**Exhibit 10.27**

 

LEASEAGREEMENT

 

Between

 

**Met 94,Ltd.,**

 

asLandlord,

 

and

 

**EncoreOrthopedics, Inc.,**

 

asTenant,

 

Coveringapproximately **52,800** gross square feet

ofthe Building known (or to be known) as

 

 

**Metric #4**

 

 

located at

 

 

**         METRICBLVD.**

 

 

**Austin,Texas, 78758**

 

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| STANDARD INDUSTRIAL LEASE AGREEMENT |                                                                                                                                  |
|-------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
| TRAMMELL CROW COMPANY - (AUS/91)    |                                                                                                                                  |
|                                | Approximately 52,800 gross  square feet                                                                                               |
|                                |                     Metric,  Blvd |
|                                | Austin, Texas 78758                                                                                                                   |
|                                | (Metric #4)                                                                                                                           |

 

**LEASEAGREEMENT**

 

THIS LEASE AGREEMENT (this “Lease”) is madeand entered into by and between Met 94, Ltd, hereinafter referred to as “Landlord,”and Encore Orthopedics, Inc., hereinafter referred to as “Tenant”

 

1.             **PREMISES AND TERM.**In consideration of the mutualobligations of Landlord and Tenant set forth herein, Landlord leases to Tenant, and Tenant herebytakes from Landlord, certain leased premises situated within the County ofTravis, State of Texas, as more particularly described on EXHIBIT “A” attachedhereto and incorporated herein by reference (the “Premises”), to have and tohold, subject to the terms, covenants and conditions in this Lease. The term ofthis Lease shall commence on the Lease Commencement Date hereinafter set forthand shall end on the last day of the month that is one hundred twenty (120)months after the Lease Commencement Date.

 

A             [IntentionallyOmitted]

 

B             Building or Improvements to be Constructed   Landlordshall commit to a “substantially complete” shell building on the date which isone hundred eighty (180) days subsequent to the execution of this LeaseAgreement This period will be subject to extension for force majeure delays TheLease Commencement Date will be thirty (30) days after the date of SubstantialCompletion of (i) the shell building and (ii) the tenant interiorfinish-out (the “Tenant Improvements”) Landlord shall use its best efforts andtake all appropriate steps to complete the cul-de-sac described on Exhibit C-9by no later than February 1, 1997 Rent shall commence on the LeaseCommencement Date (the “Rent Commencement Date”) The term “SubstantialCompletion” shall mean the date (1) theselected contractor has completedthe Tenant Improvements that it is obligated to perform pursuant to thecontract it has with Tenant, notwithstanding “punch list” items which donot interfere with use of the Premises, (2) Landlord obtains aCertificate of Occupancy for the Premises, (3) all building fire alarms,fire sprinklers, smoke detectors, exit lights, life safety equipment and otherbuilding code requirements are installed and operational on the Premises, and (4) HVAC,utilities, plumbing service and doors and hardware for the Premises aresufficiently completed so as to enable Tenant to fully move in and install itsfurniture, fixtures, machinery and equipment in the Premises and conduct normalbusiness operations in the Premises Tenant shall have the right to occupy thatportion of the Premises that comprise its cleaning and packaging area of theTenant Improvements at any time prior to Substantial Completion of the TenantImprovements, provided that such occupancy shall not interfere with Landlord’sefforts to obtain Substantial Completion of the Tenant Improvements.Furthermore, Tenant shall have the right to occupy the entire Premises at anytime after the date of Substantial Completion. The Landlord agrees to the abovecompletion date subject to no delays of more than one (1) day causedsolely by Tenant In the event that Tenant does cause one or more delays of morethan one (1) day, then the time for the Landlord to achieve SubstantialCompletion shall be extended by such number of days.  Tenant shall not be deemed to have caused adelay unless it has been given no later than thirty (30) days prior to anydeadline, a schedule and timetable of when Tenant is responsible for makingdecisions that impact on Landlord’s ability to achieve Substantial CompletionIn the event that Landlord does not substantially complete the shell buildingwithin two hundred ten (210) days (or such other extended date pursuant to thisparagraph) from execution of this Lease Agreement, Landlord shall give Tenant acredit against rent due and payable under this Lease at the rate of ThreeHundred Fifty Dollars ($350) per day for each day after the two hundred tenth(210th) day (or such other later extended datepursuant to this paragraph) that it takes to reach substantial completion ofthe shell building. As soon as the shell building and the Tenant Improvementshave been substantially completed, Landlord shall notify Tenant in writing thatSubstantial Completion has occurred

 

2.             **BASE RENT, SECURITY DEPOSIT AND ESCROW DEPOSITS.**

 

A             Base RentTenant agrees to pay Landlordrent for the Premises, inadvance, without demand, deduction or set off, at the rate of Six hundredthirteen one thousandths cents ($0.613) per square foot of rentable area permonth during months 1 through 60 of the term hereof and Seven hundred thirteenone thousandths cents ($0.713) per square foot of rentable area per monthduring months 61 through 120 of the term hereof.  One such monthly installment, plus the othermonthly charges set forth in Paragraph 2C below, shall be due and payable onthe date hereof, and a like monthly installment shall be due and payable on orbefore the first day of each calendar month succeeding the Rent CommencementDate, except that all payments due hereunder for any fractional calendar monthshall be prorated.

 

B             Security DepositPursuant to the provisions of Exhibit C-6, Tenant shall provide a Letterof Credit or Certificateof Deposit (the “Credit Enhancement”) At such point as the Credit Enhancementis amortized down to Twenty-Five

 
|   |   | Initial | Illegible |
|--------|--------|---------|-----------|
|   |   | Date    | 6/6/96    |

 

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Thousand Dollars ($25,000), this amount, whichat the option of Tenant may be converted into a cash deposit or a certificateof deposit which is pledged to Landlord, shall be held by Landlord, withoutobligation for interest, as security for the performance of Tenant’sobligations under this Lease (the “Security Deposit”), it being expresslyunderstood and agreed that the Security Deposit is not an advance rentaldeposit or a measure of Landlord’s damages in case of Tenant’s default. Uponoccurrence of an Event of Default, subject to the provisions of Exhibit C-6,Landlord may convert the Security Deposit to cash and use all or part of theSecurity Deposit to pay past due rent or other payments due Landlord under thisLease or the cost of any other damage, injury, expense or liability caused bysuch Event of Default, without prejudice to any other remedy provided herein orprovided by law.  On demand, Tenant shallpay Landlord the amount that will restore the Security Deposit to its originalamount.  The Security Deposit shall be deemedthe property of Landlord, but any remainingbalance of the Security Deposit shall be returned by Landlord to Tenant whenall of Tenant’s present and future obligations under this Lease have beenfulfilled

 

C             EscrowDeposits. Without limiting in any way Tenant’s other obligations under thisLease, subject to the provisions of Section 4-B hereof, Tenant agrees topay to Landlord its Proportionate Share (a; defined in this Paragraph 2C below)of (i) Taxes (hereinafter defined) payable by Landlord pursuant toParagraph 3A below, (ii) the cost of utilities payable by Landlordpursuant to Paragraph 8 below, (iii) Landlord’s cost of maintaining anyinsurance or insurance related expense applicable to the Building andLandlord’s personal property used in connection therewith including, but notlimited to, insurance pursuant to Paragraph 9A below (the “Common Insurance”),and (iv) Landlord’s cost of maintaining the Premises pursuant to paragraph5E below and any common area charges payable by Tenant in accordance withParagraph 4B below (the “Common Maintenance”) (all of (i), (ii), (iii) and (iv) arecollectively, the “Tenant Costs”) During each month of the term of this Lease,on the same day that rent is due hereunder, Tenant shall deposit in escrow withLandlord an amount equal to one-twelfth (1/12) of the estimated amount ofTenant’s Proportionate Share of the Tenant Costs Tenant authorizes Landlord touse the funds deposited with Landlord under this Paragraph 2C to pay suchTenant Costs The initial monthly escrow payments are based upon the estimatedamounts for the year in question and shall be increased or decreased annuallyto reflect the projected actual amount of all Tenant Costs.  If the Tenant’s total escrow deposits for anycalendar year are less than Tenant’s actual Proportionate Share of the TenantCosts for such calendar year, Tenant shall pay the difference to Landlordwithin thirty (30) days after demand. If the total escrow deposits of Tenantfor any calendar year are more than Tenant’s actual Proportionate Share of theTenant Costs for such calendar year, Landlord shall retain such excess andcredit it against Tenant’s escrow deposits next maturing after suchdetermination.  Landlord agrees to makesuch determination as early in each calendar year as is practicable and shallprovide Tenant, within fifteen (15) days of written request by Tenant, with astatement showing (a) actual Tenant Costs for the preceding calendar year,(b) any amount paid by Tenant toward said Tenant Costs during suchcalendar year on an estimated basis, and (c) any revised estimate ofTenant’s obligation for Tenant Costs for the current calendar year In the eventthe Premises constitute a portion of a multiple occupancy building (the“Building”), Tenant’s “Proportionate Share” with respect to the Building, asused in this Lease, shall mean a fraction, the numerator of which is the grossrentable area on the ground floor contained in the Premises and the denominator of which is the grossrentable area on the ground floor contained in the entire Building. In theevent the Premises or the Building is part of a project or business park owned,managed or leased by Landlord or an affiliate of Landlord (the “Project”),Tenant’s “Proportionate Share” of the Project, as used in this Lease, shallmean a fraction, the numerator of which is the gross rentable area on theground floor contained in the Premises and the denominator of which is thegross rentable area on the ground floor contained in all of the buildingscurrently constructed or planned to be constructed (including the Building) withinthe Project

 

3.             **TAXES**

 

A             Real PropertyTaxes. Subject to reimbursement under Paragraph 2C herein, Landlord agreesto pay all taxes, assessments and governmental charges of any kind and nature(collectively referred to herein as “Taxes”) that accrue against the Premises,the Building and/or the land of which the Premises or the Building are a partIf at any time during the term of this Lease there shall be levied, assessed orimposed on Landlord a capital levy or other tax directly on the rents receivedtherefrom and/or a franchise tax, assessment, levy or charge measured by orbased, in whole or in part, upon such rents from the Premises and/or the landand improvements of which the Premises are a part, then all such taxes,assessments, levies or charges, or the part thereof so measured or based shallbe deemed to be included within the term “Taxes” for the purposes hereof.  The Landlord shall have the right to employ atax consulting firm to attempt to assure a fair tax burden on the real propertywithin the applicable taxing jurisdiction Tenant agrees to pay itsProportionate Share of the cost of such consultant

 

If at any time during the term of this Lease there shall be levied,assessed or imposed on the Landlord a franchise tax, business tax, income tax,or other levy relating to this Lease or the Premises, such levy being in lieuof all or a portion of the local property tax for schools, a reasonableallocation of such amount shall be deemed to be included within the term“Taxes” for purposes of determining Tenant’s share of Taxes to be reimbursed toLandlord

 

B             Personal Property Taxes. Tenant shall be liable for all taxes leviedor assessed against any personal property or fixtures placed in or on the Premises. Ifany such taxes are levied or assessed against Landlord or Landlord’s propertyand (i) Landlord pays the same or (ii) the assessed value ofLandlord’s property is increased by inclusion of such personal property andfixtures and Landlord pays the increased taxes, then Tenant shall pay to Landlord,upon demand, the amount of such taxes

 
|   |   | Initial | Illegible |
|--------|--------|---------|-----------|
|   |   | Date    | 6/6/96    |

 

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4.             **LANDLORD’S REPAIRS AND MAINTENANCE****.**

 

A             Structural RepairsLandlord, at its own cost and expense (without any pass through to Tenant),shall maintainin a condition consistent with similar buildings in similar locations inAustin, Texas, the roof, foundation and the structural soundness of theexterior walls of the Building in good repair, reasonable wear and tearexcluded. The term “walls” as used herein shall not include windows, glass orplate glass, any doors, special store fronts or office entries, and the term“foundation” as used herein shall not include loading docks. Tenant shallimmediately give Landlord written notice (“Tenant Repair Notice”) of defect orneed for repairs, after which Landlord shall have reasonable opportunity toeffect such repairs or cure such defect Landlord agrees to commence the repairsnot later than five (5) days after receipt of a Tenant Repair Notice.  In the event of an emergency, Tenant shallhave the right to immediately undertake repairs which are Landlord’sresponsibility and to notify Landlord after the repairs have been undertaken IfLandlord fails to immediately and diligently undertake to repair or maintainthe Premises within five (5) days after receipt of a Tenant Repair Notice,or if Tenant undertakes emergency repairs as provided herein, Tenant mayperform the repairs or maintenance and, in addition to any other remediesTenant may have at law or in equity, Tenant may bill Landlord for the costs ofthe repairs and maintenance. In the event that Landlord has not paid such billwithin thirty (30) days of the receipt of the invoice or is not in good faithnegotiating with Tenant with respect to whose responsibility the repairs were,then Tenant may deduct such costs from the rent next coming due.

 

B.            Tenant’s Share ofCommon Area Charges Tenant agrees to pay its Proportionate Share of thecost of (i) maintenance and/or landscaping (including both maintenance andreplacement of landscaping, but not the initial cost of landscaping theBuilding) of any property that is a part of the Building and/or the Project; (ii) operating,maintaining and repairing any property, facilities or services (includingwithout limitation utilities and insurance therefore) provided for the use orbenefit of Tenant or the common use or benefit of Tenant and other lessees ofthe Building; and (iii) an administrative fee of seven and one-halfpercent (71/2%) of all common area maintenance charges.Notwithstanding the foregoing, there will be no property management fees passedthrough to Tenant during the term and the renewal Common Maintenance will becapped to increase on a cumulative basis to no more than six percent (6%) peryear.

 

C.            Right to AuditTenant Costs Tenant shall have the right, at Tenant’ssole cost, to audit the Landlord’s records of Tenants Costs.  Tenantmay review only those records of Landlord that are specifically related toTenant Costs Tenant will keep confidential all agreements involving the rightsprovided in this section and the results of any audits conducted hereunderNotwithstanding the foregoing, Tenant shall be permitted to furnish theforegoing information to its attorneys, accountants, and auditors to the extentnecessary to perform their respective services for Tenant Tenant may notconduct an audit more often than once each calendar year Tenant may auditrecords with respect to each lease year only one time. No audit shall cover aperiod of time in excess of the one calendar year immediately preceding theaudit. Notwithstanding the first sentence of this provision, in the event thatthe total amount of annual Tenant’s Costs are misstated by more than tenpercent (10%), the cost of such audit to Tenant will be reimbursed to Tenant byLandlord within thirty (30) days of the date that Tenant invoices Landlord forsuch costs

 

5.             **TENANT’S REPAIRS.**

 

A.            Maintenance  of Premises and Appurtenances Tenant, atits own cost and expense, shall (i) maintain all parts of the Premises and promptly make allnecessary repairs and replacements to the Premises (except those for whichLandlord is expressly responsible hereunder), and (ii) keep the parkingareas, driveways and alleys surrounding the Premises in a clean and sanitarycondition.  Tenant’s obligation to maintain,repair and make replacements to the Premises shall cover, but not be limitedto, pest control (including termites), trash removal and the maintenance,repair and replacement of all HVAC, electrical, plumbing (but not includingcommon lines), sprinkler and other mechanical systems.  Landlord shall assign to Tenant all rightsunder every manufacturer’s warranty for equipment and mechanical systems thatLandlord obtains during the construction of the Building that relate to thePremises

 

B             [IntentionallyOmitted]

 

C             Parking.Tenant and its employees, customers and licensees shall have the right to usethe one hundred ninety-two (192) parking spaces for the initial term adjacent to the Premisesas shown on Exhibit A-1.  Inaddition, if Tenant leases up to additional 28,800 square feet in the Building,it will have the right to use up to eighty (80) more spaces (on a pro rata basis) as shown on Exhibit B Suchparking shall be subject to (i) all rules and regulations promulgatedby Landlord, and (ii) rights of ingress and egress of other lessees.Landlord shall not be responsible for enforcing Tenant’s parking rights againstany third parties, and Tenant expressly does not have the right to tow orobstruct improperly parked vehicles Tenant agrees not to park on any publicstreets or private roadways adjacent to or in the vicinity of the Premisesexcept where legal parking is allowed

 

D.            System Maintenance.Tenant, at its own cost and expense, shall enter into a regularly scheduledpreventive maintenance/servicecontract with a maintenance contractor approved by Landlord for servicing allheating and air conditioning systems and equipment within the Premises Theservice contract must include all services suggested by he equipment

 
|   |   | Initial | Illegible |
|--------|--------|---------|-----------|
|   |   | Date    | 6/6/96    |

 

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manufacturer in its operations/maintenancemanual and must become effective within thirty (30) days of the date Tenanttakes possession of the Premises.

 

E              Option toMaintain Premises Landlord reserves the right to perform, in whole or inpart, maintenance, repairs and replacements to the exterior of the Premises,paving, common area, landscape, exterior painting, common sewage line plumbingand any other items that are otherwise Tenant’s obligations under thisParagraph 5, in which event, Tenant shall be liable for its Proportionate Shareof the cost and expense of such repair, replacement, maintenance and other suchitems

 

6.             **ALTERATIONS.**Except as set forth herein, Tenant shall not make any alterations, additions orimprovements to the Premises without the prior written consent of LandlordTenant, at its own cost and expense, may erect such shelves, bins, machineryand trade fixtures as it desires, provided that (i) such items do notalter the basic character of the Premises or the Building, (ii) such itemsdo not overload or damage same, (iii) such items may be removed withoutinjury to the Premises, and (iv) the construction, erection orinstallation thereof complies with all applicable governmental laws,ordinances, regulations and with Landlord’s specifications and requirements.With respect to tenant improvements constructed after Substantial Completion,Tenant shall be responsible for compliance with The Americans With DisabilitiesAct of 1990 Landlord shall be responsible for having the shell building andTenant Improvements upon Substantial Completion comply with The Americans WithDisabilities Act of 1990 Without implying any consent of Landlord thereto, allalterations, additions, improvements and partitions erected by Tenant shall beand remain the property of Tenant during the term of this Lease. Tenant mayremove, either during or at the termination of the Lease, all bus duct, allelements relating to the cleaning and packaging room, the exhaust system forthe grinding and polishing room, the air compressors to run the internalcompressed air lines and the outside signage All shelves, bins, machinery andtrade fixtures installed by Tenant shall be removed on or before the earlier tooccur of the day of termination or expiration of this Lease or vacating thePremises, at which time Tenant shall restore the Premises to their originalcondition, wear and tear excepted. All alterations, installations, removals andrestorations shall be performed in a good and workmanlike manner so as not todamage or alter the primary structure or structural qualities of the Buildingor other improvements situated on the Premises or of which the Premises are apart. Tenant is allowed to make changes to the space upon the Landlord’sconsent Tenant is allowed to make, without consent, up to $50,000 per year ofimprovements to the Premises subsequent to the construction of the initialTenant Improvements, if such improvements do not affect the structure of theBuilding Except for improvements made by the Tenant to the mezzanine level ofthe Premises, any such improvements are subject to demolition upon thetermination or expiration of this Lease if Landlord notifies Tenant prior tothe time that the improvements are constructed that demolition will be requiredat the termination or expiration of this Lease Improvements to the mezzaninelevel of the Premises may be required to be demolished at the termination ofthe Lease If required, Landlord must notify Tenant of such requirement at leastthree (3) months prior to the termination of the Lease Any demolitionrequired under this provision is to be performed by Tenant, at Tenant’s costs.

 

7.             **SIGNS.**  Any signage Tenant desires for thePremises shall be subject to Landlord’s written approval and shall be submitted toLandlord prior to the Lease Commencement Date of this Lease Tenant, at Tenant’sexpense, will be allowed to have signage (including company logo) on theoutside of the building. The design shall be in keeping with the architecturaland environmental integrity of the Property and shall be as shown on Exhibit Eattached hereto Tenant shall repair, paint and/or. replace the Building fasciasurface to which its signs are attached upon Tenant’s vacating the Premises orthe removal or alteration of its signage. Tenant shall not, without Landlord’sprior written consent, (i) make any changes to the exterior of thePremises, such as painting; (ii) install any exterior lights, decorations,balloons, flags, pennants or banners; or (iii) erect or install any signs,windows or door lettering, placards, decorations or advertising media of anytype which can be viewed from the exterior of the Premises All signs, decorations,advertising media, blinds, draperies and other window treatment or bars orother security installations visible from outside the Premises shall conform inall respects to the criteria established by Landlord or shall be otherwisesubject to Landlord’s prior written consent

 

8.             **UTILITIES.**  Landlord agrees to provide normal water,electricity, gas and sewer service to the Premises. Tenant shall pay for allwater, gas, heat, light, power, telephone, sewer, sprinkler charges and otherutilities and services used on or at the Premises, together with any taxes,penalties, surcharges or the like pertaining to the Tenant’s use of thePremises and any maintenance charges for utilities Such services are to beseparately metered to Tenant and Landlord shall install, at its expense, suchwater and natural gas submeters as are necessary for this purpose Tenant shallpay its pro rata share, as reasonably determined by Landlord, of all chargesfor jointly metered utilities. Except when caused by the gross negligence orwillful misconduct of Landlord, its employees, agents or representatives,Landlord shall not be liable for any interruption or failure of utility serviceon the Premises, and Tenant shall have no rights or claims as a result of anysuch failure

 

9.             **INSURANCE.**

 

A.            Landlord’sInsurance. Subject to reimbursement under Paragraph 2C herein, Landlordshall maintain comprehensive general liability insurance with limits of net less thatS1,000,000 combined single limit and insurance covering the Building in anamount not less than ninety percent (90%) of the “replacement cost”, excludingsite and foundation costs thereof, insuring against the perils of fire,lightning, extended coverage, vandalism and malicious mischief.

 
|   |   | Initial | Illegible |
|--------|--------|---------|-----------|
|   |   | Date    | 6/6/96    |

 

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B             Tenant’s Insurance.Tenant, at its own expense, shall maintain during the term of this Lease apolicy or policies of workers’ compensation and comprehensive general liabilityinsurance, including personal injury and property damage, with contractualliability endorsement, in the amount of Five Hundred Thousand Dollars ($500,00000) for property damage and One Million Dollars ($1,000,000 00) per occurrenceand One Million Dollars ($1,000,000 00) in the aggregate for personal injuriesor deaths of persons occurring in or about the Premises. Tenant, at its ownexpense, shall also maintain during the term of this Lease fire and extendedcoverage insurance covering the replacement cost of (i) all alterations, additions,partitions and improvements installed or placed on the Premises by Tenant or byLandlord on behalf of Tenant (the “Tenant Alterations”); and (ii) all ofTenant’s personal property contained within the Premises. Said policies shall (i) namethe Landlord as additional insured; (ii) be issued by an insurance companywhich is reasonably acceptable to Landlord; and (iii) provide that saidinsurance shall not be canceled unless thirty (30) days prior written noticehas been given to Landlord Said policy or policies or certificates thereofshall be delivered to Landlord by Tenant on or before the Lease CommencementDate and upon each renewal ofsaid insurance. Any insurance proceeds awarded or paid to Tenant for Tenant’ssigns, trade fixtures, equipment, the Tenant Alterations or any property ownedby Tenant shall be paid andbelong to Tenant

 

C             Prohibited Uses.Tenant will not permit the Premises to be used for any purpose or in any mannerthat would (i) void the insurance thereon, (ii) increase the insurancerisk or cost thereof, or (iii) cause the disallowance of any sprinklercredits; including without limitation, use of the Premises for the receipt,storage or handling of any product, material or merchandise that is explosiveor highly inflammable It is understood that Tenant in its normal operationsuses titanium and there shall be no additional charge to Tenant for insurancedue to such usage.  If any increase inthe cost of any insurance on the Premises or the Building is caused by Tenant’suse of the Premises or because Tenant vacates the Premises, then Tenant shallpay the amount of such increase to Landlord upon demand therefor.

 

**10.          FIRE AND CASUALTY DAMAGE.**

 

A.            Total orSubstantial Damage and Destruction If the Premises or the Building shouldbe damaged or destroyed by fire or other peril, Tenant shall immediately givewritten notice to Landlord of such damage or destruction. If the Premises orthe Building should be totally destroyed by any peril covered by the insuranceto be provided by Landlord under Paragraph 9A above, or if they should be sodamaged thereby that, in Landlord’s reasonable estimation, rebuilding orrepairs cannot be completed within one hundred eighty (180) days after the dateof such damage (“Total Damage”), then this Lease shall terminate, the rentshall be abated during the unexpired portion of this Lease, effective upon thedate of the occurrence of such damage, and Tenant****shall not berequired to pay for any unamortized finish-out allowance or commissionsremaining under the Lease. Landlord shall notify Tenant within four (4) weeksof the damage or destruction of its intentions to rebuild. Failure to notify Tenant within suchtime period shall obligate Landlord to undertake the repairs necessary torestore the Premises to their original conditions. If Landlord chooses torebuild or restore the Premises, Landlord shall promptly and diligentlyundertake such efforts

 

B.            Partial Damage orDestruction. If the Premises or the Building should be damaged by any perilcovered by the insurance to be provided by Landlord under Paragraph 9A aboveand, in Landlord’s estimation, rebuilding or repairs can be substantiallycompleted within one hundred eighty (180) days after the date of such damage,then this Lease shall not terminate and Landlord shall promptly and diligentlysubstantially restore the Premises to its previous condition, except thatLandlord shall not be required to rebuild, repair or replace any part of thepartitions, fixtures, additions and other improvements that may have beenconstructed, erected or installed in or about the Premises which were paid fordirectly by Tenant (not including any amounts paid for by Tenant as part of theTenant Improvement Allowance)

 

C.            Lienholders’ Rights inProceeds. Notwithstanding anything herein to the contrary, in the event theholder of any indebtedness secured by a mortgage or deed of trust covering thePremises requires that in the event of Total Damage to the Premises that theinsurance proceeds be applied to such indebtedness, then Landlord shall havethe right to terminate this Lease bydelivering written notice of termination to Tenant within fifteen (15) daysafter such requirement is made known to Landlordby any such holder, whereupon all rights and obligations hereunder shallcease and terminate; provided however, such determination must have been madewithin four (4) weeks of the damage or destruction. In such event, Tenantshall not be required to pay for any unamortized finish-out allowance orcommissions remaining under the Lease

 

D.            Waiver ofSubrogation. Notwithstanding anything in this Lease to the contrary,Landlord and Tenant hereby waive and release each other of and from any and allrights of recovery, claims, actions or causes of action against each other, ortheir respective agents, officers and employees, for any loss or damage thatmay occur to the Premises, improvements to the Building or personal property(Building contents) within the Building and/or Premises, for any reasonregardless of cause or origin.  Each partyto this Lease agrees immediately after execution of this Lease to give writtennotice of the terms of the mutual waivers contained in this subparagraph toeach insurance company that has issued to such party policies of fire andextended coverage insurance and to have the insurance policies properlyendorsed to provide that the carriers of such policies waive all rights ofrecovery under subrogation or otherwise against the other party

 
|   |   | Initial | Illegible |
|--------|--------|---------|-----------|
|   |   | Date    | 6/6/96    |

 

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**11.          LIABILITYAND INDEMNIFICATION.**Except for anyclaims, rights of recovery and causes of action that Landlord has released,Tenant shall hold Landlord harmless from and defend Landlord against any andall claims or liability for any injury or damage (i) to any person orproperty whatsoever occurring in, on or about the Premises or any part thereof,the Building and/or other common areas, the use of which Tenant may have inaccordance with this Lease, if (and only if) such injury or damage shall becaused in whole or in part by the negligence or willful misconduct of Tenant,its agents, servants, employees or invitees; (ii) arising from the conductor management of any work done by the Tenant in or about the Premises; (iii) arisingfrom transactions of the Tenant; and (iv) all costs, counsel fees,expenses and liabilities incurred in connection with any such claim or actionor proceeding brought thereon Except for any claims, rights of recovery andcauses of action that Tenant has released, Landlord shall hold Tenant harmlessfrom and defend Tenant against any and all claims or liability for any injuryor damage (i) to any person or property whatsoever occurring in, on orabout the Premises or any part thereof, the Building and/or other common areas,the use of which Tenant may have in accordance with this Lease, if (and onlyif) such injury or damage shall be caused in whole or in part by the grossnegligence or willful misconduct of Landlord, its agents, servants, employeesof invitees; and (ii) all costs, counsel fees, expenses and liabilities incurredin connection with any such claim or action or proceeding brought thereon. Theprovisions of this Paragraph 11 shall survive the expiration or termination ofthis Lease Landlord shall not beliable in any event for personal injury or loss of Tenant’s property caused byfire, flood, water leaks, rain, hail, ice, snow, smoke, lightning, wind,explosion, interruption of utilities or other occurrences, unless such eventwas caused by the gross negligence or willful misconduct of Landlord, itsagents, servants, employees or invitees Landlord strongly recommends thatTenant secure Tenant’s own insurance in excess of the amounts requiredelsewhere in this Lease to protect against the above occurrences if Tenant desiresadditional coverage for such risks. Tenant shall give prompt notice to Landlordof any significant accidents involving injury to persons or property.  Furthermore, Landlord shall not beresponsible for lost or stolen personal property, equipment, money or jewelryfrom the unless such event was caused by the gross negligence or willfulmisconduct of Landlord, its agents, servants, employees or invitees.  Landlord shall not be liable to Tenant orTenant’s employees, customers or invitees for any damages or losses to personsor property caused by any lossees in the Building or the Project, or for anydamages or losses caused by theft, burglary, assault,vandalism or other crimes unless such event was caused by the gross negligenceor willful misconduct of Landlord, its agents, servants, employees or invitees. Landlord strongly recommends that Tenantprovide its own security systems and services and secure Tenant’s own insurancein excess of the amounts required elsewhere in this Lease to protect againstthe above occurrences if Tenant desires additional protection or coverage for such risks.  Tenantshall give Landlord prompt notice of any criminal or suspicious conduct itobserves within or about the Premises, the Building or the Project and/or anypersonal injury or property damagecaused thereby Landlord may, but is not obligated to, enter into agreementswith third parties for the provision, monitoring, maintenance and repair of anycourtesy patrols or similar services or fire protective systems and equipmentand, to the extent same is provided at Landlord’s sole discretion, Landlordshall not be liable to Tenant for any damages, costs or expenses which occurfor any reason in the event any such system or equipment is not properlyinstalled, monitored or maintained or any such services are not properlyprovided. Landlord shall use reasonable diligence in the maintenance oflighting in the parking areas servicing the Premises, which shall be at a levelto provide a safe environment for Tenant and its employees, visitors andguests, it being understood that such level to be determined solely by theLandlord.

 

**12.          USE.**** **The Premisesshall be used only for the purpose of manufacturing, receiving, storing,shipping and selling (other than retail) products, materials and merchandisemade and/or distributed by Tenant, generaloffice use and for such other legally permitted uses compatible with theBuilding’s current zoning Except for the outside storage of waste cutting fluidand other materials in the area outside of the Premises designated for suchpurposes, outside storage, including without limitation storage of trucks andother vehicles, is prohibited without Landlord’s prior written consent  Tenant shall comply with all governmentallaws, ordinances and regulations applicable to the use of the Premises andshall promptly comply with all governmental orders and directives for thecorrection, prevention and abatement of nuisances in, upon or connected withthe Premises, all at Tenant’s sole expense.  Other than in the ordinary course of business,Tenant shall not permit any objectionable or unpleasant odors, smoke, dust,gas, noise or vibrations to emanate from the Premises, nor take any otheraction that would constitute a nuisance or would disturb, unreasonably interferewith or endanger Landlord or any other lessees of the Building or the Project,it being understood and permitted that Tenant’s normal business operationscreate dust and other fumes relating to polishing and grinding of metals, andthat metal machining will be occurring on an ongoing basis within the Premises.

 

**13**.          **HAZARDOUSWASTE.**The term “Hazardous Substances,” as used in this Lease, shallmean pollutants, contaminants, toxic or hazardous wastes, radioactive materialsor any other substances, the use and/or the removal of which is required or theuse of which is restricted, prohibited or penalized by any “Environmental Law,”which term shall mean any federal, state or local statute, ordinance,regulation or other law of a governmental or quasi-governmental authorityrelating to pollution or protection of the environment or the regulation of thestorage or handling of Hazardous Substances. Tenant hereby agrees that: (i) noactivity will be conducted on the Premises that will produce any Hazardous Substances,except for such activities that are part of the ordinary course of Tenant’sbusiness activities (the “Permitted Activities”), provided said PermittedActivities are conducted in accordance with all Environmental Laws and Tenantshall have notified Landlord of such activities and, in connection therewith,Tenant shall be responsible for obtaining any required permits orauthorizations and paying any fees and providing any testing required by anygovernmental agency; (ii) the Premises will not be used in any manner forthe storage of any Hazardous Substances, except for the temporary storage ofsuch materials that are used in the ordinary course of Tenant’s business (the“Permitted Materials”), provided such Permitted Materials are properly storedin a manner and location

 
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meeting all Environmental Laws, and, inconnection therewith, Tenant shall be responsible for obtaining any requiredpermits or authorizations and paying any fees and providing any testingrequired by any governmental agency; (iii) no portion of the Premises willbe used as a landfill or a dump; (iv) Tenant will not install anyunderground tanks of any type; (v) Tenant will not allow any surface orsubsurface conditions to exist or come into existence that constitute, or withthe passage of time may constitute, a public or private nuisance; and (vi) Tenantwill not permit any Hazardous Substances to be brought onto the Premises,except for the Permitted Materials, and if so brought or found located thereon,the same shall be immediately removed, with proper disposal, and all requiredclean-up procedures shall be diligently undertaken by Tenant at its sole costpursuant to all Environmental Laws.  Landlordand Landlord’s representatives shall have the right but not the obligation toenter the Premises for the purpose of inspecting the storage, use and disposalof any Permitted Materials to ensure compliance with all Environmental LawsShould it be determined by a court of competent jurisdiction, that anyPermitted Materials are being improperly stored, used or disposed of, inviolation of Environmental Laws, then Tenant shall immediately take suchcorrective action as requested by Landlord. Should Tenant fail to take suchcorrective action within twenty-four (24) hours, Landlord shall have the rightto perform such work and Tenant shall reimburse Landlord, on demand, for anyand all costs associated with said work. If at any time during or after the termof this Lease, the Premises is found to be contaminated with HazardousSubstances as a result of Tenant’s operations, Tenant shall diligentlyinstitute proper and thorough clean-up procedures, at Tenant’s sole cost Tenantagrees to indemnify and hold Landlord harmless from all claims, demands,actions, liabilities, costs, expenses, damages, penalties and obligations ofany nature arising from or as a result of any contamination by it of thePremises with Hazardous Substances, or otherwise arising from the use of thePremises by Tenant.  The foregoingindemnification and the responsibilities of Tenant shall survive the terminationor expiration of this Lease.  TheLandlord recognizes and accepts the fact that Tenant uses nitric acid and othercorrosive and hazardous materials as part of its cleaning and manufacturingprocess Tenant agrees to provide Landlord on or before the Lease CommencementDate, and thereafter as the list changes, a list of Hazardous Substances thatTenant uses in its manufacturing and cleaning processes  Tenant agrees to continue to comply with TNRCCand other government regulations regarding the use of all hazardous materials  To evidence such environmental compliance, atLandlord’s request Tenant will furnish Landlord a copy of any of the reportsthat they have submitted to any government entity.  The Landlord, at its sole cost and expense,reserves the right to retain an environmental consultant to monitor Tenant’shandling of hazardous waste to ensure compliance with environmental laws.

 

**14.          INSPECTION.** Landlord’sagents and representatives shall have the right to enter the Premises at anyreasonable time, after reasonable notice, during business hours (or at any timein case of emergency) (i) to inspect the Premises, (ii) to make suchrepairs as may be required or permitted pursuant to this Lease, and/or (iii) duringthe last six (6) months of the Lease term, for the purpose of showing thePremises; provided, however, that without Tenant’s prior consent, Landlordshall not show the Premises to a competitor of Tenant. In addition, during thelast (6) months of the Lease term, Landlord shall have the right to erecta suitable sign on the Premises stating the Premises are available for leaseTenant and Landlord shall arrange to meet for a joint inspection of thePremises prior to vacating.

 

**15.          ASSIGNMENTAND SUBLETTING.** Tenant will have the right to sublease allor any portion of the Lease Premises, or assign all of the Lease Premises, asthe case may be, during the primary lease term, or any renewals thereof,subject to the consent of Landlord, such consent not to be unreasonablywithheld. Any attempted assignment, subletting, transfer or encumbrance byTenant in violation of the terms and covenants of this paragraph shall be voidAny assignee, sublessee or transferee of Tenant’s interest in this Lease (allsuch assignees, sublessees and transferees being hereinafter referred to as“Transferees”), by assuming Tenant’s obligations hereunder, shall assumeliability to Landlord for all amounts paid to persons other than Landlord bysuch Transferees to which Landlord is entitled or is otherwise in contraventionof this Paragraph 15 No assignment, subletting or other transfer, whether ornot consented to by Landlord or permitted hereunder, shall relieve Tenant ofits liability under this Lease. If an Event of Default occurs while thePremises or any part thereof are assigned or sublet, then Landlord, in additionto any other remedies herein provided or provided by law, may collect directlyfrom such ‘Transferee all rents payable to the Tenant and apply such rentagainst any sums due Landlord hereunder No such collection shall be construedto constitute a novation or a release of Tenant from the further performance ofTenant’s obligations hereunder. If Landlord consents to any subletting orassignment by Tenant as hereinabove provided, any profits received by Tenant asrent from the sublessee, after factoring in the cost to sublease the space(tenant improvements, commissions, etc.) will be equally split between Landlordand Tenant The following shall additionally constitute an assignment of thisLease by Tenant for the purposes of this Paragraph 15: the mortgage, pledge,hypothecation or other encumbrance of or grant of a security interest by Tenantin this Lease, or of any of Tenant’s rights hereunder If the Landlord choosesto terminate this Lease as opposed to allowing Tenant to sublease or assign itsspace, Tenant will not be required to pay for unamortized finish-out allowanceor commissions on that space. In the event that Tenant has sublet more thanone-third of its space in the Premises, any renewal option as to such spacewill automatically terminate

 

**16.          CONDEMNATION.** If more thanfifty percent (50%) of the Premises, including the parking designated forTenant under this Lease (unless alternative parking can be provided by Landlordwithin one thousand (1000) feet to the Premises), are taken for any public orquasi-public use under governmental law, ordinance or regulation, or by rightof eminent domain or private purchase in lieu thereof, and the taking preventsor materially interferes with the use of the remainder of the Premises for thepurpose for which they were leased to Tenant, then this Lease shall terminateand the rent shall be abated during the unexpired portion of this Lease,effective on the date of such taking. If less than fifty percent (50%) of thePremises or the

 
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parking designated for Tenant under this Lease(unless alternative parking can be provided by Landlord within one thousand(1000) feet to the Premises), are taken for any public or quasi-public useunder any governmental law, ordinance or regulation, or by right of eminentdomain or private purchase in lieu thereof, or if the taking does not prevent or materially interfere with the use ofthe remainder of the Premises for the purpose for which they were leased toTenant, then this Lease shall not terminate, but the rent payable hereunderduring the unexpired portion of this Lease shall be reduced to such extent asmay be fair and reasonable under all of the circumstances All compensationawarded in connection with or as a result of any of the foregoing proceedingsshall be the property of Landlord, provided, to the extent any of the award isfor Tenant Improvements, such amounts shall be deducted from the AmortizableTenant Improvement Allowance (as defined herein), and Tenant hereby assigns anyinterest in any such award to Landlord; provided, however, Landlord shall haveno interest in any award made to Tenant for loss of business or goodwill or forthe taking of Tenant’s trade fixtures and personal property, if a separateaward for such items is made to Tenant

 

**17.          HOLDING****OVER.**  At the termination of this Lease by itsexpiration or otherwise, Tenant shall immediately deliver possession of the Premises to Landlord with all repairs andmaintenance required herein to be performed by Tenant completed If, for anyreason, Tenant retains possession of the Premises after the expiration ortermination of this Lease, unless the parties hereto otherwise agree inwriting, such possession shall be deemed to be a tenancy at will only, and allof the other terms and provisions of this Lease shall be applicable during suchperiod, except that Tenant shall pay Landlord from time to time, upon demand,as rental for the period of such possession, an amount equal to one andone-half (11/2) times the rentin effect on the date of such termination of this Lease, computed on a dailybasis for each day of such period.  Noholding over by Tenant, whether with or without consent of Landlord, shalloperate to extend this Lease except as otherwise expressly provided. Thepreceding provisions of this Paragraph 17 shall not be construed as consent forTenant to retain possession of the Premises in the absence of written consentthereto by Landlord.

 

**18.          QUIET ENJOYMENT.**Landlordrepresents that it has the authority to enter into this Lease and that, so longas Tenant pays all amountsdue hereunder and performs all other covenants and agreements herein set forth,Tenant shall peaceably and quietly have, hold and enjoy the Premises for theterm hereof without hindrance or molestation from Landlord, subject to the termsand provisions of this Lease.

 

**19.          EVENTS OF DEFAULT.  **The followingevents (herein individually referred to as an “Event of Default”) each shall bedeemed to be a default in or breach of Tenant’s obligations under this Lease:

 

A             Tenant shall fail topay any installment of the rent herein reserved when due, or any other paymentor reimbursement to Landlord required herein when due, and such failure shallcontinue for a period of five (5) days after Tenant has received fromLandlord verbal notice that such payment has not been received when due, suchnotice to not be given by Landlord before a period of five (5) days fromthe date such payment was due.

 

B             [Intentionally Omitted]

 

C.            Tenant shall fail todischarge or bond around any lien placed upon the Premisesin violation of Paragraph 22 hereof within twenty (20) days after any suchlien or encumbrance is filed against the Premises

 

D             Tenantshall default in the performance of any of its obligations under any otherlease to Tenant from Landlord, or from any person or entity affiliated with orrelated to Landlord, and same shall remain uncured after the lapsing of anyapplicable cure periods provided for under such other lease

 

E              Tenant shall fail tocomply with any term, provision or covenant of this Lease (other than thoselisted above in this paragraph) and shall not cure, or be attempting to cureand diligently pursuing such cure, such failure within thirty (30) days afterwritten notice thereof from Landlord

 

**20.          REMEDIES.**Upon eachoccurrence of an Event of Default, Landlord shall have the option to pursue anyone or more of the following remedies without any notice or demand:

 

(a)           Terminatethis Lease;

 

(b)           Enter upon and takepossession of the Premises without terminating this Lease;

 

(c)           Make such paymentsand/or take such action and pay and/or perform whatever Tenant is obligated topay or performunder the terms of this Lease, and Tenant agrees that Landlord shall not beliable for any damages resulting to Tenant from such action; and/or

 
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(d)           Alter all locks andother security devices at the Premises, with or without terminating this Lease,and pursue, atLandlord’s option, one or more remedies pursuant to this Lease, and Tenanthereby expressly agrees that Landlord shall not be required to provide toTenant the new key to the Premises, regardless of hour, including Tenant’sregular business hours;

 

and in any such event Tenant shall immediatelyvacate the Premises, and if Tenant fails to do so, Landlord, without waivingany other remedy it may have, may enter upon and take possession of thePremises and expel or remove Tenant and any other person who may be occupyingsuch Premises or any part thereof, without being liable for prosecution or anyclaim of damages therefore. In the event of any violation of Section 93002 of the Texas Property Code by Landlord or by any agent or employee ofLandlord, Tenant hereby expressly waives any and all rights Tenant may haveunder Paragraph (g) of such Section 93 002

 

A.            Damages UponTermination. If Landlord terminates this Lease at Landlord’s option, Tenantshall be liable for and shall pay to Landlord the sum of all rental and otherpayments owed to Landlord hereunder accrued to the date of such termination,plus, as liquidated damages, an amount equal to (i) the present value ofthe total rental and other payments owed hereunder for the remaining portion ofthe Lease term, calculated as if such term expired on the date set forth inParagraph 1, less (ii) the present value of the then fair market rentalfor the Premises for such period.

 

B.            Damages UponRepossession. If Landlord repossesses the Premises without terminating thisLease, Tenant, at Landlord’s option, shall be liable for and shall pay Landlordon demand all rental and other payments owed to Landlord hereunder, accrued tothe date of such repossession, plus all amounts required to be paid by Tenantto Landlord until the date of expiration of the term as stated in Paragraph 1,diminished by all amounts actually received by Landlord through reletting thePremises during such remaining term (but only to the extent of the rent hereinreserved). Actions to collect amounts due by Tenant to Landlord under thisparagraph may be brought from time to time, on one or more occasions, withoutthe necessity of Landlord’s waiting until expiration of the Lease term.

 

C             Costs of Reletting,Removing, Repairs and Enforcement. Upon an Event of Default, in addition toany sum provided to be paid under this Paragraph 20, Tenant also shall beliable for and shall pay to Landlord (i) brokers’ fees and all other costsand expenses incurred by Landlord in connection with reletting the whole or anypart of the Premises, but, in the event that the reletting is for a periodlonger than the original term of this Lease, only for costs and expensesdirectly related to the period of time left on the original term of this Lease;(ii) the costs of removing, storing or disposing of Tenant’s or any otheroccupant’s property; (iii) the costs of repairing, altering, remodeling or otherwise putting the Premises intocondition acceptable to a new tenant or tenants; (iv) any and allreasonable costs and expenses incurred by Landlord in effecting compliance withTenant’s obligations under this Lease; and (v) all reasonable expensesincurred by Landlord in enforcing or defending Landlord’s rights and/orremedies hereunder, including without limitation all reasonable attorneys’ feesand all court costs incurred in connection with such enforcement or defense.

 

D.            Late Charge.In the event Tenant fails to make any payment due hereunder within five (5) daysafter such payment is due, including without limitation any rental or escrowpayment, in order to help defray the additional cost to Landlord for processingsuch late payments and not as interest, Tenant shall pay toLandlord on demand a late charge in an amount equal to five percent (5%) ofsuch payment. The provision for such late charge shall be in addition to all ofLandlord’s other rights and remedies hereunder or at law, and shall not beconstrued as liquidated damages or as limiting Landlord’s remedies in any manner.

 

E.             Interest on PastDue Amounts If Tenant fails to pay any sum which at any time becomes due toLandlord under any provision of this Lease as and when the same becomes duehereunder, and such failure continues for ten (10) days after the due datefor such payment, then Tenant shall pay to Landlord interest on such overdueamounts from the date due until paid at an annual rate which equals the lesserof (i) twelve percent (12%) or (ii) the highest rate then permittedby law

 

F              No ImpliedAcceptances or Waivers. Exercise by Landlord of any one or more remedieshereunder granted or otherwise available shall not be deemed to be anacceptance by Landlord of Tenant’s surrender of the Premises, it beingunderstood that such surrender can be effected only by the written agreement ofLandlord.  Tenant and Landlord furtheragree that forbearance by Landlord to enforce any of its rights under thisLease or at law or in equity shall not be a waiver of Landlord’s right toenforce any one or more of its rights, including any right previously forborne,in connection with any existing or subsequent default. No re-entry or takingpossession of the Premises by Landlord shall be construed as an election on itspart to terminate this Lease, unless a written notice of such intention isgiven to Tenant, and, notwithstanding any such reletting or re-entry or takingpossession of the Premises, Landlord may at any time thereafter elect toterminate this Lease for a previous default, provided that Landlord makes suchelection within ninety (90) days of such default. Pursuit of any remedieshereunder shall not preclude the pursuit of any other remedy herein provided orany other remedies provided by law, nor shall pursuit of any remedy hereinprovided constitute a forfeiture or waiver of any rent due to Landlordhereunder or of any damages occurring to Landlord by reason of the violation ofany of the terms, provisions and covenants contained in this Lease.  Landlord’s acceptance of any rent following anEvent of Default hereunder shall not be construed as Landlord’s waiver of suchEvent of Default No waiver by Landlord of any violation or breach of any of theterms, provisions and covenants of this Lease shall be deemed or construed toconstitute a waiver of any other violation or default.

 
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G.            Reletting ofPremises.  In the event of anytermination of this Lease and/or repossession of the Premises for an Event ofDefault, Landlord shall use reasonable efforts to relet the Premises and tocollect rental after reletting, with no obligation to accept any lessee thatLandlord deems undesirable or to expend any funds in connection with such reletting or collection ofrents therefrom.  Tenant shall not beentitled to credit for or reimbursement of any proceeds of such reletting inexcess of the rental owed hereunder for the period of such reletting.  Landlord may relet the whole or any portion ofthe Premises, for any period, to any tenant and for any use or purpose.

 

H             Landlord’s Default. If Landlord fails to perform any of itsobligations hereunder within thirty (30) days after written noticefrom Tenant specifying such failure, Tenant’s shall have the right to performsuch obligations and shall have the right to bill Landlord for the costs ofsuch actions. Unless and until Landlord fails to so cure any default after suchnotice, Tenant shall not have any remedy or cause of action by reason thereof.  All obligations of Landlord hereunder will beconstrued as covenants, not conditions; and all such obligations will bebinding upon Landlord only during the period of its possession of the premisesand not thereafter.  The term “Landlord”shall mean only the owner, for the time being, of the Premises and, in theevent of the transfer by such owner of its interest in the Premises, such ownershall thereupon be released and discharged from all covenants and obligationsof the Landlord thereafter accruing, provided that such covenants andobligations shall be binding during the Lease term upon each new owner for theduration of such owner’s ownership Notwithstanding any other provision of thisLease, except as provided herein, Landlord shall not have any personalliability hereunder. In the event of any breach or default by Landlord in anyterm or provision of this Lease, Tenant agrees to look solely to the equity orinterest then owned by Landlord in the Premises or the Building  The exercise by Tenant of any one or moreremedies hereunder granted or otherwise available shall not be deemed to be anacceptance by Tenant of Landlord’s performance, it being understood that suchacceptance can be effected only by the written agreement of Tenant  Tenant and Landlord further agree thatforbearance by Tenant to enforce any of its rights under this Lease or at lawor in equity shall not be a waiver of Tenant’s right to enforce any one or moreof its rights, including any right previously forborne, in connection with anyexisting or subsequent default Pursuit of any remedies hereunder shall notpreclude the pursuit of any other remedy herein provided or any other remediesprovided by law, nor shall pursuit of any remedy herein provided constitute aforfeiture or waiver of any damages occurring to Tenant by reason of the violationof any of the terms, provisions and covenants contained in this Lease  No waiver by Tenant of any violation or breachof any of the terms, provisions and covenants of this Lease shall be deemed orconstrued to constitute a waiver of any other violation or default.

 

I               Tenant’sPersonal Property  If Landlordrepossesses the Premises pursuant to the authority herein granted, or if Tenant vacatesor abandons all or any part of the Premises, then, in addition to Landlord’srights under Paragraph 27 hereof, Landlord shall have the right to (i) keepin place and use, or (ii) remove and store, all of the furniture, fixturesand equipment at the Premises, including that which is owned by or leased toTenant, at all times prior to any foreclosure thereon by Landlord orrepossession thereof by any lessor thereof or third party having a lienthereon. In addition to the Landlord’s other rights hereunder, Landlord maydispose of the stored property if Tenant does not claim the property within ten(10) days after the date the property is stored. Landlord shall giveTenant at least ten (10) days prior written notice of such intendeddisposition Landlord shall also have the right to relinquish possession of allor any portion of such furniture, fixtures, equipment and other property to anyperson (“Claimant”) who presents to Landlord a copy of any instrumentrepresented by Claimant to have been executed by Tenant (or any predecessor ofTenant) granting Claimant the right under various circumstances to takepossession of such furniture, fixtures, equipment or other property, withoutthe necessity on the part of Landlord to inquire into the authenticity orlegality of said instrument. The rights of Landlord herein stated shall be inaddition to any and all other rights that Landlord has or may hereafter have atlaw or in equity, and Tenant stipulates and agrees that the rights grantedLandlord under this paragraph are commercially reasonable.

 

**21.          MORTGAGES.** Provided that Landlord furnishes Tenant the non-disturbance agreement requiredunder Exhibit C-8, Tenant accepts this Lease subject and subordinate to any mortgagesand/or deeds of trust now or at any time hereafter constituting a lien orcharge upon the Premises or the improvements situated thereon or the Building,provided, however, that if the mortgagee, trustee or holder of any suchmortgage or deed of trust elects to have Tenent’s interest in this Leasesuperior to any such instrument, then by notice to Tenant from such mortgagee,trustee or holder, this Lease shall be deemed superior to such lien, whetherthis Lease was executedbefore or after said mortgage or deed of trust Tenant, at any time hereafter ondemand, shall execute any instruments, releases or other documents that may berequired by any mortgagee, trustee or holder for the purpose of subjecting andsubordinating this Lease to the lien of any such mortgage Tenant shall notterminate this Lease or pursue any other remedy available to Tenant hereunderfor any default on the part of Landlord without first giving written notice bycertified or registered mail, return receipt requested, to any mortgagee,trustee or holder of any such mortgage or deed of trust, the name and postoffice address of which Tenant has received written notice, specifying thedefault in reasonable detail and affording such mortgagee, trustee or holder areasonable opportunity (but in no event less than thirty (30) days) to makeperformance, at its election, for and on behalf of Landlord.

 

**22.          MECHANIC’S LIENS.** Tenant has no authority, express or implied, to create orplace any lien or encumbrance of any kind or nature whatsoever upon, or in anymanner to bind, the interest of Landlord or Tenant in the Premises. Tenant willsave and hold Landlord harmless from any and all loss, cost or expense,including without limitation attorneys’ fees, based on or

 
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arising out of asserted claims or liensagainst the leasehold estate or against the right, title and interest of theLandlord in the Premises or under the terms of this Lease

 

**23.          MISCELLANEOUS.**

 

A             InterpretationThe captions inserted in this Lease are for convenience only and in no waydefine, limit or otherwise describe the scope or intent of this Lease, or any provisionhereof, or in any way affect the interpretation of this Lease Any reference inthis Lease to rentable area shall mean the rentable area as determined by theguidelines of the BOMA for such purposes.

 

B             Binding Effect. Except as otherwise herein expresslyprovided, the terms, provisions and covenants and conditions in this Leaseshall apply to, inure to the benefit of and be binding upon the parties heretoand upon their respective heirs, executors, personal representatives, legalrepresentatives, successors and assigns Landlord shall have the right totransfer and assign, in whole or in part, its rights and obligations in thePremises and in the Building and other property that are the subject of thisLease.

 

C             Evidence of Authority.Tenant agrees to furnish to Landlord, promptly upon demand, a corporateresolution, proof of dueauthorization by partners or other appropriate documentation evidencing the dueauthorization of such party to enter into this Lease.

 

D             Force Majeure Neither Landlord nor Tenant shall be heldresponsible for delays in the performance of its obligations hereunder whencaused by material shortages, acts of God, labor disputes or other eventsbeyond the control of Landlord or Tenant, as the case may be.

 

E              Payments ConstituteRent. Notwithstanding anything in this Lease to the contrary, all amountspayable by Tenant to or on behalf of Landlord under this Lease, whether or notexpressly denominated as rent, shall constitute rent.

 

F              Estoppel Certificates.Tenant agrees, from time to time, within ten (10) days after request ofLandlord, to deliver toLandlord, or Landlord’s designee, an estoppel certificate stating that thisLease is in full force and effect, the date to which rent has been paid, theunexpired term of this Lease, any defaults existing under this Lease (or theabsence thereof) and such other factual or legal matters pertaining to thisLease as may be requested by Landlord. It is understood and agreed thatTenant’s obligation to furnish such estoppel certificates in a timely fashionis a material inducement for Landlord’s execution of this Lease Landlordagrees, from time to time, within ten (10) days after request of Tenant,to deliver to Tenant, or Tenant’s designee, an estoppel certificate statingthat this Lease is in full force and effect, the date to which rent has beenpaid, the unexpired term of this Lease, any defaults existing under this Lease(or the absence thereof) and such other factual or legal matters pertaining tothis Lease as may be requested by Tenant

 

Tenant agrees, on an annual basis, to deliver to Landlord copies ofTenant’s annual audited financial statements, including an income statement, abalance sheet and related footnotes.

 

G             Entire Agreement. This Leaseconstitutes the entire understanding and agreement of Landlord and Tenant with respect to the subject matter of thisLease, and contains all of the covenants and agreements of Landlord and Tenantwith respect thereto. Landlord and Tenant each acknowledge that norepresentations, inducements, promises or agreements, oral or written, havebeen made by Landlord or Tenant, or anyone acting on behalf of Landlord ortenant, which are not contained herein, and any prior agreements, promises,negotiations or representations not expressly set forth in this Lease are of noforce or effect. EXCEPT AS SPECIFICALLY PROVIDED IN THIS LEASE, TENANT HEREBY WAIVES THE BENEFIT OF ALL WARRANTIES, EXPRESS ORIMPLIED, WITH RESPECT TO THE PREMISES, INCLUDING WITHOUT LIMITATION ANY IMPLIEDWARRANTY THAT THE PREMISES ARE SUITABLE FOR ANY PARTICULARPURPOSE. Landlord’s agents and employees do not and will not have authority tomake exceptions, changes or amendments to this Lease, or factualrepresentations not expressly contained in this Lease. Under no circumstancesshall Landlord or Tenant be considered an agent of the other This Lease may notbe altered, changed or amended except by an instrument in writing signed byboth parties hereto

 

H             Survival of Obligations. Allobligations of Tenant hereunder not fully performed as of the expiration or earlier termination of the term of this Leaseshall survive the expiration or earlier termination of the term hereof,including without limitation all payment obligations with respect to taxes andinsurance and all obligations concerning the condition and repair of thePremises. Upon the expiration or earlier termination of the term hereof, andprior to Tenant vacating the Premises, Tenant shall pay to Landlord any amountreasonably estimated by Landlord as necessary to put the Premises in goodcondition and repair, reasonable wear and tear excluded, including withoutlimitation the cost of repairs to and replacements of all heating and airconditioning systems and equipment therein Tenant shall also, prior to vacatingthe Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant’sobligation hereunder for real estate taxes and insurance premiums for the yearin which the Lease expires or terminates. All such amounts shall be used andheld by Landlord for payment of such obligations of

 
|   |   | Initial | Illegible |
|--------|--------|---------|-----------|
|   |   | Date    | 6/6/96    |

 

11

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Tenant hereunder, with Tenant being liable forany additional costs therefore upon demand by Landlord, or with any excess tobe returned to Tenant after all such obligations have been determined andsatisfied, as the case may be. Any Security Deposit held by Landlord may, atLandlord’s option, be credited against any amounts due from Tenant under thisParagraph 23H

 

I.              Severability ofTerms. If any clause or provision of this Lease is illegal, invalid orunenforceable under present or future laws effective during the term of thisLease, then, in such event, it is the intention of the parties hereto that theremainder of this Lease shall not be affected thereby, and it is also theintention of the parties to this Lease that in lieu of each clause or provisionof this Lease that is illegal, invalid or unenforceable, there be added, as apart of this Lease, a clause or provision as similar in terms to such illegal,invalid or unenforceable clause or provision as may be possible and be legal,valid and enforceable

 

J.             Effective Date.All references in this Lease to “the date hereof” or similar references shallbe deemed to refer to the last date, in point of time, on which all partieshereto have executed this Lease

 

K.            Brokers’Commission. Tenant represents and warrants that, except for CommercialIndustrial Properties and Keith Zimmerman (whose broker is Bradley Schlosser),it has dealt with and will deal with no broker, agent or other person inconnection with this transaction or future related transactions and that nobroker, agent or other person brought about this transaction, and Tenant agreesto indemnify and hold Landlord harmless from and against any claims by anybroker, agent or other person claiming a commission or other form ofcompensation by virtue of having dealt with Tenant with regard to this leasingtransaction.

 

Landlord acknowledges and accepts CIP and Keith Zimmerman (whose brokeris Bradley Schlosser) (collectively, the “Brokers”) represent only TenantLandlord will pay a commission to the Brokers equal to four percent (4%) of theTotal Rents. Total Rents shall be defined as base net rent reflecting SevenDollars ($7.00) per square foot of tenant improvements, which shall be equal toSix Dollars ($6.00) per square foot per year  The payment for the initial five (5)-yearperiod will be made in two (2) equal installments; the initial paymentwill be made upon lease execution and the second and final payment will be madeupon the Rent Commencement Date In addition, if Tenant does not elect toexercise its termination option, then Landlord shall pay a commission as notedabove (adjusted for increases in base rent) for years 6 through 10 at the timeof such election. Landlord will also pay four percent (4%) ofthe Total Rents on expansions as well as two percent (2%) of the Total Rentsfor any extensions beyond the initial ten (10)-year term, subject to a mutuallyagreed upon Commission Agreement between Landlord and Brokers

 

L.             AmbiguityLandlord and Tenant hereby agree and acknowledge that this Lease has been fullyreviewed and negotiated by both Landlord and Tenant, and that Landlord andTenant have each had the opportunity to have this Lease reviewed by theirrespective legal counsel, and, accordingly, in the event of any ambiguityherein.  Tenant does hereby waive the rule ofconstruction that such ambiguity shall be resolved against the party whoprepared this Lease

 

M            [Intentionally Omitted]

 

N             Third Party Rights.Nothing herein expressed or implied is intended, or shall be construed, to confer upon or give to any person or entity,other than the parties hereto, any right or remedy under or by reason of thisLease

 

O             Exhibits andAttachments. All exhibits, attachments, riders and addenda referred to inthis Lease, and the exhibits listed herein below and attached hereto, areincorporated into this Lease and made a part hereof for all intents andpurposes as if fully set out herein  Allcapitalized terms used in such documents shall, unless otherwise definedtherein, have the same meanings as are set forth herein.

 

P.             ApplicableLaw. This Lease has been executed in the State of Texas and shall begoverned in all respects by the laws of the State of Texas  It is the intent of Landlord and Tenant toconform strictly to all applicable state and federal usury laws  All agreements between Landlord and Tenant,whether now existing or hereafter arising and whether written or oral, arehereby expressly limited so that in no contingency or event whatsoever shallthe amount contracted for, charged or received by Landlord for the use,forbearance or retention of money hereunder or otherwise exceed the maximumamount which Landlord is legally entitled to contract for, charge or collectunder the applicable state or federal law.  If, from any circumstance whatsoever,fulfillment of any provision hereof at the time performance of such provisionshall be due shall involve transcending the limit of validity prescribed bylaw, then the obligation to be fulfilled shall be automatically reduced to thelimit of such validity, and if from any such circumstance Landlord shall everreceive as interest or otherwise an amount in excess of the maximum that can belegally collected, then such amount which would be excessive interest shall beapplied to the reduction of rent hereunder, and if such amount which would beexcessive interest exceeds such rent, then such additional amount shall berefunded to Tenant.

 

**24.          NOTICES.**Each provision of this instrument or of anyapplicable governmental laws, ordinances, regulations and other requirementswith reference to the sending, mailing or delivering of notice or the making ofany payment by Landlord to

 
|   |   | Initial | Illegible |
|--------|--------|---------|-----------|
|   |   | Date    | 6/6/96    |

 

12

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Tenant or with reference to the sending,mailing or delivering of any notice or the making of any payment by Tenant toLandlord shall be deemed to be complied with when and if the following stepsare taken:

 

(i)            All rent and otherpayments required to be made by Tenant to Landlord hereunder shall be payableto Landlord at the address for Landlord set forth below or at such otheraddress as Landlord may specify from time to time by written notice deliveredin accordance herewith  Tenant’sobligation to pay rent and any other amounts to Landlord under the terms ofthis Lease shall not be deemed satisfied until such rent and other amounts havebeen actually received by Landlord

 

(ii)           All paymentsrequired to be made by Landlord to Tenant hereunder shall be payable to Tenantat the address set forth below, or at such other address within the continental UnitedStates as Tenant may specify from time to time by written notice delivered inaccordance herewith

 

(iii)          Except as expresslyprovided herein, any written notice, document or payment required or permittedto be delivered hereunder shall be deemed to be delivered when received or,whether actually received or not, when deposited in the United States Mail,postage prepaid, Certified or Registered Mail, addressed to the parties heretoat the respective addresses set out below, or at such other address as theyhave theretofore specified by written notice delivered in accordance herewith

 

(iv)          All notices toTenant, whether written or verbal, are to be delivered, mailed or communicated,as the case maybe, to:

 

Encore Orthopedics, Inc

         Metric Blvd. (after the Lease CommencementDate)

8900 Shoal Creek Blvd., Bldg300 (before the Lease Commencement Date)

Austin, Texas 78758 (afterthe Lease Commencement Date)

Austin, Texas 78757 (beforethe Lease Commencement Date)

Attn : Craig L. Smith,President or Harry L Zimmerman, Vice President-General Counsel

 

**25.          ADDITIONALPROVISIONS****.**  See EXHIBIT “C” attached hereto andincorporated herein by reference 

 

**26.**          [Intentionally Omitted]

 

**27****.****          LANDLORD’SLIEN.** In addition to any statutory lien for rent in Landlord’s favor,subject to the provisions hereof, Landlord shall have and Tenant hereby grants to Landlord a continuingsecurity interest in all rentals and other sums of money which may become dueunder this Lease from Tenant, all goods, equipment, fixtures, furniture,inventory, and other personal property of Tenant now or hereafter situated at,on or within the real property described in EXHIBIT “A” attached hereto andincorporated herein by reference, and such property shall not be removedtherefrom without the consent of Landlord, except in the ordinary course ofTenant’s business  In the event any ofthe foregoing described property is removed from the Premises in violation ofthe covenant in the preceding sentence, the security interest shall continue insuch property and all proceeds and products, regardless of location. Upon anEvent of Default hereunder by Tenant, in addition to all of Landlord’s otherrights and remedies, Landlord shall have all rights and remedies under theUniform Commercial Code, including without limitation the right to sell theproperty described in this paragraph at public or private sale at any timeafter ten (10) days prior notice by Landlord  Tenant hereby agrees to execute such otherinstruments deemed by Landlord as necessary or desirable under applicable lawto perfect more fully the security interest hereby created  Landlord and Tenant agree that this Lease andsecurity agreement and EXHIBIT “A” attached hereto serves as a financingstatement and that a copy, photograph or other reproduction of this portion ofthis Lease may be filed of record by Landlord and have the same force andeffect as the original  This securityagreement and financing statement also covers fixtures located at the Premisessubject to this Lease and legally described in EXHIBIT “A” attached hereto, andall rents or other consideration received by or on behalf of Tenant inconnection with any assignment of Tenant’s interest in this Lease or anysublease of the Premises or any part thereof, and, therefore, may also be filedfor record in the appropriate real estate records. It is agreed and understood thatthe lien the Landlord has as a result of this provision shall be subordinate toany and all liens granted by Tenant to any lender, equipment lessor, or othercreditor  Landlord agrees to execute asnecessary such commercially reasonable subordination agreements as arerequested by Tenant to evidence the subordination described in this provision.In the event that Landlord fails to execute such commercially reasonablesubordination agreement within ten (10) business days of receipt of acommercially reasonable agreement, then Landlord shall thereafter forfeit allrights it has under this provision

 
|   |   | Initial | Illegible |
|--------|--------|---------|-----------|
|   |   | Date    | 6/6/96    |

 

13

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| EXECUTED BY LANDLORD, this  11th day  of June, 1996                                   | ** **                                           |
|--------------------------------------------------------------------------------------------|------------------------------------------------------|
|                                                                                       | ** **                                           |
|                                                                                       | **MET 94, LTD., a  Texas Limited Partnership:**      |
|                                                                                       | By: ORI, Inc., a Texas  Corporation, General Partner |
|                                                                                       |                                                 |
|                                                                                       | /s/ Sanford L Gottesman                              |
|                                                                                       | By:                                                  | Sanford L Gottesman |
|                                                                                       | Title:                                               | President |
|                                                                                       | Address:                                             | c/o Trammell Crow Central Texas, Inc. |
|                                                                                       |                                                 | 301 Congress Avenue, Suite 1300,  Austin, TX 78701 |
|                                                                                       |                                                 |   |
|                                                                                       |                                                 |   |
| EXECUTED BY TENANT, this        day  of June, 1996 |                                                 |   |
|                                                                                       | **ENCORE  ORTHOPEDIC, INC :**                        |
|                                                                                       |                                                 |   |
|                                                                                       | /s/ Craig L Smith                                    |
|                                                                                       | By:                                                  | Craig L Smith |
|                                                                                       | Title:                                               | President |
|                                                                                       | Address:                                             |  8900 Shoal Creek Blvd , Bldg 300 |
|                                                                                       |                                                 | Austin, Texas 78757 |

 
| EXHIBIT “A” | - | Description of Premises        |
|-----------------------|---|--------------------------------|
| EXHIBIT “B” | - | Location of Parking            |
| EXHIBIT “C” | - | Additional Provisions          |
| EXHIBIT “D” | - | Form of Letter of  Credit |
| EXHIBIT “E” | - | Sign Plan                      |

 
|   |   | Initial | Illegible |
|--------|--------|---------|-----------|
|   |   | Date    | 6/6/96    |

 

14

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**FIRST AMENDMENT TO LEASE AGREEMENT BETWEENMET 94, LTD., AS LANDLORD, ANDENCORE ORTHOPEDICS, INC., AS TENANT**

 

To be attached to and form a part of Leasemade the 11th day ofJune, 1996 (which together with any amendments, modifications and extensionsthereof, is hereinafter called the Lease), between Landlord and Tenant,covering a total of 52,800 square feet and located at 9800 Metric Boulevard,Austin, Texas, known as Metric #4.

 

WITNESSETH that the Lease is hereby amendedas follows:

 

Paragraph 2.A shall be amended to adjust themonthly as referenced in Exhibit C, Paragraphs 3 and 4 of the follows:

 
| **TERM**     | ** ** | **MONTHLY RENTAL AMOUNT  PER SQUARE FOOT** | ** ** | **TOTAL MONTHLY RENTAL  AMOUNT** | ** ** |
|--------------|------------|----------------------------------------------------------------|------------|--------------------------------------------|------------|
| Years 1 - 5  |       | $                                                              | 0.6709     |                                       | $          | 35,422.26 |   |
| Years 6 - 10 |       | $                                                              | 0.7709     |                                       | $          | 40,702.26 |   |

 

Except as herein and hereby modified and amended the Agreement of Leaseshall remain in full force and effect and all the terms, provisions, covenantsand conditions thereof are hereby ratified and confirmed.

 

DATED AS OF THE 31st DAY OF March,1997.

 
|     |   |                                               |   | ** ** |
|----------|--------|----------------------------------------------------|--------|------------|
|     |   | ** **                                         |
| WITNESS: |   | LANDLORD:                                          |
|     |   | MET 94, LTD.,  a Texas Limited Partnership         |
|     |   | By: ORI Inc, a Texas  Corporation, General Partner |
|     |   |                                               |
|     |   | /s/ Sanford L. Gottesman                           |
|     |   | By: Sanford L. Gottesman                           |
|     |   | Title: President                                   |
|     |   |                                               |
| WITNESS: |   | TENANT:                                            |
|     |   | ENCORE  ORTHOPEDIC, INC.:                          |
|     |   |                                               |
|          |   |                                                    |
|     |   |                                               |
|     |   | Printed Name: Craig L.  Smith                      |
|     |   | Title: President                                   |
|     |   |                                               |

 

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**SECONDAMENDMENT TO THE LEASE AGREEMENT BETWEENENCORE MEDICAL, L.P., AS SUCCESSOR IN INTEREST TO ENCOREORTHOPEDICS, INC., AS TENANT, AND MET 4/12, LTD., A TEXAS LIMITEDPARTNERSHIP, AS LANDLORD**

 

To beattached to and form a part of the Lease made the 11th day of June, 1996 (whichtogether with any amendments, modifications and extensions thereof, ishereinafter called the “Lease”), between Landlord and Tenant, covering a totalof 52,800 square feet and located at 9800 Metric Blvd., Austin, Texas 78758,known as Metric 4 (“Premises”).

 

Terms capitalized herein that are not definedherein shall have the meaning ascribed to them in the Lease.

 

1.             TheLease is hereby extended and renewed for a further term of sixty (60) months toexpire on the31st day of March, 2012, on condition that Landlord and Tenant comply with allterms, covenants and conditions contained in the Lease, and the Monthly BaseRent shall be as listed below:

 
| ** **          | ** ** | ** **                        | ** ** | **Tenant Finish**            | ** ** | **Total Monthly** | ** ** |
|---------------------|------------|-----------------------------------|------------|-----------------------------------|------------|------------------------|------------|
| ** **          | ** ** | **Monthly Base P.S.F.** | ** ** | **Amortization **            | ** ** | **Base Rent**     | ** ** |
| **Months**          | ** ** | **Rate**                          | ** ** | **P.S.F. (“TFA”)** | ** ** | **including TFA** | ** ** |
| 10/3/2005-9/30/2009 |       | $                                 | 0.62       |                              | $          | 0.0457                 |       | $ | 35,148.96 |   |
| 10/1/2009-3/31/2012 |       | $                                 | 0.65       |                              | $          | 0.0457                 |       | $ | 36,732.96 |   |

 

Theseamounts shall be in addition to Tenant’s proportionate share of common areamaintenance, property taxes, management fees, and insurance as currentlyprovided in the Lease, and any Additional Tenant Finish Amortization asdescribed in paragraph 8 below.

 

2.             Notwithstanding any other provisionof the Lease, Tenant will not be responsible for pass through of capitalexpenditures except for (a) any capital expenditures requested by Tenant ,and paid for by Landlord, for which Landlord is not otherwise responsible underthe terms of the Lease; and (b) the annual amortization over the actualuseful life as determined by Landlord in its reasonable discretion, with areasonable salvage value, on a straight line basis of the costs of (i) anynon-structural capital improvements made by Landlord and required by anychanges in applicable building codes or laws enacted after the CommencementDate; and (ii) the cost of any non-structural capital improvements made byLandlord after the Commencement Date that are reasonably intended to achieve acurrent savings in operating expenses, but only to the extent of the savings.Landlord will continue to be responsible for the repair and cost ofconstruction defects in the Building, the Building systems, the parking lot,and the other areas outside the Building, to the extent it is required to do sounder the terms of the Lease.

 

3.             Tenant and Landlord agree thatTenant currently has a security deposit on file in the amount of $25,000.00 per paragraph 2B of’ theLease. Landlord will return said Security Deposit to Tenant upon the signing ofthis Second Amendment, but the Security Deposit will be restored with Landlordon the date that is the first to occur of (i) Encore Medial Corporationreporting a

 

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fiscal year end net worth less than OneHundred Million Dollars ($100,000,000) or (ii) January 1, 2012.

 

4.             Landlord has an option to relocatethe current neighboring tenant in Metric 4, Image Microsystems, Inc.(“Neighbor”), either to Metric 12 or Metric 10E. Should Tenant need expansion space,Landlord will work in good faith to relocate the Neighbor. Any space (the“Expansion Space”) provided in Metric 4 under this provision shall be leasedunder the same concessions, allowances and amortization opportunities as arethe Premises, except allowances shall be prorated on a straight line basisbased on length of term remaining, and the lease term for any expansion spaceshall be coterminous with the lease term of the Premises, subject to a three(3)-year minimum term. The rental rate for any Expansion Space shall be equalto ninety-five percent (95%) of the then current Market Rate (as defined anddetermined pursuant to Exhibit C-1 of the Lease).

 

5.             Landlord is the owner of thePremises, as well as the adjacent 96,000 square foot premises within Metric 4.It is agreed that Tenant shall have an ongoing right of first refusal to leasethe adjacent space from the Landlord subject to any existing lease(s) inplace. In the event a prospective tenant desires to lease this space fromLandlord, Landlord shall notify Tenant thereof in the manner provided in theLease for notice, whereupon Tenant shall have seven (7) business daysafter receipt of such notice in which to elect to exercise Tenant’s right offirst refusal. In the event Tenant fails to give Landlord written notice ofTenant’s election to lease the adjacent space within said seven (7) businessday period, Tenant shall have no further right, title or interest in theadjacent space and this right of first refusal shall terminate and be of no furtherforce and effect as it relates to the current prospective tenant, but shallremain in place for such space as it relates to future prospective tenants. If,on the other hand, Tenant exercises its right of first refusal in the mannerprovided above, the rental rate for this Expansion Space shall be equal to therate which had been agreed to be accepted by the prospective tenant for suchspace and shall include an allowance package equal to that offered to theproposed new Tenant.

 

Tenantmay at any time, but not more than once every twelve (12) months, request fromLandlord, by notice, a list of all available and unencumbered space in Metric 4or Metric 12.

 

6.             Any Expansion Space leased toTenant in accordance with paragraph 4 and 5 above (or otherwise) shall be for alease term that is coterminous with the expiration date of the Lease subject toa three (3)-year minimum term, and shall be subject to identical renewaloptions. In the event Tenant leases Expansion Space within the last thirty-six(36) months of the Lease term, Tenant shall have the option to extend the Leaseon the Premises for a period that would be coterminous with that of anyExpansion Space. The rental rate for any extended term for the Premises underthis scenario would be ninety-five percent (95%) of the then current MarketRate, with a floor of Tenant’s then current rental rate and a cap of onehundred five percent (105%) of Tenant’s then current rental rate in effect atthe time of the expansion. Additionally, for any proposed expansion space,Tenant shall have the right to require Landlord to advance to it up to anadditional Five Dollars ($5.00) per rentable square foot for Tenant improvementallowances, which advance shall be repaid based on a straight-line amortizationover the Lease term at an annual percentage rate of ten percent (10%), subjectto there being no material adverse change in Encore Medical Corporation’sfinancial situation as of the time of the request when compared to EncoreMedical

 

2

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Corporation’sfinancial situation as of the date of this Second Amendment. Such electionshall be made prior to commencement of construction.

 

7.             If Tenant is not in defaulthereunder, Tenant shall have the right and option to renew the Lease for theentire portion of the Premises, including any Expansion Space leased withinMetric 4 or 12, or solely for the initial 52,800 square feet of the Premises,for two (2) additional five (5) year terms by delivering writtennotice thereof to Landlord at least one hundred eighty (180) days, but no morethan two hundred ten (210) days, prior to the expiration date of the Leaseterm. Upon the delivery of said notice and subject to the conditions set forthin the preceding sentence, the Lease shall be extended upon the same terms,covenants and conditions as provided in the Lease, except that the rentalpayable during said extended term shall be ninety-five percent (95%) of thethen prevailing Market Rate. Tenant’s option to renew this Lease is subject tothe conditions that: (i) on the date Tenant delivers its notice exercisingits option to renew, Tenant is not in default under this Lease, and (ii) Tenantshall not have assigned the Lease or sublet any portion of the Premises under asublease which is effective at any time during the final twelve (12) months ofthe initial Lease term.

 

8.             Landlord shall provide Tenant witha tenant finish allowance (the “Allowance”) of One Hundred Thirty-Two ThousandDollars ($132,000) towards Tenant’s costs related to construction ofimprovements (including, without limitation, space planning costs,architectural and engineering fees, general contractor fees and other similarfees and expenses) to the Premises (the “Tenant Improvements”). Tenant shallbear the entire cost of any interior improvements to be installed by eitherLandlord or Tenant in the Premises in excess of the Allowance and shall pay forsuch excess over the Allowance. Landlord shall provide the Allowance (or anyportion thereof) within fifteen (15) days after Tenant has requested suchamount and has provided Landlord with such receipts , lien waivers, anddocumentation that evidence that Tenant has spent such funds on costs relatedto construction of the Tenant Improvements.

 

Inaddition to the preceding, Landlord shall also provide, at Tenant’s option, aone-time additional tenant finish allowance (“ATFA”) of One Hundred Thirty-TwoThousand Dollars ($132,000) to be applied toward interior improvements. In theevent that Tenant exercises its option to draw upon the AIFA to fund additionalimprovements, the monthly Base Rate shall be increased to reflect the monthlyamortization of the AIFA, based on an eight percent (8%) per annum interestrate over the remaining term of the Lease.

 

9.             Tenant will competitively bid theTenant Improvements construction with at least three mutually acceptablequalified tenant finish contractors and Tenant shall select one of the biddersto construct the Tenant Improvements. Tenant reserves the right to pre-select amutually acceptable general contractor based on fee and general conditionnegotiations. Tenant will enter into a contract with the successful bidder toconstruct the Tenant Improvements.

 

10.           Landlord shall not charge Tenant aconstruction management fee in connection with Tenant’s construction of theTenant Improvements, however, Landlord will receive a one-time fee in theamount of Two Thousand Five Hundred Dollars ($2,500) to compensate Landlord forthe cost of reviewing Tenant’s plans and for conducting inspections, which feeshall be deducted from the Allowance.

 

3

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11.           Landlordagrees it will not lease space in Metric 4 or Metric 12 to any person or entitywhose primary business competes directly or indirectly with Tenant’s businessof orthopedic medical device manufacturing and sales. This provision shallapply during the initial Lease Term and any renewals or extensions of the Lease.

 

12.           Tenantshall have the right to install a satellite dish and related communications equipmentand/or supplemental HVAC equipment on the roof of the Building and the PremisesSuch right, including vertical access to the roof, shall be at no additionalcost to Tenant Specifications for such equipment, including installation andlocation, shall meet Landlord’s reasonable approval. All installation andupkeep costs and removal at the end of the Lease term, if so required byLandlord, are at Tenant’s expense. Tenant may not perform such installationswithout the prior written consent of Landlord, which shall not be unreasonablyconditioned, withheld, or delayed.

 

13.           Tenantshall maintain the right to place its name and corporate logo on the Buildingand shall have the right to construct a monument sign(s) outside theBuilding at mutually agreeable locations. Tenant shall give Landlord the rightto approve the design of any signage. Such approval shall not be unreasonablyconditioned, withheld or delayed. Tenant’s signage rights shall be transferableto an approved assignee or sublessee. Tenant shall be granted identical signrights for any other building in the project at such time Tenant occupies 50%or more of such building Landlord shall not name the Building or project forany person or entity whose primary business competes with Tenant’s primarybusiness of medical device manufacturing and sales or grant signage rights toany person or entity whose primary business competes with Tenant’s primarybusiness of medical device manufacturing and sales.

 

14.           Landlordshall continue to provide Tenant with the right to use at no cost the onehundred ninety-two (192) parking spaces for the extended term (including anyrenewal options exercised) of the Lease as shown on Exhibit A-1. AtTenant’s option during the term of the Lease, Tenant may request Landlordprovide it with the right to use up to thirty-three (33) additional parkingspaces Landlord will use its best efforts to provide up to the requestedparking spaces in an area close to the Premises on property owned by eitherLandlord or another entity related to Landlord. If that is not possible, thenLandlord shall arrange for Tenant to lease up to thirty-three (33) additionalparking spaces on either the Metric overflow lot located east of Metric Boulevardand south of the Premises or the North Pond overflow lot located south ofRundberg Lane (at Landlord’s election) subject to prior leasing of such spaces.The cost for such parking shall be the lower of (i) $18 per space permonth, increasing two percent (2%) annually or (ii) the actual cost thatLandlord is paying the owner of such spots. In the event that during the termof the Lease Landlord becomes aware of another party attempting to leaseparking spaces in these overflow lots, Landlord shall notify Tenant, who willhave a continuing right of first refusal to lease up to thirty-three (33)additional parking spaces in these overflow lots.

 

15.           Tenantshall have the right to sublease or assign the Lease without Landlord’s consentto any affiliated company or entity resulting fromthe merger, sale, consolidation or restructuring of Tenant or in connectionwith the sale of the assets used in connection with the business operated byTenant at the Building. Tenant shall retain one hundred percent (100%) of any profits (after

 

4

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deducting allreasonable costs associated with subleasing or an assignment) obtained fromsubleasing or an assignment to an affiliate Landlord shall not have recapture rights.

 

16.           The Lease expressly refers to Tenantas “Encore Orthopedics, Inc.” The Tenant’s name has been changed to “EncoreMedical, L.P.” The Lease and all related documents are hereby amended such thatall references to “Tenant” or “Encore Orthopedics, Inc.” will translate to mean“Encore Medical, L.P.”

 

Except as hereinand hereby modified and amended the Lease shall remain in full force andeffect and all the terms, provisions, covenants and conditions thereof arehereby ratified and confirmed.

 

DATED AS OF THE 26th DAY OF OCTOBER, 2005

 
|   | **LANDLORD:**                                   |
|--------|-------------------------------------------------|
|   | ** **                                      |
|   | **MET 4/12, LTD., A TEXAS LIMITED PARTNERSHIP** |
|   | **By:**                                         | **GP Met 4/12, Ltd., a Texas Limited  Partnership** |
|   | **By:**                                         | **ORI, Inc., a Texas Corporation,  General Partner** |
|   |                                            |   |
|   |                                            |   |
|   | By:                                             |  |
|   | Name:                                           | [ILLEGIBLE] |
|   | Title:                                          | CFO |
|   |                                            |
|   |                                            |
|   | **TENANT:**                                     |
|   | ** **                                      |
|   | **ENCORE MEDICAL, L.P.**                        |
|   | ** **                                      |
|   | ** **                                      |
|   | **By:**                                         | **Encore Medical GP, Inc., its general  partner** |
|   | ** **                                      |  |
|   | **By:**                                         | [ILLEGIBLE] |
|   | **Title:**                                      | [ILLEGIBLE] |

 

5

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