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LEASE AGREEMENT


BETWEEN


FMBP INDUSTRIAL I LP,

AS LANDLORD


AND


FUNIMATION PRODUCTIONS, LTD

AS TENANT


May 29, 2007


Corporate Ridge

Flower Mound, Texas



 

 






 









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	 	 	Page No.	 
	SECTION 1 —DEFINITIONS
	 	 	1	 
	1.1 Definitions
	 	 	1	 
	SECTION 2 — PREMISES
	 	 	3	 
	2.1 Lease Grant
	 	 	3	 
	2.2 Improvements
	 	 	4	 
	2.3 WAIVER OF WARRANTIES; ACCEPTANCE OF CONDITION.
	 	 	4	 
	2.4 Option to Lease Additional Space
	 	 	4	 
	SECTION 3 —LEASE TERM
	 	 	4	 
	3.1 Lease Term
	 	 	4	 
	3.2 Confirmation of Commencement Date
	 	 	4	 
	3.3 Delay in Commencement Date
	 	 	5	 
	3.4 Holding Over
	 	 	5	 
	SECTION 4 —RENT
	 	 	5	 
	4.1 Payment of Rent.
	 	 	5	 
	4.2 Basic Operating Costs.
	 	 	5	 
	4.3 Other Amounts Owing to Landlord
	 	 	8	 
	4.4 Late Payments; Dishonored Checks
	 	 	8	 
	4.5 Net Lease
	 	 	8	 
	SECTION 5 —CREDIT ENHANCEMENT
	 	 	8	 
	5.1 Security Deposit
	 	 	8	 
	5.2 Guaranty
	 	 	8	 
	SECTION 6 —LEGAL AND CONTRACTUAL LIMITATIONS ON USE OF PREMISES
	 	 	9	 
	6.1 Use
	 	 	9	 
	6.2 Compliance with Laws
	 	 	9	 
	6.3 Building Rules and Regulations; No Nuisance
	 	 	10	 
	6.4 Quiet Enjoyment
	 	 	10	 
	SECTION 7 —OPERATIONAL MATTERS
	 	 	10	 
	7.1 Services to be Furnished by Landlord
	 	 	10	 
	7.2 Parking
	 	 	11	 
	7.3 Signage
	 	 	11	 
	7.4 Repairs and Maintenance by Landlord
	 	 	11	 
	7.5 Maintenance by Tenant
	 	 	11	 
	7.6 Repairs by Tenant
	 	 	12	 
	7.7 Alterations, Improvements
	 	 	12	 
	7.8 Telecommunications
	 	 	13	 
	7.9 Change of Name or Common Areas
	 	 	13	 
	7.10 Entry by Landlord
	 	 	13	 
	SECTION 8 —TRANSFER OF LEASEHOLD RIGHTS
	 	 	13	 
	8.1 Transfers by Tenant
	 	 	13	 
	8.2 Affiliate Transfers
	 	 	14	 
	8.3 Transfer Requirements
	 	 	14	 
	8.4 Transfers by Landlord
	 	 	15	 
	8.5 Sublease of Offer Space
	 	 	15	 
	SECTION 9 —INSURANCE; CASUALTY; ALLOCATION OF LIABILITY
	 	 	15	 
	9.1 Property Insurance
	 	 	15	 
	9.2 Liability and Other Insurance
	 	 	15	 
	9.3 Casualty Damage
	 	 	16	 






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	 	 	Page No.	 
	9.4 INDEMNITY BY TENANT
	 	 	16	 
	9.5 INDEMNITY BY LANDLORD
	 	 	17	 
	9.6 Waiver of Claims and Subrogation Rights
	 	 	17	 
	9.7 Damages from Certain Causes
	 	 	17	 
	SECTION 10 — CONDEMNATION
	 	 	18	 
	10.1 Condemnation
	 	 	18	 
	10.2 Condemnation Award
	 	 	18	 
	SECTION 11 —TITLE ENCUMBRANCES
	 	 	18	 
	11.1 Subordination to Mortgage; Lender Rights
	 	 	18	 
	11.2 Landlord’s Lien; Security Interest
	 	 	19	 
	11.3 Mechanic’s Liens
	 	 	19	 
	SECTION 12 —DEFAULT; DISPUTES; REMEDIES
	 	 	19	 
	12.1 Default by Tenant
	 	 	19	 
	12.2 Landlord’s Remedies
	 	 	19	 
	12.3 Default by Landlord
	 	 	20	 
	12.4 Limitation on Landlord’s Liability
	 	 	21	 
	12.5 Attorney’s Fees
	 	 	21	 
	SECTION 13 — MISCELLANEOUS
	 	 	21	 
	13.1 Notices
	 	 	21	 
	13.2 Estoppel Agreements
	 	 	21	 
	13.3 No Implied Waiver
	 	 	21	 
	13.4 Independent Obligations
	 	 	21	 
	13.5 Severability
	 	 	21	 
	13.6 Recording
	 	 	21	 
	13.7 Governing Law
	 	 	21	 
	13.8 Force Majeure
	 	 	21	 
	13.9 Time of Performance
	 	 	22	 
	13.10 Commissions
	 	 	22	 
	13.11 Merger of Estates
	 	 	22	 
	13.12 Survival of Indemnities and Covenants
	 	 	22	 
	13.13 Headings
	 	 	22	 
	13.14 Entire Agreement
	 	 	22	 
	13.15 Amendment
	 	 	22	 
	13.16 Joint and Several Liability
	 	 	22	 
	13.17 Multiple Counterparts
	 	 	22	 
	13.18 Effect of Delivery of this Lease
	 	 	22	 
	13.19 Property Code
	 	 	22	 











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LEASE AGREEMENT




     THIS LEASE AGREEMENT (“Lease”) is executed effective as of May ___, 2007 (the
“Effective Date”), between FMBP INDUSTRIAL I LP, a Delaware limited partnership
(“Landlord”), and FUNIMATION PRODUCTIONS, LTD, a Texas limited partnership
(“Tenant”).








SECTION 1 — DEFINITIONS








     1.1 Definitions. As used in this Lease, the following terms are defined below:



          “Base Rent” means the following:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Base Rent per	 	 	 	 
	 	 	Square Foot of	 	 	 	 
	 	 	Floor Space (per	 	 	 	 
	Lease Year	 	year)	 	Annual Base Rent	 	Monthly Base Rent
	1-2
	 	$	12.12	*	 	$	587,820.00	*	 	$	48,985.00	*
	3-6
	 	$	12.78	 	 	$	619,830.00	 	 	$	51,652.50	 
	7-10
	 	$	13.10	 	 	$	635,350.00	 	 	$	52,945.83	 








 




			
	*	 	Base Rent for the first 7 months of the Lease Term will be abated pursuant to Section
4.1(c).





          “Basic Operating Costs” has the meaning given to such term in Section 4.2.




          “Broker” means, collectively, Robert Lynn Company representing Landlord, and Capstone
Commercial representing Tenant.




          “Building” means Building 1.




          “Building 1” means that certain building identified as Building 1 on the Site Plan
attached hereto as Exhibit “B”. The address of Building 1 is 1200 Lakeside Parkway,
Building 1, Flower Mound, Texas 75028. Building 1 contains 48,500 square feet of floor space.




          “Building 2” means that certain building identified as Building 2 on the Site Plan
attached hereto as Exhibit “B”. The address of Building 2 is 1200 Lakeside Parkway,
Building 2, Flower Mound, Texas 75028. Building 2 contains 35,000 square feet of floor space.




          “Building 3” means that certain building identified as Building 3 on the Site Plan
attached hereto as Exhibit “B”. The address of Building 3 is 1200 Lakeside Parkway,
Building 3, Flower Mound, Texas 75028. Building 3 contains 254,000 square feet of floor space.




          “Building 4” means that certain building identified as Building 4 on the Site Plan
attached hereto as Exhibit “B”. The address of Building 4 is 1200 Lakeside Parkway,
Building 4, Flower Mound, Texas 75028. Building 4 contains 140,000 square feet of floor space.




          “Buildings” means, collectively, Building 1, Building 2, Building 3 and Building 4.




          “Building Standard” means the level of service or type of equipment standard in the
Building or the type, brand or quality of materials Landlord designates from time to time to be the
minimum or exclusive type, brand or quality to be used in the Building.




          “Commencement Date” means the earlier of (i) the date that Tenant takes occupancy of
the Premises to conduct its business or to install its leasehold improvements, furniture, fixtures,
or equipment (as applicable), or (ii) October 1, 2007.




          “Common Areas” means all areas, spaces, facilities and equipment (whether or not
located within the Building) made available by Landlord for the common and joint use of Landlord,
Tenant and others designated by Landlord. “Common Areas” includes, without limitation,
tunnels, loading docks, walkways, sidewalks and driveways necessary for access to Parking Areas,
lobbies, atriums, landscaped areas, public corridors, public restrooms, stairs, elevators open to
the public, service elevators, drinking fountains and any such other areas and facilities, if any,
as are designated by Landlord from time to time as Common Areas. “Common Areas” also
includes areas so designated by Landlord on a floor of the Buildings occupied by a single tenant.




 









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          “Complex” means the project located on the Property and commonly known as “Corporate
Ridge”, which includes the Building, Building 2, Building 3, Building 4 and the Common Areas. The
Complex contains 477,500 square feet of floor space.




          “Default Rate” means the lesser of (i) the rate of 18% per year, and (ii) the maximum
rate of interest then permissible for a commercial loan to Tenant in the State.




          “Improvements” means those improvements to the Premises that Landlord has agreed to
construct pursuant to the Tenant Improvements Agreement.




          “Landlord-Related Party” means any officer, director, owner, partner, employee, agent,
contractor, property manager, or broker of Landlord.




          “Lease Term” means the period that begins on the Commencement Date and ends on the
last day of the 120th full calendar month after the Commencement Date. By way of example, if the
Commencement Date is March 15, the Lease Term would expire on March 31 of the appropriate year.




          “Lease Year” means a period of 12 consecutive calendar months. If the Commencement
Date does not occur on the first day of a month, the first Lease Year will begin on the first day
of the month following the Commencement Date.




          “Market Area” means the North Dallas-Fort Worth industrial market area.




          “Notice Address” means:




	 	 	 	 	 
	     

	 	With respect to Landlord:
	 	c/o Champion Partners Group, Ltd.
	 

	 	 	 	8401 N. Central Expressway
	 

	 	 	 	Suite 410
	 

	 	 	 	Dallas, Texas 75225
	 

	 	 	 	Attn: Barney Sinclair
	 

	 	 	 	Tel.: 214.365.8523
	 

	 	 	 	Fax: 972.490.5599
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Winstead Sechrest & Minick P.C.
	 

	 	 	 	1201 Elm Street, Suite 5400
	 

	 	 	 	Dallas, Texas 75270
	 

	 	 	 	Attn: T. Andrew Dow, Esq.
	 

	 	 	 	Tel.: 214.745.5387
	 

	 	 	 	Fax: 214.745.5390
	 
	 	 	 	 
	 

	 	With respect to Tenant:
	 	FUNimation Productions, LTD
	 

	 	(Prior to the Commencement Date)
	 	6851 N.E. Loop 820, Ste. 400
	 

	 	 	 	Fort Worth, TX 76180
	 

	 	 	 	Attn: Ward Thomas
	 

	 	 	 	Tel.: 817-788-0627 ext 300
	 

	 	 	 	Fax: 817-788-0628
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Navarre Corporation
	 

	 	 	 	7400 49th Avenue North
	 

	 	 	 	New Hope, MN 55428
	 

	 	 	 	Attn: General Counsel
	 

	 	 	 	Tel.: 763-535-8333
	 

	 	 	 	Fax: 763-504-1107
	 
	 	 	 	 
	 

	 	With respect to Tenant:
	 	FUNimation Productions, LTD
	 

	 	(After the Commencement Date)
	 	1200 Lakeside Parkway, Building 1
	 

	 	 	 	Flower Mound, Texas 75028
	 

	 	 	 	Attn: Ward Thomas
	 

	 	 	 	Tel.:                                              
	 

	 	 	 	Fax:                                              
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Navarre Corporation
	 

	 	 	 	7400 49th Avenue North
	 

	 	 	 	New Hope, MN 55428
	 

	 	 	 	Attn: General Counsel
	 

	 	 	 	Tel.: 763-535-8333
	 

	 	 	 	Fax: 763-504-1107





 









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          “Parking Areas” means those areas located upon the Property designated by Landlord,
from time to time, to be parking areas.




          “Parking Spaces” means 3.6 parking spaces per 1,000 square feet of floor space in the
Premises, within the portion of the Parking Areas identified on Exhibit “B”.




          “Premises” means all of the Building outlined on the site plan attached to this Lease
as Exhibit “B”. The Premises contains 48,500 square feet of floor space.




          “Property” means the land described in Exhibit “A” attached hereto.




          “Punchlist Items” means touch-up, minor finish, mechanical adjustment, or decoration
work to be performed as a part of completing the Improvements.




          “Ready for Occupancy” means that the Improvements are Substantially Complete (as
defined below) and a temporary or permanent certificate of occupancy (or its equivalent) has been
issued for the Premises.




          “Rent” means, collectively, the Base Rent, the Tenant’s Share of Basic Operating Costs
(as provided in Section 4), the amounts to be paid by Tenant pursuant to the Tenant
Improvements Agreement (if any), and all other sums of money becoming due and payable to Landlord
under this Lease.




          “Rules and Regulations” means the rules and regulations for the Complex set forth on
Exhibit “C” attached hereto, and any other reasonable rules and regulations that may be
adopted or altered by Landlord in accordance with this Lease.




          “Security Deposit” means the sum of $48,985.00.




          “Service Areas” means those areas, spaces, facilities and equipment serving the
Buildings (whether or not located within the Buildings), including, but not limited to, service
elevators, mechanical, telephone, electrical, janitorial and similar rooms and air and water
refrigeration equipment, but to which Tenant and other occupants of the Buildings will have limited
or no access.




          “State” means the State of Texas.




          “Substantially Complete” means that the Improvements have been completed substantially
in accordance with the Tenant’s Final Plans (as defined in the Tenant Improvements Agreement),
excluding Punchlist Items, and that the Premises is capable of being occupied for the purposes
described in Section 6.1.




          “Taxes” means all taxes, assessments and governmental charges, whether federal, state,
county or municipal, and whether they be by taxing districts or authorities presently taxing the
Complex or by others, subsequently created or otherwise and any other taxes, association dues and
assessments attributable to the Complex or its operation. The term “Taxes” does not include
federal and state income taxes, franchise taxes, inheritance, estate, gift, corporation, net
profits or any similar tax for which Landlord becomes liable or which may be imposed upon or
assessed against Landlord. If, at any time during the Lease Term, the present method of taxation
is changed so that in lieu of the whole or any part of any taxes, assessments or governmental
charges levied, assessed or imposed on the Complex, there is levied, assessed or imposed on
Landlord a capital levy or other tax directly on the Rent, or a franchise tax, assessment, levy or
charge measured by or based, in whole or in part, upon the Rent, then all such taxes, assessments,
levies or charges, or the part thereof so measured or based, will be included within the term
“Taxes”.




          “Tenant Improvements Agreement” means the Tenant Improvements Agreement attached to
this Lease as Exhibit “D”.




          “Tenant-Related Party” means any officer, director, owner, partner, employee, agent,
contractor, vendor or broker of Tenant.




          “Tenant’s Share” means (i) as it relates to the Building, 100%, which is the
proportion that the floor space of the Premises bears to the entire floor space of the Building or
(ii) as it relates to the Complex, 10.16%, which is the proportion that the floor space of the
Premises bears to the entire floor space of the Complex.








SECTION 2 — PREMISES








     2.1 Lease Grant. Landlord leases to Tenant, and Tenant leases from Landlord, the Premises and the non-exclusive
right to use the Common Areas and Parking Areas, subject to all of the terms and conditions of this
Lease. Landlord retains the right to grant easements and similar rights over, upon,
and



 









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through
the Premises without the consent or joinder of Tenant, so long as Landlord’s exercise of such right
does not adversely affect Tenant’s rights hereunder in any material respect.







     2.2 Improvements. Landlord will construct the Improvements in accordance with the terms of
the Tenant Improvements Agreement. If no Tenant Improvements Agreement is attached to this Lease,
no Improvements are being provided by Landlord and Tenant is taking the Premises “as is” and “with
all faults”.







     2.3 WAIVER OF WARRANTIES; ACCEPTANCE OF CONDITION.



          (a) TENANT ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE
(INCLUDING THE CONSTRUCTION AGREEMENT), NEITHER LANDLORD NOR ANY LANDLORD-RELATED PARTY HAS MADE
ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE HABITABILITY, MERCHANTABILITY,
SUITABILITY, QUALITY, CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE (COLLECTIVELY, THE
“DISCLAIMED WARRANTIES”) WITH REGARD TO THE PREMISES OR THE COMPLEX. TENANT HEREBY WAIVES,
TO THE EXTENT PERMITTED BY LAW, THE DISCLAIMED WARRANTIES WITH REGARD TO THE PREMISES AND THE
COMPLEX.




          (b) Tenant’s taking possession of the Premises will be conclusive evidence that (i) Tenant has
inspected (or has caused to be inspected) the Premises and the Complex, (ii) Tenant accepts the
Premises and the Complex as being in good and satisfactory condition and suitable for Tenant’s
purposes, and (iii) the Premises and the Complex fully comply with Landlord’s covenants and
obligations hereunder.




          (c) Notwithstanding the foregoing, Tenant does not waive the right to cause Landlord to (i)
correct any defective work covered by any warranty in the Tenant Improvements Agreement, (ii)
complete any Punchlist Items in accordance with the terms of the Tenant Improvements Agreement or
(iii) correct any “latent defects” (i.e., defects not reasonably discoverable during a thorough
investigation of the Premises) in or affecting the Premises. If Tenant does not give Landlord
written notice within 6 months following the Commencement Date, regarding alleged defects in the
performance of the work under the Tenant Improvements Agreement (if any) or latent defects in or
affecting the Premises, such failure will constitute a waiver of any further claims of Tenant
regarding such defects. However, nothing contained in this Section 2.3(c) limits the right
of Tenant to enforce the repair and maintenance obligations of Landlord under this Lease.








          2.4 Option to Lease Additional Space. So long as the Lease is in full force and
effect and there is no uncured Event of Default under the Lease, Tenant will have a one-time right
of first offer (“Right of First Offer”) to lease all (but not part) of the last 10,000
square feet of contiguous floor space within Building 2 (“Offer Space”), at any time prior
to April 30, 2008. Prior to Landlord initially leasing the Offer Space to third parties, Landlord
will first offer to lease the Offer Space to Tenant by giving a written notice (the
“Offer”) to Tenant, containing all of the material terms and conditions upon which Landlord
would be willing to lease the Offer Space, including, without limitation, rental rate, allowances
and concessions, term, and date of occupancy. Tenant will have 5 days from receipt of the Offer to
accept the Offer in writing. If Tenant fails to accept the Offer within such 5-day period, such
failure will constitute rejection of the Offer. If Tenant accepts the Offer, Landlord and Tenant
will promptly enter into an amendment to the Lease adding the Offer Space to the Premises and
otherwise incorporating the terms and conditions of the Offer. If Tenant rejects (or is deemed to
have rejected) the Offer, Landlord will be free to lease the Offer Space to a third party upon the
same basic terms and conditions as were stated in the Offer and the Right of First Offer granted
herein will automatically terminate and be of no further force or effect. This Right of First
Offer is personal to Tenant and is not assignable to any third parties, including, but not limited
to, any assignee or sublessee of Tenant. Notwithstanding anything to the contrary set forth
herein, the Right of First Offer granted pursuant to this Section 2.4 will terminate and
Tenant will have no further preferential rights with respect to the Offer Space on April 30, 2008.








SECTION 3 — LEASE TERM








     3.1 Lease Term. This Lease will continue in force during a period beginning on the
Effective Date of this Lease and ending on the expiration of the Lease Term, unless this Lease is
terminated early or extended to a later date pursuant to the terms of this Lease. The Lease Term
will commence and Rent will accrue beginning on the Commencement Date.







     3.2 Confirmation of Commencement Date. On or about the Commencement Date, Landlord and
Tenant agree to execute a Memorandum Regarding Acceptance of Premises in the form of Exhibit
“E” attached hereto confirming the Commencement Date and the acceptance of the Premises by
Tenant (subject to the completion of any Punchlist Items).



 









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     3.3 Delay in Commencement Date. If the Commencement Date is delayed due to a Tenant Delay
(as defined in the Tenant Improvements Agreement), the obligations of Tenant under this Lease
(including, without limitation, the obligation to pay Rent) will commence as of the date that the
Commencement Date would have occurred but for the Tenant Delay. If, however, the Commencement Date
is delayed due to any reason other than a Tenant Delay (subject to Section 13.8 hereof),
then, as Tenant’s sole remedy for the delay in Tenant’s occupancy of the Premises, the Commencement
Date will be delayed and the obligation to pay Rent will not commence until the earlier to occur of
(i) the date of actual occupancy by Tenant of the Premises for the conduct of its business, or (ii)
the date which is 5 business days following the date on which the Premises is Ready for Occupancy.







     3.4 Holding Over. If Tenant continues to occupy the Premises after the expiration of the
Lease Term without the prior written consent of Landlord, such occupancy will be a tenancy at
sufferance under all of the terms, covenants and conditions of this Lease, but the Base Rent will
increase to a daily Base Rent equal to the number determined by multiplying the Base Rent for the
final month of the Lease Term by 150%, and then dividing by 30. Tenant will also pay any and all
costs, expenses or damages sustained by Landlord as a result of such holdover.








SECTION 4 — RENT








     4.1 Payment of Rent.



          (a) Except as otherwise expressly provided in this Lease, Tenant must pay Rent to Landlord in
advance in monthly installments on the first day of each calendar month during the Lease Term, at
Landlord’s Notice Address or to such other person or at such other address as Landlord may from
time to time designate in writing.




          (b) Rent must be paid without notice, demand, abatement, deduction or offset, except as
otherwise expressly provided in this Lease.




          (c) If the Lease Term commences on a day other than the first day of a calendar month, then
the Base Rent for such partial month will be prorated and paid at the rental rate applicable during
the first full month of the Lease Term, and shall be payable on the first day of the calendar month
following the Commencement Date. Notwithstanding anything to the contrary set forth herein,
Tenant’s monthly installments of Base Rent shall be conditionally abated during the first 7 full
months of the Lease Term (provided, that notwithstanding such abatement of Base Rent, all other
sums due under the Lease shall be payable as provided for in this Lease). The abatement of Base
Rent is conditioned upon the full performance by Tenant of all its obligations under this Lease,
and if, at any time during the first 7 months of the Lease Term, an Event of Default by Tenant
occurs and has not been cured within any applicable notice and cure period, then the abatement of
Base Rent provided by this Section 4.1(c) shall immediately become void and Tenant shall
thereupon be obligated to promptly pay to Landlord the full amount of all Base Rent abated pursuant
hereto. Tenant must pay the Base Rent due for the eighth (8th) full month of the Lease
Term when Tenant delivers to Landlord an executed copy of this Lease.




          (d) Together with its payment of Rent, Tenant also must pay to Landlord any applicable
municipal, city, county, state, or federal excise, sales, use or transaction privilege taxes levied
or imposed against or on account of the amounts payable by Tenant hereunder or the receipt thereof
by Landlord (excluding state or federal income taxes imposed or levied against Landlord).








     4.2 Basic Operating Costs.



          (a) Prior to the commencement of this Lease and prior to the commencement of each additional
calendar year during the Lease Term, Landlord may, at its option, provide Tenant with a
then-current estimate of Basic Operating Costs for the upcoming calendar year. Thereafter, Tenant
must pay, as additional rental, in monthly installments in accordance with Section 4.1, the
estimated Tenant’s Share
of Basic Operating Costs for the calendar year in question. The failure of Landlord to
estimate Basic Operating Costs and bill Tenant on a monthly basis will not relieve Tenant of its
obligation to pay Tenant’s Share of Basic Operating Costs. Tenant acknowledges that Landlord’s
current estimate of Basic Operating Costs for 2007 is $1.75 per square foot, which will be payable
by Tenant in accordance with the terms of this Lease. Notwithstanding anything to the contrary set
forth herein, Tenant’s obligation to pay the Controllable Costs (hereinafter defined) component of
Tenant’s Share of Basic Operating Costs for any given calendar year shall be limited to the extent
that the percentage increase in Controllable Costs, on an overall cumulative basis, exceeds 7% per
annum; that is to say, increases in Controllable Costs may not exceed 7% per year on a cumulative
basis for the period in question. For example, if the percentage increase in Controllable Costs is
4% in Lease Year 2, the Controllable Costs may not increase in Lease Year 3 by more than 10%. The
term “Controllable Costs” shall mean all Basic Operating Costs except utility costs, Taxes,
security costs, and insurance premiums.




 









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          (b) If the Building or the Complex, as applicable, is not at least 95% occupied during any
year of the Lease Term (including the calendar year in which the Lease Term commences), the Basic
Operating Costs will be “grossed up” by increasing the variable components of Basic Operating Costs
to the amount which Landlord projects would have been incurred had the Building or the Complex, as
applicable, been 95% occupied during such year, such amount to be annualized for any partial year.




          (c) By April 1 of each calendar year during Tenant’s occupancy (including the calendar year
following the year in which the Lease Term is terminated), or as soon thereafter as possible,
Landlord will furnish to Tenant a statement of Tenant’s Share of Basic Operating Costs (the
“Statement”). The Statement will include a breakdown of Basic Operating Costs that are
attributable to the Building and Basic Operating Costs that relate to the Complex. For Basic
Operating Costs that are identified on the Statement as attributable to the Building, Tenant’s
Share will be the percentage in Section 1.1 relating to the proportion that the floor space
of the Premises bears to the entire floor space of the Building. For all other Basic Operating
Costs on the Statement, Tenant’s Share will be the percentage in Section 1.1 relating to
the proportion that the floor space of the Premises bears to the entire floor space of the Complex.
Landlord and Tenant will determine whether there is any difference between the amount, if any,
collected by Landlord from Tenant for the estimated Tenant’s Share of Basic Operating Costs and the
actual amount of Tenant’s Share of Basic Operating Costs. If there is an underpayment by Tenant,
Tenant must pay the amount of such underpayment to Landlord within 30 days following delivery of
the Statement. If there has been an overpayment by Tenant, Landlord will credit such overpayment
against Rent next coming due under the Lease. At the end of the Lease Term, if no Event of Default
exists, Landlord will refund any overpayment to Tenant in cash. If the Lease Term commences or
ends at any time other than the first day of a calendar year, Tenant’s Share of Basic Operating
Costs will be prorated for such calendar year according to the number of days of the Lease Term in
such calendar year




          (d) If there exists any dispute as to the calculation of Tenant’s Share of Basic Operating
Costs (a “Dispute”), the events, errors, acts or omissions giving rise to the Dispute will
not constitute a breach or default by Landlord nor shall Landlord be liable to Tenant, except as
specifically provided below. If there is a Dispute, Tenant must notify Landlord in writing
(specifying the items in dispute) within 90 days after receipt of the Statement. Notwithstanding
the existence of a Dispute, Tenant must timely pay the amount in dispute as and when required under
this Lease, but payment will be without prejudice to Tenant’s position. Upon receipt of the
payment, Landlord will give Tenant such supplementary information regarding the items in Dispute as
may be reasonably requested by Tenant in an effort to resolve such Dispute. If Landlord and Tenant
are unable to resolve the Dispute, the Dispute will be referred to a mutually satisfactory third
party certified public accountant for final resolution, although Tenant will retain the audit
rights contained in Section 4.2(e). The cost of the certified public accountant will be
paid by the party found to be least accurate (in terms of dollars in dispute). The decision of the
certified public accountant will be final and binding. Final settlement must be made within 30
days after receipt of such accountant’s decision. If Tenant does not dispute the calculation of
Tenant’s Share of Basic Operating Costs in accordance with the procedures and within the time
periods specified in this Section 4.2(d), or if Tenant does not request an audit of the
Basic Operating Costs in accordance with the procedures and within the time periods specified in
Section 4.2(e), the Statement will be considered final and binding for the calendar year in
question.




          (e) Tenant, at Tenant’s expense, will have the right, no more frequently than once per
calendar year, following 30 days’ prior written notice (such written notice to be given within 30
days following Tenant’s receipt of the Statement) to Landlord, to audit Landlord’s books and
records relating to Basic Operating Costs for the immediately preceding calendar year only.
Tenant’s right to audit Landlord’s books and records is subject to the following conditions:





          (i) Basic Operating Costs for the calendar year in question must have increased by more
than 5% over Basic Operating Costs for the immediately preceding calendar year.




          (ii) Tenant must conduct the audit in a manner that will not unreasonably interfere
with the conduct of Landlord’s business.




          (iii) Tenant must conduct the audit during normal business hours and at the location
where Landlord maintains its books and records.




          (iv) Tenant must deliver to Landlord a copy of the results of such audit within 5 days
after its receipt by Tenant.




          (v) No audit will be permitted if an Event of Default by Tenant (including any failure
by Tenant to pay an amount in Dispute) has occurred and is continuing.




          (vi) Tenant must reimburse Landlord for the cost of all copies requested by Tenant or
Tenant’s auditor.



 









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          (vii) The audit must be conducted by an independent, nationally-recognized accounting
firm or a local accounting firm reasonably acceptable to Landlord that is not being
compensated by Tenant on a contingency fee basis. The auditor and Tenant must agree with
Landlord in writing to keep the results of the audit confidential by executing and
delivering to Landlord a confidentiality agreement in a form acceptable to Landlord, in
Landlord’s reasonable discretion.




          (viii) No subtenant will have the right to audit Landlord.




          (ix) Tenant and its permitted assignees will be permitted only a total of 1 audit per
calendar year.




          (x) Tenant must conclude the audit within 60 days after Tenant’s receipt of the
Statement.




          (xi) Any assignee’s audit right will be limited to the period after the effective date
of the assignment.


Unless Landlord in good faith disputes the results of the audit, an appropriate adjustment will be
made between Landlord and Tenant to reflect any overpayment or underpayment of Tenant’s Share of
Basic Operating Cost Increases within 30 days after delivery of such audit to Landlord, in the
manner described in Section 4.2(c). If Landlord in good faith disputes the results of any
such audit, the parties will in good faith attempt to resolve any disputed items. If Landlord and
Tenant are able to resolve such dispute, final settlement will be made within 30 days after
resolution of the dispute. If the parties are unable to resolve any such dispute, either Landlord
or Tenant may trigger the Dispute mechanism described in Section 4.2(d).




          (f) “Basic Operating Costs” means all costs and expenses incurred by Landlord in each
calendar year for operating, maintaining, repairing, managing and, except as otherwise specifically
provided in Section 4.2(g) below, owning the Complex. “Basic Operating Costs”
includes, without limitation, utilities attributable to the Common Areas, insurance, Taxes, general
landscaping, mowing of grass, care of shrubs (including replacement of plants), operation and
maintenance of lawn sprinkler system, operation and maintenance of exterior security lighting,
water service and sewer charges, repainting of exterior surfaces of truck doors, handrails, down
spouts and other parts of the Buildings that require periodic preventative maintenance, roof
repairs and maintenance (to the extent not directly paid by Tenant), parking lot maintenance
(including paving repairs and maintenance), common area maintenance, security service, pest control
service for the Common Areas and Service Areas, property management fees, property owners’
association dues and assessments, costs of insurance relating to the Complex, legal expenses
incurred with respect to the Complex which relate directly to the operation of the complex and
which benefit all of the tenants of the Complex generally, and any and all sales, use or other
taxes with respect to the foregoing charged by 1 or more applicable authorities. Landlord may, at
its option, amortize over a period of time reasonably determined by Landlord in accordance with
generally accepted accounting principles using the straight-line method of depreciation, and
collect through Basic Operating Costs, the amortized costs and expenses associated with the
replacement of capital investment items which (i) Landlord reasonably believes will reduce (or
avoid increases in) Basic Operating Costs, to the extent the replacement actually reduces or avoids
increases in Basic Operating Costs, (ii) Landlord reasonably believes is required for the safety of
tenants and occupants of the Complex, or (iii) may be required in order to comply with any federal,
state or municipal law, code or ordinance, or regulation which was not promulgated, or which was
promulgated but was not in effect or applicable to the Complex as of the Effective Date.




          (g) “Basic Operating Costs” will not include any expenses or costs for the following
items:





          (i) Except as provided in Section 4.2(f), costs that, under generally accepted
accounting principles, are required to be classified as capital expenditures;




          (ii) Except as provided in Section 4.2(f), depreciation or amortization of the
Building or its contents or components;




          (iii) Expenses for the preparation of space (including tenant finish out costs) or
other similar type work that Landlord performs for any tenant or prospective tenant of the
Building;




          (iv) Expenses incurred in leasing or obtaining new tenants or retaining existing
tenants, such as marketing costs and leasing commissions;




          (v) Except as provided in Section 4.2(f), legal expenses;



 









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          (vi) Interest, amortization or other costs associated with any mortgage, loan or
refinancing of the Complex; or




          (vii) Any ground rent incurred for the Complex.







     4.3 Other Amounts Owing to Landlord. If Landlord incurs any expenses on behalf of Tenant
or is otherwise due reimbursement from Tenant under this Lease, such amounts will be additional
Rent. Tenant must pay the amounts owing within 10 days after its receipt of an invoice from
Landlord.







     4.4 Late Payments; Dishonored Checks.



          (a) If Landlord does not receive any installment of Rent within 5 days after the date due,
Tenant, to the extent permitted by law, must pay, in addition to the installment of Rent, a late
payment charge equal to 5% of the installment of Rent due. The late payment charge will increase
to 10% of the installment of Rent due if Tenant becomes responsible for a late payment charge more
than twice during any consecutive 12-month period. The late payment charge will revert to 5% after
Tenant has paid Rent for 12 consecutive months without incurring a late payment charge. Because
the additional costs and expenses resulting to Landlord from late payments are difficult to
ascertain precisely, this late payment charge constitutes a reasonable and good faith estimate by
the parties of the extent of such additional costs and expenses.




          (b) In addition to the late payment charge contained in Section 4.4(a), all Rent, if
not paid within 30 days after the date due, will, at the option of Landlord, and to the extent
permitted by law, bear interest from the date due until paid at the Default Rate.




          (c) If any check is tendered by Tenant and not duly honored with good funds, the check will
not constitute payment of Rent. Tenant will, in addition to any other remedies available to
Landlord under this Lease (including late payment charges), pay Landlord a “NSF” fee of $25.00.




          (d) Acceptance of a late payment charge by Landlord does not constitute a waiver of Tenant’s
default with respect to the overdue amount, nor will it be construed as a waiver by Landlord of the
requirement for timely payment nor create a course of dealing permitting such late payments. Any
payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Rent
due under this Lease will be deemed to be on account of the earliest Rent due hereunder. No
endorsement or statement on any check or any letter accompanying any check or payment as Rent will
be deemed an accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy
provided in this Lease.








     4.5 Net Lease. This Lease is intended to be a fully net lease, so that this Lease will
yield, net to Landlord, the Rent specified in this Lease. In that regard, all Basic Operating
Costs (including, without limitation, all Taxes, insurance premiums, and utility charges),
maintenance (except as otherwise provided in this Lease), repair and replacement expenses (except
as otherwise provided in this Lease), expenses relating to compliance with all applicable laws and
all other costs, fees, charges, expenses, reimbursements and obligations of every kind and nature
whatsoever relating to the Premises which may arise or become due during the Lease Term must be
paid and discharged by Tenant.







SECTION 5 — CREDIT ENHANCEMENT








     5.1 Security Deposit. Tenant must deliver to Landlord the Security Deposit when Tenant
delivers to Landlord a signed counterpart of this Lease. Landlord will hold the Security Deposit,
without liability for interest, as security for the performance by Tenant of Tenant’s covenants and
obligations under this Lease. The Security Deposit is not to be considered an advance payment of
Rent or a measure of Tenant’s liability for damages in case of default by Tenant. Landlord may,
from time to time, without prejudice to any other remedy, use the Security Deposit to the extent
necessary to make good any arrearages of Rent or to satisfy any other covenant or obligation of
Tenant hereunder. After Landlord makes such application of the Security Deposit to Rent or other
costs, Tenant will pay to Landlord on demand the amount so applied in order to restore the Security
Deposit to its original amount. If Tenant is not in default at the termination of this Lease,
Landlord will return to Tenant the balance of the Security Deposit within 30 days following the
termination of this Lease. If Landlord transfers its interest in the Complex during the Lease
Term, Landlord may assign the Security Deposit to the transferee. Upon assumption by such
transferee of liability for the Security Deposit, Landlord shall have no further liability for the
return of such Security Deposit.







     5.2 Guaranty. The obligations of Tenant under this Lease, financial and otherwise,
will be guaranteed by Navarre Corporation, a Minnesota corporation (“Guarantor”) pursuant
to the terms of that



 









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certain Guaranty Agreement (the “Guaranty”) in the form attached
hereto as Exhibit “G”. The Guaranty must be signed by Guarantor concurrently with the
execution of this Lease.







SECTION 6 — LEGAL AND CONTRACTUAL LIMITATIONS ON USE OF PREMISES








     6.1 Use. The Premises must be used solely for light industrial and office purposes. The
Premises may not be used for any other purpose. Tenant, at Tenant’s sole cost and expense, must
obtain any and all licenses necessary for its use of the Premises.







     6.2 Compliance with Laws.



          (a) Tenant, at Tenant’s sole cost and expense, must comply with all current and future
federal, state, municipal and other laws and ordinances and all covenants, conditions, restrictions
and other matters of record applicable to the use of the Premises, the employees, agents, visitors
and invitees of Tenant, and the business conducted in the Premises by Tenant.




          (b) Without limiting the requirements in Section 6.2(a), Tenant must, at Tenant’s own
expense, comply with all laws regulating the use, generation, storage, transportation, or disposal
of Hazardous Substances (“Environmental Laws”). Landlord and Tenant agree upon the
following additional terms with regard to Environmental Laws:





          (i) The term “Hazardous Substances”, as used in this Lease, includes, without
limitation, flammable, explosives, radioactive materials, asbestos, polychlorinated biphenyl
(PCB’s), chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants,
irritants, hazardous wastes, toxic substances or related materials, petroleum and petroleum
products, and substances declared to be hazardous or toxic under any law or regulation now
or hereafter enacted or promulgated by any applicable governmental authority, including
under federal, state, and local laws, rules, regulations, and ordinances.




          (ii) Tenant must, at Tenant’s own expense, make all submissions to, provide all
information required by, and comply with all requirements of all governmental authorities
(the “Authorities”) under the Environmental Laws.




          (iii) If any Authority or any third party demands that a clean-up plan be prepared and
that a clean-up be undertaken because of any deposit, spill, discharge, or other release of
Hazardous Substances that occurs during the Lease Term or in connection with this Lease or
Tenant’s use of the Premises, whether during the Lease Term or not, at or from the Premises,
or which arises at any time from Tenant’s use or occupancy of the Premises, then Tenant
must, at Tenant’s own expense, prepare and submit the required plans and all related bonds
and other financial assurances to the applicable Authorities. In such case Tenant must
provide copies of all of such to Landlord at the same time provided to the Authorities.
Tenant shall carry out all such clean-up plans.




          (iv) Tenant must promptly provide all information regarding the use, generation,
storage, transportation, or disposal of Hazardous Substances that is requested by Landlord.
If Tenant fails to fulfill any duty imposed under this Section 6.2(b) within a
reasonable time, Landlord may do so. In such case, Tenant must cooperate with Landlord in
order to prepare all documents Landlord deems necessary or appropriate to determine the
applicability of the Environmental Laws to the Premises and Tenant’s use thereof, and for
compliance therewith, and Tenant must execute all documents promptly upon Landlord’s
request. No such action by Landlord and no attempt made by Landlord to mitigate damages
under any Law will constitute a waiver of any of Tenant’s obligations under this Section
6.2(b).




          (v) Notwithstanding anything contained in this Section 6.2(b) to the contrary,
Tenant may not take any remedial action in or about the Premises, nor enter into any
settlement agreement, consent decree or other compromise with respect to any claims relating
to any Hazardous Substances in any way connected with the Premises without first notifying
Landlord of Tenant’s intention to do so and affording the Landlord the opportunity to
appear, intervene or otherwise assert and protect Landlord’s interest with respect thereto.




          (vi) Tenant must indemnity, defend at its cost, and hold harmless Landlord and the
Landlord-Related Parties from all fines, suits, procedures, claims and actions of every
kind, and all costs associated therewith (including attorneys’ and consultants’ fees)
arising out of or in any way connected with (A) any deposit, spill, discharge or other
release of Hazardous Substances that occurs during the Lease Term, at or from the Premises,
or that arises at any time from Tenant’s use or occupancy of the Premises (whether or not
during the Lease Term), (B) Tenant’s failure to provide all information, make all
submissions, and take all steps required



 









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by all Authorities under the Environmental Laws and
all other environmental laws, or (C) Tenant’s failure to otherwise fulfill each and every
obligation to be performed by it in this Section 6.2(b).




          (vii) Tenant must promptly notify Landlord and provide Landlord with copies of any
notice or other correspondence given or received by Tenant regarding (A) Hazardous
Substances affecting the Premises or the Complex, (B) Tenant’s knowledge as to the violation
of any law relating to Hazardous Substances on the Premises or in the Complex or (C) the
breach by Tenant of any provisions of this Section 6.2(b).




          (viii) Tenant’s obligations and liabilities under this Section 6.2(b) will
survive the expiration or earlier termination of this Lease.



          (c) Accessibility Laws. Tenant, at its sole cost, is responsible for compliance with
the Americans With Disabilities Act and comparable federal, state and local statutes or regulations
relating to accessibility of facilities (the “Accessibility Laws”) with respect to the
Premises (including the Improvements and all Alterations made to the Premises or any other acts of
Tenant after the Commencement Date) and all requirements of Accessibility Laws that relate to the
employer-employee relationship or that are necessitated by the special needs of any employee,
agent, visitor or invitee of Tenant, including, without limitation, requirements related to
auxiliary aids and graphics. Landlord, at its sole cost, is responsible for compliance with
Accessibility Laws with respect to the Common Areas and the Service Areas, except for any
improvements required to the Common Areas or Service Areas that are attributable to Tenant’s
specific use of the Premises. Neither party will be in default under this Section 6.2(c)
for its failure to comply with Accessibility Laws so long as the responsible party is either
contesting in good faith, and by legal means, the enforcement of Accessibility Laws, or is
undertaking diligent efforts to comply with Accessibility Laws.








     6.3 Building Rules and Regulations; No Nuisance.



          (a) Landlord has the right to adopt and modify Rules and Regulations governing the use and
occupancy of the Complex, including the Parking Areas. Tenant must comply with the Rules and
Regulations and must cause all of its Tenant-Related Parties, contractors, invitees and visitors to
do so as well. Landlord may change the Rules and Regulations from time to time, as Landlord deems
necessary. Any changes to the Rules and Regulations will be effective when sent by Landlord to
Tenant in writing. Landlord will have no liability to Tenant or any other person for its failure
to enforce the Rules and Regulations.




          (b) Tenant may not commit any act which is a nuisance or annoyance to Landlord or to other
tenants in the Building or Complex or which might, in the reasonable judgment of Landlord,
appreciably damage Landlord’s goodwill or reputation, or tend to injure or depreciate the value of
the Building or Complex.








     6.4 Quiet Enjoyment. Tenant, on paying all sums required under this Lease and performing
and observing all of its covenants and agreements, may peaceably and quietly occupy and use the
Premises during the Lease Term. Such occupancy and use is subject to the provisions of this Lease,
all matters of record affecting the Complex and applicable governmental laws, rules, and
regulations. Landlord warrants and forever defends Tenant’s right to such occupancy against the
claims of any and all persons lawfully claiming the same or any part thereof by, through or under
Landlord, subject only to the provisions of this Lease, all matters of record now or hereafter
affecting the Complex and all applicable governmental laws, rules, and regulations.







SECTION 7 — OPERATIONAL MATTERS








     7.1 Services to be Furnished by Landlord.



          (a) So long as no Event of Default exists under this Lease, Landlord agrees to furnish to
Tenant the following services:





          (i) Water, sewer, electricity, and telecommunications connections. Tenant must pay the
appropriate utility provider directly for all such services that are separately metered to
Tenant. If any such services are not separately metered to Tenant, Tenant must pay Tenant’s
Share, as determined by Landlord, of all charges jointly metered with other premises. If
Landlord elects to supply any of the foregoing utilities to the Premises or select a utility
supplier for the Premises, Tenant agrees to purchase and pay for the utilities provided
within 10 days after receipt by Tenant of the bills therefor. If any such amount is not
paid within 10 days after the date of Landlord’s invoice to Tenant, the unpaid amount will
bear interest from the date due until the date paid at the Default Rate.




 









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          (ii) Building Standard maintenance, management and operation of all Common Areas
and Service Areas.



          (b) If Landlord agrees to provide any additional services at the specific request of Tenant
(without implying any obligation on the part of Landlord to do so), Tenant will reimburse Landlord
for the cost of providing such service (plus an administrative charge equal to 10% of such cost,
plus applicable sales tax). Landlord may discontinue the provision of such additional service at
any time upon 30 days’ advance written notice (or immediately upon the occurrence of an Event of
Default).




          (c) If any of the services Landlord is required to furnish hereunder are interrupted, Landlord
will use reasonable diligence to restore the services promptly, but Tenant will have no claim for
rebate of Rent, damages (including damages for business interruption) or eviction on account
thereof. In no event will Landlord be liable for any interruption or failure of utility services
on the Premises.








     7.2 Parking.



          (a) Landlord is providing the Parking Areas for the non-exclusive and common use of Landlord,
all tenants of the Complex, and their respective employees, agents, subtenants, licensees,
visitors, guests and invitees. If any parking spaces become unavailable to Tenant due to casualty
damage, flooding, condemnation or repairs, Landlord will use reasonable efforts to provide Tenant
with reasonably satisfactory alternative parking arrangements until the use of the parking spaces
is restored. If Tenant delivers written notice to Landlord that the Parking Spaces are not
available for Tenant’s use due to use by other tenants of the Complex, and such unavailability
persists for five (5) consecutive business days, then Landlord will use commercially reasonable
efforts to address such parking issue in order to make the Parking Spaces available for Tenant’s
use. Tenant will have no right, however, to terminate this Lease by reason of the loss of any
parking spaces.




          (b) Tenant, the Tenant-Related Parties, and Tenant’s contractors, licensees and invitees must
comply with the Rules and Regulations regarding the Parking Areas.








     7.3 Signage. As part of Landlord’s construction of the Improvements, Landlord will install
a sign on the exterior of the building identifying Tenant’s business in the Premises. The
specifications of the sign will be subject to the approval of Landlord and Tenant pursuant to
Paragraph 2 of Exhibit “D” attached hereto; however, the size and location of the sign will be
determined by Landlord in its sole discretion. The cost of such sign will be paid out of the
Allowance. If the cost of such sign causes the Cost of the Work (as defined in Exhibit “D”
attached hereto) to exceed the amount of the Allowance, Landlord will pay up to $5,000.00 of such
excess amount attributable to the sign, and the amount in excess of $5,000.00 will be deemed part
of the “Excess Amount” (as defined in Exhibit “D” attached hereto) and will be paid by
Tenant in accordance with Exhibit “D”. Tenant is required to obtain Landlord’s prior
written approval for any additional exterior Building signage and any signage to be located in the
Premises that is visible from the exterior of the Building. All such signage is subject to any
applicable governmental laws, ordinances, regulations, Landlord’s standard sign criteria,
subdivision codes, covenants and restrictions and must be in the standard graphics for the
Building. Tenant, at its sole cost and expense, must remove all non-Building Standard signage upon
the termination of this Lease and repair any damage caused by such removal, all to the reasonable
satisfaction of Landlord.







     7.4 Repairs and Maintenance by Landlord. Landlord will maintain and keep in good repair,
reasonable wear and tear excepted, only the following: roof structure of the Building, the
structural soundness of the exterior walls of the Building (including windows, glass or plate
glass, and doors), exterior painting of the Building, the foundation of the Building, the Common
Areas, the Service Areas, and the Parking Areas. All requests for repairs must be submitted to
Landlord in writing, except in the case of an emergency. The cost of repairs and maintenance by
Landlord pursuant to this Section 7.4 will be included in Basic Operating Costs, except to
the extent excluded by Section 4.2(g).







     7.5 Maintenance by Tenant.



          (a) Tenant must, at Tenant’s sole cost and expense, maintain in good condition, reasonable
wear and tear excepted, all parts of the Premises, except those for which Landlord is expressly
responsible as described in Section 7.4 above, including, but not limited to, interior
windows, interior
glass and plate glass, interior doors, special store fronts, office entries, interior walls
(including demising walls of the Premises if they are not exterior walls of the Building), finish
work, floor and floor coverings, ceilings, heating, air conditioning and ventilation systems within
the Premises, truck doors, dock bumpers, plumbing lines and fixtures within the Premises and other
utility lines, equipment and facilities within the Premises, and termite and pest extermination.
Tenant must also pay for, and at the election of Landlord, perform, repairs, maintenance or
replacements to the items described in Section 7.4 above if the damage thereto is caused by
negligence of Tenant, its employees, agents, licensees or invitees.




 









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          (b) Tenant must maintain the Premises in a clean, orderly and sanitary condition and must not
commit or allow any waste to be committed on any portion of the Premises. Tenant must provide
regular janitorial service for the Premises.




          (c) At the expiration or early termination of this Lease, Tenant will deliver up the Premises
to Landlord in as good condition as at the Commencement Date, ordinary wear and tear and damage by
fire or casualty loss excepted.




          (d) Tenant must, at its sole cost and expense, enter into regularly scheduled preventive
maintenance/service contracts with reputable maintenance contractors for servicing all hot water,
heating, ventilating and air conditioning and other mechanical systems and equipment within the
Premises. Each such contract must include all services suggested by the equipment manufacturer in
the operation/maintenance manual and must become effective (and a copy thereof delivered to
Landlord) within 30 days after the date Tenant takes possession of the Premises. Tenant agrees to
make copies of all maintenance and service records available to Landlord upon request.








     7.6 Repairs by Tenant.



          (a) Tenant will repair or replace, at Tenant’s cost, any damage to the Premises (including
doors and door frames, interior windows and any kitchen equipment, such as dishwashers, sinks,
refrigerators, trash compactors and plumbing and other mechanical systems related thereto) that is
not caused by Landlord and any damage to the Complex, or any part thereof, caused by Tenant, any
Tenant-Related Party or any subtenant, guest, licensee or invitee of Tenant.




          (b) If any damage described in Section 7.6(a) is located outside of the Premises or
below floor coverings, above ceilings or behind walls or columns or if Tenant fails to make any
other repairs or replacements within 30 days after receipt of written notice from Landlord,
Landlord may, at Landlord’s option, make such repairs or replacements on Tenant’s behalf, Tenant
will reimburse Landlord for the cost of such repairs or replacements, plus an administrative charge
equal to 10% of the cost of such repairs or replacements. If any such damage is covered by
Landlord’s insurance, in whole or in part, Tenant’s liability under this Section 7.6 will
be limited to the deductible payable by Landlord and any portion of the cost of repairing such
damage not covered by Landlord’s insurance.




          (c) In connection with repairs or replacements made by Tenant, Tenant will provide to Landlord
with a copy of the contractor agreement regarding such repairs, copies of certificates of insurance
evidencing contractor coverage satisfactory to Landlord, copies of “as-built” plans and
specifications and other information or documentation reasonably required by Landlord, including
evidence of the lien-free completion of the repairs or replacements.








     7.7 Alterations, Improvements.



          (a) Tenant may make no alteration, change, improvement, replacement or addition to the
Premises (including, but not limited to, roof and wall penetrations) (collectively,
“Alterations”) without the prior written consent of Landlord. Landlord will not
unreasonably withhold consent with respect to interior Alterations that do not affect, in any way,
the mechanical, electrical, plumbing, HVAC, structural and/or fire and life safety components of
the Building (“Non-Structural Alterations”). Landlord may, at its option, require Tenant to
submit plans and specifications to Landlord for approval prior to commencing any Alterations. All
Alterations must be done in a good and workmanlike manner and in compliance with all applicable
laws and ordinances. All Alterations (other than Non-Structural Alterations) must be performed by
a contractor on Landlord’s approved list (a copy of which may be obtained from the Building
manager). Any contractors used by Tenant must carry a comprehensive liability (including builder’s
risk) insurance policy in such amounts as Landlord may reasonably require and must provide proof of
such insurance to Landlord prior to the commencement of any Alterations. Landlord reserves the
right to require payment and performance bonds to be procured by Tenant or its contractors in
connection with such work. Upon completion of any Alterations, Tenant must provide Landlord with a
copy of its building permit, final inspection tag and, if plans and specifications were
required by Landlord, final “as built” plans and specifications, together with evidence of the
lien-free completion of such Alterations. Except for the Improvements (which shall be governed by
the Tenant Improvements Agreement, if any), all Alterations now or hereafter placed or constructed
on the Premises at the request of Tenant will be at Tenant’s cost. If Landlord performs
Alterations on Tenant’s behalf, Tenant must pay the cost of such Alterations (plus a construction
management fee equal to 10% of hard costs).




          (b) Upon the expiration or early termination of this Lease, Tenant must surrender the Premises
to Landlord in the same condition as the Premises were delivered to Tenant on the date the Premises
were Ready for Occupancy, reasonable wear and tear excepted. Accordingly, Tenant may remove its
trade fixtures, supplies and movable furniture and equipment provided (i) such removal is made
prior to the termination or expiration of the Lease Term; (ii) Tenant is not then in default in the


 









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timely performance of any obligation or covenant under this Lease; and (iii) Tenant promptly
repairs all damage caused by such removal to the reasonable satisfaction of the Landlord. Tenant
must repair any damage caused by such removal.








     7.8 Telecommunications. If Tenant desires to utilize the services of a telephone or
telecommunications provider whose equipment is not servicing the Building as of the Effective Date
(the “Telecommunications Provider”), Tenant must notify Landlord. The Telecommunications
Provider must obtain the written consent of Landlord, which consent will not be unreasonably
withheld or delayed, before installing its lines or equipment or otherwise providing service within
the Complex. Landlord’s consent under this section will not be deemed any kind of warranty or
representation by Landlord as to the suitability, competence, or financial strength of the
Telecommunications Provider. All telephone and telecommunications services desired by Tenant will
be ordered and utilized at the sole risk and expense of Tenant. Tenant agrees that if service by
the Telecommunications Provider is interrupted, curtailed, or discontinued, Landlord will have no
obligation or liability with respect thereto and that Tenant will have the sole obligation to
obtain substitute service at its expense.







     7.9 Change of Name or Common Areas.



          (a) Landlord reserves the right at any time to change the name of the Building or Complex.
Landlord will use reasonable efforts to give Tenant 30 days’ advance written notice of such change.




          (b) Landlord hereby reserves the right to repair, change, redecorate, alter, improve, or
renovate any part of the Common Areas (including the Common Areas located on any full floor leased
by Tenant) and to close the Common Areas temporarily for maintenance and other reasonable purposes.
In exercising such right, Landlord will use reasonable efforts to minimize any interruption of
Tenant’s business conducted in the Premises.








     7.10 Entry by Landlord. Tenant agrees that Landlord and the Landlord-Related Parties may
enter into and upon any part of the Premises upon prior notice to Tenant (except in the event of an
emergency) at all reasonable hours to inspect the same, to make repairs, replacements, or
improvements, to clean or maintain the Premises, or to show the Premises to prospective purchasers,
mortgagees, insurers or, within the last 12 months of the Lease Term, to prospective tenants.
Tenant will not be entitled to any abatement or reduction of Rent by reason of any such entry.
Landlord will use reasonable efforts to minimize any disruption to the conduct of Tenant’s business
by reason of any such entry.







SECTION 8 — TRANSFER OF LEASEHOLD RIGHTS








     8.1 Transfers by Tenant.



          (a) Tenant may not assign this Lease or sublease the Premises or any part thereof or mortgage,
pledge or hypothecate its leasehold interest or grant any concession or license within the Premises
(any such assignment, sublease, mortgage, pledge, hypothecation, or grant of a concession or
license by Tenant is referred to in this Section 8 as a “Transfer”) without the
prior written consent of Landlord, which consent will not be unreasonably withheld or delayed.
Without limiting the foregoing,
Landlord and Tenant acknowledge that it would be reasonable for Landlord to withhold its
consent in any of the following instances: (i) the tangible net worth of the proposed assignee or
sublessee is not sufficient to perform the obligations of Tenant under this Lease as they become
due; (ii) the proposed assignee or sublessee is a governmental agency; (iii) in Landlord’s
reasonable judgment, the use of the Premises by the proposed assignee or sublessee would entail
alterations which would reduce the value of the leasehold improvements in the Premises, or would
require materially increased services by Landlord; (iv) Landlord has experienced previous defaults
by or is in litigation with the proposed assignee or sublessee; (v) the proposed assignee or
sublessee’s anticipated use of the Premises involves the generation, storage, use, treatment or
disposal of Hazardous Substances in a manner that would violate the terms of the Lease; (vi) the
proposed assignee or sublessee is an entity with whom Landlord is under negotiation to lease space
in the Complex; (vii) the proposed assignment or sublease would cause a violation of another lease
for space in the Complex or would give an occupant of the Complex a right to terminate or cancel
its lease; (viii) the Landlord’s mortgagee does not consent to the Transfer for any reason; or (ix)
either an “Event of Default” exists under this Lease or there exists an event or circumstance which
with the passage of time or the giving of notice would constitute an “Event of Default” under this
Lease. Any attempt to effect a Transfer without the consent of Landlord will be void and of no
effect.




          (b) To make a Transfer, Tenant must request in writing Landlord’s consent at least 30 days in
advance of the date on which Tenant desires to make a Transfer and pay Landlord a $250.00 fee for
reviewing the request, plus any charges that may be assessed for such transfer by Landlord’s
mortgagee (the “Review Fee”) provided that the Review Fee does not exceed $750.00. The
request must include the name of the proposed transferee, current financial information on the
proposed transferee, the



 









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terms of the proposed Transfer, and, if the Transfer pertains to only a
portion of the Premises, information regarding access or construction issues that must be addressed
to facilitate the Transfer. Landlord will, within 30 days following receipt of such request,
notify Tenant in writing that Landlord elects (i) to terminate this Lease as to the space so
affected as of the date so specified by Tenant, in which event Tenant will be relieved of all
further obligations hereunder as to such space, (ii) to permit Tenant to assign or sublet such
space in accordance with the terms provided to Landlord, or (iii) to refuse consent to Tenant’s
requested Transfer and to continue this Lease in full force and effect as to the entire Premises.
If Landlord fails to notify Tenant in writing of such election within the 30-day period, Landlord
will be deemed to have elected option (iii) above. If Landlord elects option (i)
above, Tenant will have the right to withdraw the request for consent by delivering written notice
to Landlord within 5 days after Tenant’s receipt of Landlord’s notice exercising option
(i), in which case the termination of the Lease will be negated. If Tenant does not elect to
negate the termination, the Lease will terminate effective as of the 6th day after
Landlord’s notice and Landlord will return the Review Fee to Tenant.




          (c) The consent by Landlord to a particular Transfer will not be deemed a consent to any other
subsequent Transfer. If this Lease, the Premises or the Tenant’s leasehold interest, or any
portion of the foregoing, is transferred, or if the Premises is occupied in whole or in part by
anyone other than Tenant without the prior written consent of Landlord as provided herein, Landlord
may collect rent from the transferee or other occupant and apply the net amount collected to the
Rent payable hereunder. Such collection or application of rent by Landlord, however, will not be
deemed a waiver of the provisions hereof or a release of Tenant from the further performance by
Tenant of its covenants, duties and obligations hereunder.




          (d) As used herein, the term “Transfer” includes any merger, consolidation,
reorganization, sale of assets, sale of a controlling interest in stock, or other transfer by like
manner or operation of law. Notwithstanding anything to the contrary, Tenant has the right,
subject to Section 8.3, without Landlord’s consent, to assign this Lease to (i) any
corporation or other entity resulting from a merger or consolidation with Tenant, so long as such
surviving corporation or entity acquires all or substantially all of Tenant’s assets and on-going
concern, and has a tangible net worth at least equal to Tenant’s tangible net worth either as of
the Effective Date or the date immediately preceding the proposed Transfer, whichever is greater,
or (ii) any person or entity which acquires all or substantially all of Tenant’s assets and
on-going concern, so long as such person or entity has a tangible net worth at least equal to
Tenant’s tangible net worth either as of the Effective Date or the date immediately preceding the
proposed Transfer, whichever is greater, or (iii) any person or entity which acquires a controlling
interest in Tenant’s stock, so long as such person or entity has a tangible net worth at least
equal to Guarantor’s tangible net worth either as of the Effective Date or the date immediately
preceding the proposed Transfer, whichever is greater.








     8.2 Affiliate Transfers. Tenant has the right, subject to Section 8.3, without
Landlord’s consent, to assign this Lease or sublet all or any portion of the Premises to any person
or entity that controls, is controlled by, or is under common control with the original Tenant
named in this Lease (an “Affiliate Transfer”). The term “control” means, with
respect to a corporation, the right to exercise, directly or indirectly, more than 50% of the
voting rights attributable to the shares of the controlled corporation, and, with respect to a
person or entity that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or policies of the
controlled person or entity. Tenant must provide Landlord with written notice of any Affiliate
Transfer within 10 days after the effective date of such the Affiliate Transfer.







     8.3 Transfer Requirements. The following requirements apply to all Transfers (including
Affiliate Transfers):



          (a) Tenant must, in the case of an assignment, cause the assignee to expressly assume and
agree to perform, all of the covenants, duties and obligations of Tenant under this Lease. The
assignee will be jointly and severally liable under the Lease along with Tenant.




          (b) Except in the case of an Affiliate Transfer, if the rent or other consideration payable
by a sublessee or assignee under any such permitted sublease or assignment exceeds the Rent for the
portion of the Premises so transferred, Tenant must pay to Landlord, as additional Rent, all such
excess rental and other consideration, immediately upon receipt thereof by Tenant.




          (c) The use of the Premises by the assignee or transferee must be consistent with the terms of
this Lease. All of the terms and provisions of this Lease will continue to apply after a Transfer,
unless otherwise expressly provided herein.




          (d) Tenant will remain directly and primarily liable for the performance of all the covenants,
duties and obligations of Tenant under this Lease (including, without limitation, the obligation to
pay Rent). Landlord will be permitted to enforce the provisions of this Lease against the
undersigned



 









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Tenant or any transferee, or both, without demand upon or proceeding in any way against
any other persons.








     8.4 Transfers by Landlord. Landlord will have the right to transfer and assign, in whole
or in part, all of its rights and obligations hereunder and in the Complex. Upon the assumption by
the transferee of the obligations of Landlord hereunder, Landlord will be released from any further
obligations accruing after the date of transfer, and Tenant will look solely to such
successor-in-interest of Landlord for the performance of such obligations.







     8.5 Sublease of Offer Space. In the event Landlord and Tenant enter into an amendment
to this Lease to incorporate the Offer Space pursuant to Section 2.4 above, Landlord hereby
consents to Tenant’s sublease of the Offer Space to an entity known as Gong Anime, Inc., a joint
venture of which Guarantor is a 50% owner, so long as the sublease of the Offer Space satisfies the
conditions and requirements of this Lease (other than obtaining Landlord’s prior written consent),
including, without limitation, Section 8.3, and Tenant deliverers to Landlord a copy of the
sublessee whereby the sublessee agrees to be bound by all provisions of this Lease.







SECTION 9 — INSURANCE; CASUALTY; ALLOCATION OF LIABILITY








     9.1 Property Insurance.



          (a) Landlord must maintain insurance policy or policies of “risks of direct physical loss” in
a “special form” basis (or comparable coverage by whatever name denominated) on the portion of the
Complex that is the property of Landlord (including Alterations by Tenant that have become the
property of Landlord), in an amount equal to not less than 90% of the replacement cost (or such
greater amount as may be necessary to comply with the provisions of any co-insurance clauses of the
policy). The premium for such policy will be included as a part of the Basic Operating Costs.
Payments for losses thereunder will be made solely to Landlord or to the mortgagees of Landlord as
their interests may appear. If insurance premiums for the Complex increase due to: (i) the
Improvements to the Premises in excess of Building Standard or any subsequent improvements made by
Tenant to the Premises or made by Landlord at Tenant’s request, or (ii) as a result of Tenant’s use
of the Premises, Landlord may elect to require Tenant to pay directly for the increased premiums
rather than including such increased premiums in Basic Operating Costs.




          (b) Tenant must maintain an insurance policy or policies of “risks of direct physical loss” in
a “special form” basis (or comparable coverage by whatever name denominated) on all of its personal
property, including removable trade fixtures, supplies and movable furniture and equipment located
on the Premises, in an amount equal to full replacement cost and endorsed to provide that Tenant’s
insurance is primary in the event of any overlapping coverage with the insurance carried by
Landlord.
Such insurance will be maintained at the expense of Tenant and payment for losses thereunder
will be made solely to Tenant or to the mortgagees of Tenant (if permitted hereunder) as their
interests may appear. Tenant must, prior to occupancy of the Premises and at Landlord’s request
from time to time, provide to Landlord a current certificate of insurance evidencing Tenant’s
compliance with this Section 9.1. Tenant must obtain the agreement of Tenant’s insurers to
notify Landlord at least 30 days prior to any cancellation, modification or expiration of a
property insurance policy.








     9.2 Liability and Other Insurance.



          (a) Landlord must maintain a policy or policies of commercial general liability insurance
covering the Complex (but excluding the Premises) on ISO Form CG 0001 or its equivalent, insuring
against claims for personal or bodily injury or death or property damage (including contractual
indemnity and liability coverage without contractual exclusion) occurring upon, in or about the
Complex (but excluding the Premises), affording protection to the limit of not less than $1,000,000
per occurrence for bodily injury and property damage, $1,000,000 per occurrence for personal or
advertising injury, $1,000,000 for general aggregate liability, and such other coverage as Landlord
may reasonably deem appropriate. Such insurance will be maintained at the expense of Landlord (as
a part of the Basic Operating Costs), and payments for losses thereunder will be made solely to
Landlord or any other additional insured, as appropriate. Landlord’s insurance will contain an
endorsement that Landlord’s insurance is primary for claims arising out of an incident or event
occurring within the Common Areas.




          (b) Tenant must maintain a policy or policies of (i) commercial general liability insurance
covering the Premises and Tenant’s use thereof on ISO Form CG 0001 or its equivalent, insuring
against claims for personal or bodily injury or death or property damage (including contractual
indemnity and liability coverage without contractual exclusion) occurring upon, in or about the
Premises, (ii) worker’s compensation insurance coverage in accordance with applicable law with a
waiver of subrogation in favor of Landlord, and (iii) motor vehicle liability insurance with
coverage for all owned and hired vehicles with combined limits of not less than $1,000,000 each
accident for bodily injury or property damage. The policy or policies must be issued by and
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licensed to do business in the State having an A.M. Best Rating
of “AVII” or better. Tenant’s liability insurance must provide minimum protection of not less than
$1,000,000 per occurrence for bodily injury and property damage, $1,000,000 per occurrence for
personal or advertising injury, $1,000,000 for general aggregate liability, and such other coverage
as Landlord may reasonably deem appropriate. Tenant’s insurance must contain an endorsement that
Tenant’s insurance is primary and non-contributory for claims arising out of an incident or event
occurring within the Premises. Tenant’s insurance must contain a provision naming Landlord (and
any mortgagee designated by Landlord) as an additional insured. Tenant must, prior to and during
all times of occupancy of the Premises, provide Landlord with a current certificate of insurance
evidencing Tenant’s compliance with this Section 9.2. Tenant must obtain the agreement of
Tenant’s insurers to notify Landlord at least 30 days prior to any cancellation, modification or
expiration of a liability insurance policy.




          (c) From time to time during the Lease Term (but not more often than once every 3 years),
Landlord may increase the minimum coverage amount specified in this Section 9.2 in order to
reflect inflation and other relevant factors. Within 30 days after Landlord notifies Tenant of
such an increase, both Landlord and Tenant must deliver to the other a certificate of insurance
reflecting such increases in coverage.








     9.3 Casualty Damage.



          (a) If the Premises or the Building is damaged by fire or other casualty, Tenant must give
prompt written notice to Landlord.




          (b) Landlord may terminate the Lease due to a casualty to the Premises or any portion of the
Building if:





          (i) The Building is so damaged by fire or other casualty that substantial alteration or
reconstruction of the Building will, in the judgment of an independent architect selected by
Landlord, be required (whether or not the Premises has been damaged by the casualty) or, in
Landlord’s reasonable opinion, repair or reconstruction cannot be made within 180 days after
the fire or casualty;




          (ii) Any mortgagee under a first mortgage or first deed of trust covering the Building
requires that the insurance proceeds payable as a result of the casualty be used to retire
the mortgage debt;




          (iii) The casualty is not insured under the property insurance required to be carried
by Landlord pursuant to the terms of Section 9.1; or




          (iv) Landlord determines that insurance proceeds will be insufficient to restore the
Building.



          (c) If Landlord does not terminate this Lease, Landlord will, as soon as practicable, but no
more than 90 days after the date of the casualty, commence to repair and restore the Building and
will proceed with reasonable diligence to restore the Building to substantially its condition prior
to the occurrence of the casualty. However, Landlord will not be required to rebuild, repair, or
replace any part of Tenant’s removable furniture, fixtures and equipment or any Alterations to the
Premises made by Tenant following the Commencement Date which were not approved by Landlord in
writing. Furthermore, Landlord will not be required to spend for the restoration work an amount in
excess of the insurance proceeds actually received by Landlord as a result of the casualty, plus
any deductible amounts thereunder (but the Landlord may choose, at its option, to provide the extra
funds necessary to complete the restoration).




          (d) If Landlord does not either commence the repairs to the Building within the time required
herein or complete the repairs to the Building within 180 days after the date of the casualty,
Tenant may terminate the Lease by written notice to Landlord given no later than 30 days following
the date on which Landlord was to commence or complete such repairs, as the case may be.




          (e) Except as provided in Section 6.4 herein, Landlord will not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from
the casualty or its repair. However, Landlord may allow Tenant an equitable abatement of Rent
during the time and to the extent the Premises is unfit for occupancy and vacated by Tenant. If
the Premises or any other portion of the Complex is damaged by a casualty resulting from the
intentional acts of Tenant or any Tenant-Related Party, subtenant, or licensee of Tenant, Rent
will not be abated during the repair of such damage.








     9.4 INDEMNITY BY TENANT. TENANT HEREBY INDEMNIFIES, DEFENDS AND HOLDS HARMLESS LANDLORD
AND THE LANDLORD-RELATED PARTIES FROM AND



 








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AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, DAMAGES,
CLAIMS, SUITS, LOSSES, CAUSES OF ACTION, LIENS, JUDGMENTS AND EXPENSES (INCLUDING COURT COSTS,
ATTORNEY’S FEES AND COSTS OF INVESTIGATION) OF ANY KIND, NATURE OR DESCRIPTION RESULTING FROM ANY
INJURIES TO OR DEATH OF ANY PERSON OR ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE
FROM THE FOLLOWING (COLLECTIVELY, THE “TENANT-RELATED CLAIMS”): (i) AN INCIDENT OR EVENT
WHICH OCCURRED WITHIN OR ON THE PREMISES; (ii) AN INCIDENT OR EVENT WHICH OCCURRED DURING THE
PERFORMANCE OF ANY ALTERATIONS MADE BY OR ON BEHALF OF TENANT UNDER SECTION 7.7; (iii) AN
INCIDENT OR EVENT WHICH OCCURRED DURING THE CONSTRUCTION OF ANY TENANT IMPROVEMENTS OR ALTERATIONS
BY TENANT OR A PARTY ON BEHALF OF TENANT; (iv) THE OPERATION OR CONDUCT OF TENANT’S BUSINESS
WITHIN THE PREMISES; OR (v) THE BREACH OF THIS LEASE BY TENANT. SUCH INDEMNIFICATION WILL BE IN
EFFECT EVEN IF THE TENANT-RELATED CLAIM IS THE RESULT OF OR CAUSED BY THE NEGLIGENT ACTS OR
OMISSIONS OF LANDLORD OR ANY LANDLORD-RELATED PARTY. THE INDEMNITY OBLIGATIONS OF TENANT UNDER
THIS SECTION 9.4 WILL NOT APPLY TO A TENANT-RELATED CLAIM ARISING OUT OF THE GROSS
NEGLIGENCE OR INTENTIONAL MISCONDUCT OF LANDLORD OR ANY LANDLORD-RELATED PARTY.







     9.5 INDEMNITY BY LANDLORD. LANDLORD HEREBY INDEMNIFIES, DEFENDS AND HOLDS HARMLESS TENANT
AND THE TENANT-RELATED PARTIES FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, DAMAGES,
CLAIMS, SUITS, LOSSES, CAUSES OF ACTION, LIENS, JUDGMENTS AND EXPENSES (INCLUDING COURT COSTS,
ATTORNEYS’ FEES AND COSTS OF INVESTIGATION) OF ANY KIND, NATURE OR DESCRIPTION RESULTING FROM ANY
INJURIES TO OR DEATH OF ANY PERSON OR ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE
FROM THE FOLLOWING (COLLECTIVELY, THE “LANDLORD-RELATED CLAIMS”): (i) AN INCIDENT OR EVENT
WHICH OCCURRED WITHIN OR ON THE COMMON AREAS; (ii) THE OPERATION OR CONDUCT OF LANDLORD’S BUSINESS
WITHIN THE COMMON AREAS; OR (iii) THE BREACH OF THIS LEASE BY LANDLORD. SUCH INDEMNIFICATION WILL
BE IN EFFECT EVEN IF THE LANDLORD-RELATED CLAIM IS THE RESULT OF OR CAUSED BY THE NEGLIGENT ACTS OR
OMISSIONS OF TENANT OR ANY TENANT-RELATED PARTY. THE INDEMNITY
OBLIGATIONS OF LANDLORD UNDER THIS SECTION 9.5 WILL NOT APPLY TO A LANDLORD-RELATED CLAIM
ARISING OUT OF THE GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT OF TENANT OR ANY TENANT-RELATED
PARTY. FURTHERMORE, ALL CLAIMS AGAINST LANDLORD ARE LIMITED BY SECTION 12.4.







     9.6 Waiver of Claims and Subrogation Rights. So long as it is permissible to do so under
the laws and regulations governing the writing of insurance within the State, all insurance carried
by either Landlord or Tenant will provide for a waiver of rights of subrogation against Landlord
and Tenant on the part of the insurance carrier. Unless the waivers contemplated by this sentence
are not obtainable for the reasons described in this Section 9.6, Landlord waives any and
all rights of recovery, claims, actions or causes of action against Tenant and the Tenant-Related
Parties, and Tenant waives any and all rights of recovery, claims, actions or causes or action
against Landlord and the Landlord-Related Parties, for any loss or damage to property or any
injuries to or death of any person which is covered or would have been covered under the insurance
policies required under this Lease. The foregoing release will not apply to losses or damages in
excess of actual or required policy limits (whichever is greater) nor to any deductible (up to a
maximum of $10,000) applicable under any policy obtained by the waiving party. The failure of
either party (the “Defaulting Party”) to take out or maintain any insurance policy required
under this Lease will be a defense to any claim asserted by the Defaulting Party against the other
party hereto by reason of any loss sustained by the Defaulting Party that would have been covered
by any such required policy. The waivers set forth in the immediately preceding sentence will be
in addition to, and not in substitution for, any other waivers, indemnities, or exclusions of
liabilities set forth in this Lease.








     9.7 Damages from Certain Causes. Notwithstanding anything contained in this Lease to the
contrary, and subject to the terms of Section 9.6, neither Landlord nor any
Landlord-Related Party will be liable for damages to Tenant or any party claiming through Tenant
for any injury to or death of any person or damage to property or for interruption or damage to
business resulting from (and Tenant, for itself and the Tenant-Related Parties, specifically waives
and releases any claims it may have with respect to) any of the following:



          (a) any act, omission or negligence of Tenant, any Tenant-Related Party or Tenant’s
contractors, subtenants, assignees, licensees, invitees or customers;




          (b) any act, omission or negligence of any other tenant within the Building, or any of their
respective employees, agents, contractors, tenants, assignees, licensees, invitees or customers;


 









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          (c) the repair, alteration, maintenance, damage or destruction of the Premises or any other
portion of the Building (including the construction of tenant improvements for other tenants of the
Building), except to the extent caused by the negligence or willful misconduct of Landlord or any
Landlord-Related Party;




          (d) vandalism, theft, burglary and other criminal acts (other than those committed by
Landlord’s employees) in or about the Complex (including the Parking Areas);




          (e) any defect in or failure of equipment, pipes, wiring, heating or air conditioning
equipment, stairs, elevators, or sidewalks, the bursting of any pipes or the leaking, escaping or
flowing of gas, water, steam, electricity, or oil, broken glass, or the backing up of any drains,
except to the extent caused by the negligence or willful misconduct of Landlord or any
Landlord-Related Party;




          (f) injury done or occasioned by wind, snow, rain or ice, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, requisition, order of any governmental
body or authority; or




          (g) any other cause beyond the reasonable control of Landlord.



Under no circumstances will Landlord be liable for damages related to business interruption or loss
of profits. The provisions of this Section 9.7 will not limit the obligations of Landlord
under this Lease or the rights of Tenant to seek enforcement of the terms of this Lease, so long as
such enforcement by Tenant does not involve a claim for damages.








SECTION 10 — CONDEMNATION








     10.1 Condemnation. Landlord may terminate this Lease if the whole or substantially the whole of the Complex, or the
whole or such portion of the Premises as will render the remainder unfit for Tenant’s use, is taken
for any public or quasi-public use, by right of eminent domain or otherwise, or sold in lieu of
condemnation. The effective date of the termination will be the date when physical possession of
the Building or the Premises is taken by the condemning authority. If this Lease is not terminated
upon any such taking or sale, the Base Rent payable hereunder will be reduced by an amount
representing that portion of Base Rent applicable to the portion of the Premises subject to such
taking or sale. Landlord will to the extent Landlord deems feasible, restore the Building and the
Premises to substantially their former condition. However, Landlord will not be required to
rebuild, repair, or replace any Alterations to the Premises made by Tenant following the
Commencement Date that were not approved by Landlord in writing. Furthermore, Landlord will not be
required to spend for such work an amount in excess of the amount received by Landlord as
compensation for such taking.







     10.2 Condemnation Award. All amounts awarded upon a taking of any part or all of the
Property, Building or the Premises will belong to Landlord, and Tenant will not be entitled to and
expressly waives all claims to any such compensation. Tenant may, however, make a separate claim
upon the condemning authority for expenses related to relocation and for the unamortized cost of
leasehold improvements paid for by Tenant.







SECTION 11 — TITLE ENCUMBRANCES








     11.1 Subordination to Mortgage; Lender Rights.



          (a) This Lease will be subordinate to any mortgage, deed of trust or other lien now existing
or hereafter placed upon the Premises or upon the Complex, and to any renewals, modifications,
consolidations, refinancings, and extensions thereof, but Tenant agrees that any such mortgagee or
deed of trust beneficiary will have the right at any time to subordinate such mortgage, deed of
trust or other lien to this Lease on such terms and subject to such conditions as such mortgagee or
deed of trust beneficiary may deem appropriate, in its discretion. If any proceedings are brought
for the foreclosure of, or in the event of the exercise of the power of sale under, any such
mortgage, deed of trust or other lien, Tenant agrees, without further action hereunder, to attorn
to the purchaser upon such foreclosure (or any deed in lieu of foreclosure) and recognize such
purchaser as the Landlord under this Lease. Landlord is hereby irrevocably vested with full power
and authority to subordinate this Lease to any mortgage, deed of trust or other lien now existing
or hereafter placed upon the Premises or the Complex and Tenant agrees upon demand to execute such
further instruments subordinating this Lease or attorning to the holder of any such liens as
Landlord may reasonably request.




          (b) Upon Tenant’s written request, Landlord will use reasonable efforts to obtain from
Landlord’s lender, a subordination, non-disturbance and attornment agreement on such lender’s form
and otherwise reasonably satisfactory to Landlord, Tenant and such lender. Tenant must pay all
fees, costs and expenses incurred by Landlord in connection therewith (but no more than $1,500 per
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          (c) If the Premises is subject to the lien of a mortgage or deed of trust or similar
instrument in favor of a lender, Tenant must give written notice to any such lender whose name and
address have been given to Tenant before taking any action on account of any default by Landlord
hereunder. Any such notice given by Tenant must (i) be given in the manner described in
Section 13.1 of this Lease, (ii) specify the default by Landlord in reasonable detail, and
(iii) afford the lender a reasonable period of time to perform the obligation on behalf of
Landlord.








     11.2 Landlord’s Lien; Security Interest. Tenant hereby grants to Landlord a lien and
security interest in all property of Tenant now or hereafter placed in or upon the Premises for
payment of all Rent and other sums agreed to be paid by Tenant under this Lease. The provisions of
this section relating to such lien and security interest will constitute a security agreement under
and subject to the “Uniform Commercial Code,” as enacted in the State, so that Landlord may enforce
a security interest in all property of Tenant now or hereafter placed in or on the Premises, in
addition and cumulative of the landlord’s liens and rights provided by law or by the other terms
and provisions of this Lease. Landlord may enforce this landlord’s lien and security interest
immediately upon a breach of this Lease by Tenant (whether an Event of Default will exist or not)
if Tenant is vacating or is threatening to vacate the Premises. Tenant agrees to execute, as
debtor, such financing statement or statements as Landlord may now or hereafter request. Landlord
may at its election at any time file a copy of this page of this Lease and the signature page of
this Lease as a financing statement, with Tenant as the “debtor” and Landlord as the “secured
party.”







     11.3 Mechanic’s Liens. Tenant may not permit any mechanic’s liens, materialmen’s liens or
other liens to be placed upon the Premises or the Complex for any work performed by or at the
request of Tenant, or any assignee, sublessee or licensee of Tenant. If any such lien is attached
to the Premises or the Complex and not discharged by payment, bonding or otherwise within 20 days
after notice from Landlord to Tenant, then, in addition to any other right or remedy of Landlord,
Landlord may, but is not be obligated to, discharge the same. Any amount paid by Landlord for the
aforesaid purpose will be paid by Tenant to Landlord on demand as additional Rent and will bear
interest at the Default Rate from the date paid by Landlord until reimbursed by Tenant.







SECTION 12 — DEFAULT; DISPUTES; REMEDIES








     12.1 Default by Tenant. The following events will be deemed to be events of default by
Tenant under this Lease (each an “Event of Default”):



          (a) Tenant fails to timely pay any Rent and such failure continues for a period of 5 days
after written notice of such default has been delivered to Tenant (but if Landlord has given Tenant
2 such notices during any 12-month period, Landlord will not be required to give further notice;
thereafter, the failure by Tenant to make any payment of Rent when due hereunder will be an Event
of Default without notice or grace period);




          (b) Tenant fails to comply with any terms, provisions or covenants of this Lease or any other
agreement between Landlord and Tenant (other than a failure related to the non-payment of Rent),
all of which terms, provisions and covenants will be deemed material, and such failure continues
for a period of 30 days after written notice of such failure has been delivered to Tenant, or if
such failure cannot reasonably be cured within such 30-day period, Tenant fails to commence to cure
such failure within such 30-day period or thereafter fails to prosecute the cure diligently and
continuously or fails to complete the cure within 60 days after the date of Landlord’s notice of
default;




          (c) Tenant or any Guarantor takes any action to, or notifies Landlord that Tenant or any
Guarantor intends to, file a petition under any section or chapter of the United States Bankruptcy
Code, as amended from time to time, or under any similar law or statute of the United States or any
state thereof; or a petition is filed against Tenant or any Guarantor under any such statute and is
not dismissed within 60 days thereafter;




          (d) A receiver or trustee is appointed for Tenant’s leasehold interest in the Premises or for
all or a substantial part of the assets of Tenant or any Guarantor; or




          (e) Tenant abandons all or any substantial portion of the Premises or Tenant refuses to take
occupancy of the Premises.








     12.2 Landlord’s Remedies.



          (a) Upon the occurrence of any Event of Default, Landlord may, at its option and without
further notice to Tenant and without judicial process, in addition to all other remedies given
hereunder or by law or equity, do any one or more of the following: (i) terminate this Lease, in
which event Tenant will immediately surrender possession of the Premises to Landlord; (ii) enter
upon and take possession of the Premises and expel or remove Tenant therefrom, with or without
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Lease; (iii) apply all or any portion of the Security Deposit to cure such
Event of Default; (iv) change or re-key all locks to entrances to the Premises, and Landlord will
have no obligation to give Tenant a new key to the Premises until such Event of Default is cured;
and (v) remove from the Premises any furniture, fixtures, equipment or other personal property of
Tenant, without liability for trespass or conversion, and store such items either in the Complex or
elsewhere at the sole cost of Tenant and without liability to Tenant. Landlord may retain control
over all such property for the purpose of foreclosing the security interest created by Section
11.2. Any of such furniture, fixtures, equipment or personal property not claimed within 30
days from the date of removal will be deemed abandoned.




          (b) Exercise by Landlord of any one or more remedies hereunder will not constitute forfeiture
or an acceptance of surrender of the Premises by Tenant. Such surrender can be effected only by
the written agreement of Landlord and Tenant.




          (c) If Landlord terminates this Lease by reason of an Event of Default, Tenant must pay to
Landlord the sum of (i) the cost of recovering the Premises (including attorney’s fees and costs),
(ii) the unpaid Rent and all other indebtedness accrued hereunder to the date of such
termination, (iii) the amounts stated in Section 12.2(e), (iv) the total Rent which
Landlord would have received under this Lease for the remainder of the Lease Term minus the Fair
Market Rental Value (hereinafter defined) of the Premises for the same period, both discounted to
present value at the Prime Rate (hereinafter defined) in effect upon the date of determination, and
(v) any other damages or relief which Landlord may be entitled to at law or in equity. For the
purposes of this section, “Fair Market Rental Value” will be the rental rate that would be
received from a comparable tenant for a comparable lease for premises and other properties of
equivalent quality, size, condition and location as the Premises, taking into account any free rent
or other concessions that are generally prevailing in the marketplace at the time of Tenant’s
default, market conditions and the period of time the Premises may reasonably be expected to remain
vacant before Landlord is able to re-let the Premises to a suitable new tenant. For purposes of
this section, “Prime Rate” will mean the per annum rate of interest announced or published
from time to time by Bank of America, N.A., Dallas, Texas (or its successors or assigns) as its
prime commercial lending rate.




          (d) If Landlord repossesses the Premises without terminating this Lease, then Tenant must pay
to Landlord the sum of (i) the cost of recovering the Premises (including attorney’s fees and
costs), (ii) the unpaid Rent and other indebtedness accrued to the date of such repossession, and
(iii) the total Rent that Landlord would have received under this Lease for the remainder of the
Lease Term minus any net sums thereafter received by Landlord through reletting the Premises during
said period after deducting expenses incurred by Landlord in connection with such reletting for
advertising costs, brokerage commissions, architectural fees, tenant improvement costs and
allowances and any other allowances or concessions provided by Landlord (amortized pro rata over
the term of such new lease). Re-entry by Landlord will not affect the obligations of Tenant for
the unexpired Lease Term. Tenant will not be entitled to any excess of rent obtained by reletting
over the Rent required to be paid by Tenant hereunder. Actions to collect amounts due by Tenant
may be brought 1 or more times, without the necessity of Landlord’s waiting until the expiration of
the Lease Term. In addition, Landlord may, at any time following repossession of the Premises
without termination of the Lease, elect to terminate the Lease and pursue the remedies available to
Landlord pursuant to Section 12.2(c) above in lieu of the remedies available to Landlord
pursuant to this Section 12.2(d).




          (e) If Landlord has terminated this Lease pursuant to Section 12.2(c), Tenant must
also pay to Landlord the unamortized portion (assuming level amortization at 12% interest over the
Lease Term), calculated as of the date of termination, of all leasing commissions, tenant
improvement costs and allowances, architectural costs and allowances, any other allowances actually
provided by Landlord and all other out-of-pocket costs actually incurred by Landlord related to
this Lease.




          (f) Upon termination of this Lease or repossession of the Premises due to the occurrence of an
Event of Default, Landlord will not be obligated to relet or attempt to relet the Premises.




          (g) If Tenant fails to make any payment, perform any obligation, or cure any default hereunder
within 10 days after receipt of written notice thereof, Landlord, without obligation to do so and
without thereby waiving such failure or default, may make such payment, perform such obligation,
and/or remedy such other default for the account of Tenant (and enter the Premises for such
purpose). Tenant must pay all costs, expenses and disbursements (including attorneys’ fees)
incurred by Landlord in taking such remedial action, plus, at the option of Landlord, interest
thereon at the Default Rate.








     12.3 Default by Landlord. Landlord will be in default under this Lease if Landlord fails
to perform any of its obligations hereunder and such failure continues for a period of 30 days
after Tenant delivers written notice of such failure to Landlord. Tenant must also deliver written
notice of such failure to the holder(s) of any indebtedness or other obligations secured by any
mortgage or deed of trust affecting the Premises, of which Tenant has received actual notice. If
such failure cannot reasonably be cured within the 30-day period, Landlord will not be in default
hereunder as long as Landlord or such holder(s) commences the remedying of such failure within the
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same to completion. Landlord will not be liable to
Tenant for consequential, special or punitive damages by reason of a failure to perform (or a
default) by Landlord under this Lease.







     12.4 Limitation on Landlord’s Liability. Tenant will be entitled to look solely to
Landlord’s equity in the Complex for the recovery of any judgment against Landlord, and Landlord
will not be personally liable for any deficiency with respect to the recovery of such judgment.
This recourse limitation will not limit any right that Tenant might otherwise have to obtain
specific performance of Landlord’s obligations under this Lease.







     12.5 Attorney’s Fees. If Landlord or Tenant employs an attorney to assert or defend any action arising out of the
breach of any term, covenant or provision of this Lease, or to bring legal action for the unlawful
detainer of the Premises, the prevailing party will be entitled to recover from the non-prevailing
party attorney’s fees and costs of suit incurred in connection therewith. For purposes of this
Section 12.5, a party will be considered to be the “prevailing party” if (i) such party
initiated the litigation and substantially obtained the relief which it sought (whether by
judgment, voluntary agreement or action of the other party, trial, or alternative dispute
resolution process), (ii) such party did not initiate the litigation and either (A) received a
judgment in its favor, or (B) did not receive judgment in its favor, but the party receiving the
judgment did not substantially obtain the relief which it sought, or (iii) the other party to the
litigation withdrew its claim or action without having substantially received the relief which it
was seeking.







SECTION 13 — MISCELLANEOUS








     13.1 Notices. Any notice under this Lease must be in writing and must be sent to the
appropriate Notice Address by (i) personal delivery, (ii) a recognized overnight courier, (iii)
United States mail, postage prepaid, certified mail, return receipt requested, or (iv) facsimile
with either electronic or telephonic verification of receipt, so long as the original of the
facsimile notice is deposited in the United States mail within 3 days after the fax notice is sent.
Notice by personal delivery or overnight courier will be effective upon receipt, notice by mail
will be effective upon deposit in the United States mail in the manner above described and notice
by facsimile will be effective upon electronic or telephonic verification of receipt. Any party
may change its Notice Address by delivering appropriate written notice to the other party in the
manner described above. The change in Notice Address will be effective 10 days after the effective
date of the notice.







     13.2 Estoppel Agreements. Tenant will, from time to time, within 10 days after written
request by Landlord, execute and deliver to such persons as Landlord may designate, an estoppel
agreement in recordable form certifying that this Lease is unmodified and in full force and effect
(or if there have been modifications, that this Lease is in full force and effect as so modified),
stating the dates to which Rent and other charges payable under this Lease have been paid, stating
that the Landlord is not in default hereunder (or if Tenant alleges a default, stating the nature
of such alleged default) and further stating such other matters as Landlord may reasonably require.







     13.3 No Implied Waiver. The failure of either party to insist at any time upon the strict
performance of any covenant or agreement in this Lease or to exercise any right, power or remedy
contained in this Lease will not be construed as a waiver or a relinquishment thereof for the
future.







     13.4 Independent Obligations. The obligation of Tenant to pay Rent hereunder and the
obligation of Tenant to perform Tenant’s other covenants and duties hereunder constitute
independent, unconditional obligations to be performed at all times provided for hereunder and are
independent of the Landlord’s performance of Landlord’s duties and obligations hereunder.







     13.5 Severability. If any term or provision of this Lease, or the application thereof to
any person or circumstance will, to any extent, be invalid or unenforceable, the remainder of this
Lease, or the application of such term or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, will not be affected thereby, and each term and
provision of this Lease will be valid and enforced to the fullest extent permitted by law.







     13.6 Recording. Tenant agrees not to record this Lease. Upon written request from Tenant,
Landlord will deliver to Tenant a memorandum of lease executed by Landlord in a form acceptable for
recording in the real property records of the county in which the Premises is located, which Tenant
may cause to be recorded at Tenant’s sole cost and expense.







     13.7 Governing Law. This Lease will be governed by the laws of the State in which the Premises is located. This
Lease is performable in, and the exclusive venue for any action brought with respect hereto, will
be in Dallas County in the State.







     13.8 Force Majeure. Whenever a period of time is herein prescribed for the taking of any
action by Landlord or Tenant, the party responsible for taking such action will not be liable or
responsible



 









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for any delays due to strikes, riots, acts of God, shortages of labor or materials,
war, governmental laws, regulations or restrictions, or any other cause whatsoever (other than
financial inability) beyond the control of the party responsible for taking such action (a
“Force Majeure Event”). The period of time for taking action will be extended by the
number of days of delay. However, the provisions of this Section 13.8 will never be
construed as allowing an extension of time with respect to Tenant’s obligation to pay Rent when and
as due under this Lease, except in those circumstances in which a Force Majeure Event actually
prevents Tenant from accessing funds to pay Rent when and as due under this Lease, in which event
Rent will be due and payable immediately on the day upon which the funds first become accessible.







     13.9 Time of Performance. Except as otherwise expressly provided herein, time is of the
essence under this Lease.







     13.10 Commissions. Landlord and Tenant agree that the Broker is the only broker involved
in the procurement, negotiation or execution of this Lease, and that the Broker’s commission will
be paid by Landlord pursuant to a separate commission agreement. Landlord and Tenant hereby agree
to defend, indemnify and hold each other harmless against any loss, claim, expense or liability
with respect to any commissions, brokerage or similar fees claimed on account of the execution or
renewal of this Lease, the expansion of the Premises, or the exercise of any other rights set forth
in this Lease due to any action or statement of the indemnifying party.







     13.11 Merger of Estates. The voluntary or involuntary surrender of this Lease by Tenant,
or a mutual cancellation thereof, will not constitute a merger of the Landlord’s fee estate in the
Property and the leasehold interest created hereby. In that event, Landlord will have the option,
in Landlord’s sole discretion, to either terminate or assume all or any existing subleases or
subtenancies.







     13.12 Survival of Indemnities and Covenants. All indemnities of Landlord or Tenant and all
covenants of Landlord or Tenant not fully performed on the date of the expiration or termination of
this Lease will survive such expiration or termination.







     13.13 Headings. Descriptive headings are for convenience only and will not control or
affect the meaning or construction of any provision of this Lease.







     13.14 Entire Agreement. This Lease, including the exhibits listed in this Section
13.14, embodies the entire agreement between the parties hereto with relation to the Premises.
There are no covenants, agreements, representations, warranties or restrictions between the parties
hereto, other than those specifically set forth in this Lease. The following exhibits are attached
hereto and incorporated herein and made a part of this Lease for all purposes:



	 	 	 	 	 	 	 
	     
	 	Exhibit “A”	 	—	 	Property Description
	 
	 	Exhibit “B”	 	—	 	Site Plan
	 
	 	Exhibit “C”	 	—	 	Rules and Regulations
	 
	 	Exhibit “D”	 	—	 	Tenant Improvements Agreement
	 
	 	Exhibit “E”	 	—	 	Acceptance of Premises Memorandum
	 
	 	Exhibit “F”	 	—	 	Moving Allowance
	 
	 	Exhibit “G”	 	—	 	Guaranty










     13.15 Amendment. To be effective, any amendment or modification of this Lease must be in writing and signed by
Landlord and Tenant.







     13.16 Joint and Several Liability. If Tenant consists of more than 1 person or entity, the
obligations of such parties under this Lease will be joint and several.







     13.17 Multiple Counterparts. This Lease may be executed in multiple counterparts, each of
which will constitute an original instrument, but all of which will constitute one and the same
agreement.







     13.18 Effect of Delivery of this Lease. Landlord has delivered a copy of this Lease to
Tenant for Tenant’s review only, and the delivery hereof does not constitute an offer to Tenant or
an option to be exercised by Tenant. This Lease will not be effective until a copy of this Lease
executed by both Landlord and Tenant is delivered by Landlord to Tenant.







     13.19 Property Code. Tenant hereby waives any statutory rights otherwise applicable under
Section 91.004 and Section 93.002 of the Texas Property Code. Landlord and Tenant hereby each
acknowledge and agree that they are knowledgeable and experienced in commercial transactions and
further hereby acknowledge and agree that the provisions of this Lease for determining charges,
amounts and additional Rent payable by Tenant are commercially reasonable and valid even though
such methods may not state precise mathematical formulae for determining such charges.
ACCORDINGLY, TENANT



 









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HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ALL RIGHTS AND BENEFITS TO WHICH TENANT
MAY BE ENTITLED UNDER SECTION 93.012 OF THE TEXAS PROPERTY CODE, AS SUCH SECTION NOW EXISTS OR AS
SAME MAY BE HEREAFTER AMENDED OR SUCCEEDED.



[Signature page follows.]




 









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     IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the Effective Date.



	 	 	 	 	 	 
	 	LANDLORD:





FMBP INDUSTRIAL I LP,

a Delaware limited partnership

 	 
	 	By:  	FMBP Industrial I GP LLC,
 a Delaware limited liability
company, 
its General Partner
 	 
	 	 	 
	 	 	By:  	
 	 
	 	 	 	Name:  	 	 
	 	 	 	Title:  	 	 
	 
	 	TENANT:





FUNIMATION PRODUCTIONS, LTD,

a Texas limited partnership

 	 
	 	By:  	Navarre CP, LLC, 
a Minnesota
limited liability company,
 its General Partner
 	 
	 
	 	 	By:  	
 	 
	 	 	 	Name:  	 	 
	 	 	 	Title: