**Exhibit 10.67**

 
| STATE OF TEXAS  | § | **SECOND  FULLY RESTATED** |
|-----------------|--------|----------------------------|
|            | § | COMMERCIAL LEASE AGREEMENT |
| COUNTY OF BEXAR | § |                       |

 

THIS SECOND FULLY RESTATEDLEASE AGREEMENT (the “Lease”) is made and entered into as of the effective dateprovided below, by and between Green Wing Management, Ltd. (“Lessor”), and ISIDetention Contracting Group, Inc., a Texas corporation (“Lessee”).

 

1.             LEASED PREMISES.  For and in consideration of the rents,covenants, agreements, and stipulations herein contained, Lessor does herebylease unto Lessee, and Lessee does hereby rent from Lessor for the term andupon the terms and conditions hereinafter set out, the following (the “LeasedPremises”): the property located at 12903 Delivery Drive and 12918 DeliveryDrive; in the City of San Antonio, Bexar County, Texas, the land beingdescribed on Exhibit A attached hereto and the improvements shown on thesite plan which is attached hereto as Exhibit B.

 

A.            Acceptance.  Lessee represents and warrants to Lessor thatLessee has actual knowledge of the status and condition of every part, phase,system, improvement, and component of the Leased Premises.  Taking possession of the Leased Premises byLessee shall be deemed conclusively to establish that Lessee accepts the LeasedPremises in its “as is” condition, and acknowledges that it is in good andsatisfactory condition, as of the date when possession was so taken.  Lessee acknowledges that Lessor has made nowarranties or representations of any kind, neither express nor implied, andthat Lessee has inspected the premises and has made all investigations as toits suitability for its particular purposes that it deems, in its sole opinion,necessary.  Lessee is not relying uponany representations by Lessor as to the suitability of the Premises for Lessee’sparticular purpose.  Lessee accepts thePremises based on its own investigation and believes them to be suitable forLessee’s intended commercial purpose.

 

2.             USE OF PREMISES.  The Leased Premises will be used and occupiedby Lessee for a commercial enterprise engaged in the sale, installation,repair, and maintenance of: (i) detention equipment and systems; (ii) fireand security alarm systems and equipment; (iii) access control systems andequipment; (iv) commercial enterprises and light manufacturing reasonablysuited for the Leased Premises and permissible under all applicable laws,rules, regulations and ordinances, and for other uses reasonably incidentthereto, and Lessee shall not use the Leased Premises for any other purposewithout the written consent of Lessor, which consent will not be unreasonablywithheld.  Lessee shall not perform anyacts or carry on any practices in its use of the Leased Premises which maydamage the improvements situated thereon, or which may be a nuisance or menaceto the general public or the tenants and owners of adjoining properties.  Lessee shall keep the Leased Premises and allsidewalks, driveways, and other areas of public access on the Leased Premisesclean and free of all rubbish and debris at all times.  Lessee shall comply with all laws,ordinances, orders, rules and regulations of state, federal, municipal orother governmental agencies or bodies having jurisdiction relating to the use,condition and occupancy of the Leased Premises. The operating hours of Lessee’s business shall be in Lessee’s solediscretion..

 

3.            MERGER AGREEMENT.  Lessee is a wholly owned subsidiary of ISIDetention Contracting Group, Inc., a Delaware corporation (the “Company”).  Pursuant to the Merger 

 

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Agreement,as amended, dated December 8, 2006, entered into by Company, ISI SecurityGroup, Inc., a Delaware corporation (“Acquisition Corp.”) and ArgyleSecurity Acquisition Corporation, a Delaware corporation (“Parent”), theCompany will merge with and into the Acquisition Corp., with Company being thesurviving entity (the “Merger”). Acquisition Corp. is a wholly owned subsidiary of Parent.  If, for any reason, the Company, AcquisitionCorp. and Parent should fail to close the merger on or before July 31, 2007,then this Lease is void, and the First Fully Restated Commercial LeaseAgreement entered into by and between Lessor and Lessee, effective as of February 1,2004, as amended, is revived and continues in full force and effect.

 

4.             TERM.  The term of this Lease will commence on August 1,2007 (the “Effective Date”), and shall end on the last day of August 2019(the “Primary Term”), unless sooner terminated in accordance with the terms andconditions hereinafter set forth.  Duringthe year of the lease term, Lessor will have the right to enter and show theLeased Premises for the purpose of reletting said premises at reasonable timesand on reasonable notice to the Lessee.

 

A.            Option to Renew.  Lessee shall have one option to extend theterm of this Lease for a period of five (5) years.  To exercise the option, Lessee must givewritten notice of its exercising the option to Lessor on or before two yearsprior to the expiration of the Primary Term.  Lessee may exercise this option to renew onlyif: (1) Lessee is not in default in the performance of this Lease whenLessee gives notice of its exercising of the option; (2) Lessee and Lessorare able to agree, within the time frame set forth below, upon an amount for amonthly rental during the five (5) year term of the option (“Option Term”);(3) Lessee and Lessor shall make a good faith effort to agree upon arental amount; and (4) Lessee remains in full compliance with the Leaseuntil the Primary Term expires.  Themonthly rental for the Option Term shall be negotiated between Lessor andLessee at the time that Lessee exercises its option, subject to the requirementthat each year’s rent shall be not less than the previous year’s rent paid byLessee hereunder.  If Lessor and Lesseeare unable to agree upon the amount of the monthly rental for the Option Termwithin two hundred and seventy (270) days of the expiration of the PrimaryTerm, then this option to renew shall, without further action by Lessor, bedeemed to be wholly and conclusively terminated, and Lessee shall vacate theLeased Premises by the end of the Primary Term.

 

5.            PARENT’S RIGHTTO PURCHASE/RIGHT OF FIRST REFUSAL.  Atany time during the Primary Term, Parent maintains the right, at Parent’s solediscretion, to purchase Lessor’s interest in the Leased Premises at fair marketvalue to be determined by independent appraisal conducted contemporaneouslywith purchase and agreed to by both Parent and Lessor; provided, however, thatsuch amount shall not be less than the appraisal amount set immediately priorto the date of the Merger.  Should Lessoroffer the Leased Premises for sale to any party at any time during the PrimaryTerm, Parent is granted a right of first refusal to purchase the LeasedPremises according to the terms of this section.  If Parent elects not to exercise its right offirst refusal, then Lessor reserves the right to sell, mortgage or otherwisedispose of all or any part of Lessor’s interest in the Leased Premises to anyparty.  In such event, this Lease shallcontinue in full force and effect.  Anysuch sale shall operate to release Lessor from all obligations and liabilityunder this Lease except for the return of any security deposit not transferredto the new owner.

 

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4.             RENT.  Lessee agrees to pay Lessor at San Antonio,Bexar County, Texas, monthly rentals as provided below.

 

A.            Base Rental.  Based on the independent rent appraisal conductedin November 2006, Lessor and Lessee agree that the market rate (the “InitialMarket Rate”) for the Leased Premises is at least $20,273.16 per month, as ofthe Effective Date.  The base monthlyrental for the Leased Premises is hereby agreed to be **$18,246.52**,an amount equal to ninety percent (90%) of the Initial Market Rate.  The base monthly rental shall be payable inadvance and without demand, on the Effective Date and on the first day of eachsubsequent calendar month during the term hereof.

 

B.            Recalculation of Base Rental.  At the end of each three-year period ofoccupancy, an independent rent appraisal will be conducted to establish the newmarket rate and to determine the basis for setting the monthly base rentalapplicable to the ensuing three-year period. This adjustment of base monthly rental will be calculated as follows: (i) ifthe new appraisal reflects a market rate greater than the market rateestablished at the most recent prior appraisal, then the base monthly rentalwill be set at ten percent (10%) less than the new market rate; or (ii) ifthe new appraisal reflects a market rate lower than the market rate establishedat the most recent prior appraisal, then the base monthly rental will (a) remainunchanged if the new market rate is less than ten percent (10%) below theprevious market rate, or (b) equal the new market rate if the new marketrate is more than ten percent (10%) below the previous market rate.

 

C.            Late Penalty.  If any monthly rental payment is not receivedby Lessor on or before the fifth (5th) day of the month, but is received on orbefore the fifth (5th) day, a late charge equal to five percent (5%) of thethen due monthly rental payment shall be added to the rental due; if themonthly rental payment is received after the fifth (5th) day, but on or beforethe fifteenth (15th) day of the month it is due, a late charge equal to tenpercent (10%) of such rental payment shall be added to the rental due.  The parties agree that any charge orcollection of late fees pursuant to this subsection is to compensate for costsincurred as a consequence of late payments, and that such fees will notconstitute contracting for, charging, or collecting interest.

 

D.            Taxes.

 

(1)           Personal Property Taxes.  Lessee agrees that it will pay to theappropriate taxing authorities all taxes, assessments, or other charges levied byany governmental or quasi-governmental authority, which during the time of thisLease may be levied or assessed against its personal property.

 

(2)           Ad Valorem Taxes.  Lessee shall also pay all ad valorem taxes andassessments levied against the Leased Premises including, but not limited to,the real property described on Exhibit A and the improvements described onExhibit B.  Lessee will remitpayment for the taxes owed by Lessee to Lessor no later than January 5 ofeach year; however, if the due date of such taxes is not February 1, thenLessee will remit payment to Lessor not later than twenty-five (25) days priorto the date of delinquency of such taxes.  In the event Lessee fails 

 

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to pay for the taxes owed byLessee as provided above, then such failure shall constitute a defaulthereunder.  Taxes for any partialcalendar year during the term of this Lease shall be prorated between Lessorand Lessee as follows: (i) Lessee shall pay to Lessor that amount equal tothe product of the amount of taxes for such calendar year (determined as ifthis Lease had been in effect for the entire tax year), multiplied by afraction, the numerator of which is the number of days during such year thatLessee occupied the Leased Premises under the terms of this Lease and thedenominator of which is 365; and (ii) Lessor shall pay that amount equalto the tax assessment for such calendar year, less the amount paid by Lesseepursuant to (i) above.  In the eventthis Lease terminates or expires prior to Lessor’s receipt of the taxassessment for such calendar year, Lessee shall pay to Lessor an amount equalto Lessee’s pro rata share of one hundred twenty-five percent (125%) of thetaxes for the previous calendar year.  Uponreceipt of the assessment for such calendar year, Lessor shall calculate Lessee’spro rata share of such taxes and send to Lessee a copy of such tax assessmenttogether with either (i) a refund of any amounts paid by Lessee in excessof Lessee’s pro rata share of such taxes, or (ii) a request for payment ofany amount still owed by Lessee to Lessor for Lessee’s pro rata share of taxes.  Lessee shall pay any such amount still owedto Lessor within thirty (30) days following receipt of the request for payment.

 

Notwithstanding theforegoing, Lessee may, upon notice to Lessor, at Lessee’s option and at Lessee’ssole cost and expense, protest, appeal, or institute such other proceedings asLessee may deem appropriate to effect a reduction of ad valorem taxes or assessmentsagainst the Leased Premises and Lessor, without out-of-pocket cost or expenseto Lessor, shall cooperate with Lessee in such protest, appeal, or other actionto the extent required in order comply with all applicable state, federal andlocal laws and ordinances pertaining to the process of such protest, appeal orother action.  Lessee hereby agrees toindemnify, defend, and hold Lessor harmless from and against any claims,obligations, costs, expenses, fees, and liabilities against or incurred by Lessorin connection with such cooperation.

 

E.             Miscellaneous.  All payments shall be made in lawful money ofthe United States of America.  Lesseeshall not be entitled to deduct from or offset any sums owing or claimed to beowing by Lessor to Lessee from any such amounts, and no conditions orcircumstances shall entitle Lessee to an abatement of any such payment unlessotherwise specifically provided herein.  Allrent shall be due and payable without demand.  All past due rent shall bear interest at the annualrate of eighteen percent (18%) or the maximum legal rate, whichever is less,until paid.  If any payment is made bycheck and the check is not honored, then (i) Lessee shall pay all ofLessor’s costs, expenses, and fees resulting from the dishonor and anadditional $50.00 for processing; and (ii) in the event two (2) checksare ever dishonored during this Lease, then Lessor may, at its option, requirethat all future rent payments be in the form of certified funds (money order,certified check, etc.).

 

F.             Place for Payment.  All rents are payable to Lessor at 12903Delivery Drive, San Antonio, Texas 78247, or other place designated in writingby Lessor.

 

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G.            Allocation of Rent.  The annual rent to be paid by Lesseehereunder shall be allocated between the properties subject to this Lease asfollows:

 

(i)            Seventy-five percent(75%) of the annual rent due hereunder shall be allocated to the propertycommonly referred to as: 12903 Delivery Drive.

 

(ii)           Twenty-five percent(25%) of the annual rent due hereunder shall be allocated to property commonlyreferred to as: 12919 Delivery Drive.

 

7.             SIGNS.  Lessee shall maintain signs, lettering, andadvertising materials as may be placed on the exterior or in the exteriorwindows of the Leased Premises in good condition and repair at all times and inabsolute compliance with all applicable governmental ordinances and regulationsincluding, but not limited to, all applicable deed restrictions.

 

8.            RULES AND REGULATIONS.  No garbage, refuse or debris shall bedeposited or stored by Lessee in any public area except as designated byLessor, and then only in approved containers, and shall be handled in such amanner as to not be offensive nor create a nuisance.  The plumbing facilities and water fixturesshall not be used for any purpose other than those for which they wereconstructed.  In addition to Lessee’sduties of maintenance and repair as contained in the Lease, Lessee has the dutyto repair the following conditions that may occur during the Lease Term, or anyrenewal or extension: (i) damage from wastewater stoppages caused byforeign or improper objects in lines; (ii) damage of any nature to doors,windows, screens, or signs; and (iii) damage from windows or doors leftopen.  Lessee will not allow anycanvassing, soliciting, peddling, or panhandling within the Leased Premises.

 

9.             OBLIGATIONS FORREPAIRS.  Lessee agrees to maintain andmake all repairs and replacements to, at its own cost and expense, the interiorand exterior of the Leased Premises, so as to return the Leased Premises toLessor at the end of the Primary Term, and any renewal or extension thereof, insubstantially the same condition as when originally leased, reasonable wear andtear excepted, including the maintenance, repair, and replacement of exteriorwalls, foundations, plumbing, HVAC, lighting systems, electrical, telephone,and data wiring, roof, gutters, and down spouts, including the performance ofall maintenance replacements and repairs necessary or incidental thereto.  Lessee will accomplish such maintenancerepairs and replacements promptly in a good and workmanlike manner, incompliance with all applicable laws of all governmental authorities, and in astyle, character, and quality conforming to existing construction, and willprovide Lessor with advance notice of intent to make such repairs andreplacements; such repairs and replacements to include, but not be limited to,all necessary maintenance and repairs to and replacements of the constructionmaterials forming the outer shell of the buildings, the water, sewage, gas,electrical, telephone, and data lines and installation servicing the buildingsand the Leased Premises, the heating and air-conditioning system in thebuildings, all repairs and restoration made necessary by fire or othercasualty, and all necessary repairs and replacements of improvements to theLeased Premises originally constructed by Lessor.  All maintenance, repairs, and replacementsrequired to preserve the Leased Premises in the condition they exist on the daythis Lease commences shall be the sole responsibility and obligation of Lessee,and not Lessor.  Lessee agrees to holdLessor harmless, and to fully indemnify Lessor, for any damages occasioned bythe physical condition or state of repair of the buildings or the LeasedPremises.  Lessee shall have an annualpest and termite inspection 

 

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performed at the LeasedPremises on or before July 1 of each year and provide a copy of theinspection to Lessor.  The cost of suchinspection and any repairs occasioned by pest and termite damage shall be paidby Lessee.  Lessor shall have noresponsibility or obligation of any nature to maintain the Leased Premises orperform any repairs or replacements relating to the Leased Premises.

 

A.          In the eventLessee does not complete the maintenance, repairs, and replacements as requiredherein, Lessor shall have the right, but not the obligation, to immediatelyperform such replacements, repairs, or maintenance as may be deemed anemergency by Lessor, and to charge the cost thereof to Lessee, said cost to bepayable by Lessee on demand as additional rent hereunder.  An “emergency” shall mean a defect, or stateof disrepair, that Lessor reasonably believes constitutes a dangerous conditionto the physical safety or well-being of any person entering the Leased Premisesor possibility of significant damage to premises.  Failure to pay said charge within fifteen (15)days of a demand by Lessor shall be a material default and breach of thisLease, and shall not be subject to the rights of remediation or cure set forthin Section 19 herein, or otherwise.

 

B.           In the eventLessor believes that the Leased Premises are not being properly repaired ormaintained, but the defect is not of an emergency nature, then Lessor shallgive Lessee notice of the defect.  IfLessee does not repair the defect within twenty (20) days after receiving thenotice from Lessor, then Lessor shall have the right, but not the obligation,to perform such repairs or maintenance as may be necessary, and to charge thereasonable cost thereof to Lessee.  Thesecosts of maintenance or repair shall be payable by Lessee on demand as additionalrent.  Failure to pay said charge withinfifteen (15) days of a demand by Lessor shall be a material default and breachof this Lease, and shall not be subject to the rights of remediation or cureset forth in Section 19 herein, or otherwise.

 

10.          UTILITIES.  Lessee shall pay all charges for water, gas,telephone, electricity, and all utilities used in the Leased Premises as wellas waste disposal services and all janitorial services.  Lessee shall at its expense maintain, repair,and replace when necessary, all heating, air conditioning, plumbing, gas,electrical and mechanical appurtenances and fixtures in the Leased Premises.

 

11.          SECURITY DEPOSIT.  Lessee shall deposit with Lessor as securityfor Lessee’s continued performance of this Lease a sum equal to three months’rental hereunder.  Upon Lessee’s failureto pay any required payment hereunder, the deposit may, at Lessor’s option, beapplied by Lessor to delinquent rental or to damages, and if so used, Lesseeshall immediately pay to Lessor the amount so used.  Any Security Deposit remaining at theconclusion of the Primary Term, or any extension thereof, shall be returned toLessee within sixty (60) days after the Lessee has vacated the Leased Premises,subject to any offsets or credits deemed appropriate by Lessor.

 

12.          INDEMNITY.  Lessor will not be liable to Lessee or anyother person for injury, death, or damage to persons or property received on,related to, or incidental to the use of the Leased Premises or this Lease.  Lessee further agrees to defend, at its ownexpense, and on behalf of Lessor and in the name of Lessor, any claim, demand,assertion, or litigation of every nature 

 

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broughtor made against Lessor in connection with, arising from, or relating to theLeased Premises or this Lease; and Lessee shall indemnify and save Lessorharmless from and against any loss, claim, cost, expense, fee, or liability ofevery nature in connection with, arising from, or relating to the LeasedPremises or this Lease save and except for claims arising solely fromstructural defects or building code non-compliance in the Leased Premises oracts of god.  **Lessee irrevocably stipulates that this provision isconspicuous, as required by law, and Lessee specifically represents andwarrants to Lessor, with the intent to induce Lessor to rely thereon, thatLessee has reviewed this provision and has full understanding and appreciationof the import of each of the terms of this provision.  Lessee is obligated to defend and indemnifyLessor for all conduct of Lessor involving willful misconduct or grossnegligence.**

 

13.           ALTERATIONS.

 

A.             Lessee shallnot make any additions, alterations, or changes in the Leased Premises withoutfirst obtaining Lessor’s written approval, which approval will not beunreasonably withheld.  Notwithstandingthe foregoing, Lessee may install in the Leased Premises any and all equipment,trade fixtures, furnishings, furniture and other personal property used byLessee in connection with its business (collectively, “Lessee’s Property”)without obtaining Lessor’s approval, unless such installation would affect ormodify the structural integrity, foundation/slab, roof or exterior walls of theLeased Premises (a “Structural Modification”). Upon termination or expiration of the Lease, Lessee shall remove all ofLessee’s Property and shall restore the Leased Premises to the condition inwhich it existed prior to installation of the Lessee’s Property.  In the event Lessee makes a permittedStructural Modification, Lessor shall have the option to elect whether suchStructural Modification shall remain on the Leased Premises and become theproperty of Lessor or shall be removed by Lessee at Lessee’s expense.  Lessee shall furnish to Lessor, not less than180 days prior to the expiration of the Lease term, a written list of allStructural Modifications; within thirty (30) days of receipt of this list,Lessor will furnish to Lessee a written list of all Structural Modifications tobe removed by Lessee.  Notwithstandingany provision herein to the contrary, HVAC systems, plumbing lines andfixtures, electrical, telephone, and data wiring and fixtures, and otherfixtures (i) which are integrally incorporated into the Leased Premisesand (ii) the removal of which would alter the structural integrity,foundation/slab or roof of the Leased Premises, shall constitute StructuralModifications.  In the event Lessorelects to have any such Structural Modifications removed, Lessee agrees to payall costs of and repair any damages resulting from such removal.  Such removal shall be completed on or beforethe date of the expiration of the Lease term provided herein, or, in the eventof early termination due to default by Lessee, within a reasonable time afterreceipt of written notice of the items to be removed, and shall be diligentlyconducted to completion.

 

B.             Lesseecovenants and agrees to keep the premises free and clear of all liens andencumbrances of whatsoever kind, granted or claimed by, through, or underLessee.

 

14.           LESSOR’S ACCESS.  Lessor shall have the right to enter upon theLeased Premises at reasonable hours and on reasonable notice to Lessee for thepurpose of inspecting same.

 

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15.           INSURANCE.  Lessee shall, at Lessee’s expense, provideand maintain in full force and effect during the term of this Lease insurancefrom reputable companies to which Lessor has no reasonable objection and whichare authorized to do business in Texas as follows: (a) Commercial GeneralLiability insurance in an amount of $2,000,000.00 each occurrence for bodilyinjury and property damage, plus an excess umbrella liability policy with alimit for bodily injury and/or property damage in an amount of not less than$3,000,000.00; and (b) fire and extended coverage insurance, includingvandalism and malicious mischief, on the Leased Premises and all of Lessee’simprovements in an amount equal to the “full replacement value” (as hereinafterdefined) thereof;; and (c) Worker’s Compensation Insurance as required bythe State of Texas.  All insurance whichLessee is required to maintain pursuant to the terms of this Lease shall: (i) namethe Lessor as an additional insured and the holder or holders (“Mortgagee”) ofany mortgage, deed of trust or other security agreement now or hereaftergranted by Lessor covering the Leased Premises as additional insureds pursuantto a standard mortgagee’s loss payable endorsement; and (ii) be written bysuch companies and upon such policy forms as Lessor shall approve, whichapproval shall not be unreasonably withheld or delayed.  Lessee shall furnish Lessor with certificatesof all insurance required by this section prior to Lessee’s taking possessionof the Leased Premises.  In the eventLessee shall fail to provide or maintain the insurance required in thissection, in addition to any other right or remedy which Lessor may havepursuant to this Lease, at law or in equity, or otherwise, Lessor shall havethe right, but not the obligation, to procure such insurance and charge thecost thereof to Lessee, said cost to be payable by Lessee upon demand byLessor.  Failure to pay said chargewithin fifteen (15) days of a demand for payment by Lessor shall be a materialdefault and breach of this Lease, and shall not be subject to the rights ofremediation and cure set forth in Section 19 hereof, or otherwise.  Losses shall be payable to Lessor and Lesseeas provided in Section 16 hereof. The amount of any insurance coverage required under this Lease shall beincreased from time to time, as Lessor reasonably requires.  Lessee is not required to carry insurance onits furniture, furnishings, fixtures and equipment on or in the LeasedPremises, but Lessee warrants and represents that, if it chooses not to carrysuch insurance, it will maintain an adequate financial standing to beresponsible for any and all losses to such items.

 

Forpurposes hereof, the phrase “full replacement value” shall mean the actualreplacement cost of the Leased Premises requiring replacement from time totime, including an increased cost of construction endorsement, if available andeconomically feasible, less exclusions provided in the standard form of fireinsurance policy.  In the event Lessorreasonably believes that full replacement cost (the then replacement cost lesssuch exclusions) has increased or decreased at any time during the Lease term,Lessor shall have the right to have such replacement cost redetermined.

 

A.          Subject to the provisions of Section 16 below,Lessor and Lessee agree that in the event of loss due to any of the perils forwhich they have agreed to provide insurance, each party shall look solely toits insurance for recovery.  Lessor andLessee hereby grant to each other, on behalf of any insurer providing insuranceto either of them with respect to the Leased Premises, a waiver of any right ofsubrogation which any insurer of one party may acquire against the other byvirtue of payment of any loss under such insurance.

 

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B.           Lessor andLessee hereby waive any and every claim which arises or may arise in its favorand against the other party hereto during the term of this Lease or anyextension or renewal thereof for any and all loss of, or damage to, any of itsproperty located within or upon, or constituting a part of, the LeasedPremises, which loss or damage is covered by valid and collectible fire andextended coverage insurance policies, to the extent that such loss or damage isrecoverable under said insurance policies. Said mutual waivers shall be in addition to, and not in limitation orderogation of, any other waiver or release contained in this Lease with respectto any loss or damage to property of the parties hereto.  Inasmuch as the above mutual waivers will precludethe assignment of any aforesaid claim by way of subrogation (or otherwise) toan insurance company (or any other person), Lessor and Lessee hereby agreeimmediately to give to each insurance company which has issued to it policiesof fire and extended coverage insurance written notice of the terms of saidmutual waivers, and to have said insurance policies properly endorsed, ifnecessary, to prevent the invalidation of said insurance coverage by reason ofsaid waivers.

 

16.          DAMAGE TO PREMISES.

 

A.                                  Rights of Mortgagee.  All of the rights of Lessee and Lessor inthis Section 16 are subject to, and inferior to, the rights of any partyholding a mortgage or deed of trust to the Leased Premises (the “Mortgagee”) torequire, pursuant to such Mortgagee’s mortgage, deed of trust or other securityinstrument, that all insurance proceeds received in connection with a casualtyevent be paid to the Mortgagee for purposes of reducing the indebtedness thenowed by Lessor to such Mortgagee.  In theevent any Mortgagee requires that all insurance proceeds be paid to itfollowing damage or destruction of the Leased Premises, either Lessee or Lessormay terminate this Lease immediately upon written notice to the otherparty.  Thereafter, Lessee and Lessorshall have no further obligations under this Lease (except for such obligationswhich expressly survive termination).

 

B.           TotalDestruction.  If, duringthe term of this Lease, the Leased Premises are totally destroyed or so damagedby fire or any other casualty or accident that the Leased Premises cannot, inLessor’s reasonable determination, be used by Lessee for conducting itsbusiness therein, then this Lease may be terminated by either Lessee or Lessor,without liability to the other.  Suchelection shall be made, and written notice thereof given to the other, withinthirty (30) days following the destruction or damage.  In the event the Lease is terminated underthis subsection B, all insurance proceeds payable in connection with suchdamage or destruction shall be paid to Lessor, and Lessee shall have no furtherobligations hereunder with respect to repair or restoration of the LeasedPremises or removal of any Structural Modifications or other improvements fromthe Leased Premises (except for Lessee’s Property which Lessee shall have theright to remove).  Notwithstanding anyprovision herein to the contrary, in the event of casualty or other damage ordestruction of the Leased Premises, Lessee shall receive all insurance proceedspayable in connection with or attributable to Lessee’s Property.

 

C.                                    PartialDestruction.  In theevent the Leased Premises are partially damaged or destroyed but, in Lessor’sreasonable determination, can still be used for the purposes and 

 

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in the manner intended by Lessee, or in the event of total destructionof the Leased Premises and neither Lessor nor Lessee has elected to terminatethis Lease, then all insurance proceeds payable in connection with such damageor destruction shall be paid to Lessee and used by Lessee to repair and restorethe Leased Premises in accordance with this section.  In this event, the Lease shall continue infull force and effect.  Lessee shallprepare or have prepared plans, specifications, and working drawings that willbe necessary for repair and restoration of the Leased Premises.  The plans, specifications, and workingdrawings must be approved by Lessor (and by the Mortgagee, if applicable),which approval shall not be unreasonably withheld and must be given or refusedwithin ten (10) business days after receipt thereof by Lessor (andMortgagee, if applicable).  If Lessor orthe Mortgagee disapproves the plans, specifications, or working drawings,Lessor or Mortgagee shall notify Lessee of its objections and Lessee may eithersatisfy the objections, mediate any such matters, or terminate the Lease bywritten notice to the Lessor.  In theevent of such termination, all of the insurance proceeds payable in connectionwith such damage or destruction shall be paid to Lessor (except for proceedsfrom insurance attributable to Lessee’s Property).  If Lessor (and Mortgagee, if applicable)approves the plans, specifications and working drawings, Lessee shall restorethe Leased Premises substantially in accordance with the approved plans,specifications, and working drawings. Construction shall commence as soon as reasonably possible after thenecessary governmental approvals have been obtained and shall be diligentlypursued to completion.  Lessee shallretain a contractor that is experienced in the type of constructionrequired.  In the event that insuranceproceeds received by Lessee for the damage or destruction of the LeasedPremises are insufficient to cover all costs of repair or restoration of theLeased Premises, Lessee shall either (i) pay any and all costs andexpenses for repair and restoration of the Leased Premises in accordance withthe approved plans, specifications and working drawings, in excess of suchinsurance proceeds, (ii) modify the plans, specifications and workingdrawings such that all repairs and restoration of the Leased Premises may becompleted for an amount equal to or less than the insurance proceeds receivedby Lessee hereunder, or (iii) terminate this Lease by written notice toLessor, unless Lessor, in its sole discretion, elects to: (a) terminatethis Lease by written notice to Lessee; or (b) pay such excess.

 

17.           SUBLETTING AND ASSIGNING;CHANGE IN LESSEE’S CORPORATE FORM.

 

A.            Lessee shallnot mortgage, encumber, or pledge the Leased Premises.  If Lessee intends to sublet the LeasedPremises or any portion thereof, Lessee shall give notice of intent to subleaseto Lessor not less than one hundred eighty (180) days prior to the anticipatedeffective date of such sublease.  Afterreceiving notice, Lessor will have the right to conduct due diligence on theproposed sublessee to determine if the proposed sublessee is comparable toLessee’s status (as of the execution of this Lease) with regard to (a) financialstanding, (b) business reputation, and (c) capability of operating abusiness as is contemplated in this Lease. If Lessor, in its sole discretion, determines that the proposedsublessee is not comparable to Lessee’s status as of the date of execution ofthis Lease with regard to these matters, Lessor may refuse to approve suchsublease, which refusal Lessee hereby conclusively recognizes asreasonable.  Lessor may also refuse toapprove such sublease on any other grounds that Lessor, in its sole discretion,deems to be proper.

 

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B.            Lessee shallnot assign this Lease, in whole or in part, by operation of law or otherwise,except with the prior written consent of Lessor.

 

C.            In the eventthat this Lease is sublet or assigned as provided herein, such action shall notrelieve Lessee from any liability hereunder.

 

18.          HOLDING OVER.  It is agreed and understood that any holdingover by the Lessee of the Leased Premises after the expiration of the leaseterm or termination for whatever cause shall be a tenancy at the will of theLessor at a monthly rental equal to one-hundred fifty percent (150%) of therental then payable as provided herein and may be terminated by Lessor at anytime upon notice to Lessee.

 

19.          LESSEE’S DEFAULT.  In the event Lessee defaults in the paymentof any of the rentals or other sums provided to be paid hereunder which is notremedied within fifteen (15) days after written notice of such default is givenby Lessor to Lessee and Lessee’s lenders as set forth in Schedule A; or,if Lessee defaults in the observance or performance of any other covenant,condition, agreement or provision hereof which is not remedied within thirty(30) days after written notice of such default is given by Lessor to Lessee andLessee’s lenders as set forth on Schedule A (so long as Lessee’s righthereunder of remediation or cure of said default has not been excluded pursuantto the terms of this Lease); provided, however, that if such default cannot becured within said thirty (30) day period then such thirty (30) day period shallbe extended by such time as is necessary for Lessee to effect such cure as longas (i) Lessee or Lessee’s lenders are diligently prosecuting such cure,and (ii) Lessee or any of Lessee’s lenders deliver a written notice toLessor prior to the expiration of the initial thirty (30) day period in whichLessee or any of Lessee’s lenders notify Lessor that it cannot cure the defaultwithin such thirty (30) day period and Lessee or any of Lessee’s lendersrepresent to Lessor that they will diligently prosecute to cure such default;or, if Lessee becomes insolvent or bankrupt, conveys substantially all itsassets, admits its inability to pay its debts as they mature, or makes anassignment for the benefit of creditors, or applies for or consents to theappointment of a trustee or receiver; or if a bankruptcy, reorganization,arrangement, insolvency, or liquidation proceeding, or other proceedings forrelief under the bankruptcy law or similar law for the relief of debtors areinstituted by or against Lessee; then, in any such event, Lessor may, at itsoption, upon fifteen (15) days notice to Lessee, in addition to any otherremedy available to Lessor hereunder, or at law or in equity, exercise any oneor more of the following remedies without any notice or demand:

 

A.          Lessor mayterminate this Lease, in which event the term of this Lease shall end, and allright, title, and interest of Lessee hereunder shall terminate on the datestated in such notice.  In such event,Lessor shall be entitled to recover from Lessee all rentals accrued and unpaidfor the period up to and including such termination date, as well as any othersums payable by Lessee as provided herein which may then be owing and unpaid,and all costs and expense, including court costs and attorney’s fees, incurredby Lessor in the enforcement of its rights and remedies hereunder; and/or

 

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B.           Lessor may,without terminating this Lease, terminate the right of Lessee to possession ofthe Leased Premises by giving notice to Lessee that Lessee’s right ofpossession shall end on the date stated in the notice.  In such event Lessee’s right to possession ofthe Leased Premises shall terminate, and Lessor may take possession thereof.

 

20.          DISPUTES; MEDIATION;ARBITRATION.  All disputes andcontroversies between Lessor and Lessee that are not resolved within forty-five(45) days of the date they first arise shall be submitted for mediation.  All disputes not resolved by mediation shallbe subjected to the sole remedy of binding, non-appealable arbitration pursuantto the then existing rules and regulations of the National ArbitrationFoundation.  Such arbitration shall beconducted in San Antonio, Texas.

 

21.          NON-WAIVER.  It is expressly agreed and understood thatthe acceptance of rental hereunder, lapse of time or any other act or omissionon the part of Lessor or its agents shall not constitute a waiver of any breachby Lessee of the conditions and covenants of this Lease, but rather, so long asany such breach continues, Lessor shall have the right to terminate this Leaseand pursue any remedies to which it may be entitled as provided herein.  No act or conduct of Lessor, including butwithout limitation the acceptance of the keys to the Leased Premises shallconstitute an acceptance of the surrender of the Leased Premises by Lesseebefore the expiration of the term of this Lease.  Only a written notice from Lessor to Lessee,signed by an authorized representative of Lessor, shall constitute anacceptance of the surrender of the Leased Premises so as to effect atermination of this Lease.  No waiver ofLessee’s default by Lessor shall be valid unless it is in writing and signed byan authorized representative of Lessor.

 

22.          LANDLORD’S LIEN.

 

A.          In addition toand cumulative of any statutory or constitutional lien to which Lessor may beentitled, Lessor shall have a lien as security for rents and other covenants ofLessee herein on Lessee’s Property; provided, however, Lessor acknowledges andagrees that any statutory or constitutional liens of Lessor and the liengranted to Lessor pursuant to this Section 22 (collectively, “Lessor’sLiens”) are subordinate to any and all properly perfected liens now orhereafter held by any of Lessee’s lenders, including all renewals, modifications,and extensions thereof.  Thesubordination herein provided shall be self-operative and no further instrumentof subordination shall be required; provided, however, within ten (10) business**days following any request therefor, Lessor agrees to execute anddeliver to Lessee or any of Lessee’s lenders any instrument reasonablyrequested to evidence such subordination. Lessor hereby appoints Lessee as its true and lawful agent andattorney-in-fact (“Attorney-in-Fact”) for the Lessor and in the Lessor’s name,place and stead for the sole purpose of executing and delivering all documentsand to take such action as is deemed necessary to evidence subordination ofLessor’s Liens in the event Lessor fails to execute and deliver such instrumentas herein required.  If Lessee is indefault under this Lease, or if Lessee abandons or vacates the Leased Premises,Lessor may enter upon the Leased Premises, by any means whatsoever, and takepossession of all or any part of the Lessee’s Property, and store same at theexpense of Lessee.  Lessor willrelinquish its possession of any of Lessee’s Property that is subject to 

 

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a superior lien described above upon the written request of the holderof such superior lien.  Subject to therights of superior lien holders, Lessor may sell Lessee’s Property at a publicor private sale to the highest bidder for cash thirty (30) days after writtennotice of such sale has been mailed to Lessee at its last known address.  The proceeds of any such sale shall be firstapplied by Lessor to the cost of such sale and then to the payment of all sumsdue by Lessee to Lessor under the terms of this Lease.  Any surplus shall be mailed to Lessee at its lastknown address.  It is agreed that none ofthe above procedures shall necessitate prior judicial hearing.

 

B.           This Lease isintended as and constitutes a security agreement within the meaning of theTexas Business and Commerce Code. Lessor, in addition to the rights prescribed in this Lease, but subjectto the rights of superior lien holders (as described in subsection A above),shall have all of the rights, titles, liens, and interests in and to Lessee’sproperty, now or hereafter located upon the Leased Premises, which may begranted a secured party, as that term is defined, under the Texas Business andCommerce Code to secure to Lessor payment of all sums due and the fullperformance of all Lessee’s covenants under this Lease.  Lessee will on request execute and deliver toLessor a financing statement for the purpose of perfecting Lessor’s securityinterest under this Lease; if Lessee fails or refuses to do so, then Lessor mayfile this Lease or a copy thereof as a financing statement; such filing shallnot be a violation of Section 37 of this Lease.  Unless otherwise provided by law and for thepurpose of exercising any right pursuant to this section, Lessor and Lesseeagree that reasonable notice shall be met if such notice is given by ten (10) dayswritten notice, certified mail, return receipt requested, to Lessor or Lesseeat the addresses specified herein.

 

23.          NOTICES.  Any notices, requests, or othercommunications hereunder shall be deemed duly given if made in writing anddelivered in person or mailed by registered or certified mail as follows:

 
| To Lessor: |   | Green Wing Management,  Ltd.                |
|------------|--------|---------------------------------------------|
|       |   | 12903 Delivery Drive                        |
|       |   | San Antonio, Texas 78247                    |
|       |   |                                        |
| To Lessee: |   | ISI Detention Contracting  Group, Inc. |
|       |   | 12903 Delivery Drive                        |
|       |   | San Antonio, Texas 78247                    |

 

Anyparty may change its address for notices by notifying all the other partiespursuant to this section.

 

24.           BINDING EFFECT.  This Lease shall be binding upon and inure tothe benefit of the heirs, legatees, devisees, executors, administrators,successors and, to the extent assignment is permitted hereunder, assigns of theparties hereto.

 

25.           CERTIFICATION.  Lessor and Lessee agree that at any time andfrom time to time upon not less than ten (10) days prior notice to theother, Lessor or Lessee will execute, acknowledge and deliver to the other astatement in writing certifying (a) that this Lease is unmodified and in 

 

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fullforce and effect (or if there have been modifications, that this lease is infull force and effect as modified and identifying the modifications), (b) thedate to which the rental and other charges have been paid and (c) that sofar as the certifier knows, there is no default under the provisions of thisLease.  It is intended that any suchstatement may be relied upon by any person proposing to acquire Lessor’s orLessee’s interest, as the case may be, in this Lease or any prospectivemortgagee or assignee of any mortgage upon such interest.

 

26.          SUBORDINATION.  This Lease and all of the rights of Lesseehereunder shall be subject and subordinate to any mortgage or deed of trust(all such mortgages or deeds of trust hereinafter collectively called “Mortgage”)that may now or in the future encumber the Leased Premises, and to allrenewals, modifications, consolidations, replacements, and extensionsthereof.  Lessor represents and warrantsthat it has requested the Mortgagee of the Leased Premises to execute anon-disturbance agreement acceptable to Lessee recognizing this Lease and agreeing,for itself and its successors and assigns, that so long as Lessee is not indefault in the payment of rent or the performance and observance of allcovenants, conditions, provisions, terms and agreements to be performed andobserved by Lessee hereunder, that such Mortgagee shall not interfere with,hinder or impair Lessee’s right to quiet enjoyment under this Lease, nor theright of Lessee to continue to occupy the Leased Premises, and all portionsthereof and to conduct its business thereon in accordance with the covenants,conditions, provisions, terms and agreements of this Lease.  Lessor further agrees to cooperate in any andall reasonable ways in attempting to secure a non-disturbance agreement fromthe current Mortgagee of the Leased Premises. If the current Mortgagee agrees to execute such a non-disturbanceagreement, upon receipt by Lessee of such a non-disturbance agreement, Lesseeshall, at Lessor’s request, promptly execute any certificate or instrument thatLessor may request evidencing such subordination.  If such a non-disturbance agreement isexecuted by the current Mortgagee, Lessor agrees not to execute any additionalor replacement Mortgage (not including required periodic renewals of thecurrently existing Mortgage, or a replacement Mortgage in the event the currentMortgagee determines to terminate or not renew the current Mortgage) withoutobtaining the same non-disturbance agreement from the proposed mortgagee.  Lessor and Lessee acknowledge that anon-disturbance agreement will not be provided by Mortgagee if the Lessee is arelated party to the borrower or guarantor under the current Mortgage.  Notwithstanding any provision herein to thecontrary, the lien of any such Mortgagee shall not cover Lessee’s Propertylocated in or on the Leased Premises.  NoMortgagee shall be bound by (a) any payment of rentals for more than one (1) monthin advance, except prepayments in the nature of security for the performance byLessee of its obligations under this Lease, or (b) any amendment ormodification of this Lease made without the written consent of such Mortgagee.

 

27.          CONDEMNATION.  If during the term of this Lease, all of theLeased Premises shall be taken or condemned for any public or quasi-public useunder any governmental law, ordinance or regulation, or by right of eminent domainor by private purchase in lieu thereof, either Lessor or Lessee may terminatethis Lease upon sixty (60) days written notice to the other party and the rentshall be abated for the unexpired portion of this Lease effective on the datepossession is surrendered by Lessee.  Ifany such taking shall occur which leaves the Leased Premises suitable for theoperation of Lessee’s business, the Lease shall remain in force and effect butthe rental shall be reduced in proportion to the value of square footage, ifany, taken, by the condemning authority as compared to the total value of theLeased Premises.  Lessor shall receivethe entire award made by the condemning authority.

 

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28.           REIMBURSEMENT OFLESSOR.  If Lessor pays any sum thatLessee is obligated to pay hereunder, whether for utilities, taxes, insurance,repairs, replacements, maintenance, or otherwise, Lessee agrees to pay any suchsum to Lessor on demand, plus interest at the lesser of five percent (5%) abovethe interest rate outstanding on the Lessor’s financing of the Leased Premisesor ten percent (10%) per annum from the date Lessor paid said sum until thedate of repayment by Lessee.

 

29.          ATTORNEYS’ FEES.  In the event either party breaches any of theterms or covenants of this Lease, and it is necessary to employ attorneys toprotect or enforce the rights hereunder, then the defaulting party agrees topay the non-defaulting party’s reasonable attorneys’ fees and court costs.

 

30.          ENTIRE AGREEMENT.  This written Lease contract contains each andall of the agreements between the parties hereto, and no prior, contemporaneousagreement, whether oral, implied or in writing, shall vary the terms andprovisions hereof.  This Lease may beamended by the written consent of the parties hereto.

 

31.          INVALID CLAUSES.  In the event any one or more of theprovisions contained in this Lease shall for any reason be held to be invalid,illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceabilityshall not affect any other provision thereof, and this Lease shall be construedas if such invalid, illegal, or unenforceable provision had never beencontained herein.

 

32.          WAIVER OFAPPLICABILITY.  The parties to this Leasedesire to avoid the applicability of the Deceptive Trade Practices Act (“DTPA”)of Texas to the full extent permitted by law. In order to avoid applicability of the DTPA for the mutual benefit ofthe parties, Lessee represents that: (i) it is not in a significantlydisparate bargaining position with respect to this transaction; and (ii) Lesseewaives all of the provisions of the DTPA other than Section 17.55.

 

33.         KEYS.  Lessee shall provide Lessor with at least onekey for each different door lock within the Leased Premises.  Lessor agrees not to use the keys withoutprior notice to, and approval of, Lessee, except in case of emergency.

 

34.          FINANCIAL STATEMENTS.  Lessee shall furnish Lessor, prior to theexecution of this Lease, and also as a condition to the exercise of any optionfor additional term(s), a statement of financial condition of Lessee preparedby an independent certified public accountant and in form reasonablysatisfactory to Lessor.  Said financialstatements shall be updated on an annual basis to reflect current informationand shall be delivered by Lessee to Lessor within 120 days of the close of itsfiscal year.  Lessor may provide a copyof the financial statements to any financial institution that holds a first mortgageon the Leased Premises.

 

35.          CORPORATE AUTHORITY.  If Lessee executes this Lease as acorporation, each of the persons executing this Lease on behalf of Lessee dohereby personally represent and warrant that Lessee is a duly authorized andexisting corporation, that Lessee is qualified to do business in the state inwhich the Leased Premises are located, that the corporation has full right andauthority to 

 

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enterinto this Lease, and that each person signing on behalf of the corporation isauthorized to do so.

 

36.          LIMITATION OFWARRANTIES.  Lessor and Lessee expresslyagree that there are and shall be no implied warranties of merchantability,habitability, fitness for a particular purpose, or of any other kind arisingout of this Lease, and there are no warranties which extend beyond thoseexpressly set forth in this Lease.

 

37.          QUIET ENJOYMENT.  Lessor agrees that, subject to the terms,covenants, and provisions of this Lease, Lessee may, upon observing andcomplying with all terms, covenants, and provisions of this Lease, peaceablyand quietly occupy the Leased Premises.

 

38.          CONFIDENTIALITY.  This Lease is a confidential agreementbetween the parties herein and no terms or conditions of this Lease (includingrental payments paid or due or the method of calculating said payments) shallbe released to any appraiser, rent survey, or any third party.  No portion of this Section 38, however,shall prevent either party from complying with requirements of a lender, orgovernment regulation or law, where said law requires confidential disclosureof rental terms for purposes of tax assessment, for purposes of tax audit, orotherwise.  No portion of this Section 38shall apply to a prospective buyer of the Leased Premises pursuant to Section 5provided the prospective buyer has signed a letter of intent satisfactory toLessor and has signed a confidentiality agreement not to disclose the terms andconditions of this Lease.  No portion ofthis Section 38 shall prohibit Lessor from disclosing the terms of thisLease, pursuant to a confidentiality agreement, to any appraiser employed byLessor for tax or estate planning purposes. No portion of this Section 38 shall apply to the holder of anymortgage, deed of trust, or security interest that may now or in the futureencumber the Leased Premises or any personal property located at the LeasedPremises, and to all renewals, modifications, consolidations, replacements, andextensions thereof, said holder having the authority, if it chooses, to recordany lease estoppel letters or subordination and non-disturbance agreements towhich this Lease may be attached as an exhibit.

 

39.           EFFECT OF RESTATEMENT.  This Second Restated Commercial LeaseAgreement fully amends, restates and supercedes, but does not novate, either theFirst Restated Commercial Lease Agreement executed in or around October 2004,or the Commercial Lease Agreement executed on or about January 24, 2004,between the Lessor and the Lessee pertaining to the Leased Premises.

 

40.           SPECIAL PROVISION.  Sam Youngblood, CEO of LESSEE, and Don Carr,President of LESSEE are the principals of Green Wing Management, Ltd.,LESSOR.  Sam Youngblood and Don Carragree to act in a commercially reasonable manner as to their obligationsrelating to both the LESSOR and the LESSEE, under this Second Fully RestatedCommercial Lease Agreement.

 

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Executed this 31st day of July,2007, to be effective August 1, 2007.

 

 
| LESSEE:                                     |           | LESSOR:                                    |
|---------------------------------------------|----------------|--------------------------------------------|
|                                        |           |                                       |
| ISI Detention Contracting Group, Inc., |           | Green Wing Management, Ltd.                |
| A Texas Corporation.                        |           | By Green Wing GP, Inc, its General Partner |
|                                        |           |                                       |   |
|                                        |           |                                       |   |
| By:                                         |           |                                       | By: |   |
|                                        | Sam Youngblood |                                       |   | Sam Youngblood |
|                                        | Its: CEO       |                                       |   | Its: CEO |
|                                             |                |                                            |  |  |  |  |

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**EXHIBIT A**

** **

*LegalDescription*

* *

**Tract I**: Lots 6 and 7,Block 4, New City Block 17578, Wetmore Business Park, Unit 3, according to theplat thereof recorded in Volume 9509, Page 103, Deed and Plat Records ofBexar County, Texas; and

 

**Tract II**: Lot 1, Block3, New City Block 17577, Wetmore Business Park, Unit 3, according to the platthereof recorded at Volume 9509, Page 103, Deed and Plat Records of BexarCounty, Texas.

 

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