**Exhibit 10.65**

 

**Commercial-IndustrialLease Agreement**

 

**ARTICLE ONE: BASIC TERMS**

 

1.01         DATE OF LEASE: February 1, 2008.

 

1.02         LANDLORD: **Investment Properties,Ltd.,** a Texas limited partnership.

 

1.03         TENANT:         **ISI Security Group, Inc.,** formerly known as ISI Detention ContractingGroup, Inc., a Delaware corporation.

 

1.04         PROPERTY:   A building (the “Building”) consisting ofapproximately 14,175 rentable square feet located at 12915 Delivery Drive, SanAntonio, Texas 78247 together with the parcel of land (the “**Land**”) described on **Exhibit “A”**attached hereto (the Building and the Land are also sometimes collectivelyreferred to herein as the “**Premises**” orthe “**Property**”).

 

1.05         LEASE TERM:  The Lease Term shall be for a period ofeighty four (84) months beginning on February 1, 2008 (“**Commencement Date**”) and ending January 31, 2015 (“**Expiration Date**”), unless extended pursuant to theprovisions in Article 14.01.

 

1.06         RENT:  The “**Base Rent**”shall be the rent paid by Tenant to Landlord during the Lease Term according tothe following terms: The Base Rent amounts shall be due and payable on thefirst day of each calendar month during the term hereof and continuing throughand including the last month of the Lease Term at the following rates:

 
| Months 1-3   |   | $5,400.00 per month                                                         |
|--------------|--------|-----------------------------------------------------------------------------|
| Months 4-36  |   | $8,965.00 per month                                                         |
| Months 37-60 |   | $9,500.00 per month                                                         |
| Months 61-72 |   | $7,100.00 per month                                                         |
| Months 73-84 |   | $7,100.00 per month  plus CPI adjustment as described in Article 3.04. |

 

Tenant shall deposit theBase Rent for the first month upon execution of this Lease Agreement

 

1.07         SECURITY DEPOSIT:  Tenant shall deposit with Landlord anamount equivalent to the last two months rent ($14,200.00) less the amountcurrently held by Landlord ($5,400.00) under the terms of the existing LeaseAgreement between the parties, for a total deposit obligation of $8,800.00.

 

1.08         PERMITTED USE:  The Property may be used only for thepurpose of general office and warehouse, including sales, storage,distribution, technical support and for such other lawful purposes as may beincidental thereto.

 

1.09         INSURANCE, AD VALOREM TAXES, AND MAINTENANCEASSESSMENTS: Tenant shall pay insurance premiums as specified in Article 6and ad valorem taxes for the

 

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Property as specified in Article 11.In addition, the Tenant shall reimburse Landlord for any maintenanceassessments levied by the Wetmore Business Park Association, Inc. duringthe term of this Lease. The parties agree that the estimated amount of suchfees is $1,901.08 per month.

 
| 1.10         RENT TO BE PAID TO: | Investment Properties,  Ltd. |
|--------------------------------------------------------------------------|------------------------------|
|                                                                     | Address: P.O. Box  7608 |
|                                                                     | San Antonio, Texas  78207    |

 

1.11         DAILY LATE CHARGE (See Article 3.02): Ten Dollars($10.00) per day.

 

1.12         REALTORS COMMISSIONS: To be paid by the partyincurring such by separate agreement.

 

1.13         WETMORE BUSINESS PARK DECLARATION:  The Property is subject to a *Declaration of Covenants for Office, Commercial, Warehouse, andIndustrial Section of Wetmore Business Park, San Antonio, Texas*(“theDeclaration”), which is recorded in Volume 3423, Page 262-271 of the RealProperty Records of Bexar County, Texas. A copy of the Declaration is attachedat **Exhibit “C”**. Tenant shall besubject to these covenants, including, but not limited to, signage restrictionsand maintenance assessments.

 

**ARTICLE TWO:   LEASEAND LEASE TERM**

 

2.01         LEASE OF PROPERTY.  Landlord hereby leasesthe Property to Tenant and Tenant hereby leases the Property from Landlord forthe Lease Term stated in Article 1.05.

 

2.02         HOLDING OVER.   Tenant shall vacate theProperty upon the Expiration Date or earlier termination of this Lease. Tenantshall reimburse Landlord for and indemnify Landlord against any reasonabledamages incurred by Landlord from any delay by Tenant in vacating the Property.If Tenant does not vacate the Property upon the expiration or earliertermination of this Lease, Tenant’s occupancy of the Property shall be a “month-to-month”tenancy, subject to all the terms and provisions applicable to a month-to-monthtenancy, except that the rent then in effect shall be increased by fiftypercent (50%).

 

2.03         QUIET ENJOYMENT.   Landlord covenantsthat it has good title to the Property, free and clear of all liens andencumbrances, excepting only the lien for current taxes not yet due, suchmortgage or mortgages as are permitted by the terms of this Lease, zoningordinances and other building and fire ordinances and governmental regulationsrelating to the use of such property, and easements, restrictions and otherconditions of record. Landlord represents that it has the authority to enterinto this Lease and that so long as Tenant pays all amounts due hereunder andperforms all other covenants and agreements herein set forth, Tenant shallpeaceably and quietly have, hold and enjoy the Property for the term hereofwithout hindrance or molestation from Landlord, subject to the terms andprovisions of this Lease.

 

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**ARTICLE THREE:  RENT**

 

3.01         RENT.  Tenant agrees to payrent for the Property at the rate specified in Article 1.06. One monthly rentalinstallment shall be due and payable on the first (1st)day of the first calendar month of the Lease Term, and a like monthlyinstallment shall be due and payable on the first day of each succeedingcalendar month during the Lease Term. All rent shall be paid to the partydesignated in Article 1.10 at the address stated herein for such party. Unlessotherwise provided herein, Tenant shall pay Base Rent and all other chargesspecified in this Lease for the period of occupancy.

 

3.02         LATE CHARGE.  If any rent due hereunder isnot paid within five (5) days after written notice from Landlord that thesame was not paid when due, Tenant shall pay the party named in Article 1.10above a late charge equal to the sum stated in Article 1.11 above for eachday from its due date until such delinquent sum is paid. The parties agree thatsuch late charge represents a fair and reasonable estimate of the costsLandlord will incur by reason of such late payment.

 

3.03         NET NATURE OF LEASE.  With the exception ofLandlord’s obligations under Article 5.02, it is the intent of bothLandlord and Tenant that the Base Rent to be paid hereunder shall be absolutelynet to Landlord, so that this lease shall yield, net to Landlord, the rentalspecified in this Article in each month of the Lease Term, free of anycharges, assessments or impositions of any kind charged, assessed or imposed onor against the Property, and without abatement, deduction or set-off by Tenant,except as expressly provided otherwise herein, and Landlord shall not beexpected or required to pay any such charge, assessment or imposition, or beunder any obligation or liability hereunder, except as expressly set forth.

 

3.04         CONSUMER PRICE INDEX (“CPI”) INCREASES TO BASERENT.  The Base Rent shall be adjusted during the last full year ofthe Lease Term, beginning in on February 1, 2014. The Base Rent shall bethe Base Rent for the last month of the immediately preceding Lease Year, asadjusted by any increase in the index known as the United States Bureau ofLabor Statistics, Consumer Price Index for Urban Wage Earners and ClericalWorkers, United States City Average, index Base Period (1982-84=l00) (“CPI-W”)from February 1, 2013, provided, however, that the Base Rent shall neverbe less than the Base Rent in last month of the immediately preceding LeaseYear. If the CPI-W shall be revised or cease to be compiled during the term ofthe Lease, or in some other way fail to be a reliable index for the purposes ofthe Lease, the parties shall agree in good faith on some other index servingthe same purpose to adjust the Base Rent.

 

**ARTICLE FOUR:  USE OFPROPERTY**

 

4.01         PERMITTED USE.  Tenant may use the Propertyonly for the Permitted Use stated in Article 1.08. Tenant shall, at itsown cost and expense, obtain any and all licenses and permits necessary forsuch use (including, but not limited to, a Certificate of Occupancy, or theequivalent thereof), shall at all times maintain the Property in good condition(except with respect to

 

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obligations of Landlordunder this Lease) and comply with all governmental laws, codes, ordinances,regulations or any other applicable authorities with regard to the use,condition or occupancy of the Property (except as the same relates to Landlord’sobligations under this Lease). Tenant shall not permit any objectionable orunpleasant odors, smoke, dust, gas, noise, vibrations, or pest infestations toemanate from the Property, nor take any other action that would constitute anuisance or would disturb, unreasonably interfere with, or endanger Landlord.Tenant’s use of the Property shall at all times comply with the insuranceprovisions in Article 6.01 hereof. Tenant agrees that the point pressureresulting from Tenant’s inventory, forklifts and equipment pertaining to Tenant’suse of the Property shall not exceed allowable design floor loading for floorslabs on grade. Tenant shall hold harmless Landlord from any loss, liability,and expenses arising out of any damage or repair caused by Tenant’s negligenceor failure to comply with this paragraph.

 

4.02         COMPLIANCE WITH THE LAW.   Tenant shallcomply with all governmental laws, ordinances and regulations applicable to theuse of the Property during the Lease Term, and shall promptly comply with allgovernmental orders and directives for the correction, prevention and abatementof nuisances on or upon, or connected with the Property, all at Tenant’s soleexpense.

 

4.03         HAZARDOUS MATERIALS. The term “Substances,” as used inthis Lease shall mean pollutants, contaminants, toxic or hazardous wastes, orany other substances, the use, storage, handling, disposal, transportation orremoval of which is regulated, restricted, prohibited or penalized by any “EnvironmentalLaw,” which term shall mean any federal, state or local law, ordinance or otherstatute of a governmental or quasi-governmental authority relating to pollutionor protection of health or the environment and shall specifically include, butnot be limited to, any “hazardous substance” as that term is defined under theComprehensive Environmental Response, Compensation and Liability Act of 1980and any amendments or successors in function thereto. Tenant hereby agrees that(i) no activity will be conducted on the Property that will produce anySubstance, except for such activities that are part of the ordinary course forTenant’s business activities (the “Permitted Activities”) provided saidPermitted Activities are conducted in accordance with all Environmental Lawsand have been approved in advance in writing by Landlord (which approvalLandlord may grant or withhold in its reasonable discretion); Tenant shall beresponsible for obtaining any required permits and paying any fees andproviding any testing required by any governmental agency; (ii) theProperty will not be used in any manner for the storage of any Substancesexcept for the temporary storage of such materials that are used in theordinary course of Tenant’s business provided such substances are properlystored in a manner and location meeting all Environmental Laws and approved inadvance in writing by Landlord (which approval Landlord may grant or withholdin its sole discretion); Tenant shall be responsible for obtaining any requiredpermits and paying any fees and providing any testing required by anygovernmental agency; (iii) no portion of the Property will be used as alandfill or a dump; (iv) Tenant will not install any underground oraboveground tank of any type; (v) Tenant will not allow any surface orsubsurface conditions to exist or come into existence that constitute, or withthe passage of time, may constitute a public or private nuisance; (vi) Tenantwill not permit any Substances to be brought onto the Property, except inaccordance with the terms and

 

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conditions hereof, and ifso brought or found located thereon, the same shall be immediately removed, andproperly disposed, and all required cleanup procedures shall be diligentlyundertaken pursuant to all Environmental Laws; and (vii) Tenant shall inall regards comply with Environmental Laws including, without limitation,meeting any necessary financial responsibility requirements. Prior to anySubstance being brought upon or into the Property, whether Landlord’s writtenpermission is required or not, Tenant will provide to Landlord any applicablematerial safety data sheets regarding said Substance as well as a writtendescription of the amount of such Substance to be brought upon or into theProperty and the common and recognized chemical name of such Substance. Tenantshall bear responsibility for insuring that all record keeping, reporting andremediation responsibilities of Tenant under Environmental Laws are met andTenant assumes all such responsibility and liability for such legal compliance.Landlord or Landlord’s representative shall have the right, but not theobligation, to enter the Property for, among other purposes, the purposes ofinspecting the storage, use and disposal of any Substances and to reviewcompliance with all Environmental Laws. Should it be determined, in Landlord’ssole opinion, that any Substances are being improperly stored, used, ordisposed of, then Tenant shall immediately take such corrective action asrequired by applicable Environmental Laws. Tenant will provide Landlord writtennotification of the release or disposal of any Substance either within theProperty or outside of Tenant’s Property and will also provide Landlord writtennotice of any pending or threatened litigation concerning the breach orpurported breach of any Environmental Laws. If at any time during or after theterm of the Lease, the Property is found to be contaminated by Substances orsubject to said conditions, arising from or as a result of Tenant’s negligence(whether in whole or in part) or the use of the Property or any Substances byTenant or any of Tenant’s agents, employees, assigns or subtenants, Tenantshall diligently institute proper and thorough cleanup procedures in accordancewith Environmental Laws at Tenant’s sole cost, and Tenant agrees to indemnifyand hold Landlord harmless from all claims, demands, actions, liabilities,costs, expenses, damages, fines, reimbursement, restitution, response costs,cleanup costs, and obligations (including investigative responses and attorney’sfees) of any nature. The foregoing indemnification and the responsibilities ofTenant shall apply to Tenant regardless of whether they arise from anyPermitted Activity, Substances or Permitted Materials (as may be listed below),and shall survive the termination or expiration of this Lease. Landlord shallbe under no obligation to expend any sums or to seek reimbursement to enforcethe indemnification obligations of Tenant hereunder. In no event shall Tenantbe liable for any environmental conditions not caused by Tenant, its agents orcontractors.

 

Permitted Materials: [“None”]

 

Tenant acknowledges andagrees that it shall not be unreasonable for Landlord to withhold its consentto any proposed assignment, subletting, or transfer of Tenant’s interest inthis Lease if (i) the anticipated use of the Property by the proposedassignee, subtenant, or transferee (collectively, a “Transferee”) involves thegeneration, storage, use, treatment, or disposal of Substances other than as anon-material part of the business; (ii) the proposed Transferee has beenrequired by any prior Landlord, lender, or governmental authority to makeremedial action in connection with Substances contaminating a property, if thecontamination resulted from such

 

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Transferee’s actions oruse of the property in question; or (iii) the proposed Transferee issubject to an enforcement order issued by any governmental authority inconnection with the use, disposal, or storage of a Substance.

 

4.04         SIGNS.  Without the prior written consent ofLandlord, Tenant shall not place or affix any signs or other objects upon or tothe Property, including but not limited to the roof or exterior walls of thebuilding or other improvements thereon, or paint or otherwise deface saidexterior walls, which consent shall not be unreasonably withheld, conditionedor delayed. Any signs installed by Tenant shall conform with applicable lawsand deed and other restrictions, including the Declaration. Tenant shall removeall signs at the termination of this Lease and shall repair any damage andclose any holes caused or revealed by such removal.

 

4.05         UTILITIES.  Tenant shall pay the cost of allutility services used by Tenant at the Property. Tenant’s costs shall includebut not be limited to initial connection charges, all charges for gas, waterand electricity used on the Property, and for all electric lights, lamps andtubes.

 

4.06         LANDLORD’S ACCESS.  Landlord and itsauthorized agents shall have the right to enter upon the Property at allreasonable hours for the purpose of inspecting them, making repairs to them,exhibiting the Property to existing or prospective lenders or purchasers, orcuring any “Tenant Default,” as defined herein that Landlord elects to cure.Landlord shall not be liable to Tenant for any expense, loss or damage from anysuch entry upon the Property. Tenant shall permit Landlord, at any time duringthe last six months of the term of the Lease (as the same may be extended) toplace upon the Property any usual or ordinary “For Lease” signs and Landlord orits agent may enter upon the Property during normal business hours to exhibitsame to prospective tenants.

 

4.07         INTERRUPTION OF SERVICE.  Interruption orcurtailment of services furnished to the Property by or through Landlord shallnot entitle Tenant to any claim against Landlord or to any abatement in rent,nor shall the same constitute constructive or partial eviction, unless Landlordfails to take such measures as may be reasonable in the circumstances torestore the service without undue delay.

 

4.08         EXEMPTIONS FROM LIABILITY.  Except asspecifically provided herein, Landlord shall not be liable for any damage orinjury to the person, business (or any loss of income therefrom), goods, wares,merchandise or other property of Tenant, Tenant’s employees, invitees,customers or any other person in or about the Property, whether such damage orinjury is caused by or results from: (a) fire, steam, electricity, water,gas, or rain; (b) the breakage, leakage, obstruction or other defects ofpipes, sprinklers, wires, appliances, plumbing, air conditioning or lightingfixtures or any other cause; (c) conditions arising on or about theProperty or upon other portions of any building of which the Property is apart, or from other sources or places; or (d) any act or omission of anyother tenant of any building of which the Property is a part. Landlord shallnot be liable for any such damage or injury even though such damage or injuryis not attributable to Tenant. Subject to Article 6.04, the provisions ofthis Article 4.08 shall not,

 

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however, exempt Landlordfrom liability for Landlord’s gross negligence or willful misconduct or Landlord’sbreach of this Lease.

 

**ARTICLE FIVE: MAINTENANCE,REPAIRS AND ALTERATIONS**

 

5.01         ACCEPTANCE OF PROPERTY.  Tenant acknowledgesthat 1) it has inspected and accepts the Premises in an “AS IS, WHERE IS”CONDITION; 2) the Building and Improvements are suitable for the purpose forwhich the Premises are leased and for Tenant’s intended commercial purpose, andLandlord has made no warranty, representation, covenant, or agreement withrespect to the merchantability or fitness for any particular purpose of thePremises; 3) the Premises are in good and satisfactory condition; 4) norepresentations as to repair of the Premises, nor promises to alter, remodel,or improve the Premises have been made by Landlord (unless and except as may beset forth in the Exhibit attached to the Lease and Landlord’s maintenanceand repair obligations under Article 5.02; 5) there are no representationsor warranties, express, implied, or statutory, that extend beyond thedescription of the Premises.

 

5.02         MAINTENANCE AND REPAIRS BY LANDLORD.  Landlordshall at its expense maintain, repair, and if necessary replace, only the roof,foundation, and structure of the improvements on the Property, except forreasonable wear and tear and any non-casualty damage caused by the negligentact or omission of Tenant, or Tenant’s invitees, employees or customers. Tenantshall give prompt written notice to Landlord of the need for such maintenance,repairs or replacement and Landlord shall proceed promptly to perform suchmaintenance, repairs or replacement. Landlord shall not be liable to Tenant forany damages or inconvenience, and Tenant shall not be entitled to any damages,nor to any abatement or reduction of rent, by reason of any repairs,alterations, or additions made by Landlord under the Lease. Landlord’sliability for any defects, repairs, replacement, or maintenance for whichLandlord is responsible under the Lease shall be limited to the cost ofperforming such work. Nothing in this provision shall entitle Tenant to terminatethe Lease based on the physical condition of the Premises.  If Landlord fails, refuses or neglects tomaintain the Premises as required in this Lease, after notice shall have beengiven Landlord in accordance with the terms of this Lease, Tenant may make suchrepairs without liability to Landlord for any loss or damage that may accrue tothe Premises and Landlord shall promptly reimburse Tenant for its reasonablethird party costs; provided, however, that no notice shall be required in theevent of any hazardous or emergency condition. Landlord shall have a reasonabletime within which to perform such repairs or maintenance.

 

5.03         MAINTENANCE AND REPAIRS BY TENANT.  Tenant,at its own cost and expense, shall (i) maintain all parts of the Property(except for those items for which Landlord is responsible) in good condition,except for reasonable wear and tear and damage by casualty, (ii) promptlymake all necessary repairs and replacements, including, but not limited to,windows, glass and plate glass, exterior doors, any special office entry,interior walls and finish work, interior doors and floor covering, utilityconnections, downspouts, gutters, heating and air conditioning systems, lightbulbs and ballasts, dock boards, truck doors, dock bumpers, paving, plumbingwork and fixtures, termite and pest extermination, regular removal of trash anddebris,

 

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dedicated sewer lines andany damage due to vandalism or malicious mischief (iii) keep the parkingareas, driveways, truck aprons, and grounds surrounding the Property in a cleanand sanitary condition, (iv) repair all wind damage to glass except withrespect to tornado or hurricane damage. In the event Tenant should neglectreasonably to maintain the Property, Landlord shall have the right (but not theobligation, unless such repairs are not caused by Tenant’s neglect, in whichevent Landlord shall make the necessary repairs at its cost) to cause repairsor corrections to be made upon notice to Tenant and any reasonable coststherefore shall be payable by Tenant to Landlord as additional rental on thenext rental payment due date following written notice of such costs deliveredby Landlord. Upon termination of this Lease, Tenant shall deliver up theProperty in good repair and condition, reasonable wear and tear, defects forwhich Landlord is responsible and damage by fire, wind storm or other casualtyexcepted. Tenant shall repair any damage caused by Tenant’s act or omission, orthe act or omission of Tenant’s invitees, employees or customers.

 

5.04         ALTERATIONS.  Tenant shall not create anyopenings in the roof or exterior wall, or make any alterations, additions orimprovements to the structure, interior or exterior of the Property, withoutthe prior written consent of Landlord, not to be unreasonably withheld,conditioned or delayed. All approved construction shall be done in a good andworkmanlike manner using first class materials. Tenant shall have the right,without Landlord’s consent, to erect or install shelves, bins, machinery, andtrade fixtures, provided that Tenant complies with all applicable governmentallaws, ordinances and regulations. At the expiration or termination of thisLease, Tenant shall, subject to the restrictions of Article 5.06 below,have the right to remove such items so installed by it, provided that Tenantshall, at the time of removal of such items, repair in a good and workmanlikemanner any damage caused by installation or removal thereof and restore theProperty to the condition that existed prior to the installation of such items,reasonable wear and tear excepted. Tenant shall pay for all costs incurred orarising out of alterations, additions or improvements in or to the Property andshall not permit a mechanic’s or materialman’s lien to be asserted against theProperty.

 

5.05         SECURITY.  Any and all security of any kindfor Tenant, Tenant’s agents, employees or invitees, the Property, or anypersonal property thereon (including, without limitation, any personal propertyof any sublessee) shall be the sole responsibility and obligation of Tenant,and shall be provided by Tenant at Tenant’s sole cost and expense. Tenantacknowledges and agrees that Landlord shall have no obligation or liabilitywhatsoever with respect to the same. Tenant shall indemnify and hold Landlordharmless from and against any and all loss, cost, damage or other liabilityarising directly or indirectly from security measures or the absence thereofwith respect to the Property and the building or the project of which theProperty is a part. There is currently an alarm system installed on theProperty, however, Tenant may, at Tenant’s sole cost and expense, install alarmsystems in the Property provided such installation complies with the provisionsof Article 5.04 hereof. Removal of any Tenant installed alarm systemsshall be Tenant’s sole responsibility and, at Tenant’s sole cost and expense,shall be completed prior to lease termination and all affected areas of theProperty shall be repaired and/or restored in a good and workmanlike manner tothe condition that existed prior to such installation.

 

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5.06         CONDITION UPON TERMINATION. Upon termination of thisLease, Tenant shall surrender the Property to Landlord, broom clean and in thesame condition as received except for ordinary wear and tear or any conditionwhich Tenant was not otherwise obligated to remedy under any provision of thisLease. Tenant shall not be obligated to repair any damage which Landlord isrequired to repair hereunder. In addition, if Landlord so notified Tenant priorto commencement of work, Landlord may require Tenant to remove anyextraordinary alterations, additions or improvements made during the term ofthis Lease, without Landlord’s consent. In no event, however, shall Tenantremove any of the following materials or equipment without Landlord’s priorwritten consent: any power wiring or power panels; lighting or lightingfixtures; wall coverings; drapes, blinds or other window coverings; carpets orother floor coverings; heaters; air conditioners or any other heating and airconditioning equipment; fencing or security gates; or other similar buildingoperation equipment and decorations.

 

All obligations of Tenanthereunder not fully performed as of the expiration or earlier termination ofthe term of this Lease shall survive the expiration or earlier termination ofthe term hereof, including without limitation, all payment obligations withrespect to Base Rent and additional rental and all obligations concerning thecondition and repair of the Property. Upon the expiration or earliertermination of the term hereof, and prior to Tenant vacating the Property,Tenant shall restore the Property to good condition and repair, reasonable wearand tear excluded. Prior to Tenant vacating the Property, Tenant shall make allrepairs as specified in this Article 5 hereof, including but not limitedto any repairs necessary so that the heating and air conditioning systems arein good working order, subject to commercially reasonable obsolescence. If anyand all repairs or restoration required of Tenant hereunder are not completedby the expiration or earlier termination hereof, Landlord may cause the same tobe completed and the costs shall be paid by Tenant promptly upon demand(including a fifteen percent (15%) service charge for arranging for andcoordinating such work).

 

**ARTICLE SIX: INSURANCE ANDINDEMNITY**

 

6.01         LANDLORD INSURANCE. Landlord shall maintaininsurance covering the buildings situated on the Property, except for thoseitems the repair and maintenance of which are Tenant’s responsibility, in anamount not less than eighty percent (80%) of the “replacement cost” thereofinsuring against the perils of Fire, Lightning, Extended Coverage, Vandalism,and Malicious Mischief. Tenant shall reimburse Landlord for the cost andexpense of all such insurance within fifteen (15) days of written receipt of astatement showing the amount and computation of such premiums due. Tenant shallnot keep anything upon the Property, or do anything in or about the Propertyexcept the Permitted Use specified herein, which Landlord represents will notincrease the rates for the fire and standard extended coverage insurance uponthe building which is part of the Property. Tenant agrees to pay on writtendemand any increase in insurance premiums that may be charged to Landlordduring the term of this Lease resulting from a deviation from the Permitted Usespecified herein within Tenant’s reasonable control. Tenant shall also beresponsible for maintaining insurance on Tenant’s equipment and other personalproperty located

 

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on the Property. Tenantagrees to pay to Landlord as additional rental during the Lease Term anyamounts for commercially reasonable insurance paid by Landlord.

 

6.02         LIABILITY INSURANCE.  Tenant, at its ownexpense, shall maintain during the term of this Lease a policy or policies ofworker’s compensation and comprehensive general liability insurance, includingpersonal injury and property damage, with contractual liability endorsement, inthe amount of One Million Dollars ($1,000,000.00) for property damage and OneMillion Dollars ($1,000,000.00) per occurrence for personal injuries or deathsof persons occurring in or about the Property. Tenant, at its own expense, alsoshall maintain during the term of this Lease, fire and extended coverageinsurance covering (i) the replacement cost of all alterations, additions,partitions and improvements installed or placed on the Property by Tenant or byLandlord on behalf of Tenant and (ii) the replacement cost of all ofTenant’s personal property contained within the Property and (iii) businessinterruption of Tenant. Said policies shall (i) name Landlord as anadditional insured and insure Landlord’s contingent liability under this Lease(except for the worker’s compensation policy and Tenant’s insurance on Tenant’spersonal property, which instead shall include waiver of subrogationendorsement in favor of Landlord), (ii) be issued by an insurance companywhich is acceptable to Landlord, (iii) provide that said insurance shallnot be canceled unless thirty (30) days prior written notice shall have beengiven to Landlord, and (iv) provide primary coverage to Landlord when anypolicy issued to Landlord provides duplicate or similar coverage, and in suchcircumstance Landlord’s coverage under Landlord’s policy shall be deemed excessover and above the coverage provided by Tenant’s policy. Said policy orpolicies or certificates thereof shall be delivered to Landlord by Tenant uponcommencement of the term of the Lease and upon each renewal of said insurance.

 

6.03         LIABILITY AND INDEMNITY. Except for any claims,rights of recovery and causes of action that Tenant has released, Landlordshall hold Tenant harmless and defend Tenant against any and all claims orliability for any injury or damage to any person in, on or about the Propertyor any part thereof and/or the building of which the Property are a part, whensuch injury or damage shall be caused by the act, neglect, fault of, oromission of any duty with respect to the same by Landlord, its agents, servantsand employees. Notwithstanding the foregoing or anything to the contrary inthis Lease, Tenant hereby agrees that in no event shall Landlord be liable forany incidental or consequential damages whatsoever, including, withoutlimitation, any damages as a result of any interruption of Tenant’s business orany loss of income therefrom. Except for any claims, rights of recovery andcauses of action that Landlord has released, Tenant shall hold Landlordharmless from and defend Landlord against any and all claims or liability forany injury or damage (i) to any person or property whatsoever occurringin, on or about the Property or any part thereof and/or of the building ofwhich the Property are a part, including without limitation elevators, stairways,passageways or hallways, the use of which Tenant may have in accordance withthis Lease, when such injury or damage shall be caused by the act, neglect,fault of, or omission of any duty with respect to the same by Tenant, itsagents, servants, employees, or invitees, (ii) arising from the conduct ofmanagement of any work done by the Tenant in or about the Property, (iii) arisingfrom transactions of the Tenant, and (iv) all costs, reasonable counselfees, expenses and liabilities incurred in connection with any such claim oraction or proceeding

 

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brought thereon. Theprovisions of this Article 6.03 shall survive the expiration ortermination of this Lease with respect to any claims or liability occurringprior to such expiration or termination.

 

6.04         WAIVER OF SUBROGATION.  NOTWITHSTANDING ANYPROVISION TO THE CONTRARY IN THIS LEASE, LANDLORD AND TENANT EACH HEREBY WAIVE,AND AGREE TO CAUSE THEIR INSURERS TO WAIVE, ANY AND ALL RIGHTS OF RECOVERYAGAINST THE OTHER OR AGAINST THE OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVESOF THE OTHER (COLLECTIVELY, “RELEASED PARTIES”), FOR LOSS OR DAMAGE TO ITSPROPERTY, OR THE PROPERTY OF OTHERS UNDER ITS CONTROL, IF SUCH LOSS OR DAMAGEIS COVERED BY ANY INSURANCE POLICY REQUIRED TO BE CARRIED BY IT UNDER THIS LEASE,OR COULD BE COVERED BY STANDARD COMMERCIAL PROPERTY INSURANCE, EVEN IF SUCHLOSS OR DAMAGE IS CAUSED, IN WHOLE OR IN PART, BY THE NEGLIGENCE OF ANY OF THERELEASED PARTIES. FOR THE PURPOSES HEREIN, ALL DEDUCTIBLES UNDER ANY INSURANCEPOLICY SHALL BE FOR THE SOLE BENEFIT AND ACCOUNT OF THE INSURED PARTY UNDER THEAPPLICABLE POLICY.

 

**ARTICLESEVEN:    TRANSFER OF INTEREST**

 

7.01         ASSIGNMENT AND SUBLETTING.  Tenant shall notassign or in any manner transfer this Lease or any estate or interest therein,by operation of law or otherwise, or sublet the Property or any part thereof,or grant any license, concession or other right of occupancy of any portion ofthe Property without the prior express written consent of Landlord, which shallnot be unreasonably withheld, conditioned, or delayed.  Consent by Landlord to one or moreassignments or sublettings shall not operate as a waiver of Landlord’s rightsas to any subsequent assignments and sublettings. In no event shall anyassignment or sublease of the Property relieve or release Tenant from anyobligations under this Lease, except as herein otherwise expressly provided.Landlord shall be permitted to enforce the provisions of this instrumentagainst the undersigned Tenant and/or any assignee without demand upon orproceeding in any way against any other person. Landlord does agree, however,that Tenant shall be permitted to assign this Lease to any related entity,subsidiary or affiliate of Tenant (in which Tenant has a controlling interest)without having the obligation of securing the prior consent or approval ofLandlord. In addition, the acquisition of all the stock of Tenant by anycorporation, the stock of which is registered pursuant to the SecuritiesExchange Act of 1934, or the merger of Tenant into such a corporation the stockof which is so registered, shall not be considered to be a violation of thisArticle. Any unauthorized assignment or subleasing of the Property by Tenantshall cancel the right of any Renewal Option in Article 14.01.

 

7.02.        ASSIGNEE COVENANTS.  Notwithstanding thatthe prior express written consent of Landlord to any of the aforesaidtransactions may have been obtained, the following shall apply:

 

(a)           In the event of an assignment,contemporaneously with the granting of Landlord’s consent, Tenant shall (i) causethe assignee to expressly assume in writing and agree to perform all of theobligations of Tenant hereunder, and such assignee shall be jointly andseverally liable therefor along with Tenant; and (ii) cause such assigneeto grant to Landlord an express first and

 

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prior Landlord’s lien andsecurity interest (and execute one or more Uniform Commercial Code FinancingStatements) in assignee’s goods, wares, equipment, fixtures, furniture,merchandise, improvements and other personal property in the manner set forthin Article 9.03 hereof.

 

(b)           A signed counterpart of all instrumentsrelative thereto (executed by all parties to such transaction with theexception of Landlord) shall be submitted by Tenant to Landlord prior to or contemporaneouslywith the request for Landlord’s consent thereto (it being understood that nosuch instrument shall be effective without the written consent of Landlord).

 

(c)           Tenant shall subordinate to Landlord’sstatutory lien and Landlord’s aforesaid contractual lien and security interest,any liens or other rights which Tenant may claim with respect to any fixtures,equipment, goods, wares, merchandise, furniture, improvements, or otherpersonal property owned by the proposed assignee, subTenant, or other partyintending to occupy the Property.

 

(d)           Tenant agrees to reimburse Landlord forall attorneys’ fees and administrative expenses incurred in connection with thereview, processing or preparation of any documentation associated with theassignment, subletting or other transfer of this lease or Tenant’s interest inthe Property, whether or not Landlord’s consent to such transfer is required orobtained.

 

7.03         CONTINUING OBLIGATIONS.  Notwithstanding anyassignment or subletting, Tenant shall at all times remain fully responsibleand liable for the payment of the rent herein specified and for compliance withall of its other obligations under this Lease (even if future assignments andsublettings occur subsequent to the assignment or subletting by Tenant, andregardless of whether or not Landlord’s approval has been obtained for suchfuture assignments and sublettings). Moreover, in the event that the rental dueand payable by a sublessee exceeds the rental payable under this Lease, or ifwith respect to a permitted assignment, permitted license or other transfer byTenant permitted by Landlord, the consideration payable to Tenant by theassignee, licensee or other transferee exceeds the rental payable under thisLease, then Tenant shall be bound and obligated to pay Landlord 50% of suchexcess rental (after Tenant first recovers all of its third party expensesrelating to such transfer e.g. brokerage commissions) within ten (10) daysfollowing receipt thereof by Tenant from such sublessee, assignee, licensee orother transferee, as the case may be. In the event of any assignment orsubletting, it is understood and agreed that all rentals paid to Tenant by anassignee or sublessee shall be received by Tenant in trust for Landlord, to beforwarded immediately to Landlord without offset or reduction of any kind; andupon election by Landlord such rentals shall be paid directly to Landlord asspecified in Article 1.10 of this Lease (to be applied as a credit andoffset to Tenant’s rental obligations).

 

7.04         TRANSFERS IN BANKRUPTCY.  In the event thisLease is assigned to any person or entity pursuant to the provisions of theBankruptcy Code, 11 U.S.C. § 101 etseq. (the “Bankruptcy Code”),any and all monies or other considerations payable or otherwise to be deliveredin connection with such assignment shall be paid or delivered to Landlord,shall be and remain the

 

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exclusive property ofLandlord and shall not constitute property of Tenant or of the estate of Tenantwithin the meaning of the Bankruptcy Code. Any and all monies or otherconsiderations constituting Landlord’s property under the preceding sentencenot paid or delivered to Landlord shall be held in trust for the benefit ofLandlord and be promptly paid or delivered to Landlord. Any person or entity towhich this Lease is assigned pursuant to the Bankruptcy Code shall be deemedwithout further act or deed to have assumed all of the obligations arisingunder this Lease on and after the date of such assignment. Any such assigneeshall upon demand execute and deliver to Landlord an instrument confirming suchassumption.

 

7.05         ENCUMBRANCE.  Tenant shall not mortgage,pledge or otherwise encumber its interest in this Lease or in the Propertywithout the prior written consent of Landlord. Upon any violation of thisprovision, this Lease shall terminate at Landlord’s option.

 

7.06         ASSIGNMENT BY LANDLORD.  In the event of thetransfer and assignment by Landlord of its interest in this Lease and in thebuilding containing the Property to a person expressly assuming Landlord’sobligations under this Lease, Landlord shall thereby be released from anyfurther obligations hereunder (but Landlord shall not be released from anyobligations accruing prior to any such transfer or assignment), and Tenantagrees to look solely to such successor in interest of the Landlord forperformance of such obligations. Any security given by Tenant to secureperformance of Tenant’s obligations hereunder may be assigned and transferredby Landlord to such successor in interest, and Landlord shall thereby bedischarged of any further obligation relating thereto.

 

**ARTICLE EIGHT:  DAMAGEOR DESTRUCTION**

 

8.01         PARTIAL DAMAGE.  In the event theimprovements situated on the Property are partially damaged, or renderedpartially unfit for occupancy, by fire or other casualty, Tenant shall giveimmediate written notice thereof to Landlord. If the repairs can reasonably bemade within ninety (90) days after Landlord receives such written notice fromTenant so that the damaged portion of the Property is completely restored toits condition prior to such casualty, Landlord shall forthwith cause suchrepairs to be made within such ninety (90) days and this Lease shall notterminate. “Partial Damage” shall mean damage or destruction to the Propertyother than Tenant owned alterations, the repair cost of which damage ordestruction is less than fifty percent (50%) of the then replacement costimmediately prior to said damage or destruction. If damage is the result ofLandlord’s gross negligence or willful misconduct, Landlord shall allow Tenanta fair reduction in rent in proportion to the extent the improvements arepartially unfit for occupancy. If the repairs or restoration cannot reasonablybe made within ninety (90) days after Landlord receives such written noticefrom Tenant, this Lease shall terminate and the rent shall be paid to the dateof such casualty.

 

8.02         UNINSURED PARTIAL DAMAGE OR TOTAL OR SUBSTANTIALDESTRUCTION.  In the event of total or substantial destruction of theimprovements situated on the Property by fire or other casualty, Tenant shallgive immediate written notice thereof to Landlord. “Total or

 

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Substantial Destruction”shall mean damage or destruction to the Property other than Tenant ownedalterations, the repair cost of which damage or destruction is fifty percent(50%) or more of the then Replacement Cost of the Property, excluding Tenantowned alterations immediately prior to such damage or destruction. If Landlord’sinsurance proceeds are sufficient to pay for the necessary repairs, and if therepairs can reasonably be made within one hundred eighty (180) days afterLandlord receives such written notice from Tenant so that the damaged portionof the Property is completely restored to its condition prior to such casualty,Landlord shall forthwith cause such repairs to be made within such one hundredeighty (180) days and this Lease shall not terminate. While such repairs arebeing made, Landlord shall allow Tenant a fair reduction in rent in proportionto the extent the improvements are wholly or partially unfit for occupancy. IfLandlord’s insurance proceeds are insufficient to pay for the necessary repairsor restoration, or the repairs or restoration cannot reasonably be made withinone hundred eighty (180) days after Landlord receives such written notice fromTenant, this Lease shall terminate and the rent shall be paid to the date ofsuch casually.

 

**ARTICLE NINE:  DEFAULTAND REMEDIES**

 

9.01         EVENTS OF DEFAULT. The following events (hereinindividually referred to as “event of default”) each shall be deemed to beevents of nonperformance by Tenant under this Lease:

 

A. Tenant shall fail topay any installment of Base Rent or any additional rental herein reserved whendue, or any other payment or reimbursement to Landlord required herein whendue, and such failure shall continue for a period of five (5) days afterwritten notice to Tenant from the date such payment was due.

 

B. Tenant hereunder shall(i) become insolvent; (ii) admit in writing its inability to pay itsdebts: (iii) make a general assignment for the benefit of creditors; (iv) commenceany case, proceeding or other action seeking to have an order for reliefentered on its behalf as a debtor or to adjudicate it as bankrupt or insolvent,or seeking reorganization, arrangement, adjustment, liquidation, dissolution orcomposition of it or its debts under any law relating to bankruptcy,insolvency, reorganization or relief of debtors or seeking appointment of areceiver, trustee, custodian or other similar official for it or for all or ofany substantial part of its property; or (v) take any action to authorizeor in contemplation of any of the actions set forth above in this Paragraph.

 

C. Any case, proceedingor other action against the Tenant hereunder shall be commenced seeking (i) tohave an order for relief entered against it as a debtor or to adjudicate it asbankrupt or insolvent; (ii) reorganization, arrangement, adjustment,liquidation, dissolution or composition of it or its debts under any lawrelating to bankruptcy, insolvency, reorganization or relief of debtors (iii) appointmentof a receiver, trustee, custodian or other similar official for it or for allor any substantial part of its property, and such case, proceeding or otheraction (a) results in the entry of an order for relief against it which itis not fully stayed within seven (7) business days after the entry thereofor (b) shall remain undismissed for a period of forty-five (45) days.

 

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D. Tenant shall (i) abandonall or a substantial portion of the Property or (ii) fail to continuouslyoperate its business at the Property for the permitted use set forth herein,whether or not Tenant is in default of the rental payments due under thisLease.

 

E. Tenant shall fail todischarge any lien placed upon the Property within twenty (20) days after anysuch lien or encumbrance is filed against the Property.

 

F. Tenant shall fail tocomply with any term, provision or covenant of this Lease (other than thoselisted in this Article), and shall not cure such failure within twenty (20)days after written notice thereof to Tenant.

 

9.02         REMEDIES.

 

A. Upon each occurrenceof an event of default, Landlord shall have the option to pursue any one ormore of the following remedies without any notice or demand:

 

(1) Terminate thisLease; and/or

(2) Enter upon andtake possession of the Property with or without terminating this Lease; and/or

(3) Alter all locksand other security devices at the Property with or without terminating thisLease, and pursue, at Landlord’s option, one or more remedies pursuant to thisLease, Tenant hereby specifically waiving any state or federal law to thecontrary; and in any such event Tenant immediately shall surrender the Propertyto Landlord, and if Tenant fails to do so, Landlord, without waiving any otherremedy it may have, may enter upon and take possession of the Property andexpel or remove Tenant and any other person who may be occupying such Propertyor any part thereof, without being liable for prosecution or any claim ofdamages therefore.

 

B. If Landlord terminatesthis Lease, at Landlord’s option, Tenant shall be liable for and shall pay toLandlord, the sum of all rental and other payments owed to Landlord hereunderaccrued to the date of such termination, plus, as liquidated damages, an amountequal to the present value (using the current “prime” interest rate of FrostNational Bank of San Antonio, or should such financial institution no longerexist, a comparable financial institution) of (1) the total rental andother payments owed hereunder for the remaining portion of the Lease term, less(2) the then fair market rental of the Property.

 

C. If Landlordrepossesses the Property without terminating the Lease, Tenant, at Landlord’soption, shall be liable for and shall pay Landlord on demand all rental andother payments owed to Landlord hereunder, accrued to the date of suchrepossession, plus all amounts required to be paid by Tenant to Landlord untilthe date of expiration of the term as stated in Article 1.05, diminishedby all amounts received by Landlord through reletting of the Property duringsuch remaining term (but only to the extent of the rent herein reserved).Actions to collect amounts due

 

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by Tenant to Landlordunder this subparagraph may be brought from time to time, on one or moreoccasions, without the necessity of Landlord’s waiting until expiration of theLease term.

 

D. Upon an event ofdefault, in addition to any sum provided to be paid herein, Tenant also shallbe liable for and shall pay to Landlord (i) brokers’ fees incurred byLandlord in connection with reletting the whole or any part of the Property; (ii) thecosts of removing and storing Tenant’s or other occupant’s property; (iii) thecosts of repairing, altering, remodeling or otherwise putting the Property intoas good condition as that in which it was originally delivered to Tenant; and (iv) allreasonable expenses incurred by Landlord in enforcing or defending Landlord’srights and/or remedies. If either party hereto institutes any action or proceedingto enforce any provision hereof by reason of any alleged breach of anyprovision of this Lease, the prevailing party shall be entitled to receive fromthe losing party all reasonable attorneys’ fees and all court costs inconnection with such proceeding.

 

E. In the event Tenantfails to make any payment due hereunder when payment is due, to help defray theadditional cost to Landlord for collecting and/or processing such latepayments, Tenant shall pay to Landlord on demand a late charge as specified in Article 1.11herein; and the failure to pay such late charge within ten (10) days afterdemand therefore shall be an additional event of default hereunder. Theprovision for such late charge shall be in addition to all of Landlord’s otherrights and remedies hereunder or at law and shall not be construed asliquidated damages or as limiting Landlord’s remedies in any manner.

 

F. Exercise by Landlordof any one or more remedies hereunder granted or otherwise available shall notbe deemed to be an acceptance of surrender of the Property by Landlord, whetherby agreement or by operation of law, it being understood that such surrendercan be effected only by the written agreement of Landlord and Tenant. Tenantand Landlord further agree that forbearance by Landlord to enforce its rightspursuant to the Lease at law or in equity, shall not be a waiver of Landlord’sright to enforce one or more of its rights in connection with any subsequentdefault.

 

G. If Landlord fails toperform any of its obligations hereunder within thirty (30) days after writtennotice from Tenant specifying such failure, Tenant’s exclusive remedy shall bean action for damages. Unless and until Landlord fails to so cure any defaultafter such notice, Tenant shall not have any remedy or cause of action byreason thereof. All obligations of Landlord hereunder will be construed ascovenants, not conditions; and all such obligations will be binding uponLandlord only during the period of its possession of the Property and notthereafter. The term “Landlord” shall mean only the owner, for the time beingof the Property, and in the event of the transfer by such owner of its interestin the Property, such owner shall thereupon be released and discharged from allcovenants and obligations of the Landlord thereafter accruing, but suchcovenants and obligations shall be binding during the Lease term upon each newowner for the duration of such owner’s ownership. Notwithstanding any otherprovision hereof, Landlord shall not have any personal liability hereunder. Inthe event of any breach or default by Landlord in any term or provision of thisLease, Tenant agrees to look solely to the equity or interest then owned

 

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by Landlord in theProperty or of the building of which the Property are a part; however, in noevent, shall any deficiency judgment or any money judgment of any kind besought or obtained against any Landlord.

 

H. If Landlordrepossesses the Property pursuant to the authority herein granted, thenLandlord shall have the right to (i) keep in place and use or (ii) removeand store all of the furniture, fixtures and equipment at the Property,including that which is owned by or leased to Tenant at all times prior to anyforeclosure thereon by Landlord or repossession thereof by any Landlord thereofor third party having a lien thereon. Landlord also shall have the right torelinquish possession of all or any portion of such furniture, fixtures,equipment and other property to any person (“Claimant”) who presents toLandlord a copy of any instrument represented by Claimant to have been executedby Tenant (or any predecessor of Tenant) granting Claimant the right undervarious circumstances to take possession of such furniture, fixtures, equipmentor other property, without the necessity on the part of Landlord to inquireinto the authenticity or legality of said instrument. The rights of Landlordherein stated shall be in addition to any and all other rights that Landlordhas or may hereafter have at law or in equity; and Tenant stipulates and agreesthat the rights herein granted Landlord are commercially reasonable.

 

I. Notwithstandinganything in this Lease to the contrary, all amounts payable by Tenant to or onbehalf of Landlord under this Lease, whether or not expressly denominated asrent, shall constitute rent.

 

J. This is a contractunder which applicable law excuses Landlord from accepting performance from (orrendering performance to) any person or entity other than Tenant.

 

9.03         LANDLORD’S LIEN. Landlord agrees to subordinate itssecurity interest, whether statutory or otherwise, upon any goods, inventory,furniture, fixtures, equipment or any other personal property of Tenant (“Tenant’sProperty”) situated in or upon the Property, to any lien of Tenant’s lender,and shall sign any document to this effect reasonably requested by Tenant’slender.

 

**ARTICLE TEN:  CONDEMNATION**

 

Landlord shall notifyTenant if Landlord receives notice of any potential condemnation of theProperty or portion thereof. If all or any portion of the Property is takenunder the power of eminent domain or sold under the threat of that power (allof which are called “Condemnation”), this Lease shall terminate as to the parttaken or sold on the date the condemning authority takes title or possession,by delivering written notice to the other within ten (10) days afterreceipt of written notice of such taking (or in the absence of such notice,within ten [10] days after the condemning authority takes possession). Ifneither Landlord nor Tenant terminates this Lease, this Lease, shall remain ineffect as to the portion of the Property not taken, except that the rent shallbe reduced in proportion to the reduction in floor area of the Property. AnyCondemnation award or payment shall be distributed in the following order: (a) first,to any ground Landlord,

 

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mortgagee or beneficiaryunder a deed of trust encumbering the Property, the amount of its interest inthe Property; (b) second, to Tenant, only the amount of any awardspecifically designated for loss of or damage to Tenant’s trade fixtures orremovable personal property; and (c) third, to Landlord, the remainder ofsuch award, whether as compensation for reduction in the value of theleasehold, the taking of the fee, or otherwise. If this Lease is notterminated, Landlord shall promptly repair any damage to the Property caused bythe Condemnation, except that Landlord shall not be obligated to repair anydamage for which Tenant has been reimbursed by the condemning authority. If theseverance damages received by Landlord are not sufficient to pay for suchrepair, Landlord shall have the right to either terminate this Lease orpromptly make such repair at Landlord’s expense.

 

**ARTICLEELEVEN: TAXES**

 

Tenant shall pay theparty named in Article 1.10 above, as additional rental, the real estatetaxes on the Property for any year during the Lease Term. Tenant shall makesuch payment within twenty (20) days after receipt of a statement showing theamount and computation of such taxes. Tenant shall be responsible for thepro-rata portion of such additional rental for the portion of the firstcalendar year of the Lease Term beginning on the Commencement Date, payable asspecified in this Article 11, and for any fractional part of a yearpreceding the end of the Lease Term, which prorated sum shall be due andpayable upon the termination of this Lease. If the termination of this Leaseoccurs before the tax rate is fixed for the particular year, the prorationshall be upon the basis of the tax rate for the preceding year applied to thelatest assessed valuation, and notwithstanding the termination of this Lease,any difference in the actual real estate taxes for such year shall be adjustedbetween the parties upon receipt of written evidence of the payment thereof.Tenant agrees to pay all personal property taxes levied against the Propertyand Tenant during the term hereof by reason of Tenant’s improvements,inventory, equipment and business conducted at the Property. The Landlord shallhave the right to employ a tax consulting firm to attempt to assure a fair taxburden on the building and grounds within the applicable taxing jurisdiction.Tenant agrees to pay its proportionate share of the reasonable cost of suchconsultant. At its own cost and expense, Tenant shall have an independent rightto protest or appeal the value of the Property pursuant to the Texas PropertyCode. Landlord will reasonably cooperate with Tenant in such efforts, howeverLandlord shall have no obligation to provide notice to Tenant of any protest orappeal or any appraisal or reappraisal of the value of the Property, butLandlord or Landlord’s agent will deliver any statement of appraised value toTenant not later than twenty five (25) days after receipt.

 

**ARTICLETWELVE: SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE**

 

12.01  SUBORDINATION. Subject to Tenant’s receipt ofa Subordination Non-Disturbance and Attornment Agreement (“SDNA”) in a formreasonably acceptable to Tenant and its lender. Landlord shall have the rightto subordinate this Lease to any ground lease, deed of trust or mortgage encumberingthe Property, and advances made on the security thereof and any renewals,modifications, consolidations, replacements or extensions thereof, whenevermade or recorded.

 

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However, Tenant’s rightto quiet possession of the Property during the Lease Term shall not bedisturbed if Tenant pays the rent and performs all of Tenant’s obligationsunder this Lease and is not otherwise in default (beyond any applicable noticeand cure periods). If any ground Landlord, beneficiary or mortgagee elects tohave this Lease prior to the lien of its ground lease, deed of trust ormortgage and gives written notice thereof to Tenant, this Lease shall be deemedprior to such ground lease, deed of trust or mortgage whether this Lease isdated prior or subsequent to the date of said ground lease, deed of trust ormortgage or the date of recording thereof. Landlord shall use its best effortsto obtain an SNDA (in the form attached as Exhibit “D” attached hereto)from its existing lender within twenty one days of the execution of this Lease,however, the SNDA shall be provided not later than ninety days after executionof this Lease.

 

12.02  ATTORNMENT. If Landlord’s interest in theProperty is acquired by any ground Landlord, beneficiary under a deed of trust,mortgagee or purchaser at a foreclosure sale, Tenant shall attorn to thetransferee of or successor to Landlord’s interest in the Property and recognizesuch transferee or successor as Landlord under this Lease, provided suchsuccessor Landlord executes a SNDA in form reasonably satisfactory to Tenant.Tenant waives the protection of any statute or rule of law which gives orpurports to give Tenant any right to terminate this Lease or surrenderpossession of the Property upon the transfer of Landlord’s interest so long asthe transferee performs Landlord’s obligations under this Lease.

 

12.03  SIGNING OF DOCUMENTS. Upon reasonable writtenrequest by the other party, Landlord or Tenant shall sign and deliver anyinstruments or documents necessary or appropriate to evidence any suchattornment or subordination or agreement to do so.

 

12.04  ESTOPPEL CERTIFICATES.

 

a.             Upon Landlord’s or Tenant’sreasonable written request, Landlord or Tenant shall execute, acknowledge anddeliver to the other party a written statement certifying (i) that none ofthe terms or provisions of this Lease have been changed (or if they have beenchanged, stating how they have been changed); (ii) that this Lease has notbeen cancelled or terminated; (iii) the last due date of payment of therent and other charges and the time period covered by such payment; and (iv) thatLandlord or Tenant, as the case may be, is not in default under this Lease (or,if Landlord or Tenant is claimed to be in default, stating why). Landlord orTenant shall deliver such statement to the other party within twenty (20)business days after request. Any such statement by Tenant may be given byLandlord to any prospective purchaser or

 

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encumbrancer of theProperty. Such purchaser or encumbrancer may rely conclusively upon suchstatement as true and correct.

 

b.             If Landlord or Tenant does notdeliver such statement to the other party within such twenty (20) business daysperiod, Landlord or Tenant, as the case may be, may conclusively presume andrely upon the following facts: (i) that the terms and provisions of thisLease have not been changed except as otherwise represented by Landlord orTenant; (ii) that this Lease has not been cancelled or terminated exceptas otherwise represented by the Landlord or Tenant; (iii) that not morethan one month’s rent or other charges have been paid in advance; and (iv) thatLandlord or Tenant is not in default under the Lease. In such event, Landlordor Tenant, as the case may be, shall be estopped from denying the truth of suchfacts.

 

**ARTICLETHIRTEEN: MISCELLANEOUS**

 

13.01  EXHIBITS. All exhibits, attachments, annexed instruments and addenda referred toherein shall be considered a part hereof for all purposes with the same forceand effect as if copied at full length herein.

 

13.02  INTERPRETATION. Words of any gender used inthis Lease shall be held and construed to include any other gender, and wordsin the singular shall be held to include the plural, unless the contextotherwise requires.  In any provisionrelating to the conduct, acts or omissions of Tenant, the term “Tenant” shallinclude Tenant’s agents, employees, contractors, invitees, successors,permitted assigns or others using the Property with Tenant’s expressed orimplied permission.

 

13.03  CAPTIONS. The captions or headings of paragraphs in the Lease are inserted forconvenience only, and shall not be considered in construing the provisionshereof if any question of intent should arise.

 

13.04  WAIVERS, All waivers must be in writing andsigned by the waiving party. Landlord’s failure to enforce any provision ofthis Lease or its acceptance of rent shall not be a waiver and shall notprevent Landlord from enforcing that provision or any other provision of thisLease in the future. No statement on a check from Tenant or in a letteraccompanying a payment check shall be binding on Landlord.  Landlord may, with or without notice toTenant, negotiate such check without being bound to the conditions of suchstatement.

 

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13.05  SEVERABILITY.  If any clause orprovision of this Lease is illegal, invalid or unenforceable under present orfuture laws effective during the term of this Lease, then and in that event, itis the intention of the parties hereto that the remainder of this Lease shallnot be affected thereby, and it is also the intention of the parties to thisLease that in lieu of each clause or provision of this Lease that is illegal,invalid or unenforceable, there be added, as a part of this Lease, a clause orprovision as similar in terms to such illegal, invalid or unenforceable clauseor provision as may be possible and be legal, valid and enforceable.

 

13.06  JOINTAND SEVERAL LIABILITY. All parties signing this Lease as Tenants shall bejointly and severally liable for the obligations of Tenant.

 

13.07  INCORPORATIONOF PRIOR AGREEMENTS; MODIFICATIONS. This Lease is the only agreement betweenthe parties pertaining to the lease of the Property and no other agreements arein effect.  All amendments to this Leaseshall be in writing and signed by all parties. Any other attempted amendmentshall be void.

 

13.08  BINDING EFFECT.  The terms,conditions and covenants contained in the Lease, shall apply to, inure to thebenefit of, and be binding upon the parties hereto and their respective heirs,representatives, successors and permitted assigns, except as otherwise hereinexpressly provided. Landlord agrees to cause any purchaser, assignee or othertransferee acquiring title to the Property to assume in writing all of Landlord’sobligations, duties and covenants under this Lease.  All rights, powers, privileges, immunitiesand duties of Landlord under this Lease, including but not limited to anynotices required or permitted to be delivered by Landlord to Tenant hereunder,may, at Landlord’s option, be exercised or performed by Landlord’s agent orattorney.

 

13.09  NOTICES.  Any notice, payment ordocument required or permitted to be delivered hereunder shall be in writingand shall be deemed to be delivered whether actually received or not, (i) twobusiness days after being deposited in the United States Mail, postage prepaid,certified mail, return receipt requested, or (ii) the next business dayafter being sent by nationally recognized courier service for next business daydelivery, addressed to parties hereto at the respective addresses statedherein, or at such other address as they have theretofore specified by writtennotice delivered in accordance herewith. Notices to Landlord and Tenant shall be delivered to the addressesspecified on the signature page hereof.

 

13.10  FORCE MAJEURE.  In the eventperformance by Landlord of any term, condition or covenant in this Lease isdelayed or prevented by any Act of God, strike, lockout, shortage of

 

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material or labor,restriction by any governmental authority, civil riot, flood or any other causenot within the control of Landlord, the period of performance of such term,condition or covenant shall be extended for a period equal to the periodLandlord is so delayed or hindered.

 

13,11  ATTORNEYS’ FEES. If on account of any breachor default of any party hereto in its obligations to any other party hereto, itshall become necessary for the non-defaulting party to employ an attorney toenforce or defend any of its rights or remedies hereunder, the defaulting partyagrees to pay the non-defaulting party its reasonable attorneys’ fees, whetheror not suit is instituted in connection therewith.

 

13.12  TIME OF ESSENCE. Time is of the essence inthis Lease.

 

13.13  APPLICABLE LAW.  This Lease Agreement shall be construed underthe laws of the State of Texas. Venue for any action under this Lease shall bethe county in which the Property is located.

 

13.14  WARRANTIES DISCLAIMED. Landlord and Tenantexpressly agree that there are and shall be no implied warranties ofmerchantability, habitability, fitness for a particular purpose or any otherkind arising out of this Lease Agreement and that all express or impliedwarranties in connection therewith are expressly disclaimed.  Notwithstanding this express disclaimer ofwarranties, Landlord does represent and warrant, that to the best of Landlord’sactual knowledge, the Property has been maintained in compliance withenvironmental laws, rules and regulations and is free of all hazardousmaterials as of the date of execution of this Lease Agreement.

 

**ARTICLEFOURTEEN: SPECIAL PROVISIONS**

 

14.01  RENEWAL OPTIONS.  So long as Tenant is not in default hereunderbeyond any applicable notice and cure period, and in consideration of Tenantfulfilling all other terms, covenants, conditions, and obligations of thisLease, Tenant shall have the option to renew this Lease for one additional termof thirty six (36) months (“First Renewal Term”) and one additional term oftwenty four (24) months (“Second Renewal Term”). Such renewals shall be on thesame terms, covenants or conditions as provided for in the original term,except that the Base Rent during the First Renewal Term shall be adjusted bythe Consumer Price Index as set forth in Article 14.02.  The Base Rent during the Second Renewal Termof twenty four (24) months shall be at the fair market rental then in effect onequivalent properties, of equivalent size, in equivalent areas with the lengthof the lease, and the length of the renewal term, and other relevant factors,to

 

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be taken into account.The primary method of determining fair market rental during the Second RenewalTerm shall be an agreement between Landlord and Tenant. Should Landlord andTenant fail to agree upon the fair market rental, each may hire a real estateappraiser certified by the State of Texas to determine the fair market rental,and in the event that the appraisals so prepared (a) differ by 10% orless, the fair market rental during the Second Renewal Term shall be deemed tobe the average of the two appraisals or (b) differ by more than 10%, thenthe two appraisers shall appoint a third impartial real estate appraisercertified by the State of Texas, whose valuation shall constitute the final,binding fair market rental of the Property. Notwithstanding the foregoing sentence, in the event that the fairmarket rental rate as determined pursuant to the appraisal method set forthherein is unacceptable to the Tenant, Tenant shall have the right to rescindits election to exercise the Second Renewal Term and the Lease shall expire atthe end of the First Renewal Term. In no event shall the Base Rent, in theSecond Renewal Term be less than the Base Rent in the last month of the FirstRenewal Term. Notice of Tenant’s intention to exercise the option must be givento Landlord in writing not less than one hundred eighty (180) days prior to theexpiration of the original term of this Lease or the expiration of the FirstRenewal Term, whichever is applicable. In the renewal terms, Tenant shall alsopay as additional rent ad valorem taxes, insurance, maintenance assessments,tenant maintenance, and all other charges and assessments that Tenant isresponsible for during the Lease Term.  Inthe event the Property is sublet or assigned, in violation of Article 7 ofthis Lease, this renewal option will be null and void and of no further effect.

 

14.02  CONSUMER PRICE INDEX INCREASES TO BASERENT.  At the beginning of the FirstRenewal Term (February 1, 2015), if Tenant elects to extend the Lease Termin accordance with Article 14.01, the Base Rent shall be the Base Rent forthe last month of the Lease Term, as adjusted by any increase in the indexknown as the United States Bureau of Labor Statistics, Consumer Price Index forUrban Wage Earners and Clerical Workers, United States City Average, index BasePeriod (1982-84=100) (“CPI-W”) from February 1, 2013. Then, at the end ofeach twelve (12) month period of the First Renewal Term , the Base Rent shallagain be adjusted as of that date based on the Base Rent for the last month ofthe immediately preceding twelve (12) month renewal period adjusted by anyincreases in the CPI-W. In no event shall the Base Rent, in either the first,second or third year of the First Renewal Term be less than the Base Rent inthe immediately preceding annual period. If the CPI-W shall be revised or ceaseto be compiled during the term of the Lease, or in some other way fail to be areliable index for the purposes of the Lease, the parties shall agree in goodfaith on some other index serving the same purpose to adjust the Base Rent.

 

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14.03  ACCESS TO PREMISES.  Tenant may access the Property through theSouth Gate adjacent to the front loading dock in addition to other accesspoints.  Upon Lease Termination, Tenant shall,at Landlord’s option, remove any gates installed by Tenant and repair the fenceto its original condition.

 

14.04 CONSTRUCTION ANDACCEPTANCE OF PROPERTY. Tenant, at Tenant’s sole cost and expense, will performthe following construction:

 

*Theinterior renovation project consists of 4,975 square feet of usable officespace.  The usable office space willconsist of (10) ten enclosed offices, two gang office area’s for work cubicles,a conference room, copy/work area, a second work area, break room, Data closet,and men’s and women’s toilet facilities. Also included in the project is thedemolition of all construction related to the existing usable office space andthe erection of a new rated demising wall.*

 

The construction on theProperty shall be in accordance with the provisions of Exhibit “B” attachedhereto. By occupying the Property, Tenant shall be deemed to have accepted thesame and to have acknowledged that the Property fully complies with Landlord’scovenants and obligations hereunder, except as may be otherwise expresslyprovided in Exhibit “B”. The Property is leased to Tenant in an “AS IS”“WHERE IS” condition and without warranty of any kind, except as may beherein otherwise expressly provided.

 

14.05  PATRIOT ACT. Tenant (which for this purposeincludes without limitation, its partners, members, principal stockholders andany other constituent entities) represents and warrants (i) that it hasnot been designated as a “Specially Designated National and Blocked Person” onthe most current list published by the United States Treasury Department Officeof Foreign Assets Control at its official website,http://www.treas.gov/ofac/tllsdn.pdf or at any replacement website or otherreplacement official publication of such list or for or on behalf of anyperson, group, entity, or nation designated in Presidential Executive Order13224 as a person who commits, threatens to commit, or supports terrorism; (ii) thatit is not engaged in this Lease directly or indirectly for or on behalf of, orfacilitating this Lease directly or indirectly on behalf of, any such person,group, entity, or nation; (iii) that it is currently in compliance withand will at all times during the term of this Lease (including any extensionthereof) remain in compliance with the regulations of the Office of ForeignAssets Control of the United States Treasury Department and any statute,executive order (including without limitation the September 24, 2001,Executive Order Blocking Property and Prohibiting Transactions with Person WhoCommit, Threaten to Commit or Support Terrorism), or other governmental actionrelating thereto; and (iv) that it has not used and will not use fundsfrom illegal activities for any payment made under the Lease. Tenant agrees todefend, indemnify, and hold harmless Landlord from and against any and all

 

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claims, damages, losses,risks, liabilities, and expenses (including reasonable attorneys’ fees andcosts) arising from or related to any breach of the foregoing representationand warranty.

 

14.06 SUPERSEDINGAGREEMENT.  This Lease Agreement supersedesin all respects the Lease Agreement between the same parties dated November 16,2007 with an expiration date of May 31, 2008.

 

[signatures on next page]

 

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EXECUTED as of the datestated in Article 1.01 above.

 
| **LANDLORD:**                | ** **                   | **TENANT:**                                    |
|------------------------------|------------------------------|------------------------------------------------|
| INVESTMENT  PROPERTIES, LTD. |                         | ISI SECURITY  GROUP, INC.                      |
| BY: PROPER  INVESTMENTS, LLC |                         | f/k/a ISI  DETENTION CONTRACTING GROUP,   INC. |
| GENERAL PARTNER              |                         |                                           |
|                         |                         |                                           |
|                         |                         |                                           |
| By:                          |  /s/ Brian  Weiner |                                           | By: |  /s/ Samuel  C. Youngblood |
|                         | Brian Weiner,  President     |                                           | Samuel C.  Youngblood, CEO |
|                         |                         |                                           |   |
|                         |                         |                                           |   |
| **ADDRESS:**                 |                         | P.O. Box  7608                            |   | **ADDRESS:** |   | 12903 Delivery  Drive |
|                         |                         | San Antonio,  Texas 78207                      |   |   |   | San Antonio,  Texas 78247 |
|                         |                         | Telephone:  210-226-6820                       |   |   |   | Telephone: 210.495.5245 |
|                         |                         | Facsimile:  210-226-5716                       |   |   |   | Facsimile:  210.798.2984 |
|                              |                              |                                                |  |  |  |  |  |  |  |  |  |

 

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EXHIBIT “A”

 

**LEGAL DESCRIPTION**

 

**Lots 8 &9, Block 4, NCB 17578, Wetmore Business Park, Unit 3, City of San Antonio,Bexar County, Texas**

 

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**EXHIBIT “B”**

 

**CONSTRUCTION AND IMPROVEMENTS**

 

This Exhibit “B” isattached to the annexed Commercial-Industrial Lease Agreement (the “Lease”) byand between the Landlord and the Tenant named below.

 

ARTICLE I

PARTIES

 

Section 1.01Landlord: Investment Properties, Ltd., a Texas limited partnership

 

Section 1.02Tenant: ISI Security Group f/k/a 1SI Detention Contracting Group, Inc.,a Delaware corporation

 

ARTICLE II

LANDLORD’S WORK

 

Section 2.01With the exception of the work that Landlord has agreed to do as described in Section 2.02,it is expressly stipulated and agreed that Landlord shall not be obligated orrequired to perform any work in, on or at the Property. Tenant acknowledgesthat it has, prior to the execution hereof, inspected the Property and thatTenant has accepted the Property in its **“AS IS, WHERE IS”**condition, it being agreed that Landlord shall have no liability orresponsibility for defects in the Property, except as may be otherwiseexpressly provided in this Lease.

 

Section 2.02Landlord, at its sole cost and expense, shall complete the following work atthe property: NONE

 

Section 2.03General Provisions. Landlord shall have the right to locate utilitylines, air ducts, flues, refrigerant lines, drains, sprinkler mains and valves,and such other facilities (including access panels for same) within theProperty as deemed necessary by engineering, design and/or code requirements.Landlord shall also have the right to locate mechanical and other equipment onthe roof over the Property.

 

ARTICLE III

TENANT’S PLANS FOR THE PROPERTY

 

Section 3.01Submission of Plans. Tenant shall prepare and submit to Landlord, atTenant’s sole cost and expense, three (3) sets of plans and specificationsand working drawings for the work to be performed to finish the Property inaccordance with Tenant’s requirements set forth in Articles IV and V of this Exhibit “B”(the “Tenant’s Plans”). Tenant’s Plans shall be subject to Landlord’s approvalin writing prior to commencement of any construction by Tenant in or on theProperty. Tenant’s Plans shall be prepared in strict accordance with theprovisions contained in this Exhibit and shall indicate in detail the designcharacter and finishing of the premises. Within ten (10) days afterreceipt of Tenant’s Plans, Landlord

 

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shall notify Tenant ofany matters to which Landlord objects. Within ten (10) days after receiptof any such notice, Tenant shall cause Tenant’s Plans to be revised to theextent necessary to obtain Landlord’s approval and to be re-submitted forLandlord’s approval. The above process of submission of Tenant’s Plans toLandlord shall be repeated until all of Landlord’s objections have been satisfied.Tenant shall be responsible for obtaining any and all permits, licenses andother governmental approvals and consents necessary or required with respect toTenant’s Plans. Tenant shall furnish appropriate copies of Tenant’s Plans toany and all governmental agencies and authorities having jurisdictionsimultaneously with the submission of Tenant’s Plans to Landlord. In no eventwill Tenant’s Plans be approved or deemed approved by Landlord unless and untilthe same have been approved by all such governmental agencies and authorities.

 

Section 3.02Approval of Plans. When Landlord has approved Tenant’s Plans, the sameshall become a part hereof and shall be incorporated herein by this referencefor all purposes. After Tenant’s Plans have been approved by Landlord, nochanges, substitutions or eliminations therein shall be made without the priorwritten approval of Landlord, and Tenant shall pay any and all additional costsand expenses (including, but not limited to, architectural fees andconstruction costs) which may be incurred by Landlord in connection with or asa result of any such changes, substitutions or eliminations.

 

Section 3.03Tenant’s Failure to Submit or Resubmit Plans. Notwithstanding any otherprovision contained in the Lease or this Exhibit, in the event Tenant shallfail or refuse for any reason to submit or resubmit Tenant’s Plans as necessaryto obtain Landlord’s approval thereof within sixty (60) days after the Date ofthe Lease, Landlord shall have the continuing right and option, in addition toand without limiting or impairing any other rights available to Landlord underthe Lease, to cancel and terminate the Lease by written notice to Tenant,whereupon this Lease shall be and become null and void and of no further forceor effect and neither party shall have any further rights or obligationswhatsoever hereunder. It is further expressly understood and agreed that, inthe event the Lease is cancelled and terminated in accordance with theprovisions of this paragraph, Landlord shall be entitled to keep and retain asagreed liquidated damages on account of such default any and all sumstheretofore paid by Tenant to Landlord under the Lease.

 

ARTICLE IV

TENANT’S WORK

 

Section 4.01Work by Tenant in Property. Tenant, at its sole cost and expense, shallperform all work required to complete the Property strictly in accordance withthe approved Tenant’s Plans (“Tenant’s Work”) to a finished condition ready forthe conduct of business. Tenant’s Work shall conform to procedures, schedulesand criteria as set forth herein. Without limiting any other requirementsrelating to Tenant’s Work hereunder, Tenant shall be required to provide alladditional steel framing necessary or required for bracing Tenant’s mechanicalequipment and all necessary engineering design associated therewith.

 

Section 4.02Requirements for Tenant’s Contractor. All contractors andsub-contractors engaged in the performance of Tenant’s Work must be licensedand bondable. Any damage to any work caused by Tenant

 

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or Tenant’s Contractorshall be at the sole cost and expense of Tenant. Tenant shall submit toLandlord at least ten (10) days prior to the commencement of construction,the following information:

 

(a) The name andaddress of Tenant’s Contractor, and the names of the plumbing, mechanical, firesprinkler and electrical subcontractors (if any) to be engaged in theconstruction of the Property.

 

(b) The actualcommencement date of construction and estimated date of completion of the work.

 

(c) Evidence ofinsurance called for in this Exhibit B.

 

(d) Copy of allcontracts and subcontracts relating to the performance of Tenant’s Work.

 

(e) A bond issued bya bonding company approved by Landlord assuring the performance of Tenant’s Contractorand the payment of all obligations arising under such contract.

 

Section 4.03Performance of Tenant’s Work. All Tenant’s Work shall be governed by andsubject to the following:

 

(a) Constructionshall comply in all respects with applicable federal, state, city and countystatutes, ordinances, regulations, laws and codes, including, withoutlimitation, all requirements of the Americans With Disabilities Act and theTexas Architectural Barriers Act.

 

(b) All requiredbuilding and other permits in connection with the construction and completionof Tenant’s Work shall be obtained and paid for by Tenant.

 

(c) Tenant’s Workshall be subject to the general inspection and approval of Landlord.

 

(d) All roofopenings shall be approved by Landlord. No equipment shall be installed on theroof without the prior written approval of Landlord.

 

(e) Tenant shallkeep the Property free and clear of all liens and claims of liens in connectionwith Tenant’s Work.

 

Section 4.05Temporary Facilities During Construction. Tenant’s Contractor shallprovide and pay for all temporary power, water, other utility facilities, andthe collection of debris, as necessary and required in connection with theconstruction of the Property. Storage of Tenant’s Contractors’ constructionmaterials, tools, equipment and debris shall be confined within the Property.Tenant’s Contractor shall not run pipes or conduits over or through otherportions of the Property, except as may be directed and approved by Landlord.

 

Section 4.06Upon completion of construction of all Tenant’s Work in the Property, Tenantshall deliver to Landlord one (1) set of record plans and one (1) setof sepias (not to exceed 30” X 42”) and one (1) set of specifications anda copy of all required certificates of occupancy for the Property.

 

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Section 4.07Cleanup and Discipline:

 

(a) Tenant shall beresponsible for the preservation of good order and discipline among theemployees of Tenant and Tenant’s Contractor.

 

(b) Tenant shallmaintain the Property in a clean and orderly condition during construction andmerchandising. Tenant shall promptly remove all unused construction materials,equipment, shipping containers, packaging, debris and flammable waste from thesite. Tenant shall keep all construction materials, equipment, fixtures andmerchandise shipping containers within the Property. All trash storage withinthe premises shall be confined to covered metal containers.

 

Section 4.08Insurance. Tenant shall provide or shall cause its contractors andsub-contractors to provide insurance in responsible companies licensed to dobusiness in Texas in favor of Landlord and Tenant, as their respectiveinterests may appear, as follows:

 

(a) Liabilityinsurance as required by the Lease.

 

(b) Builder’s RiskCompleted Value fire and extended coverage insurance for the estimated cost of Tenant’sWork.

 

(c) Worker’sCompensation insurance covering all persons employed in connection with Tenant’sWork and with respect to whom death or bodily injury claims could be assertedagainst Landlord or the Property.

 

Section 4.09Indemnity. Tenant shall and does hereby agree to indemnify and holdLandlord, its agents and employees, harmless from and against any and allclaims, demands, suits and causes of action for injury to person or death andfor damage to property, including property of Landlord, arising out of or inany way connected with the construction and installation by Tenant ofimprovement required hereunder.

 

Section 4.10Allowance. Upon completion of Tenant’s Work in the Property, Tenantshall furnish Landlord:

 

(a) A Certificate ofOccupancy issued by the municipality in which the Property is located or otherevidence satisfactory to Landlord that the improvements have been approved bysuch municipality;

 

(b) An Affidavit andLien Waiver in form satisfactory to Landlord executed by Tenant’s Contractor statingthat Tenant’s Work has been completed in accordance with the provisions hereofand that all subcontractors, laborers and material suppliers engaged in orsupplying materials for such work have been paid in full;

 

(c) Lien Waivers inform satisfactory to Landlord executed by all subcontractors and materialmenwho shall have furnished labor and/or materials for the work in excess of$10,000.00;

 

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(d) Certificates ofinsurance for all policies of insurance required to be provided by Tenant.

 

As consideration forTenant’s Work, Landlord agrees to (1) maintain the Base Rent at $5,400.00for the first three months of the Lease Term and (2) make a one timepayment of $150,000.00 (“Tenant Construction Allowance”) to Tenant uponcompletion of the items enumerated in this Section 4.10 (a) through(d). In the event the Landlord fails to pay to Tenant the Tenant ConstructionAllowance within five (5) business days of the satisfaction by Tenant of theconditions set forth in 4. l0(a)-(d) above, (i) the TenantConstruction Allowance will accrue interest at the rate per annum equal to thelesser of (A) the highest lawful rate and (B) 10% and (ii) Tenantmay deduct such unpaid amounts (plus interest thereon) from rent and other sumsdue under the Lease without further notice to Landlord.

 

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**EXHIBIT “C”**

** **

*Declaration of Covenants for Office,Commercial, Warehouse, and Industrial Section of Wetmore Business Park, SanAntonio, Texas*

 

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DECLARATION OFPROTECTIVE COVENANTS FOR OFFICE, COMMERCIAL, WAREHOUSE AND INDUSTRIAL SECTION OF WETMORE BUSINESS PARKSAN ANTONIO, TEXAS

 

THIS DECLARATION made this 1st day of January, 1985 byQuincy Lee Industrial Joint Venture No. 5, herein called “Developer”.

 

W I T N E S S E TH:

 

WHEREAS, Developer is the owner of all the following describedreal property to-wit:

 

64.154 acre (2,794,542,417square feet) tract of land formerly described as 64,137 tract recorded inVolume 2356, Page 184, Official Public Records of Real Property, BexarCounty, Texas and out of a 65 acre tract recorded in Volume 1233, Page 639,Deed Records, Bexar County, Texas, and being out of the Louis Kneipp Survey No.11, Abstract 391, County Block 5014, Bexar County, Texas and being partiallylocated in New City Block 15678, City of San Antonio, Bexar County, Texas.

 

WHEREAS, such propertyhas been designated as Wetmore Business Park by Developer with the intent todevelop the above described property as a planned, mixed use businessdevelopment in the City of San Antonio, Bexar County, Texas, and

 

WHEREAS, Developerdesires to provide for the systematic, orderly development and use of the landin Wetmore Business Park and to provide systematic and timely construction criteria,taking into consideration the aesthetics of a properly planned development; and

 

WHEREAS, Developer intendsfor the development and the construction of buildings in Wetmore Business Park toproceed according to a general plan which provides for the mutual benefit of allsubsequent Owners of the property located in Wetmore Business Park.

 

NOW THEREFORE, Developerdeclares, publishes and encumbers the above described real property which shallbe held, transferred, sold, conveyed, occupied and used subject to the covenants,requirements, conditions and continuing rights held by Developer as hereinafterset forth.

 

I.

 

DEFINITIONS

 

A.            “Wetmore Business Park” (WBP) shall mean the realestate and business development above described herein sometimes referred to as“the business park”.

 

B.            “Developer” shall mean Quincy Lee Industrial JointVenture No. 5.

 

C.            “Improvements” shall mean and include, but not belimited to, buildings, outbuildings, roads, driveways, parking areas, fences, screeningwalls, retaining walls, loading areas and facilities, signs, utilities, lawns,hedges, mass plantings, landscaping, water lines, sewers, electrical and gasdistributions facilities and all metering equipment.

 

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D.            “Association” shall mean and refer to Wetmore BusinessPark Association, Inc., a Texas nonprofit corporation, its successors andassigns.

 

E.             “Owner” or “Property Owner” shall mean and refer toeach record owner other than the Association, whether one or more persons orentities, of a fee simple title to any part of the properties, includingcontract sellers, but excluding those having such interest merely as security forthe performance of an obligation.

 

F.             “Properties” shall mean and refer to that certain realproperty described above, being one tract comprising 64.154 acres.

 

G.            “Common Area” shall mean all real property owned bythe Association for the common use and enjoyment of the Owners or propertyowned by the City or by individual Owners which the Association is responsiblefor maintaining.  The common areas the Associationshall maintain are as follows:

 

1.             The entranceway and directional signs and signs advertisingthe subdivision as a whole.

 

2.             Medians owned by the City of San Antonio.

 

3.             Any areas within or abutting the property dedicated tothe City of San Antonio for street or easement purposes, (including areaswithin medians, parks, or drainage easements).

 

4.             Any landscaped area within the view of a dedicatedstreet.

 

5.             Such additional portion of the Properties as Developermay from time-to-time designate as Common Area.

 

H.            “Lot” shall mean and refer to any plot of land shownupon the recorded subdivision map or plat of the properties with the exception ofthe common area.

 

I.              “Declarant” shall mean and refer to Quincy LeeIndustrial Joint Venture No. 5.

 

J.             “Architectural Committee” shall mean the three memberArchitectural Control Committee constituted as set forth in Article VIIhereof.

 

K             “CPI” shall mean the “Consumer Price Index for AllUrban Consumers” specified for “U.S. City Average - All Items” by the U.S.Bureau of Labor Statistics, or in the event of discontinance then by any other nationallyrecognized publisher of similar statistical information, with a base index of1967=100.

 

II.

 

MEMBERSHIP ANDVOTING RIGHTS

 

A.            Every Owner shall be a member of the Association. Membershipshall be appurtenant to and may not be separated from ownership of any Lotwhich is subject to assessment.

 

B.            The Association shall have one (1) class of votingmembership. The members shall be entitled to one (1) vote for each full acrecomprising a Lot or Lots or one vote if the Lot comprises less than one acre.When more than one person holds an interest in any acre, votes for such Lotshall be exercised as they among themselves determine, but in no event shallthere be more than one (1) vote per acre, except in respect to Lotscomprising less than one (1) acre.

 

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III.

 

USE OF PREMISES

 

The following provisions shall govern the use ofbuilding.

 

A.            Permitted Uses:  Office, commercial,warehouse, industrial, retail or combination thereof.

 

B.            Non-Permitted Uses:  Any use oroccupancy which:

 

1.             Is noxious or offensive to Owners of 10% or more ofWetmore Business park by reason of the emission or discharge of noise, vibration,smoke, glare, heat, radiation, fumes or wastes, odorous or particulate matter.

 

2.             Storage, handling or use explosive material.

 

3.             Commercial landfill, dump, junkyard or other similaroperation.

 

4.             Raising, maintenance, housing or treatment of livestockor other animals, except as conducted entirely inside a laboratory and forscientific purposes.

 

5.             Commercial storage, sales or repair (except new automobileagency or dealer) of motor vehicles, mobile homes, trailers, portable buildingsor other temporary buildings.

 

6.             Outdoor storage or display of equipment, material ormerchandise except where not visible from any public street.

 

7.             Commercial amusement, entertainment or recreationalfacilities such as nightclubs, taverns, massage parlors, kiddie parks, dancehalls, outdoor theatres, and race tracks, except as such use is whollycontained within a bona fide restaurant or as is otherwise considered an amenityby the business park clientele, such as a health club, tennis club orracquetball club.

 

8.             Institutional establishments which by nature of operationor character are incompatible with the business park environment, including specifically:nursing homes, churches, mortuaries, funeral homes, and cemeteries.

 

9.             Temporary buildings, trailers and mobile homes in theopen, except as a construction office for a project being constructed withinthe business park and only for the period of such construction.

 

IV.

 

CONSTRUCTION ANDDEVELOPMENT STANDARDS

 

A.            Structural:

 

1.             Exterior Walls:  Shallbe 100% brick face, face tile, painted concrete, exposed architectural sand blastedconcrete, glass, metal or combination thereof of a design and color approved bythe Architectural Committee. No corrugated metal may be used. No concrete blockor tile construction may be used unless the wall is completely covered withstucco or a similar material.

 

2.             Roof Structure:  Allobjects mounted on the roof of any building such as air-conditioning units, exhaustfans,

 

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chillers, etc. must be screenedfrom view from any street or adjoining building.

 

3.             Lighting:  All parking lotsand buildings shall be lighted from sun-down to sun-up to provide for night-timesecurity. Lighting plans shall be approved by the Architectural Committee.

 

4.             Signs:

 

a.             Permitted signs are those which;

 

1.             Identify the business park and give directions. 

 

2.             Identify a building or a particular business.

 

b.             Non-Permitted signs are:

 

1.             Portable signs of any kind.

 

2.             Pole signs, pylon signs or signs protruding above the buildingroof Line or building parapet.

 

3.             Neon signs, blinking, rotating or animated signs.

 

4.             Promotional signs except for not more than one signof not more than thirty-two (32) square feet in area used to advertise aproperty for sale or lease. This sign must be removed as soon as the propertyis sold or leased.

 

c.             Approval:

 

1.             All signs must be architecturally coordinated with thedevelopment to which they apply and be architecturally compatible with otherbusiness park sign. All sign plans must conform to any sign criteria promulgatedby the Architectural Committee and must be approved in writing by the ArchitecturalCommittee.

 

5.             Outdoor Storage and Screening:

 

a.             Masonry screen walls (same as exteriorwalls) a minimum of 8’ in height but not less than 1’ taller than the item beingscreened shall be provided to visually screen from all parking areas andstreets and shall be within an area approved by the Architectural Committee:

 

1.             Refuse containers, utility meters and transformers;

 

2.             Outdoor storage of any kind other thannormal parking.

 

b.             A chain link fence with continuousscreening of a design and material approved by the Architectural Committee ordense landscaping may be substituted for 5.a. above.

 

6.             Fences:  No fence maybe built within view of any public street unless the fence conforms to 5.a. or5.b. above.  Any gates opening onto MetroParkway must be solid metal and painted.  No fence or wall may be

 

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erected within 40’ of the right of way line of any publicstreet.

 

7.             Parking and Truck Loading Areas:

 

a.             Parking lots shall be paved with concrete, asphalt orother permanent material.

 

b.             All parking lots built within 100’ of Metro Parkway or200’ of Wetmore Road must be overlayed with asphalt or tinted coated or coloredto simulate the dark gray appearance of asphalt.

 

c.             All parking areas shall conform to the City Code ofSan Antonio, Texas. 

 

d.             No inventory vehicles, equipment or other property naybe maintained, stored, or placed outdoors without the express written consentof the Architectural Committee except for vehicles and one television satellitedish antenna, which shall be kept within the truck loading area to the rear ofimprovements.

 

e.             With respect to buildings located on Lots which adjoinMetro Parkway, no truck doors or dock doors shall face Metro Parkway unlessthey are completely and esthetically screened by wing walls and/or Landscapingas described in 5.a above.

 

f.              No on-street parking shall be permitted.

 

B.            Landscaping:

 

1.             The street right of way line is 12’ outside of thecurb line of Metro Parkway.  From the 12’right of way line of Metro Parkway, the setbacks shall be:

 

a.             Parking: 13’ to form a 25’ parkway, inclusive ofright-of-way;

 

b.             Buildings, fences, walls, or screenwalls: 28’ to setall buildings a minimum of 40’ off the curb line.

 

2.             Parking areas must be set back 10’ from the curb lineon other public streets in the business park.

 

3.             All set back areas not used for parking or approaches andall areas of an improved Lot not covered with parking or buildings shall beeffectively landscaped.

 

4.             Landscaping shall consist of a combination of berms, grass,trees, shrubs, flowers and ground cover and an adequate underground sprinklersystem to be installed prior to the building shell being 95% complete.  Each Owner shall be responsible for watering andmaintaining vegetation on his Lot.

 

5.             All landscape maintenance for common areas, includingbut not limited to watering, fertilizing, pruning, trimming, mowing of grass, plantreplacement, spraying with herbicides and pesticides, weed removal, supervisionof crews, parking Lot sweeping, trash removal, and street cleaning shall beprovided by the Association with actual cost passed on to the land owner.  This cost shall be prorated among alllandowners on the basis outlined in Section VIII. D.  Any watering or maintenance of vegetation or landscapingby the

 

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Association within a Lot asa result of the Lot Owner’s failure so to do shall be billed to the Lot Owneras a special assessment against the Lot.

 

6.             All non-developed areas shall be bladed smooth, sown inBermuda grass and mowed regularly to maintain a neat appearance.  The Association will be responsible formowing and cleaning the undeveloped areas. The cost of this service will becharged to individual Owners on a quarterly basis.

 

7.             All landscape plans shall be reviewed and approved bythe Architectural Committee prior to installation.

 

8.             Should any Owner neglect, damage, or in any waydestroy, or allow to be destroyed any vegetation or landscaping upon his Lot,he shall be solely responsible for the repair or replacement thereof, and, inabsence of timely repair or replacement thereof by the Owner, the Associationmay perform such repair or replacement on behalf of and at the expense of theOwner.

 

V.

 

MAINTENANCE

 

A.            Construction Sites:  Each PropertyOwner shall maintain construction sites in a clean condition, removing accumulationof scrap and rubbish regularly and storing construction materials and equipmentin a neat, orderly manner.  On siteburning or disposal of trash shall be prohibited except in areas designated assuch by the Association, and in absence of designation, shall be prohibited.

 

B.            Developed Property:

 

1.             Outdoor storage of trash, materials, equipment, and vehiclesmust be screened as outlined in Article IV.5. All trash must be removed ona regular basis, and in no event less frequently than once weekly.

 

VI.

 

ENFORCEMENT

 

A.            Enforcement of Articles I and II: The Association and each Owner shall havethe right to enforce all restrictions and covenants imposed by this declaration. Failure to enforce any covenant orrestriction shall not be deemed a waiver of the right. The reservation of thiskind of enforcement shall not create an obligation of any kind to enforce same.Any court action brought to enforce any obligation or restriction hereunder shall,if successful, entitle the party initiating such action to the award of costs andattorney’s fees.

 

B.            Enforcement of Article III:  If,in the opinion of the Architectural Committee or the Owners of 10% of more ofthe business park, any Owner has failed to maintain its property, as specifiedin Article III, the Association may proceed as follows:

 

1.             Give the Owner written notice of such failure and theOwner must within thirty (30) days perform the care and maintenance required.

 

2.             Should the Owner fail to fulfill this dutywithin thirty (30) days, then the Association shall have the

 

6

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right to perform suchcare and maintenance without any liability for damages or wrongful entry ortrespassing.

 

3.             The defaulting Owner or occupants (including lessees) orany part of the properties in which such work is performed shall jointly andseverally be liable for the cost of such work and shall promptly reimburse theAssociation for such cost.

 

4.             Should the Owner or occupant fail to reimburse theAssociation within thirty (30) days after receipt of its statement, then the debtshall be a debt of all persons, jointly and severally, and shall constitute alien against that portion of the Lot on which the work was performed.

 

5.             The liens created shall be subordinate and inferior toany and all mortgages and Deed of Trust filed of record prior to filing of lienaffidavit by the Association or suit to foreclose lien.

 

6.             If any Owner requires an estoppel certificate indicatingthat no debt exists under the above provision and no debt does exist, then theAssociation shall promptly execute such certificate.

 

7.             Failure to pay on time will result in the overdueamount bearing interest at the highest legal rate compounded quarterly.

 

C.            Variances:

 

The Association shall have the sole authority to grantvariances to the covenants set forth in Articles I - IV of this instrument,Variances shall be granted only upon approval of Owners of more thanthirty-five (35) acres of property located within the park.

 

VII.

 

ARCHITECTURALCONTROL

 

A.            Architectural Control:  No building, fence,sign, or other structure or landscaping shall be erected, placed or altered onany Lot until the complete plans and specifications including site plan shallhave been approved in writing by a majority of a three member Architectural ControlCommittee designated by the Association. In the event the committee fails todisapprove any plans within ten (10) working days after submission, such plansshall be deemed approved. However, such non-action shall not constitute the approvalof any request for variance or of any plans which violate any provisionshereof. All decisions of the committee shall be final and binding and there shallbe no legal action taken against the committee or its members except by procedurefor injunctive relief when such action is patently arbitrary and capricious. Membersof the committee shall not be liable to any persons subject to or possessing orclaiming the benefits of these covenants for any damage or loss arising out oftheir acts hereunder.

 

It is understood andagreed that the remedy of any aggrieved party shall be restricted to injunctiverelief. In any event, approval of the Architectural Committee shall not beunreasonably withheld.

 

B.            The initial membership of the Architectural ControlCommittee shall consist of Mark Schwarz, Michael Hampton and Wm. Eugene Powell,Upon the death or resignation of any member, the remaining members shall appointa successor. The Association shall have the right to fill vacancies when the

 

7

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committee members havefailed to do so for more than fifteen (15) days following creation of avacancy.

 

VIII.

 

COVENANT FORMAINTENANCE ASSESSMENTS

 

A.            Creation of the Lien and Personal Obligation of Assessments:

 

The Declarants for each Lotowned within the Properties, hereby covenant and each Owner of any Lot byacceptance of a deed therefor, whether or not it shall be so expressed in such deed,is deemed to covenant and agree to pay the Association:

 

1.             annual assessments or charges, and

 

2.             special assessments for capital improvements, suchassessments to be established and collected as herein- after provided.

 

The annual and special assessments(including any expense incurred by the Association to discharge the responsibilitiesof a Lot Owner hereunder), together with interests, costs and reasonableattorney’s fees, shall be a charge on the land and shall be a continuing lienupon the property against which each such assessment is made, Each such assessment,together with interests, costs and reasonable attorney’s fees, shall also bethe personal obligation of the person who was the Owner of such property at thetime when assessment fell due. The personal obligation for delinquentassessments shall not pass to his successors in title unless expressly assumedby them.

 

B.            Purpose of Annual Assessments: The annual assessments levied by theAssociation shall be used exclusively for common area, maintenance, security, repair,taxes, utilities, and minor improvements made thereto, including the reasonablecosts of supervising, making and collecting such assessments.  Security services as may be deemed desirableby a majority of the Association members may be contracted for by the Association,but shall not be required to be provided by the Association and in no eventshall the Association be liable to Owners for security or for any negligence ormisfeasance of any security service contracted for or provided.

 

C.            Special Assessments for Capital Improvements: In addition to the annual assessments authorized above, the Associationmay levy, in any assessment year, a special assessment applicable to that year onlyfor the purpose of defraying, in whole or in part, the cost of anyconstruction, reconstruction, repair or replacement of a capital improvementupon the common area, including fixtures and personal property related thereto,providedthat any such assessment shall have the written consent ofthe Owners of the Lots, comprising two-thirds (2/3rds) or more of the acressituated in all the Lots. 

 

D.            Uniform Rate of Assessments:  EachLot, whether developed or not, shall be assessed that portion of the aforesaidannual or special assessments bearing the same ratio to the total thereof asthe number of square feet comprising said Lot shall bear to the total number ofsquare feet comprising all Lots.

 

E.             Date of Commencement of Annual Assessments - Due Dates:  TheAnnual assessments provided for herein shall commence October 1, 1985. The initialannual assessment shall be computed at a rate of $0.05 per square foot per Lot,

 

8

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prorated for the period October 1,1985 through December 31, 1985. Thereafter, annual assessments shall be atsuch rate as the Association may fix, shall be determined on a calendar yearbasis, and may be billed monthly, quarterly, or annually in advance by the Association.The Board of Directors of the Association shall, without vote of themembership, have the power to increase the annual assessment by the greater of:(a) five percent (5%) over the prior year’s assessment; or (b) the percentageincrease in CPI during the last full twelve month period preceding the settingof assessment for which such statistic is available. Membership approval of sixtypercent (60%) or more in interest shall be required to increase the annualassessment except as herein specifically authorized by the Board of Directors.

 

The annual assessment rateset forth above shall apply to all Lots which have been sold or leased by Declarantor which have been improved by a structure and opened for business or whicheverevent first occurs. All “unoccupied Lots,” defined herein to be all Lots ownedby Declarant, which have not been leased to another or improved by a structureand opened for business shall be assessed at a rate of one-third (1/3rd) theannual assessment rate provided for above.

 

F.             Effect of Nonpayment of Assessments – Remedies of theAssociation:  Any assessment or expense incurred by theAssociation to discharge an obligation of an Owner not paid within thirty (30) daysafter the due date shall bear interest from the due date at the rate ofeighteen percent (18%) per annum. The Association may bring an action at lawagainst the Owner personally obligated to pay the same, or foreclose the lien againstthe property. Each such Owner, by his acceptance of a deed to a Lot, herebyexpressly vests in the Association, or its agents the right and power to bring allactions against such Owner personally or the collection of such charges as adebt and to enforce the aforesaid lien by all methods available for theenforcement of such liens, including judicial foreclosure by an action broughtin the name of the Association in a like manner as a mortgage or deed of trust lienon real property, and such Owner hereby expressly grants to the Association apower of sale in connection with said lien.  The lien provided for in this section shall bein favor of the Association and shall be for the benefit of all other LotOwners. No Owner may waive or otherwise escape liability for the assessmentsprovided for herein by non-use of the common area or abandonment of his Lot.

 

C.            Subordination of the Lien to Mortgages:  Thelien of any assessments provided for herein shall be subordinate to the lien ofany first mortgage.  Sale or transfer ofany Lot shall not affect the assessment lien. However, the sale or transfer ofany Lot pursuant to mortgage foreclosure or any proceeding in lieu thereof, shallextinguish the lien of such assessments as to payments which became due priorto such sale or transfer. NO sale or transfer shall relieve such Lot fromliability or any assessment thereafter becoming due or from the lien thereof.

 

H.            Exempt Property:  Allproperties dedicated to, and accepted by, a local public authority and allproperties owned by a charitable or nonprofit organization exempt from taxationby the laws of the State of Texas may, at the discretion of the Board ofDirectors of the Association, be exempt from the assessments created hereinexcept in respect to any land used for business or proprietary functions. No landor improvements devoted to a business use shall be exempt from saidassessments.

 

9

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IX.

 

GENERAL PROVISIONS

 

A.            Severability:  Invalidationof any one of these covenants or restrictions by judgment or court order shallin no wise affect any other provisions which shall remain in full force andeffect.

 

B.            Term: The foregoing covenants are made and adopted to runwith the land, and shall be binding upon the undersigned and all parties andpersons claiming through and under it until 2235, at which time said covenantswill be automatically extended for successive periods of ten (10) years,unless an instrument signed by a majority interest of the than record Owners ofthe Lots in the subdivision has been recorded agreeing to change in saidcovenants in whole or in part.

 

C.            The Association and its duly assigned committees, includingthe Architectural Committee and the Developer shall perform such duties so assignedto the Association or Developer elsewhere in these protective covenants. Neitherthe Association nor the Developer shall be liable in damages or otherwise toanyone submitting plans or specifications for approval or to any Property Ownerby reasons of mistake or judgment, negligence or non-feasance in theperformance or non-performance of any duties assigned in these covenants.

 

EXECUTED effective this 1st day of January, 1985.

 
|   | QUINCY LEE INDUSTRIAL  JOINT  |
|--------|-------------------------------|
|   | VENTURE NO. 5                 |
|   |                          |
|   | By:                           | /s/ Wm. Eugene Powell |
|   |                          | Eugene Powell |
|   | Its: Managing Joint  Venturer |

 

(Acknowledgement)

 
| STATE OF TEXAS  | $ |
|-----------------|---|
| COUNTY OF BEXAR | $ |

 

This instrument was acknowledged before me on the 30thday of May, 1985, by Eugene Powell, Managing Joint Venturer of Quincy Lee IndustrialJoint Venture No. 5, a Texas Joint Venture, on behalf of said joint venture.

 

 
|   | /s/ Lametta D. Knight          |
|--------|--------------------------------|
| [SEAL] | Notary Public, State of  Texas |
|   |                           |
|   | /s/ Lametta D. Knight          |
|   | Printed Name of Notary         |
|   |                           |
|   | My Commission Expires:    | 1-04-89 |

 

AFTER RECORDING RETURN TO:

James R. Cliffe

800 Milam Building 

San Antonio, Texas7820  

 
|   |   | [ILLEGIBLE] |
|--------|--------|-------------|
|   |   |        |
|   |   | JUN 11 1985 |
|   |   |        |
|   | [SEAL] | [ILLEGIBLE] |
|   |   | [ILLEGIBLE] |

 

10

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**DECLARATIONRELATING TO A PARTY WALL**

 

**ANDEASEMENT FOR ENCROACHMENTS**

 
| STATE OF TEXAS  | $      |
|-----------------|--------|
|            |   |
| COUNTY OF BEXAR | $      |

 

WHEREAS, Elmwood Properties, a Texas general partnership(“Declarant”) is the owner of Lots 4 and 5, Block 3, N.C.B. 17577, San Antonio,Bexar County, Texas (the “lots”) upon which the Declarant has constructed awarehouse/office building which has a wall situated along and upon the commonboundary of the lots (the “party wall”); and

 

WHEREAS, the footings and foundation of the party wallencroach upon the common boundary of each of the lots; and

 

WHEREAS, title to the lots along and upon which theparty wall is constructed is to become vested in separate owners, consequently itis necessary that appropriate provision be made for the party wall to be sharedby the owner of each lot, and for encroachments which result from theconstruction of the party wall;

 

NOW, THEREFORE, in consideration of the premises andthe covenants and conditions herein contained, and other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, theDeclarant hereby declares that:

 

(a)  The well situated along and upon thecommon boundary of the lots constitutes a party wall and to the extent not inconsistentwith this declaration, the general rules of law regarding party walls andliability for property damage due to negligence or willful acts or omissions shallapply thereto;

 

(b)  The cost of reasonable repairs andmaintenance of the party wall shall be shared equally by the owner of each lotupon which the party wall is situated; 

 

(c)  If the party wall is destroyed ordamaged by fire or other casualty, the owner of either lot may restore the partywall, to substantially the condition the party wall was

 

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immediately prior to itsdestruction or damage by fire or casualty, and the owner of the other lot shallcontribute to and share equally in the cost of restoration thereof without prejudice,however, to the right of any such owner to call for a larger contribution fromthe other lot owner under any rule of law regarding liability for negligence orwillful acts or omissions;

 

(d)  Notwithstanding any of the provisionsof this declaration, the owner of a lot who by such owner’s negligence orwillful act causes the party wall to be exposed to the elements shall bear thewhole cost of furnishing the necessary protection against such elements;

 

(e)  The right of either lot owner to contributionfrom the other lot owner under this declaration shall be appurtenant to the landand shall pass to such owner’s successor in title; and

 

(f)  In the event any footings or foundationof the party wall should encroach upon the abutting lot, the owner of each lotupon which such party wall is constructed, shall possess and easement tocontinue such encroachment for so long as the encroachment and the party wallare in existence.

 

This declaration including without limitation all covenantsprovided for herein shall constitute covenants running with the land.

 
|   | EXECUTED this 3rd day  of December, 1985. |
|--------|-------------------------------------------|

 
|   | ELMWOOD PROPERTIES |
|--------|--------------------|

 

 
|   | By:    | /s/ [ILLEGIBLE]                                                                         |
|--------|--------|-----------------------------------------------------------------------------------------|
|   |   |     Its  Managing Partner                                           |
|   |   |              Declarant |

2

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The undersigned lienholder hereby Joins in theexecution of this declaration for the purpose of subordinating all of the liens   filed by it to such declaration.

 
|   | THE FROST NATIONAL BANK                               |
|--------|-------------------------------------------------------|
|   | OF SAN ANTONIO                                        |
|   |                                                  |
|   |                                                  |
|   | By:                                                   | /s/ Bernard Gonzales |
|   |   Execu. Vice  President                    |
|   |       Bernard  Gonzales |

 
| ATTEST:                |
|------------------------|
|                   |
|                   |   |
| Administrative Officer |
| Betsy Glicser          |

 
| STATE OF TEXAS  | $      |
|-----------------|--------|
|            |   |
| COUNTY OF BEXAR | $      |

 

This instrument was acknowledged before me on the 3rdday of December, 1985, by Michael S. Hampton, an Managing Partner of ElmwoodProperties, a Texas partnership, on behalf of said partnership.

 

[SEAL]

 
|   | /s/ [ILLEGIBLE]               |
|--------|-------------------------------|
|   | Notary Public State of  Texas |
|   | [ILLEGIBLE]                   |
|   | My Commission Expires: 7-1-89 |

 
| STATE OF TEXAS  | $      |
|-----------------|--------|
|            |   |
| COUNTY OF BEXAR | $      |

 

This instrument was acknowledged before me on the 3rdday of December, 1985, by BERNARD GONZALES, an Exe. Vice President of The FrostNational Bank of San Antonio, a national banking association, on behalf of saidassociation.

 

 
|   | /s/ Shunda Steveson                      |
|--------|------------------------------------------|
|   | Notary Public, State of  Texas           |
|   |     Shunda  Steveson |
|   | My Commission Explores:  10-09-89        |

 

[SEAL]

 

[ILLEGIBLE]

 

3

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FILED [ILLEGIBLE] MYOFFICE

ROBERT D. GREEN

COUNTY CLEAN BEXAR CO.

 

[ILLEGIBLE]

 
|   | DEC 6 1985  |
|--------|-------------|
|   |        |
| [SEAL] | [ILLEGIBLE] |
|   | [ILLEGIBLE] |

 

----

 

 

EXHIBIT “D”

 

**SUBORDINATION, ATTORNMENT AND NON-DISTURBANCEAGREEMENT**

 

THIS SUBORDINATION, ATTORNMENT AND NON-DISTURBANCEAGREEMENT (this “Agreement”) made this the         day of                      ,2008, by and between ISI Security Group, Inc. f/k/a ISI DetentionContracting Group, Inc., a Delaware corporation (“ISI Security Group, Inc.”)with its principal offices at 12915 Delivery Drive, San Antonio, Texas 78247 (“Tenant”),and                                                     (“Lender”)with an address                                                     .

 

W I T N E S S E T H:

 

WHEREAS by Lease dated February   , 2008, Investment Properties, Ltd., by andthrough its general partner, Proper Investments, LLC, (“Landlord”) leased andrented to Tenant certain premises (“the Leased Premises”) located in BexarCounty, Texas, constituting the real property (the “Property”) a moreparticular description of which Property appears in Exhibit “A”, attachedhereto and by this reference made a part hereof; and

 

WHEREAS, Landlord has obtained a loan (“Loan”) fromLender, secured by a Deed of Trust and Security Agreement covering the Property(the “Mortgage”) and in connection with the Loan, Lender requires that Tenantsubordinate Tenant’s interest under the Lease to the Mortgage; and

 

WHEREAS, Tenant and Lender desire hereby to establishcertain rights, safeguards, obligations and priorities with respect to theirrespective interest by means of the following Subordination Attornment andNon-Disturbance Agreement;

 

NOW, THEREFORE, for valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the parties heretoagree as follows:

 

1.             Tenantsubordinates all of its right, title and interest in and to the Lease and theLeased Premises to the liens of the Mortgage and to all renewals, extensions,modifications or replacements thereof.

 

2.             ProvidedTenant is not in default in the payment of rent or in the performance of any ofthe terms, covenants and conditions of the Lease, the right of possession ofTenant to the Leased Premises shall not be affected or disturbed by Lender inthe exercise of any of its rights under the mortgage or the note securedthereby, and any sale of the Leased

 

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Premises pursuant to the exercise of any rights andremedies under the Mortgage or otherwise shall be made subject to Tenant’sright of possession under the Lease.

 

3.             IfLender forecloses the lien of the Mortgage or accepts a conveyance in lieu offoreclosure, Tenant shall attorn to Mortgages or any purchaser of the LeasedPremises and the Lease shall continue in accordance with its terms betweenTenant and Mortgagee or such other purchaser.

 

4.             Theforegoing provisions shall be self operative; however, Tenant agrees to executeand deliver to Mortgagee or to any person to whom Tenant herein agrees toattorn, such other appropriate instrument as either shall request in order toeffectuate such provisions.

 

5.             Anysuccessor to the interest of Landlord under the Lease shall be bound to Tenantunder all the terms, covenants and conditions of the Lease for the period ofsuch successor’s ownership of the Leased Premises provided, however, suchsuccessor owner shall not be (a) liable for any act or omission of thelandlord or any prior landlord; (b) subject to any offsets or defensesthat Tenant may have against Landlord or any prior landlord; (c) bound byany rent that Tenant may have paid for more than the current month to Landlordor any prior landlord, or (d) bound by any agreement between Landlord andTenant to which Lender had not previously consented in writing.

 

6.             Tenantcovenants that the Lease has not been modified or altered and that the Leaseshall not, without the prior written consent of Lender, be terminated,surrendered, modified or altered hereafter.

 

7.             Tenantagrees that it will notify Lender in writing by certified mail, of any defaultby Landlord under the Lease and shall not cancel or terminate the Lease withoutproviding Lender thirty (30) days from the date of such notice within which tocure said default, without any obligation to do so. If any default by Landlordis cured within the time period described above, Tenant shall have no right tocancel or terminate the Lease by virtue of said default.

 

8.             ThisAgreement shall inure to the benefit of and be binding upon the parties heretoand their respective successors and/or assigns.

 

9.             ThisAgreement may be signed in multiple counterparts, each of which shallconstitute an original, but all of which together comprise one agreement.

 

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|   | **TENANT**                                  |
|--------|---------------------------------------------|
|   |                                        |
|   | ISI Security  Group, Inc. f/k/a        |
|   | ISI Detention  Contracting Group, Inc. |
|   | a Delaware  corporation                     |
|   |                                        |
|   |                                        |
|   | By:                                         |   |
|   | Title:                                      |
|   |                                        |
|   | **LENDER**                                  |
|   | ** **                                  |
|   |                                        |
|   | By:                                         |   |
|   | Name:                                       |   |
|   | Title:                                      |   |
|        |                                             |  |  |  |  |

 
| STATE OF TEXAS | §                                                                                                                                                                                                                   |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                                                     |
| COUNTY OF      |                                      |   | § |
|                |                                                                                                                                                                                                                          |  |  |

 

This instrument was acknowledged before me on this          day of      , 2008 by                                ,the                                of 1SI Security Group, Inc., a Delaware corporation.

 
|   |                           |
|--------|--------------------------------|
|   | Notary Public,  State of Texas |
|   | My commission  expires:        |   |

 
| STATE OF  | §                                                                                                                                                                                                                   |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |                                                                                                                                                                                                                     |
| COUNTY OF |                                      |   | § |
|           |                                                                                                                                                                                                                          |  |  |

 

This instrument was acknowledged before me on this           day of      ,2008 by                   ,the                      of                    .

 
|   |                    |
|--------|-------------------------|
|   | Notary Public, State of |
|   | My commission expires:  |   |

 

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