Document:

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                                                                   Exhibit 10.56

                                 PROMISSORY NOTE

$560,000.00                                                       MARCH 29, 2002
                                                         LOS ANGELES, CALIFORNIA

      FOR VALUE RECEIVED, the receipt and sufficiency of which is acknowledged,
POLLET & RICHARDSON, A LAW CORPORATION ("Maker"), hereby promises to pay STAAR
SURGICAL COMPANY, or order ("Holder"), at the address designated on the
signature page of this Note, or at such other place as Holder may designate by
written notice to Maker, the principal sum herein below described ("Principal
Amount"), together with interest thereon, in the manner and at the times
provided and subject to the terms and conditions described herein.

      1.    PRINCIPAL AMOUNT.

            The Principal Amount means the sum of $560,000.00

      2.    INTEREST.

            Interest on the Principal Amount from time-to-time remaining unpaid
shall accrue from the Commencement Date (as that term is defined herein) at the
rate of five percent (5%) per annum, compounded annually. Interest shall be
computed on the basis of a three hundred sixty (360) day year and a thirty (30)
day month.

      3.    PAYMENT OF PRINCIPAL AND INTEREST.

            Subject to paragraph 9, below, Maker shall pay the Principal Amount
and all accrued and unpaid interest on the Principal Amount and all other
indebtedness due under this Note in forty-seven (47) equal monthly installments
of ten thousand dollars ($10,000) each, commending one (1) month from the
Commencement Date, and concluding three (3) years and eleven (11) months from
the Commencement Date, and one (1) payment due four (4) years from the
Commencement Date, for all sums remaining due under this Note (i.e., approx.
$153,552). If the date set for payment by Maker of any installment or other sum
due under this Note falls on a Saturday, Sunday or holiday recognized by either
the United States of America or the State of California, payment under this Note
shall be due on the first subsequent business day.

      4.    COMMENCEMENT DATE.

            The Commencement Date shall be June 1, 2002.

      5.    SECURITY/RELEASE OF SECURITY.

            Maker shall pledge as security for the repayment of all sums payable
under this Note all of Maker's accounts receivable, both those existing at the
time of the execution of this Note and those which come into existence at a
future date prior to the exoneration of this Note. Maker shall execute a
Security Agreement of even date evidencing Holder's security interest in the
accounts receivable. If, at a future date, Maker obtains a line of credit from a
third party, not to exceed $250,000, secured by Maker's accounts receivable,
Holder's security interest in Maker's accounts receivable will be subordinated
to the security interest of the party which

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extends the line of credit to Maker. This Note shall be recourse as to Maker,
but non-recourse as to Maker's shareholders, officers, directors, agents and
employees.

      6.    PREPAYMENTS.

            Maker shall have the right to prepay any portion of the Principal
Amount and interest due without prepayment penalty or premium or discount.

      7.    MANNER OF PAYMENTS/CREDITING OF PAYMENTS.

            Payments of any amount required hereunder shall be made in lawful
money of the United States or in such other property as Holder, in its sole and
absolute discretion, may accept, without deduction or offset, and shall be
credited first against accrued but unpaid fees and costs, if any, thereafter
against accrued but unpaid interest, if any, and thereafter against the unpaid
balance of the Principal Amount.

      8.    INTEREST ON DELINQUENT PAYMENTS.

            Any payment under this Note not paid when due shall bear interest at
the same rate and method as interest is charged on the Principal Amount from the
due date until paid.

      9.    ACCELERATION UPON DEFAULT.

            At the option of Holder, all or any part of the indebtedness of
Maker hereunder shall immediately become due and payable, irrespective of any
agreed maturity date, upon the happening of any of the following events of
default:

            (a) If Maker shall breach any condition or obligation imposed on
Maker pursuant to the terms of this Note, the Settlement Agreement and General
Release or even date, or the Security Agreement of even date, provided however
that if any such breach is reasonably susceptible of being cured, Maker shall be
entitled to a grace period of fifteen (15) days following written notice of such
event of default to cure;

            (b) If Maker shall make an assignment for the benefit of creditors;

            (c) If a custodian, trustee, receiver, or agent is appointed or
takes possession of substantially all of the property of maker;

            (d) If Maker shall be adjudicated bankrupt or insolvent or admit in
writing Maker's inability to pay Maker's debts as they become due;

            (e) If any petition is filed against Maker under the Bankruptcy Code
and either (A) the Bankruptcy Court orders relief against Maker, or (B) such
petition is not dismissed by the Bankruptcy Court within thirty (30) days of the
date of filing;

            (f) If any attachment, execution or other writ is levied on
substantially all of the assets of Maker and remains in effect for more than
five (5) days; or

            (g) If Maker shall apply for or consent to the appointment of a
custodian, trustee, receiver, intervenor, liquidator or agent of maker, or
commence any proceeding related to Maker under any bankruptcy or reorganization
statute, or under any arrangement, insolvency,

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readjustment of debt, dissolution, or liquidation law of any jurisdiction,
whether now or hereafter in effect.

Maker shall notify Holder immediately if any event of default occurs.

      10.   COLLECTION COSTS AND ATTORNEY'S FEES.

            Maker agrees to pay Holder all costs and expenses, including
reasonable attorneys' fees, paid or incurred by Holder in connection with the
collection or enforcement of this Note or any instrument securing payment of
this Note, including without limitation, defending the priority of such
instrument or conducting a trustee sale thereunder. In the even any litigation
is initiated concerning the enforcement, interpretation or collection of this
Note by the parties hereto, the prevailing party in any such proceeding shall be
entitled to receive from the non-prevailing party all costs and expenses
including, without limitation, reasonable attorneys' and other fees incurred by
the prevailing party in connection with such action or proceeding.

      11.   NOTICE.

            Any notice to either party under this Note shall be given by
personal delivery or by express mail, Federal Express, DHL or similar
airborne/overnight delivery service, or by mailing such notice by first class or
certified mail, return receipt requested, addressed to such party at the address
set forth below, or to such other address as either party from time to time may
designate by written notice. Notices delivered by overnight delivery service
shall be deemed delivered the next business day following consignment to such
delivery service. Mailed notices shall be deemed delivered and received in
accordance with this provision three (3) days after deposit in the United States
mail.

      12.   USURY COMPLIANCE.

            All agreements between Maker and Holder are expressly limited, so
that in no event or contingency whatsoever, whether by reason of the
consideration given with respect to this Note, the acceleration of maturity of
the unpaid Principal Amount and interest thereon, or otherwise, shall the amount
paid or agreed to be paid to Holder for the use, forbearance, or detention of
the indebtedness which is the subject of this Note exceed the highest lawful
rate permissible under the applicable usury laws. If, under any circumstances
whatsoever, fulfillment of any provision of this Note shall involve transcending
the highest interest rate permitted by law which a court of competent
jurisdiction deems applicable, then the obligations to be fulfilled shall be
reduced to such maximum rate, and if, under any circumstances whatsoever, Holder
shall ever receive as interest an amount that exceeds the highest lawful rate,
the amount that would be excessive interest shall be applied to the reduction of
the unpaid Principal Amount under this Note and not to the payment of interest,
or, if such excessive interest exceeds the unpaid balance of the Principal
Amount under this Note, such excess shall be refunded to Maker. This provision
shall control every other provision of all agreements between Maker and Holder.

      13.   JURISDICTION; VENUE.

            This Note shall be governed by, interpreted under and construed and
enforced in accordance with the laws of the State of California, excluding any
law relating to the conflict of laws. Any action to enforce payment of this Note
shall be filed and heard solely in Los Angeles County, California.

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      14.   BUSINESS PURPOSE.

            This Note is entered into by Maker in connection with a business
transaction and not for personal, family or household purposes.

                                             MAKER:

                                             Pollet & Richardson
                                             A Law Corporation

                                             By: /s/ Eric E. Richardson, Jr.
                                                 -----------------------------
                                                 Eric E. Richardson, President

                                             MAKER'S ADDRESS:

                                             10900 Wilshire Boulevard, Suite 500
                                             Los Angeles, California 90024

                                             HOLDER'S ADDRESS:

                                             STAAR SURGICAL COMPANY
                                             1911 Walker Avenue
                                             Monrovia, California 91016
                                             Attn: Chief Financial Officerexv10w14

 

Exhibit 10.14

Sealy Properties

Standard Industrial Lease

Multi-Tenant Modified Gross – Texas

March 2003

(Woodlands — 2408 Timberloch Place)

LEASE AGREEMENT

     PARTIES

     This Lease Agreement (“Lease”) is entered into on the date of the last execution by the
parties hereto, between Sealy Woodlands, L.P., a Delaware limited partnership (“LESSOR”);
and Zonagen, Inc. (“LESSEE”), and includes all pages and exhibits attached hereto and
incorporated by reference herein, and all amendments, modifications, renewals, extensions,
restatements, additions and deletions subsequently effected pursuant to Article 36 herein.

1. LEASED PREMISES

     LESSOR hereby leases to LESSEE, and LESSEE hereby leases from LESSOR, on the terms, conditions
and covenants in this Lease, the space described, outlined and/or set forth on Exhibit “A”,
consisting of 4,800 rentable square feet, and all fixtures, systems and equipment located
thereon (the “Leased Premises”). The municipal address of the Leased Premises is 2408
Timberloch Place, Suites B1-B2, The Woodlands, Texas 77380 and is located on the land more
particularly described on Exhibit “B” (the “Land”). The term “Building” in this Lease shall mean
the physical structure(s) and all other improvements located on the Land in which the Leased
Premises is located. LESSEE shall have the non-exclusive right to use the existing parking areas
located on the Land, subject to the terms of this Lease.

2. TERM

     TO HAVE AND TO HOLD said Leased Premises for a period of seventy-four (74) months,
commencing on May 1, 2004 or on such earlier date as LESSEE may take actual possession of
the Leased Premises (the “Commencement Date”), and ending on June 30, 2010 or the last day
of the month that is seventy-four (74) full calendar months following the Commencement Date
(the “Expiration Date”), unless sooner terminated, renewed or extended as provided for herein (such
period as renewed, extended or terminated hereinafter referred to as the “Term”). If there is work
to be performed by LESSOR pursuant to Exhibit “C”, the Commencement Date shall be subject to
adjustment as provided in Article 3.

3. ACCEPTANCE OF LEASED PREMISES; CONDITION AND SUITABILITY

     A. Except for work required to be performed by LESSOR as provided for pursuant to Exhibit “C”,
LESSEE acknowledges that: (i) it has fully inspected the Leased Premises; (ii) it is fully aware
of the physical condition of the Leased Premises; (iii) it hereby accepts the Leased Premises in
its present AS IS condition with no express warranties nor promises to repair, replace or maintain
(except as expressly set forth in this Lease) and no implied warranties; (iv) the Leased Premises
is fully suitable for LESSEE’s uses, purposes and occupancy; (v) the Leased Premises is in good and
satisfactory condition.

 

 

     B. If the Leased Premises or any part thereof is to be constructed or modified by LESSOR prior
to the Commencement Date, in accordance with Exhibit “C”, the Lease Commencement Date shall be the
date which the improvements required to be performed by LESSOR pursuant to Exhibit “C” have been
substantially completed.

4. BASE RENT, SECURITY DEPOSIT AND ESCROW

     A. As rental for the Leased Premises, LESSEE agrees to pay as rent to LESSOR, without notice,
reduction, deduction or offset, at LESSOR’s office at P.O. Box 973107, Dallas, Texas 75397-3107, or
at such other place as LESSOR may from time to time designate in writing in advance, the “Base
Monthly Rent” as set forth in Article 4.E herein on or before the first day of each calendar month
through the Term.

     B. Upon delivery of this Lease, LESSEE will deposit $6,400.00 to be applied as
follows: $3,200.00 as the first Base Monthly Rent Payment as defined herein and
$3,200.00 as a Security Deposit. Any amount designated herein as “Security Deposit” shall
not bear interest, may be commingled with LESSOR’s general funds, and shall not be considered an
advance payment of rent or a measure of LESSOR’s damages. In the event of a Default (as defined in
Article 20), including but in no way limited to the non-payment of rent, LESSOR may, from time to
time without forfeiting, compromising, releasing, novating or waiving any right or remedy, use the
Security Deposit to the extent necessary to pay past due rent and other amounts due LESSOR.
Following any such application of the Security Deposit, LESSEE shall pay to LESSOR the amount so
applied in order to restore the Security Deposit to its original amount within five (5) days after
written request.

     C. If LESSEE is not in Default, the balance of the Security Deposit shall be returned by
LESSOR (or, in the event of an assignment of LESSOR’s interest in the Leased Premises and the
Security Deposit during the Term, by LESSOR’s assignee) within sixty (60) days after the later of:
(i) the end of the Term or (ii) delivery of possession of the Leased Premises to LESSOR in
accordance with this Lease. The Security Deposit shall be deemed the property of LESSOR. LESSEE
hereby expressly waives the requirements and applicability of Tex. Prop. Code §§ 93.005 — 93.011,
and agrees that LESSOR shall return to LESSEE the balance of the Security Deposit not applied to
satisfy LESSEE’S obligations within the sixty (60) day period set forth above, provided LESSEE has
performed all of its obligations hereunder. If such waiver is not effective under applicable law,
LESSOR shall, within the time required by applicable law, return to LESSEE the portion of the
Security Deposit remaining after deducting all damages, charges and other amounts permitted by law.
LESSOR and LESSEE agree that such deductions shall include, without limitation, all damages and
losses that LESSOR has suffered or that LESSOR reasonably estimates that it will suffer as a result
of any breach of this Lease by LESSEE. LESSOR shall be released from any obligation with respect
to the Security Deposit upon transfer of this Lease and the Leased Premises to a person or entity
assuming LESSOR’S obligations under this Article 4.C.

     D. In addition to the Base Monthly Rent, LESSEE agrees to pay to LESSOR as additional rent its
Proportionate Share (as defined in Article 31) of expenses with respect to the Building and/or
project of which the Leased Premises are a part, including: (i) Taxes pursuant to Article 7; (ii)
insurance costs pursuant to Article 8; (iii) utility costs pursuant to Article 12;

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(iv) Common Area costs pursuant to Article 11; and (v) the operating expenses set forth in
Articles 4.E (all of the foregoing expenses being collectively referred to herein as the “Operating
Expense” or “Operating Expenses”). During each month of the Term, on the same day that Base
Monthly Rental is due hereunder and, without notice or demand, LESSEE shall pay to LESSOR an amount
equal to 1/12 of the estimated annual cost of LESSEE’s Proportionate Share of the Operating
Expenses as reasonably determined by LESSOR. The initial monthly payments are based upon the
estimated amounts for the first calendar year of the lease, and may be increased or decreased by
LESSOR to reflect the projected actual cost of all such items during each calendar year. If
LESSEE’s total Operating Expense payments applicable to a calendar year are less than LESSEE’s
Proportionate Share of all such items, LESSEE shall pay the difference to LESSOR within ten (10)
days after written request. If after such adjustment, the payments for Operating Expenses by
LESSEE applicable to a calendar year are more than LESSEE’s actual Proportionate Share of all such
items, LESSOR shall retain such excess and credit such excess payment against LESSEE’s future
Operating Expense payments due.

     E. The amount of the initial Base Monthly Rent for the term of the Lease is outlined on
“Exhibit C — Special Stipulations.” In addition to Base Monthly Rent, LESSEE shall also pay
LESSEE’s Proportionate Share of Operating Expenses.

As used herein, the term “Total Monthly Payment” shall include all subsequent adjustments pursuant
to this Article 4. If this Lease shall commence on any date other than on the first day of a
calendar month, or end on any date other than the last day of a calendar month, rent for such month
shall be prorated on a daily basis. In the event of a partial calendar year LESSEE’s Proportionate
Share of the Operating Expenses shall be proportionately adjusted based on the number of days
comprising such partial calendar year.

5. LATE CHARGES

     Time is of the essence regarding all amounts payable to LESSOR. All amounts due under this
Lease shall be paid on or before the date due. LESSEE acknowledges that the late payment of Base
Monthly Rent or any other amounts payable by LESSEE to LESSOR hereunder (all of which shall
constitute additional rent to the same extent as the Base Monthly Rent) will cause LESSOR to incur
administrative costs and other damages, the exact amount of which would be impracticable or
extremely difficult to ascertain. LESSEE AND LESSOR agree that if LESSOR does not receive any such
payment on or before five (5) business days after the date the payment is due, LESSEE shall pay to
LESSOR, as additional rental, a late charge equal to ten percent (10%) of the overdue amount to
cover such additional administrative costs. This provision for a late charge shall be in addition
to all of LESSOR’s other rights and remedies hereunder or at law or equity, and shall not be
construed as liquidated damages.

6. PURPOSE, USE AND OCCUPANCY; COMPLIANCE WITH LAWS

     A. The Leased Premises are leased for the purpose of, and shall be used and occupied for
office and laboratory research which includes, without limitation, animal research, record storage,
laboratory chemical storage, research and development, clinical development manufacturing, and
pharmaceutical and diagnostic research, development, and manufacturing, and for no other purpose,
subject in all respects to the terms of all applicable laws, rules and

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regulations. The Leased Premises shall not be used for any unlawful purpose nor in any manner
creating a public or private nuisance or trespass. Neither sidewalks nor loading docks nor any
other area outside the Leased Premises shall be used for sale, storage or display in any manner
whatsoever.

     B. LESSEE shall, at its sole cost and expense, obtain all licenses, certificates, permits and
all other approvals necessary for such purpose, use and occupancy of the Leased Premises, and shall
provide LESSOR with copies of same within thirty (30) days of LESSEE’s occupancy and additional
copies as may be reasonably requested within five (5) days after written request. LESSEE shall
comply with all governmental statutes, laws, ordinances, orders, decrees, decisions, rules and
regulations applicable to the purpose, use and occupancy of the Leased Premises, including but in
no way limited to the correction, prevention and abatement of public or private nuisances or
Hazardous Substances (as defined in Article 28.A), in, upon, or connected with the Leased Premises,
all at LESSEE’s sole expense. LESSEE will not permit the Leased Premises to be used for any
purpose or in any manner, or take or allow any action or inaction, which would not be covered by
the insurance described in Articles 8 or 9 or which would render the insurance thereon void or
voidable or the insurance risk more hazardous or the premium therefor more expensive. If there is
any increase in the cost of any such insurance described in Article 8 or 9 because of LESSEE’s
proposed or actual actions or inactions, LESSEE shall pay the full amount of such increase within
ten (10) days after written request.

     C. LESSEE and LESSEE’s agents, employees, contractors and invitees will comply fully with all
requirements of the rules and regulations of the Building and/or project and related facilities
which are attached hereto as Exhibit “D”, and made a part hereof as though fully set out herein.
LESSOR shall at all times have the right to reasonably change such rules and regulations or to
promulgate other rules and regulations in such manner as may be deemed advisable for safety, care,
or cleanliness of the Building and/or project and related facilities, and for preservation of good
order therein, all of which rules and regulations, changes and amendments will be forwarded to
LESSEE in writing and shall be carried out and observed by LESSEE. LESSEE shall further be
responsible for the compliance with such rules and regulations by the employees, servants, agents,
visitors and invitees of LESSEE.

7. TAXES

     A. LESSEE shall pay LESSEE’s Proportionate Share pursuant to Articles 4.D and 4.E of all
taxes, assessments and governmental charges of any kind and nature imposed upon the Leased
Premises, Land, Building and/or project of which the Leased Premises are a part (referred to herein
as “Taxes”). If at any time during the Term there shall be levied, assessed or imposed on LESSOR a
capital levy or other tax directly on the rents received from the Leased Premises, Land, and/or an
assessment, levy or charge measured by or based, in whole or in part, upon such rents from the
Leased Premises, Land or Building, in which the Leased Premises are located, then all such taxes,
assessments, levies or charges, or the part thereof so measured or based, shall be deemed to be
included within the term “Taxes.”

     B. LESSEE shall be liable for and pay all taxes, assessments, levies and governmental charges
imposed against any personal property or fixtures placed in the Leased Premises. If any such
taxes, assessments, levies or governmental charges are against LESSEE’s

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property and (i) LESSOR pays same or (ii) the assessed value of LESSOR’s property is increased
by inclusion of LESSEE’s personal property and fixtures and LESSOR pays all or part of same, then,
within five (5) days after written request, LESSEE shall pay same to LESSOR.

     C. LESSOR shall have the option, but not the obligation, to pay any and all taxes,
assessments, levies and charges (whether or not included in the aforementioned definition of Taxes)
payable by LESSEE under this Lease or by law. If LESSOR does so, LESSEE shall pay to LESSOR the
amount so paid within five (5) days after written request.

     D. LESSOR shall have the right to employ a tax consulting firm to attempt to assure a fair tax
burden on the Leased Premises, Land and Building within the applicable taxing jurisdiction, and
LESSEE’s Proportionate Share of the cost of such consultant shall be included as taxes to be
charged to Lessee pursuant to this Article.

     E. LESSEE’s cost of the taxes and other items mentioned in this Article shall be defined as
its prorata share of any increase of the total annual taxes regardless of the jurisdiction,
jurisdictions, authority or authorities levying the same, in excess of the total annual taxes
levied or assessed for the Base Year of 2004. Tax expense shall be determined on an accrual basis
in accordance with generally accepted accounting principles consistently applied.

     F. LESSEE has no right to protest the real estate tax rate assessed against the Project and/or
the appraised value of the Project determined by any appraisal review board or other taxing entity
with authority to determine tax rates and/or appraised values (each a “Taxing Authority”). LESSEE
hereby knowingly, voluntarily and intentionally waives and releases any right, whether created by
law or otherwise, to (a) file or otherwise protest before any Taxing Authority any such rate or
value determination even though LESSOR may elect not to file any such protest; (b) receive, or
otherwise require LESSOR to deliver, a copy of any reappraisal notice received by LESSOR from any
Taxing Authority; and (c) appeal any order of a Taxing Authority which determines any such protest.
The foregoing waiver and release covers and includes any and all rights, remedies and recourse of
LESSEE, now or at any time hereafter, under Section 41.413 and Section 42.015 of the Texas Tax Code
(as currently enacted or hereafter modified) together with any other or further laws, rules or
regulations covering the subject matter thereof. LESSEE acknowledges and agrees that the foregoing
waiver and release was bargained for by LESSOR and LESSOR would not have agreed to enter into this
Lease in the absence of this waiver and release. If, notwithstanding any such waiver and release,
LESSEE files or otherwise appeals any such protest, then LESSEE will be in default under this Lease
and, in addition to LESSOR’s other rights and remedies, LESSEE must pay or otherwise reimburse
LESSOR for all reasonable costs, charges and expenses incurred by, or otherwise asserted against,
LESSOR as a result of any tax protest or appeal by LESSEE, including appraisal costs, tax
consultant charges and attorneys’ fees (collectively, the “Tax Protest Costs”). If, as a result of
LESSEE’s tax protest or appeal, the appraised value for the Project is increased above that
previously determined by the Taxing Authority (such increase, the “Value Increase”) for the year
covered by such tax protest or appeal (such year, the “Protest Year”), then LESSEE must pay LESSOR,
in addition to all Tax Protest Costs, an amount (the “Additional Taxes”) equal to the sum of the
following: (i) the product of the Value Increase multiplied by the tax rate in effect for the
Protest Year; plus (ii) the amount of additional taxes payable during the five (5) year period
following the Protest Year, such amount to be calculated based upon the Value Increase

5

 

multiplied by the tax rate estimated to be in effect for each year during such five (5) year
period. LESSEE must pay all Additional Taxes — even those in excess of LESSEE’s proportionate
share and which may relate to years beyond the term of this Lease. The Additional Taxes will be
conclusively determined by a tax consultant selected by LESSOR, without regard to whether and to
what extent LESSOR may be able in years following the Protest Year to reduce or otherwise eliminate
any Value Increase. All Tax Protest Costs and Additional Taxes must be paid by LESSEE within five
(5) days following written demand by LESSOR.

8. LESSOR’S INSURANCE

     A. LESSOR shall procure insurance policies and charge a Proportionate Share of the premium
cost to the LESSEE pursuant to Articles 4.D and 4.E of, fire, casualty, liability and any other
insurance coverage for the Leased Premises, Land, Building and/or project of which the Leased
Premises are a part, as is commercially practicable. Such insurance shall include, but in no way
be limited to, casualty insurance covering the Building in an amount of not less than eighty
percent (80%) of the replacement cost thereof.

     B. LESSOR shall have the right to employ an insurance consulting firm to attempt to assure a
competitive insurance cost on the Leased Premises, Land and Building, and LESSEE’s Proportionate
Share of the cost of such consultant shall be included as LESSOR’S insurance to be charged to
Lessee pursuant to this Article.

     C. LESSEE’s cost of the insurance and other items mentioned in this Article shall be defined
as its prorata share of any of the premiums in excess of such costs for the Base Year of 2004.
Insurance expense shall be determined on an accrual basis in accordance with generally accepted
accounting principles consistently applied.

9. LESSEE’S INSURANCE

     LESSEE, at its sole expense, shall obtain and maintain in full force and effect at all times
during the Term the following insurance coverage: (a) worker’s compensation insurance; (b) “All
Risk” fire and extended coverage insurance covering all contents, fixtures and improvements in the
Leased Premises in an amount not less than 100% of their full replacement cost; (c) public general
liability insurance against liability for property damage and personal injury suffered by anyone by
reason of the use or occupancy of the Leased Premises with minimum limits of $1,000,000 on account
of bodily injury to or death of one person, $1,000,000 on account of any one occurrence affecting
more than one person and $500,000 on account of damage to property; and (d) insurance covering the
releases and indemnities of LESSEE set forth in this Lease. All of such insurance shall be
provided by an insurance company or companies with A.M. Best ratings of A-VII or better and
licensed to do business in the state in which the property is located shall name LESSOR as an
additionally insured, and shall be non-cancelable except upon thirty (30) days written notice to
LESSOR and any designees of LESSOR. Within ten (10) days after the date of this Lease, and
thereafter within ten (10) days after written request, LESSEE shall provide certificates of
insurance evidencing the aforementioned coverage, or other such evidence acceptable to LESSOR in
its sole discretion.

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10. MAINTENANCE AND REPAIR BY LESSOR

     A. LESSOR, at its own cost and expense, shall maintain only the roof, foundation and the
structural soundness of the exterior walls of the Building in good repair, reasonable wear and tear
excepted. The term “exterior walls” as used herein shall not include windows, glass or plate
glass, doors, special storefronts, or office entries but will include concrete overhangs. LESSOR
agrees, if required under the American’s with Disabilities Act of 1990, to be responsible to
install appropriate curb cuts to permit wheel chair access from the parking areas into the Building
provided that such access is not a result of the LESSEE’s use or any changes made by LESSEE to the
Premises.

     B. LESSEE shall repair and pay for any damage caused by the actions or inactions of LESSEE,
and LESSEE’s employees, agents, contractors, invitees, licensees, patrons and others under its
control, or caused by LESSEE’s Default or failure to discharge its obligations and duties to repair
and maintain the Leased Premises as provided in this Lease.

     C. LESSEE shall promptly give LESSOR written notice of any defect or need for repairs after
which LESSOR shall have reasonable opportunity to repair same or cure such defect. LESSOR’s
liability with respect to any defects, repairs or maintenance for which LESSOR is responsible under
any of the provisions of this Lease shall be limited to the cost of such repairs or maintenance or
the curing of such defect. LESSOR shall be allowed full access at all times to the Leased Premises
by LESSEE for the purpose of fulfilling or attempting to fulfill its obligations under this Article
10.

11. MAINTENANCE AND REPAIR BY LESSEE; COMMON AREA MAINTENANCE

     A. LESSEE shall, at its sole expense, repair and maintain all parts of the Leased Premises,
except those for which LESSOR is expressly responsible under this Lease, in good condition, making
all necessary repairs, maintenance and replacements, including but not limited to, ceiling tiles,
windows, glass, doors, signs, office entries, railings, interior walls and finish work, floors and
floor covering, heating and ventilation systems, air conditioning systems, dock boards and ramps,
truck doors, dock bumpers, plumbing fixtures, termite and pest extermination, removal of trash and
debris, and handicap access areas, and shall keep the whole of the Leased Premises in a safe, clean
and sanitary condition. LESSEE shall not cause or permit trash to accumulate in or around the
Building.

     B. In addition, LESSEE shall at its sole expense, repair and maintain, those portions of the
Leased Premises and Building, to the extent that such items serve the Leased Premises exclusively,
not in common with other tenants; including but not limited to, plumbing, drains, electrical
systems, fire sprinkler systems, gutters, downspouts, exterior painting, trees, shrubs,
landscaping, parking areas, driveways, sidewalks, curbs, bollards, railings, loading areas,
lighting, utility consumption, owners association dues, hallways, and other areas and improvements
exclusive of the roof, foundation and other structural components of the Building.

7

 

     C. LESSEE shall not be obligated to repair any damage caused by fire, tornado or other Act of
God or Force Majeure (as defined in Article 40 of this Lease) to the extent of insurance proceeds
actually paid to LESSOR.

     D. LESSEE shall not damage any demising wall or supports or disturb the integrity or support
provided by any demising walls or supports and shall, at its sole expense, promptly repair any
damage or injury to any demising wall or support caused by LESSEE or its employees, agents,
contractors, invitees, licensees, patrons or others under its control.

     E. In multiple occupancy buildings, LESSOR reserves the right to operate, and perform
maintenance, repair, and replacement as necessary to the Common Areas. The Common Areas are the
parts of the Land and Building as designated by LESSOR from time to time for the common use of the
tenants, including, but not limited to, plumbing, drains, electrical systems, gutters, downspouts,
exterior painting, trees, shrubs, landscaping, parking areas, driveways, sidewalks, curbs,
bollards, loading areas, rail spur areas, private streets and alleys, lighting, hallways, and other
areas and improvements provided by LESSOR for the common use of all tenants, exclusive of the roof,
foundation and other structural components of the Building, all of which shall be operated and
maintained by LESSOR in such manner as LESSOR, in its reasonable discretion, shall determine to be
consistent with similar properties within The Woodlands. LESSOR reserves the right to change from
time to time the dimensions and location of the Common Areas. LESSOR shall charge to LESSEE
pursuant to Articles 4.D and 4.E LESSEE’s Proportionate Share of the cost of operation and
maintenance of the Common Areas (including, but not limited to, costs incurred for management fees
(exclusive of asset management fees), maintenance, personnel, lighting, utility consumption, owners
association dues, heating, air conditioning, water, sewerage, painting, termite control, pest
extermination, trash and debris removal, cleaning, inspecting, landscaping, lawn sprinkler systems,
repairing, replacing, policing, guarding and protecting) which may be incurred by LESSOR in its
discretion.

     F. LESSOR reserves the right but is not obligated to perform necessary repairs to common
sewage line plumbing and all other repairs, maintenance and replacements which are otherwise
LESSEE’s obligation under this Article 11, and if found to have been caused by LESSEE or its
contractors, invitees, agents or employees, LESSEE shall, with respect to such items, be liable for
and pay to LESSOR the cost of same within ten (10) days after written request. Provided that if
any other particular tenant of the Building can be clearly identified as being responsible for the
actions or inactions leading to the need for such repair, maintenance or replacement as described
in this Article 11, then LESSOR shall seek from such other tenant, if responsible, to pay for
entire cost thereof.

     G. [RAIL SERVICE PROVISION INTENTIONALLY DELETED].

     H. LESSEE shall, at its sole expense, enter into a regularly scheduled preventive
maintenance/service contract with a maintenance contractor for servicing all hot water, heating,
ventilation and air conditioning systems and other equipment within the Leased Premises. LESSOR
reserves the right to approve or disapprove of any maintenance contract and the contractor(s)
performing work on equipment serving the Leased Premises. If LESSOR disapproves any contractor,
LESSOR will provide LESSEE with the reasons for such

8

 

disapproval. The service contract must include all services recommended by the equipment
manufacturer and must become effective and a copy thereof delivered to LESSOR without demand within
thirty (30) days of the date of this Lease.

     I. LESSEE shall pay LESSEE’s Proportionate Share, pursuant to Articles 4.D and 4.E, of all
costs incurred by LESSOR associated with the Common Area items mentioned in this Article 11 in
excess of the cost of such items for the Base Year of 2004. Notwithstanding anything herein to the
contrary, in no event shall LESSEE’s Proportionate Share of Controllable Operating Expenses (as
defined below) in calendar year 2005 or any subsequent calendar year during the Term exceed 107% of
LESSEE’s Proportionate Share of Controllable Operating Expenses applicable to the then prior
calendar year, calculated on a cumulative basis. There shall be no limitation on LESSEE’s
Proportionate Share of Non-Controllable Operating Expenses (as defined below). Assume, for
example, LESSEE’s Proportionate Share of Controllable Operating Expenses for calendar year 2005 was
$100.00. In calendar year 2006, LESSEE’s Proportionate Share of Controllable Operating Expenses
would be the lesser of (i) LESSEE’s Proportionate Share of Controllable Operating Expenses for
calendar year 2006, or (ii) $107 ($100.00 plus 7%). In calendar year 2007, LESSEE’s Proportionate
Share of Controllable Operating Expenses would be the lesser of (i) LESSEE’s Proportionate Share of
Controllable Operating Expenses for calendar year 2007, or (ii) $114.49 ($107 plus 7%). As used
herein, the terms (a) “Controllable Operating Expenses” shall mean all Operating Expenses other
than Taxes, insurance premiums, utility charges, snow and ice removal charges and other Operating
Expenses outside the reasonable control of LESSOR; and (b) “Non-Controllable Operating Expenses”
shall mean all Operating Expenses, other than Controllable Operating Expenses.

12. UTILITIES

     LESSOR agrees to provide, at its sole expense, the connections to the Leased Premises for
sewer, water, electricity, natural gas and telephone service; but LESSEE shall pay for all charges
for water, gas, heat, light power, telephone, sewer, fire sprinklers and all other utilities and
services used on or from the Leased Premises, together with any taxes, assessments, deposits,
surcharges or other additional charges, penalties or the like pertaining thereto and any repair and
maintenance charges for utilities, and LESSEE shall furnish all electric light bulbs and tubes and
elements. If any such services are not separately metered to LESSEE, LESSEE shall pay its
Proportionate Share of the cost of such services pursuant to Articles 4.D and 4.E of all charges
jointly metered with other tenants of the Building; provided, however, LESSOR shall have the right
to charge LESSEE with a greater share of the cost of such services on an equitable basis to the
extent LESSEE is using a disproportionately large amount of the services in relation to the other
tenants of the Building and/or project. LESSOR reserves the right to cause any of said services to
be separately metered to LESSEE at LESSEE’s sole expense. LESSOR shall not be liable or pay for
any interruption, re-establishment or failure of utility services to the Leased Premises, except to
the extent such interruption was solely caused by an agent of LESSOR. Except as addressed in the
previous sentence, in the event of any interruption of utility service, LESSOR will use
commercially reasonable efforts (without cost nor liability to LESSOR) to restore any interruption
of utility services to the Leased Premises.

9

 

13. RELEASES AND INDEMNITY AND WAIVER OF SUBROGATION

     A. LESSEE assumes full responsibility to LESSOR and all third parties for the condition and
security of the Leased Premises, and agrees to keep the Leased Premises in a safe condition and to
defend, indemnify and hold LESSOR, its employees, representatives, agents, contractors, patrons,
invitees, and licensees harmless from any and all liability for and against any injury or damage
relating to, arising from or connected with: (i) the condition of and the use and occupancy of the
Leased Premises, including but not limited to any injury or damage caused by, relating to,
connected with, or arising from the condition of the Leased Premises or the actions or inactions of
LESSEE, its employees, agents, contractors, patrons, invitees, licensees or others under its
control, or by fire, explosion, falling plaster, or other materials, Hazardous Substances, steam,
gas, electricity, water, rain, sleet, snow, or hail, or from leaks from any parts of the Leased
Premises, or from pipes, appliances, or plumbing works, from the roof, street, or subsurface or
from any other place, or by dampness or by occupants of contiguous or adjacent property, or the
public, or from any damage caused by operations in connection with any construction or demolition,
or by any other cause or catastrophe whatsoever; (ii) all actions or inactions of LESSEE, its
employees, agents, contractors, patrons, invitees, licensees or others under its control, in or
about the Leased Premises; (iii) all costs, reasonable attorney’s fees, expenses and liability
incurred by LESSOR in connection with any suit, claim or action or proceeding brought on account of
the events and transactions described in Articles 7.A(i) and (ii); provided, however, LESSEE shall
not be required to indemnify and hold LESSOR harmless from or against any such injury or damage
caused by the sole negligence or willful misconduct of LESSOR or its employees or agents. Unless
caused by the gross negligence of LESSOR or its employees or agents, LESSOR shall not be liable or
responsible for any loss of or damage to the personal property of LESSEE or others by theft, all of
which property shall be insured or self-insured by LESSEE, at LESSEE’s sole cost and expense.

     B. LESSOR and LESSEE each hereby release each other from all loss or damage caused by perils
required by this Lease to be insured through, by or under them by way of subrogation or otherwise,
even if such loss or damage shall have been caused by the actions or inactions of the other party
or anyone for whom such party may be responsible; provided, however, that this release shall be
applicable and in effect only with respect to loss or damage occurring during such times as the
releasor’s policies shall contain a clause or endorsement to the effect that any such release shall
not adversely affect or impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds paid under such policies. LESSOR
and LESSEE agree that they will request their respective insurance carriers to include in their
policies such a clause or endorsement.

     C. The provisions of Articles 7.A and 7.B shall survive the lease Term with respect to all
events, occurrences, series of events or occurrences, transactions, suits, claims or actions
occurring during the Term of this Lease.

14. ALTERATIONS AND FIXTURES

     LESSEE shall not make any alterations, additions or improvements (“Alterations”) to the Leased
Premises, Land or Building (including but in no way limited to roof and wall penetrations) without
the express prior written consent of LESSOR, which consent (a) as to

10

 

structural Alterations or non-structural Alterations having an aggregate cost in any calendar
year of more than $5,000, may be withheld in LESSOR’s sole and absolute discretion; and (b) as to
non-structural Alterations of $5,000 or less in any calendar year, shall not be unreasonably
withheld, conditioned or delayed. LESSEE may, without the consent of LESSOR, but at its sole
expense and in a good workmanlike manner, erect such shelves, bins, machinery and trade fixtures
(“Fixtures”), without altering the structural soundness, aesthetics or basic character of the
Leased Premises, Land or Building or its walls, and in any case complying with all applicable
governmental laws, ordinances, decisions, orders, decrees, regulations and other requirements. All
Alterations and Fixtures erected by LESSEE that are affixed to the Leased Premises or the Building
shall be and remain the property of LESSOR during the Term of this Lease; however, LESSEE shall,
unless LESSOR otherwise agrees in writing prior to the date of installation, remove all Alterations
and Fixtures erected by LESSEE and restore the Leased Premises to its original condition by the end
of the Term or upon earlier vacating of the Leased Premises, whichever comes first. Any
Alterations and Fixtures as LESSOR agrees may remain in the Leased Premises shall be and become the
property of LESSOR upon and after such end of the Term or LESSEE’s earlier vacating of the Leased
Premises. All removals and restorations by LESSEE shall be accomplished in a good and workmanlike
manner so as not to damage the Leased Premises, Land or Building or their structural, aesthetic or
functional qualities, and LESSEE shall repair any such damage at its sole cost and expense.

15. SIGNS AND SIGN REMOVAL

     After first obtaining express written approval from LESSOR, LESSEE shall have the right to
erect signs on the exterior walls of the Building in accordance with signage specifications
established by LESSOR. Any such signs shall be securely attached parallel to the walls and shall
be in keeping with the general scheme of the signs and aesthetic characteristics in the immediate
vicinity of the Leased Premises and shall not be other than customary trade signs identifying the
business of LESSEE. LESSEE shall not erect any sign over the public way, over the roofline or on
the roof, nor paint or otherwise deface or alter the exterior walls of the Building or Leased
Premises. The erection of any signs by LESSEE shall be subject to and in conformity with all
applicable laws, zoning ordinances, building restrictions, and covenants of record and in
accordance with LESSOR’s signage standards. On or before the end of the Term, LESSEE shall remove
all signs thus erected, and shall repair any damage or disfigurement, and close any holes, caused
by such removal.

16. ASSIGNMENT OR SUBLETTING

     LESSEE may not assign this Lease or sublease the Leased Premises in whole or in part without
LESSOR’s prior express written consent (such consent not to be unreasonably withheld, conditioned
or delayed), and then only in accordance with and subject to the following conditions, the
satisfaction of which shall be in the sole discretion of LESSOR:

     A. If LESSEE desires to assign this Lease or sublet the Leased Premises in whole, then, at
least sixty (60) days prior to the proposed effective date of any assignment or sublease, the
LESSEE shall deliver to LESSOR a written notice of intention to assign or to sublease, setting
forth a proposed commencement date for the assignment or sublease and shall attach to such notice a
copy of the proposed assignment or sublease agreement and all agreements

11

 

collateral thereto. The LESSOR shall then have the right, to be exercised by giving written
notice to LESSEE within thirty (30) days after receipt of LESSEE’s notice of intention to assign or
sublease, to cancel and terminate this Lease, as of the day before the proposed effective date of
the assignment or sublease.

     B. In the event of the assignment of this Lease or sublease of all or any portion of the
Leased Premises where the rental reserved in the assignment or sublease exceeds the rental or the
pro-rata portion of the rental, as the case may be, for such space reserved in this Lease, LESSEE
shall pay the LESSOR monthly, as additional rent, at the same time and at the same place as the
monthly installments of rent hereunder, all of the excess of the rental reserved in the assignment
or sublease over the rental reserved in this Lease applicable to the assigned or subleased space
(after reduction for the amortized portion of any tenant improvement costs and leasing commissions,
if any, actually paid by LESSEE to non-affiliated parties in connection with any such assignment or
sublease, but not otherwise).

     C. None of LESSEE’s obligations to LESSOR under this Lease shall be waived, forfeited,
compromised, released or novated regardless of any assignment or sublease, and any assignment or
sublease shall be expressly subject to and in compliance with the provisions of this Lease.
Further, the terms and conditions of this Lease shall take precedence over and control the
provisions of any sublease or assignment to the extent of conflict or differing interpretation.

     D. LESSEE acknowledges and agrees that, among other matters, LESSOR has no obligation to
consent to any assignment or subletting (and will be acting reasonably if consent is denied) if:
(a) same would cause LESSOR to be in violation of its obligations under another lease or agreement
to which LESSOR is a party; (b) in LESSOR’s reasonable judgment, a proposed assignee or subtenant
is not able financially to pay the rents due under this Lease as and when they are due and payable;
(c) a proposed assignee’s or subtenant’s business will impose a burden on the Building’s parking
facilities, Common Areas or utilities that is greater than the burden imposed by LESSEE, in
LESSOR’s judgment; (d) the terms of a proposed assignment or subletting will allow the proposed
assignee or subtenant to exercise a right of renewal, right of expansion, right of first offer,
right of first refusal or similar right held by LESSEE; (e) a proposed assignee or subtenant
refuses to enter into a written assignment agreement or sublease, in form satisfactory to LESSOR,
which provides that it will assume all of the terms and conditions of this Lease for the term of
any assignment or sublease; (f) the use of the Leased Premises by the proposed assignee or
subtenant will not be identical to the use permitted by this Lease; (g) LESSEE is in default at the
time of the request; (h) LESSOR has sued or been sued by the proposed assignee or subtenant or has
otherwise been involved in a legal dispute with the proposed assignee or subtenant; (i) the
assignee or subtenant is involved in a business which is not in keeping with the then current
standards of the Building; (j) the proposed assignee or subtenant is an existing tenant of the
Building or is a person or entity then negotiating with LESSOR for the lease of space in the
Building or another facility owned by LESSOR or an affiliate; or (k) the assignee or subtenant is a
governmental or quasi-governmental entity or an agency, department or instrumentality of a
governmental or quasi-governmental agency. LESSEE acknowledges and agrees that the list set forth
above has been included for illustration purposes only and does not represent the sole or exclusive
basis upon which LESSOR may withhold LESSOR’s consent to any assignment or subletting.

12

 

     E. The involvement by LESSEE or its assets in any transaction, or series of transactions (by
way of merger, sale, acquisition, financing, refinancing, transfer, leveraged buy-out or
otherwise), whether or not a formal assignment or hypothecation of this Lease or LESSEE’s assets
occurs, which results or will result in a reduction of the “Net Worth” of LESSEE as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such Net Worth of
LESSEE as it is represented to LESSOR at the time of the execution by LESSOR of this Lease or as it
exists immediately prior to said transaction or transactions constituting such reduction, at
whichever time said Net Worth of LESSEE was or is greater, shall be considered to be an assignment
of this Lease by LESSEE to which LESSOR may withhold its consent. “Net Worth” of LESSEE for
purposes of this Article 16.E shall be the tangible net worth of LESSEE (excluding any guarantors)
established under generally accepted accounting principles consistently applied.

17. DAMAGE OR DESTRUCTION

     A. If, at any time prior to the Commencement Date or during the Term, the Leased Premises or
the Building should be destroyed or damaged to any extent which may require repairs in an amount in
excess of twenty (20%) percent of the replacement cost, less reasonable depreciation under the
straight line method, of the Leased Premises or the Building, LESSOR shall have the right and
option of either:

          (1) Immediately terminating this Lease, in which case neither party shall have any rights
against the other party from and after the occurrence or destruction except those arising from this
Lease; or

          (2) Repairing or rebuilding such damaged or destroyed portions of the Leased Premises or
Building in substantially the same or better condition as immediately prior to the destruction or
damage, in which event rental shall be reduced proportionately to the loss of actual physical
occupancy suffered by LESSEE, provided that, if such damage was the result of the actions or
inactions of LESSEE, its employees, agents, contractors, invitees, licensees, patrons or others
under its control, rental shall not be reduced during such period.

     B. If during the Term there should be any such damage or destruction, but to an extent less
than the said twenty percent (20%) of the depreciated replacement cost as discussed above, this
Lease shall continue and LESSOR shall repair or rebuild the damaged or destroyed portions of the
Leased Premises as set forth in Article 17.A above, and the rent shall be reduced in proportion to
the actual loss of physical occupancy suffered by LESSEE for the period of the repair or
rebuilding, provided LESSOR shall have no obligation to spend or incur costs for such repair or
rebuilding in excess of the insurance proceeds actually paid to LESSOR.

     C. If during the Term, there should be any damage or destruction (without any regard to
whether the percentage of replacement cost exceeds twenty (20%) percent) to the Leased Premises or
the Building, and LESSOR fails, within one hundred eighty (180) days following the date of LESSOR’s
receipt of insurance proceeds and commencement of repairs, to repair and rebuild same to
substantially the same condition as existed prior to such damage or destruction, then in such event
LESSEE shall have the right to terminate this Lease by delivery of written notice to LESSOR no
later than the tenth (10th) day thereafter. Any such termination will, if

13

 

LESSEE timely delivers such notice, be effective as of the thirtieth (30th) day
following the date of LESSEE’s notice.

     D. If during sixty (60) days after the occurrence of any damage or destruction which gives
rise to the option of LESSOR either to terminate, repair or rebuild, LESSOR should not give LESSEE
notice of its decision, then this Lease shall continue in full effect, the option to terminate this
Lease shall be deemed to have been waived, and LESSOR shall repair or rebuild the Leased Premises,
provided LESSOR shall have no obligation to spend or incur costs for such repair or rebuilding in
excess of the insurance proceeds actually paid to LESSOR.

18. CONDEMNATION

     A. If, at any time during the Term, (a) title to the entire Leased Premises should become
vested in a public or quasi-public authority by virtue of the exercise of expropriation,
condemnation or other power in the nature of eminent domain, or by voluntary transfer from the
owner of the Leased Premises under threat of such a taking, or (b) if less than the entire Leased
Premises be thus taken, or transferred in lieu of such a taking, but it would be legally and
commercially impossible for LESSEE to occupy the portion of the Leased Premises remaining, and
impossible for LESSEE reasonably to conduct his trade or business therein, or then in either event,
the Term shall end as of the time of such vesting of title, after which neither party shall be
further obligated to the other except for occurrences antedating such taking.

     B. Should there be such a partial taking or transfer in lieu thereof, but not to such an
extent as to make such continued occupancy and operation by LESSEE an impossibility, then this
Lease shall continue on all of its same terms and conditions subject only to a reduction in rent
proportionate to such taking. It is provided, however, that LESSOR shall have the right and option
to terminate this Lease in the event there is a partial taking or transfer in lieu thereof which
affects a portion of the Building and/or the project to the extent that, in LESSOR’s reasonable
opinion, it is commercially impractical to continue the operation of the Building or the project in
a manner that will justify the continuation of this Lease.

     C. In the event of any such taking or private purchase in lieu thereof, all compensation
awarded for any taking (or sale proceeds in lieu thereof) of the fee or leasehold interest shall be
the property of LESSOR, and LESSEE shall have no claim thereto, the same being hereby expressly
waived by LESSEE. Any amounts specifically awarded or agreed upon by LESSEE and the expropriating
authority for the taking of LESSEE’s removable trade fixtures or the value of improvements made by
LESSEE to the Leased Premises shall be the property of LESSEE. LESSEE further grants LESSOR
exclusive authority to negotiate with any such authority for payment both with respect to the
interest of LESSOR and the leasehold interest of LESSEE in the Leased Premises.

19. ENTRY DURING TERM

     A. LESSOR shall have the right to enter the Leased Premises throughout the Term for the
following purposes: (1) inspecting the general condition and state of repair of the Leased
Premises; (2) performing such maintenance and other obligations as may be required or permitted by
this Lease of LESSOR; (3) showing the Leased Premises to any prospective

14

 

purchasers or lenders; (4) showing the leased premised to prospective tenants during the last
six (6) months of the Term or in the event of Default by LESSEE, at any time; (5) taking any
emergency action which LESSOR in its sole discretion deems necessary to protect the Leased
Premises, Land or Building; (6) determining whether there has been a Default under this Lease; and
(7) any other reasonable purposes. LESSOR agrees to use reasonable efforts to provide LESSEE with
at least twenty-four (24) hours prior notice of any such entry.

     B. If this Lease is not renewed or extended within one hundred twenty (120) days prior to the
end of the Term, LESSOR, its officers, agents or assigns, shall have the right to erect on or about
the Leased Premises a customary sign advertising the Leased Premises, Building and/or Land for
lease or for sale; and shall likewise have the right to enter the Leased Premises for the purpose
of showing the Leased Premises to prospective tenants.

20. DEFAULT

     The following, whether one or more and whether occurring together or separately, shall each be
considered a breach and default by LESSEE under and of this Lease (“Default”): (i) failure to
timely pay all or part of any amount payable under this Lease within five (5) days after the same
shall be due; (ii) failure, for any reason whatsoever, of LESSEE to perform or effect performance
of any of the other terms, conditions, obligations, agreements or covenants to be observed or
performed by LESSEE under this Lease, within five (5) days after written notice to LESSEE of its
failure to do so; (iii) failure, without any grace period, to comply with the provisions of Article
28 entitled “Environmental Hazards”; (iv) LESSEE or any officer, agent, successor, employee,
director, legal representative or assign of LESSEE shall falsify any report or information
furnished to LESSOR; (v) LESSEE or any guarantor of this Lease shall become bankrupt or insolvent
or file or have filed against it any debtor or bankruptcy proceeding pursuant to any statute,
either of the United States or of any state, or for the reorganization or for the appointment of a
receiver or trustee of all or a portion of its property; (vi) LESSEE or any guarantor of this Lease
makes an assignment for the benefit of creditors, or petitions for or enters into a plan of
arrangements; and (vii) LESSEE shall abandon the Leased Premises or suffer this Lease to be seized
or otherwise taken under any levy, turnover order, writ of execution or any other order, decree,
writ or judgment.

21. REMEDIES

     A. Upon each occurrence of Default, LESSOR shall have the option to pursue, at any time and
from time to time, any one or more of the following remedies, and/or any other remedy provided by
law or in equity, without any notice or demand, LESSEE specifically waiving any municipal, county,
state or federal law to the contrary:

	 	(1)  	Terminate this Lease; and/or
	 
	 	(2)  	Enter upon and take possession of the Leased Premises with or
without terminating this Lease; and/or
	 
	 	(3)  	Alter and/or change all locks and other security devices at the
Leased Premises with or without terminating this Lease;

15

 

and in any such event LESSEE immediately shall surrender possession of the Leased Premises to
LESSOR, and if LESSEE fails so to do, LESSOR may enter upon and take possession of the Leased
Premises and expel or remove LESSEE and LESSEE’s property and any other person and property
occupying such Leased Premises or any part thereof, without service or notice or resort to legal
process and being liable for prosecution or any claim of damages therefor, including but in no way
limited to trespass or loss or damage to persons or property.

     B. If LESSOR terminates this Lease, LESSEE shall be liable for and shall pay to LESSOR within
five (5) days after written request the sum of all base monthly rental and other payments owed to
LESSOR hereunder accrued through the date of such termination, plus an amount equal to (1) the
present value (using a discount rate equal to the 90-day U.S. Treasury Bill rate at the date of
such determination) of the remaining Total Monthly Payment payments for the remaining portion of
the Lease, calculated as if the Term expired on the date set forth in Article 2, less (2) the then
present fair market rental value of the Leased Premises remaining for such period.

     C. If LESSOR repossesses the Leased Premises without terminating this Lease, LESSEE, at
LESSOR’s option, shall be liable for and shall pay LESSOR within five (5) days after written
request all of the Total Monthly Payment and other payments owed to LESSOR accrued through the date
of such repossession, plus all amounts required to be paid by LESSEE to LESSOR under this Lease
through the date of expiration of the Term diminished by all amounts received by LESSOR through
reletting the Leased Premises for the remainder of the Term. Actions to collect amounts due by
LESSEE to LESSOR under this Article 21.C may be brought from time to time, on one or more
occasions, without the necessity of LESSOR’s waiting until expiration of the Term.

     D. Upon Default, in addition to any amount provided to be paid herein, LESSEE also shall be
liable for and shall pay to LESSOR (i) brokers’ fees incurred by LESSOR in connection with
reletting the whole or any part of the Leased Premises; (ii) the costs of removing and storing
LESSEE’s or other occupant’s property; (iii) the costs of repairing, altering, remodeling or
otherwise putting the Leased Premises and the fixtures, equipment and systems located therein into
condition acceptable to a new tenant; (iv) all reasonable expenses and fees, including but in no
way limited to attorney’s fees, incurred by LESSOR in enforcing or defending LESSOR’s rights and/or
remedies; and (v) interest at the rate of eighteen 18.00% percent per annum on all sums due and
owed to LESSOR by virtue of any provision of this lease including without limitation, Base Monthly
Rent and late charges, from the time they are due and payable until they are paid.

     E. LESSEE acknowledges that LESSOR has entered into this Lease in reliance upon, among other
matters, LESSEE’s agreement and continuing obligation to pay all Rent due throughout the Term. As
a result, LESSEE hereby agrees that LESSOR has no obligation to: (i) relet the Leased Premises
prior to leasing any other space within the Building; (ii) relet the Leased Premises (A) at a
rental rate or otherwise on terms below market, as then determined by LESSOR in its sole
discretion; (B) to any entity not satisfying LESSOR’s then standard financial credit risk criteria;
(C) for a use (1) not consistent with LESSEE’s use prior to the Default; (2) which would violate
then applicable law or any restrictive covenant or other lease affecting the Building; (3) which
would impose a greater burden upon the Building’s parking, HVAC or

16

 

other facilities; and/or (4) which would involve any use of Hazardous Materials; (iii) divide
the Leased Premises, install new demising walls or otherwise reconfigure the Leased Premises to
make same more marketable; (iv) pay any leasing or other commissions arising from such reletting,
unless LESSEE unconditionally delivers LESSOR, in good and sufficient funds, the full amount
thereof in advance; (v) pay, and/or grant any allowance for, tenant finish or other costs
associated with any new lease, even though same may be amortized over the applicable lease term,
unless LESSEE unconditionally delivers LESSOR, in good and sufficient funds, the full amount
thereof in advance; and/or (vi) relet the Leased Premises, if to do so, LESSOR would be required to
alter other portions of the Building, make ADA-type modifications or otherwise install or replace
any sprinkler, security, safety, HVAC or other Building operating systems.

     F. If LESSOR repossesses the Leased Premises, LESSOR shall have the right to (i) keep in place
and use or (ii) remove and store all of the furniture, fixtures, equipment and other contents
located at the Leased Premises, including that which is owned by or leased to LESSEE at all times
prior to any foreclosure or repossession by LESSOR or third party having a lien thereon. LESSOR
also shall have the right to relinquish possession of all or any portion of such furniture,
fixtures, equipment and other property to any person (“Claimant”) who presents to LESSOR a copy of
any instrument represented by Claimant to have been executed by LESSEE (or any predecessor of
LESSEE) granting Claimant the right under various circumstances to take possession of such
furniture, fixtures, equipment or other property, without the necessity on the part of LESSOR to
inquire into the authenticity or legality of said instrument. The rights of LESSOR herein stated
shall be in addition to any and all other rights that LESSOR has or may hereafter have at law or in
equity; and LESSEE stipulates and agrees that the rights granted LESSOR are commercially
reasonable.

     G. LESSEE AND LESSOR WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LESSOR AND LESSEE
ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

22. CONDITION AT TERMINATION AND KEYS

     The Leased Premises and keys to same shall be surrendered to LESSOR, broom clean (free of all
debris and property of LESSEE), no later than 5:00 p.m. on the last day of the Term, with the
entire Leased Premises in good repair, reasonable wear and tear excepted (except as provided to the
contrary in this Lease), and with all equipment and systems in good operating condition. Should
LESSEE surrender the Leased Premises or the equipment or systems in other than the above specified
condition, LESSEE hereby grants LESSOR the right to have the Leased Premises placed in such
condition and LESSEE agrees to pay the cost of such reconditioning, as well as the Total Monthly
Payment for the period necessary to accomplish same, within ten (10) days after written request to
LESSEE. At the end of the Term, LESSEE shall surrender all keys to LESSOR at the place then fixed
for the payment of rent or such other location as specified by LESSOR in writing. All obligations
of the LESSEE contained in this Article 22 shall survive the end of the Term. Notwithstanding any
provision in this Lease to the contrary, all personal property of LESSEE that shall remain in the
Leased Premises after the vacation of the Leased

17

 

Premises by LESSEE shall be deemed abandoned, shall thereupon, at the election of LESSOR,
become the property of LESSOR, and the LESSOR may dispose of such property in any way at any time,
without notice, as LESSOR sees fit without liability or payment for same or damage thereto to
LESSEE, at LESSEE’s sole expense.

23. HOLDING OVER

     If, for any reason, LESSEE retains possession of the Leased Premises after the termination of
the Term, such possession shall be subject to immediate termination by LESSOR at any time, and all
of the other terms and provisions of this Lease (excluding any expansion or renewal option or other
similar right or option) shall be applicable during such holdover period, except that LESSEE shall
pay LESSOR from time to time, upon demand, as Base Rent for the holdover period, an amount equal to
150% of the Base Rent in effect on the termination date, computed on a monthly basis for each month
or part thereof during such holding over. All other payments shall continue under the terms of
this Lease. In addition to the foregoing, LESSEE shall be liable for all damages incurred by
LESSOR as a result of such holding over, such damages to include, without limitation, LESSOR’s loss
of rental income from one or more prospective tenants for the Leased Premises due to LESSEE’s
failure to timely vacate the Leased Premises. No holding over by LESSEE, whether with or without
consent of LESSOR, shall operate to extend this Lease and this Article 23 shall not be construed as
consent for LESSEE to retain possession of the Leased Premises.

24. FINANCIAL STATEMENTS

     Within ten (10) days after written request, LESSEE shall furnish to LESSOR a copy of LESSEE’S
income statements and balance sheets covering LESSEE’s last four (4) quarterly accounting periods,
and shall include all corresponding notes, comments, opinions and statements. Such financial
information shall be certified by LESSEE or a Certified Public Accountant to be materially
accurate.

25. SUBORDINATION AND ATTORNMENT

     A. LESSEE agrees that this Lease is and shall remain subject to and subordinate to all present
and future mortgages, deeds to secure debt, deeds of trust, security agreements, financing
statements and all other security instruments and other similar encumbrances (the “Encumbrances”)
affecting the Land or the Building, or any part thereof, and within ten (10) days after written
request, LESSEE shall execute, acknowledge, verify and deliver to LESSOR such certificate(s),
letters, representations and agreements in writing as LESSOR or its lender may request,
acknowledging the subordination of this Lease to such Encumbrances; provided, however, no such
subordination will be effective unless LESSEE receives a non-disturbance agreement from the holder
of any such Encumbrance. LESSOR agrees to use commercially reasonable efforts to obtain a
subordination, non-disturbance and attornment agreement from the holder of any existing Encumbrance
on the standard form then required by such holder. Notwithstanding the foregoing, any such lender
may at any time subordinate its Encumbrance to this Lease, without notice or LESSEE’s consent, and
thereupon this Lease shall be deemed prior to such Encumbrance without regard to their respective
dates of execution, delivery or recording and in that event such lender shall have the same rights
with respect to this Lease as though this

18

 

Lease had been executed prior to the execution, delivery and recording of such Encumbrance and
had been assigned to such lender. LESSEE hereby irrevocably appoints LESSOR as LESSEE’S
attorney-in-fact, coupled with an interest, and grants LESSOR power of attorney to subordinate
LESSEE’S interest under this Lease to all Encumbrances on the Land and the Building, and any part
thereof.

     B. Nothing in this Lease shall in any manner restrict LESSOR’s right to assign or encumber
this Lease in its sole discretion. Should the LESSOR assign this Lease or should LESSOR enter into
Encumbrances affecting all or any portion of the Leased Premises and should the holder(s) of such
Encumbrances succeed to the interest of LESSOR, LESSEE shall be bound to any such holder under all
the terms, covenants and conditions of this Lease, and LESSEE shall promptly attorn to such holder
as LESSOR under this Lease.

26. EXCULPATION

     LESSEE agrees that LESSEE shall look solely to LESSOR’s interest in the Leased Premises, Land
and Building for the satisfaction of any claim, judgment, decree, decision, or ruling lawfully
requiring the payment of money by LESSOR, and no other property or assets of LESSOR, its officers,
directors, agents, employees, partners, owners, shareholders, successors, assigns or legal
representatives, shall be subject to lien, levy, execution or other enforcement procedure for the
satisfaction of any such claim, judgment, injunction, decree, decision or ruling, nor shall any of
the foregoing individuals or entities have any liability, whether jointly, individually or
derivatively, for any obligation of or any claim against LESSOR.

27. ESTOPPEL REPRESENTATIONS

     Within ten (10) days after written request from LESSOR, LESSEE shall execute, acknowledge,
verify and deliver to LESSOR written statements certifying that this Lease is in full force and
effect (and, if there has been a modification thereof, that the same is in full force and effect as
modified), that there are no uncured defaults on the part of LESSOR (or of any such default exists,
the specific nature and extent thereof), the date to which any rent or other charges have been paid
in advance, if any, that all tenant finish allowances and related costs owed by LESSOR have been
paid in full (or, if not, the specific amount owed) and such other matters as LESSOR may, in its
sole discretion request. It is understood and agreed that LESSEE’s obligation to furnish each
estoppel certificate in a timely fashion is a material inducement for LESSOR’s execution of this
Lease. No cure or grace period provided in this Lease shall apply to LESSEE’s obligations to
timely deliver an estoppel certificate. LESSEE irrevocably appoints LESSOR as its
attorney-in-fact, coupled with an interest, and grants LESSOR power of attorney to execute,
acknowledge, verify and deliver, for, by and in the name of LESSEE, any statement, representation,
document or instrument provided for in this Article 27.

28. ENVIRONMENTAL HAZARDS

     A. The term “Hazardous Substances”, as used in this Lease shall mean all pollutants,
contaminants, explosives, flammable materials, compressed materials, corrosives and toxic,
radioactive and hazardous materials, and all other substances, the use, containment, existence,
monitoring, transporting, maintenance prevention and/or removal of which is monitored,

19

 

restricted, prohibited or penalized by an “Environmental Law”, which term shall mean all
federal, state or local laws, ordinances, statutes, orders, directives and decrees, and all orders,
directives, rulings, rules, regulations and decisions of a governmental or quasi-governmental
authority, and all decisions, orders, decrees and judgments of a judicial or quasi-judicial body,
and all rules, regulations, rulings, orders, directives and decisions of any regulatory or
quasi-regulatory body relating to the foregoing or the pollution, contamination, regulation,
monitoring, cleansing or protection of the environment. LESSEE hereby agrees that: (i) no
activity or inactivity will be conducted on the Leased Premises that will produce any Hazardous
Substances, except for such activities that are part of ordinary course for LESSEE’s business
activities and which are conducted in accordance with all Environmental Laws and have been
expressly and specifically approved in advance in writing by LESSOR in its sole discretion
(“Permitted Activities”); LESSEE shall be responsible for obtaining any required permits,
certificates variances and all approvals and for paying any fees and providing any testing required
by any governmental agency; (ii) the Leased Premises will not be used in any manner for the storage
of any Hazardous Substances except for the temporary storage of “Permitted Materials” (as defined
in Article 28.B), which are properly stored in a manner and location meeting all Environmental Laws
and are expressly and specifically approved in advance in writing by LESSOR in its sole discretion;
(iii) no portion of the Leased Premises will be used as a landfill, waste disposal facility, waste
storage facility or a dump; (iv) there will be no installation of any above ground or underground
tanks or other storage facilities of any type; (v) no surface or subsurface conditions will exist
or come into existence that constitute, or with the passage of time may constitute a public or
private nuisance; (vi) there will be no Hazardous Substances brought onto the Leased Premises,
except for the Permitted Materials, and if so brought or found located thereon, the same shall be
immediately removed by LESSEE, with proper disposal pursuant to all Environmental Laws, and all
required cleanup procedures shall be diligently undertaken pursuant to all Environmental Laws.
LESSOR shall have the right but not the obligation to enter the Leased Premises for the purpose of
inspecting the storage, use and disposal of Permitted Materials to ensure compliance with this
Lease and all Environmental Laws. Should it be determined, in LESSOR’s sole discretion, that said
Permitted Materials are being improperly stored, used, or disposed of, then LESSEE shall take such
corrective action within 24 hours after written demand from LESSOR. If such corrective action is
not so taken, LESSOR shall have the right, but not the obligation, to perform such work and LESSEE
shall reimburse LESSOR for all costs associated with said work within five (5) days after written
request. If at any time during or after the Term, the Leased Premises are found to be so
contaminated or subject to said conditions, LESSEE shall immediately institute proper and thorough
cleanup procedures at LESSEE’s sole cost, and LESSEE agrees to indemnify and hold LESSOR harmless
from all claims, demands, actions, liabilities, costs, expenses, damages and obligations of any
nature arising from, in connection with or as a result of said conditions. If such corrective
action is not so taken, LESSOR shall have the right, but not the obligation, to perform such work
and LESSEE shall reimburse LESSOR for all costs associated with said work within five (5) days
after written request. At the expiration or earlier termination of the Lease, LESSOR shall have
the right, at its option and at LESSEE’s sole cost and expense, to undertake an
 environmental
assessment of the Leased Premises to determine LESSEE’s compliance with all Environmental Laws.
LESSOR and LESSEE agree that LESSOR’s receipt of or satisfaction with any environmental assessment
in no way waives any rights that LESSOR holds against LESSEE. LESSOR acknowledges and agrees that
LESSEE shall have no responsibility for any claims,

20

 

demands, actions, liabilities, costs, expenses or damages resulting from an environmental condition
which is proven to have existed prior to the date of this Lease through no fault of LESSEE, but not
otherwise. The foregoing indemnification and the responsibilities of LESSEE in this Article 28
shall survive the end of the Term.

	 	B.  	PERMITTED MATERIALS:
	 
	 	   	Chemicals, reagents, compounds and drugs used in connection with or produced as a
result of the permitted uses of the Leased Premises but only to the extent LESSEE uses,
stores, disposes and otherwise holds same in accordance with all applicable Environmental
Laws.

29. PROHIBITION OF LIENS

     LESSEE has no authority, express or implied, to create, place or allow any lien or encumbrance
of any kind or nature whatsoever upon the Leased Premises, Land or Building, or in any manner to
bind the interest of LESSOR or LESSEE in the Leased Premises, Land or Building or to charge any
amount payable under this Lease for any claim in favor of any person dealing with LESSEE, including
those who may furnish materials or perform labor for any construction or repairs. LESSEE agrees
that it will pay or cause to be paid all sums for labor performed or materials furnished in
connection with any work performed on the Leased Premises, and that it will save and hold LESSOR
harmless from any and all loss, cost or expense based on or arising out of asserted claims or liens
against the Leased Premises, Land or Building or against the right, title and interest of the
LESSOR in the Leased Premises, Land or Building or under this Lease. LESSEE agrees to give LESSOR
written notice within five (5) days of the placing of any lien or encumbrance against the Leased
Premises, Land or Building.

30. LESSOR’S LIEN

     As security for LESSEE’s payment of Rent, damages and all other payments required to be made
by this Lease, LESSEE hereby grants to LESSOR a lien upon all movable property of LESSEE now or
subsequently located upon the Premises. If LESSEE abandons or vacates any substantial portion of
the Premises or is in default in the payment of any rentals, damage or other payments required to
be made by this Lease, LESSOR may take any action it deems necessary and may be available to it
under the laws of the State of Louisiana. The proceeds of the sale of the movable property shall
be applied by LESSOR toward the cost of the sale and then toward the payment of all sums then due
by LESSEE to LESSOR under the terms of this Lease. Upon LESSEE’s request, LESSOR agrees to
subordinate this lien to the lien held by any non-affiliated party providing LESSEE with financing
on terms acceptable to LESSOR, in LESSOR’s reasonable discretion.

31. PROPORTIONATE SHARE

     “Proportionate Share”, as used in this Lease, shall mean the percentage which is the ratio of
the square feet of the Leased Premises to the total rentable square feet contained in the Building

and/or project of which the Leased Premises are a part, whichever is appropriate as determined by
LESSOR in its reasonable discretion.

21

 

32. SEVERABILITY

     If any term, covenant or condition of this Lease or the application thereof to any person or
circumstance shall, to any extent and for any reason, be declared invalid or unenforceable by a
court of law or regulatory agency, the remainder of this Lease and the application of such term,
covenant or condition to persons or circumstances other than those which or to which such may be
held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition
of this Lease shall be valid and enforceable to the fullest extent permitted by law.

33. FURNISHING NOTICE

     Any notice, demand, request or writing which shall be required or permitted under this Lease
must be in writing and (i) delivered in person or by courier or (ii) deposited, postage prepaid,
return receipt requested in the US Mail, certified or registered, or (iii) via a nationally
recognized overnight delivery service, and addressed to:

	 	 	 	 	 
	

	 	LESSOR:
	 	Sealy Woodlands, L.P.
	

	 	 	 	Attn: Mark P. Sealy
	

	 	 	 	333 Texas Street, Suite 1050
	

	 	 	 	Shreveport, Louisiana 71101
	 
	 	 	 	 
	

	 	 	 	Telephone No.:     318-222-8700
	

	 	 	 	Facsimile No.:     318-222-4124
	 
	 	 	 	 
	

	 	WITH A COPY TO:	 	 
	

	 	 	 	The Holt Companies
	

	 	 	 	Attn: Property Manager
	

	 	 	 	1217 W. Loop North, Suite 100
	

	 	 	 	Houston, TX 77055
	 
	 	 	 	 
	

	 	LESSEE:	 	 
	

	 	 	Legal Notice Address:
	

	 	 	 	Zonagen, Inc.
	

	 	 	 	Louis Ploth
	

	 	 	 	2408 Timberloch, Suite 1
	

	 	 	 	The Woodlands, TX 77380
	

	 	 	 	Telephone No.: (281) 719-3400
	 
	 	 	 	 
	

	 	 	Billing Address:
	

	 	 	 	Zonagen, Inc.
	

	 	 	 	Louis Ploth
	

	 	 	 	2408 Timberloch, Suite 1
	

	 	 	 	The Woodlands, TX 77380
	

	 	 	 	Telephone No.: (281) 719-3400

22

 

	 	 	 	 	 
	

	 	 	On-Site Contact:
	

	 	 	 	Zonagen, Inc.
	

	 	 	 	Louis Ploth
	

	 	 	 	2408 Timberloch, Suite 1
	

	 	 	 	The Woodlands, TX 77380
	

	 	 	 	Telephone No.: (281) 719-3400

or such other address as LESSOR or LESSEE shall have most recently designated by written notice.
Any notice, demand or request hereunder shall be deemed to have been received on the date of
delivery, if delivered in person or by courier, or on the date of receipt on the return receipt, if
delivered by US Mail or overnight delivery service.

34. TITLES

     Notations or titles appearing in this Lease are provided merely for ease of reference, and the
parties hereto expressly acknowledge and agree that such notations and titles do not constitute a
part of this Lease, have no legal effect whatsoever in determining the rights or obligations of
parties and shall have no bearing upon the meaning or interpretation of this Lease or any portion
of it.

35. NON-WAIVER

     The failure by LESSOR to act upon a specific Default, failure or breach of any term, covenant
or condition in this Lease (whether once or more) is not and will not be intended to be, and shall
not be deemed to be a surrender of the Leased Premises or a waiver, forfeiture, compromise, release
or novation of such term, covenant, or condition nor of any subsequent Default, failure or breach
of the same or any other term, covenant or condition of this Lease. Any acceptance by LESSOR of
any amount of money is not intended to be, nor shall be deemed to be a surrender of the Leased
Premises or a waiver, forfeiture, compromise, release or novation of any Default, failure or breach
by LESSEE of any term, covenant or condition of this Lease, regardless of LESSOR’s knowledge of
such Default, failure or breach at the time of acceptance of such amount. No covenant, term or
condition of this Lease shall be deemed to have been compromised, forfeited, released, novated or waived by LESSOR unless specifically expressed in
writing by LESSOR.

36. ENTIRE AGREEMENT

     This Lease constitutes the entire agreement between the parties, and there are no other
agreements or covenants by either LESSOR or LESSEE other than set forth in this Lease. No
subsequent amendment, modification, renewal, extension, restatement, addition or deletion to this
Lease shall be binding upon or inure to the benefit of LESSOR or LESSEE unless reduced to writing,
signed by their authorized representatives.

37. RECORDATION OF LEASE OR SHORT FORM

     LESSEE shall not record this Lease or a short form of this Lease, unless expressly approved by
LESSOR in writing. Within five (5) days after written request by LESSOR, LESSEE shall join LESSOR
in the execution of a memorandum or “short form” of this Lease for

23

 

the purposes of recordation at LESSOR’S sole discretion. The memorandum shall describe the
parties, the Leased Premises, and the Term of this Lease, and shall incorporate this Lease by
reference.

38. TIME OF ESSENCE

     Time is the essence with respect to the performance of each of the payments, covenants and
agreements in this Lease.

39. GOVERNING LAW; JURISDICTION; VENUE

     The laws of the State of Texas shall govern the validity, performance, interpretation and
enforcement of this Lease and all claims, suits, demands and actions relating to, in connection
with and arising from this Lease and its subject matter, and all such claims, suits, demands and
actions shall be made and brought in the County of the State of Texas in which the Building is
located.

40. ACTS OF GOD; FORCE MAJEURE

     LESSOR shall not be required to perform any term, condition or covenant of this Lease, or be
liable for any damages to LESSEE, so long as the performance or nonperformance of the term,
condition or covenant is delayed, caused by or prevented by an Act of God or Force Majeure. For
purposes of this Lease, Acts of God and Force Majeure are defined as strikes, lock-outs, sit-downs,
material or labor restrictions by any governmental authority, unusual transportation delay, riots,
floods, washouts, explosions, earthquakes, fire, storms, weather (including wet grounds or
inclement weather which prevents construction), acts of terrorism and public enemy, wars,
insurrections or any other cause not reasonably within the control of LESSOR and which LESSOR by
the exercise of due diligence is unable, fully or in part, to prevent or overcome.

41. AUTHORITY

     Both LESSEE and the individual(s) signing on behalf of LESSEE below hereby represent and
warrant that they are duly authorized to execute and deliver this Lease and bind LESSEE to the
terms thereof without the consent of any other individual, entity or group of individuals and/or
entities. Both LESSOR and the individual(s) signing on behalf of LESSOR below hereby represent and
warrant that they are duly authorized to execute and deliver this Lease and bind LESSOR to the
terms thereof without the consent of any other individual, entity or group of individuals and/or
entities.

42. COMPLIANCE WITH LAW

     All agreements between LESSOR and LESSEE, whether now existing or hereafter arising, are
hereby limited so that in no contingency, whether by reason of demand or acceleration or otherwise,
shall any amount contracted for, charged, received, paid or agreed to be paid to LESSOR exceed the
maximum amount permissible under applicable law. If, from any circumstances whatsoever, any amount
would otherwise be payable to LESSOR in excess of the maximum lawful amount, such payable to LESSOR
shall be reduced to the maximum amount

24

 

permitted under applicable law; and if from any circumstances LESSOR shall ever receive
anything of value deemed interest by applicable law in excess of the maximum lawful amount, an
amount equal to any excessive interest shall be applied to the reduction of the amounts due and to
become due under this Lease and not the payment of interest, or if such excessive amount exceeds
amounts due and to become due under this Lease, such excess shall be refunded to LESSEE. This
Article 42 shall control all agreements between the LESSOR and LESSEE.

43. WAIVER OF CONSUMER RIGHTS

     LESSOR and LESSEE waive their rights under the Deceptive Trade Practices-Consumer Protection
Act, Section 17.41 et seq., Business & Commerce Code, a law that gives consumers special rights and
protections. Each, after consultation with an attorney of its selection, voluntarily consents to
this waiver.

44. CERTAIN CALCULATIONS

     LESSOR and LESSEE are knowledgeable and experienced in commercial transactions and agree that
the provisions set forth in this Lease for determining charges, amounts and additional rent payable
by LESSEE are commercially reasonable and valid even though such methods may not state a precise
mathematical formula for determining such charges. ACCORDINGLY, LESSEE HEREBY VOLUNTARILY AND
KNOWINGLY WAIVES ALL RIGHTS AND BENEFITS OF LESSEE UNDER SECTION 93.004 OF THE TEXAS PROPERTY CODE,
AS SUCH SECTION NOW EXISTS OR AS MAY BE HEREAFTER AMENDED OR SUCCEEDED.

45. SUBSTITUTION SPACE [INTENTIONALLY DELETED]

46. NO IMPLIED WARRANTY

     LESSOR AND LESSEE EXPRESSLY WAIVE AND DISCLAIM ANY IMPLIED WARRANTY THAT THE LEASED PREMISES
ARE SUITABLE FOR LESSEE’S INTENDED COMMERCIAL PURPOSE. FURTHER, LESSEE AGREES THAT LESSEE’S
OBLIGATION TO PAY BASE RENT AND OTHER SUMS HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE
LEASED PREMISES OR THE PERFORMANCE BY LESSOR OF ITS OBLIGATIONS HEREUNDER AND, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, LESSEE SHALL CONTINUE TO PAY BASE RENT AND SUCH OTHER SUMS, WITHOUT
ABATEMENT, SETOFF OR DEDUCTION, NOTWITHSTANDING ANY BREACH BY LESSOR OF SUCH OBLIGATIONS, WHETHER
EXPRESS OR IMPLIED.

25

 

This Lease Agreement is executed as of the dates indicated below.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	WITNESS:	 	LESSEE:
	 	 	ZONAGEN, INC.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	/s/ Damon Palermo

	 	By:	 	/s/ Louis Ploth, Jr.	 	 
	 	 	 	 	 
	Damon Palermo
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Printed Name: Louis Ploth
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	Its:	 	Vice President and CFO
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	Date:	 	May 4, 2004	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	WITNESS:	 	LESSOR:
	 	 	SEALY WOODLANDS, L.P.,
	 	 	a Delaware limited partnership
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Sealy Woodlands General Partner, L.P.,
	 	 	 	 	its general partner
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	Sealy G.P. Woodlands, L.P.,
	 	 	 	 	 	 	its general partner
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	By:	 	Sealy Woodlands Investors,
	 	 	 	 	 	 	 	 	L.L.C., its general partner
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	By:	 	/s/ Scott P. Sealy
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Printed Name: Scott P. Sealy
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Its: Manager
	 
	

	 	 	 	 	 	 	 	Date:	 	May 11, 2004
	 	 	 	 	 	 	 	 	 	 	 

26

 

All exhibits to the lease
agreement have been intentionally omitted. Zonagen will provide copies
of such exhibits to stockholders upon request directed to
Zonagen’s corporate secretary.

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