done or permittedby any tenant on the Premises, except that Underwriters’ Laboratory approvedmicrowave ovens or equipment for brewing coffee, tea, hot chocolate and similarbeverages shall be permitted provided that such equipment and use is inaccordance with all applicable federal, state and city laws, codes, ordinances,rules and regulations.

 

19.           Tenant shall not use in any space orin the public halls of the Building any hand trucks except those equipped withthe rubber tires and side guards or such other material-handling equipment asLandlord may approve.  Tenant shall notbring any other vehicles of any kind into the Building.

 

20.           Tenant shall not permit any motorvehicles to be washed or mechanical work or maintenance of motor vehicles to beperformed in any parking lot.

 

21.           Tenant shall not use the name of theBuilding in connection with or in promoting or advertising Tenant’s business,except that Tenant may include the Building name in Tenant’s address.  Landlord shall have the right, exercisablewithout notice and without liability to any tenant, to change the name andaddress of the Building.

 

22.           Tenant requests for services must besubmitted to the Building office by an authorized individual.  Employees of Landlord shall not perform anywork or do anything outside of their regular duties unless under special instructionfrom

 

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Landlord, andno employee of Landlord will admit any person (Tenant or otherwise) to anyoffice without specific instructions from Landlord.

 

23.           Tenant shall not permit smoking orcarrying of lighted cigarettes or cigars other than in areas designated byLandlord as smoking areas.

 

24.           Canvassing, soliciting, distributionof handbills or any other written material in the Building is prohibited andeach tenant shall cooperate to prevent the same.  No tenant shall solicit business from other tenants or permit thesale of any good or merchandise in the Building without the written consent ofLandlord.

 

25.           Tenant shall not permit any animalsother than service animals, e.g. seeing-eye dogs, to be brought or kept in orabout the Premises or any common area of the Building.

 

26.           These Rules and Regulations are inaddition to, and shall not be construed to in any way modify or amend, in wholeor in part, the terms, covenants, agreements and conditions of any lease of anypremises in the Building. Landlord may waive any one or more of these Rules andRegulations for the benefit of any particular tenant or tenants, but no suchwaiver by Landlord shall be construed as a waiver of such Rules and Regulationsin favor of any other tenant or tenants, nor prevent Landlord from thereafterenforcing any such Rules and Regulations against any or all of the tenants ofthe Building.

 

27.           Landlord reserves the right to makesuch other and reasonable rules and regulations as in its judgment may fromtime to time be needed for safety and security, for care and cleanliness of theBuilding, and for the preservation of good order in and about theBuilding.  Tenant agrees to abide by allsuch rules and regulations herein stated and any additional rules andregulations, which are adopted. Tenant shall be responsible for the observanceof all of the foregoing rules by Tenant’s employees, agents, clients,customers, invitees and guests.

 

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**EXHIBITE****– RENEWALOPTION**

 

**attached to and made a part of Lease bearingthe**

**Lease Reference Date of January 12, 2004between**

**CALWEST INDUSTRIAL HOLDINGS TEXAS, L.P., asLandlord and**

**INTRUSION INC., as Tenant**

 

Tenant shall, provided theLease is in full force and effect and Tenant is not in default under any of theother terms and conditions of the Lease at the time of notification orcommencement, have two (2) successive options to renew this Lease for a term offive (5) years each, for the portion of the Premises being leased by Tenant asof the date the renewal term is to commence, on the same terms and conditionsset forth in the Lease, except as modified by the terms, covenants andconditions as set forth below:

 

a.                                       If Tenant elects to exercise said option,then Tenant shall provide Landlord with written notice no earlier than the datewhich is two hundred seventy (240) days prior to the expiration of the thencurrent term of the Lease but no later than the date which is one hundredtwenty (180) days prior to the expiration of the then current term of thisLease.  If Tenant fails to provide suchnotice, Tenant shall have no further or additional right to extend or renew theterm of the Lease.

 

b.                                      The Annual Rent and Monthly Installmentof Rent in effect at the expiration of the then current term of the Lease shallbe increased to reflect the current fair market rental for comparable space inthe Building and in other similar buildings in the same rental market as of thedate the renewal term is to commence, taking into account the specificprovisions of the Lease which will remain constant.  Landlord shall advise Tenant of the new Annual Rent and MonthlyInstallment of Rent for the Premises no later than sixty (60) days afterreceipt of Tenant’s written request therefore. Said request shall be made no earlier than thirty (30) days prior to thefirst date on which Tenant may exercise its option under this Paragraph.  Said notification of the new Annual Rent mayinclude a provision for its escalation to provide for a change in fair marketrental between the time of notification and the commencement of the renewalterm.  In no event shall the Annual Rentand Monthly Installment of Rent for the option period be less than the AnnualRent and Monthly Installment of Rent in the preceding period.  Tenant shall have ten (10) days from saidnotification to provide Landlord with written notice that Tenant elects toexercise its renewal option.  If Tenantfails to provide such notice, then Tenant will be deemed to have waived itsoption to renew the Lease, and Tenant shall have no further or additional rightto extend the term of the Lease.

 

c.                                       This option is not transferable; theparties hereto acknowledge and agree that they intend that the aforesaid optionto renew this Lease shall be “personal” to Tenant or its permitted assignees asset forth above and that in no event will any assignee or sublessee have anyrights to exercise the aforesaid option to renew, unless approved by Landlordin its sole and absolute discretion.

 

d.                                      As each renewal option provided for aboveis exercised, the number of renewal options remaining to be exercised isreduced by one and upon exercise of the last remaining renewal option Tenantshall have no further right to extend the term of the Lease.

 

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