Document:

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                                                                   EXHIBIT 10.35
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                          CONSTRUCTION LOAN AGREEMENT

                                    BETWEEN

                          INTROGEN THERAPEUTICS, INC.

                                      AND

                                  COMPASS BANK

                           Dated as of July 24, 2000

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                               TABLE OF CONTENTS

<TABLE>
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                                                                             Page

<S>          <C>                                                             <C>
SECTION 1 - DEFINITIONS ......................................................  1
             1.1  Definitions ................................................  1
             1.2  Accounting Terms ........................................... 11
             1.3  Other Terms ................................................ 11
             1.4  References ................................................. 11
             1.5  Sections ................................................... 11
             1.6  Number and Gender .......................................... 12
             1.7  Incorporation of Exhibits .................................. 12
             1.8  Certain Other Matters of Construction ...................... 12

SECTION 2 - CONDITIONS ....................................................... 12
             2.1  Conditions Precedent to the Initial Advance ................ 12
             2.2  Conditions Precedent to Future Advances .................... 14
             2.3  Conditions to Final Advance for Retainage .................. 16

SECTION 3 - THE CONSTRUCTION LOAN ............................................ 18
             3.1  General Information and Purpose ............................ 18
             3.2  Commitment to Lend ......................................... 19
             3.3  Payments ................................................... 19
             3.4  Draw Request ............................................... 19
             3.5  Additional Equity Requirement .............................. 20
             3.6  Construction Advances ...................................... 20
             3.7  Direct Advances ............................................ 20
             3.8  Conditions and Waivers ..................................... 21
             3.9  Funding .................................................... 21
             3.10 Budget ..................................................... 21
             3.11 Execution of M.D. Anderson Lease ........................... 22
             3.12 Tenant Payment ............................................. 22

SECTION 4 - REPRESENTATIONS AND WARRANTIES ................................... 22
             4.1  Representations and Warranties of Borrower ................. 22

SECTION 5 - AFFIRMATIVE COVENANTS ............................................ 26
             5.1  Covenants of Borrower ...................................... 26

SECTION 6 - NEGATIVE COVENANTS ............................................... 30
             6.1  Negative Covenants of Borrower ............................. 30

SECTION 7 - EVENTS OF DEFAULT ................................................ 32
             7.1  Events of Default .......................................... 32
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<TABLE>
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SECTION 8 - RIGHTS AND REMEDIES OF LENDER .................................36
     8.1  Remedies ........................................................36
     8.2  Attorney-in-Fact ................................................37

SECTION 9 - MISCELLANEOUS .................................................38
     9.1  Other Loans .....................................................38
     9.2  No Duty or Special Relationship .................................39
     9.3  Other Remedies Not Required .....................................39
     9.4  NO CONTROL BY LENDER ............................................39
     9.5  No Partnership ..................................................39
     9.6  Representations and Warranties ..................................39
     9.7  Notice ..........................................................40
     9.8  Assignments of Contracts and Plans ..............................40
     9.9  Binding Effect ..................................................41
     9.10 Inconsistencies and Conflicts ...................................41
     9.11 Renewal of Indebtedness .........................................41
     9.12 No Waiver .......................................................41
     9.13 APPLICABLE LAW ..................................................41
     9.14 Amendment .......................................................42
     9.15 Future Advances .................................................42
     9.16 Severability ....................................................42
     9.17 Lender's Discretion .............................................42
     9.18 Entire Agreement ................................................42
     9.19 Counterparts ....................................................42
     9.20 Controlling Agreement ...........................................42
     9.21 Business Loans ..................................................43
</TABLE>

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                          CONSTRUCTION LOAN AGREEMENT

              THIS CONSTRUCTION LOAN AGREEMENT (this "AGREEMENT") is made and
entered into as of this 24th day of July, 2000, by and between INTROGEN
THERAPEUTICS, INC., a Delaware corporation ("BORROWER"), and COMPASS BANK, an
Alabama state chartered bank ("LENDER").

                                   WITNESSETH:

              In consideration of the mutual covenants and agreements herein
contained, Lender and Borrower agree as follows:

                             SECTION 1 - DEFINITIONS

         1.1 Definitions. In addition to the defined terms set forth elsewhere
herein, the following terms shall have the meanings set forth below:

         "AFFILIATE" shall mean (a) a corporation the majority of whose
         outstanding shares are owned (individually or collectively) by (i)
         Borrower, (ii) any Person identified in this paragraph, (iii) any
         Subsidiary of Borrower or any Person identified in this paragraph, (iv)
         the parent corporation of Borrower, or (v) any Subsidiary of Borrower's
         parent corporation, (b) any joint venture in which Borrower or any
         Person identified in this paragraph is a joint venturer, (c) any
         general or limited partnership in which Borrower or any Person
         identified in this paragraph is a general partner, (d) any limited
         liability company or limited liability partnership in which Borrower or
         any Person identified in this paragraph is a member or partner, (e) any
         shareholder who owns more than ten percent (10%) of the outstanding
         common stock of Borrower or any other Person identified in this
         Paragraph, (f) any employee, officer, or director of Borrower or any
         other Person identified in this Paragraph, and (g) any blood relation
         of any living Person identified in this Paragraph.

         "AGGREGATE COST" shall have the meaning assigned to such term in
         Section 3.10.

         "AUTHORIZATION LETTER" shall mean the letter dated June 22, 2000, from
         Borrower to Tenant, together with all prior letters referenced therein,
         and all supplements, replacements, amendments thereof (but only to the
         extent that any such supplement, replacement, or amendment is approved
         in writing by Lender).

         "AUTHORIZED OFFICER" shall mean, as to any Person, any officer of such
         Person who is duly authorized by the board of directors, or its
         equivalent, of such Person to execute the Loan Documents or any other
         documents

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         or certificates to be executed by such Parson hereunder in connection
         with this Agreement (and the transactions described herein).

         "BORROWER" and "LENDER" shall mean the parties identified above.

         "BUDGET" shall mean the budget and cost itemization for the Project, in
         form and substance satisfactory to Lender, and provided pursuant to
         Section 2.1 (a)(vii).

         "BUSINESS DAY" shall mean a day, other than Saturday or Sunday, when
         Lender is open for conducting all of its normal business activities.

         "COMPLIANCE CERTIFICATE" shall mean that certain report in the form of
         Exhibit "C" attached hereto and made a part hereof for all purposes.

         "CONSTRUCTION LOAN" shall mean the loan by Lender to Borrower, in the
         maximum amount of up to $3,500,000.00, but not to exceed, in the
         aggregate, the payment of the costs incident to the Improved Premises
         as specified in the Budget, as may be modified, renewed, rearranged,
         increased, and extended from time to time.

         "CONTRACTOR" shall mean J.T. Vaughn Construction Company, Inc., and
         all other original contractors engaged by Borrower from time to time in
         connection with the Project.

         "CONVERSION DATE" shall mean the earlier to occur of (a) March 1,
         2001, or (b) the later to occur of (i) November 30, 2000, or (ii) the
         date of the execution and delivery of the M.D. Anderson Lease by
         Tenant.

         "DEBT" shall mean (a) all items of indebtedness or liability (other
         than the debt of an Affiliate, capital, surplus, deferred credits and
         reserves, as such) which in accordance with GAAP would be included in
         determining total liabilities as shown on the liability side of a
         balance sheet as of the date as of which indebtedness is to be
         determined, (b) indebtedness or other liabilities secured by any
         mortgage, security agreement, pledge, or lien existing on or
         encumbering property owned by Borrower, whether or not the
         indebtedness or other liabilities secured thereby shall have been
         assumed by Borrower, and (c) all indebtedness of any Person (i) which
         Borrower has directly or indirectly guaranteed, endorsed (otherwise
         than for collection or deposit in the ordinary course of business),
         discounted with recourse, agreed (contingently or otherwise) to
         purchase or repurchase or otherwise acquire, (ii) in respect of which
         Borrower has agreed to supply or advance funds (whether by way of loan,
         purchase of securities or capital contribution, through a commitment to
         pay for property or services regardless of the non-delivery of such
         property or the

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         non-furnishing of such services or otherwise), or (iii) in respect of
         which Borrower has otherwise become directly or indirectly liable,
         contingently or otherwise, whether now existing or hereafter arising.

         "DEFAULT" shall mean any of the events specified in Section 7 of this
         Agreement, whether or not any requirement for the giving of notice or
         lapse of time or other condition precedent has been satisfied.

         "DRAW REQUEST" shall have the meaning assigned to such term in Section
         3.4.

         "ENVIRONMENTAL COMPLAINT" shall mean any written or oral complaint,
         order, directive, claim, citation, notice of environmental report or
         investigation, or other notice by any Governmental Authority or any
         other Person with respect to (a) air emissions, (b) spills, releases,
         or discharges to soils, any improvements located thereon, surface
         water, groundwater, or the sewer, septic, waste treatment, storage, or
         disposal systems servicing any of the Property, (c) solid or liquid
         waste disposal, (d) the use, generation, storage, transportation, or
         disposal of any Hazardous Substance, or (e) other environmental,
         health, or safety matters affecting any of the Property or the business
         conducted thereon.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
         as amended, from time to time, and the rules and regulations
         promulgated thereunder and the interpretations thereof.

         "EXCUSABLE DELAYS" shall mean unusually adverse weather conditions
         which have not been taken into account in the construction schedule,
         fire, earthquake or other acts of God, strike, lockout, acts of public
         enemy, riot, or insurrection or any unforeseen circumstances or events
         (except financial circumstances or events or matters which may be
         resolved by the payment of money) beyond the control of Borrower, not
         to exceed a total of ten (10) days, provided Borrower shall notify
         Lender in writing within five (5) days after such occurrence, but no
         Excusable Delay shall extend the Conversion Date or suspend or abate
         any obligation of Borrower or any other person to pay any money under
         this Agreement and the other Loan Documents.

         "EVENT OF DEFAULT" shall mean any of the events specified in Section 7
         of this Agreement, provided that any applicable requirements
         specifically provided for in Section 7 for notice, lapse of time, or
         otherwise have been satisfied.

         "FINANCIAL STATEMENTS" shall initially mean the financial statements of
         Borrower, Guarantor, and Tenant, which have been delivered to Lender

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         as a condition precedent to Lender's obligations under and pursuant to
         this Agreement.

         "GAAP" shall mean generally accepted accounting principles established
         by the Financial Accounting Standards Board or the American Institute
         of Certified Public Accountants and in effect in the United States from
         time to time, applied on a basis consistent with that of the preceding
         fiscal year of Borrower, reflecting only such changes in accounting
         principles or practice with which the independent public accountants of
         Borrower concur.

         "GROUND LEASE" shall mean the Enhanced-Use Lease dated August 25, 1993,
         between Amelang Partners, Inc., as Lessee, and The United States
         Department of Veterans Affairs, as amended.

         "GROUND LEASES" shall mean, collectively, the Ground Lease, the Ground
         Sublease, and the Ground Sub-Sublease.

         "GROUND SUBLEASE" shall mean the Amended and Restated Ground Sublease
         Agreement effective as of September 24, 1998, from Amelang Partners,
         Inc., as Lessor, to Borrower, as Lessee (Borrower's obligations
         thereunder have been assigned to and assumed by Guarantor pursuant to
         an Assignment and Assumption Agreement dated November 22, 1998).

         "GROUND SUB-SUBLEASE" shall mean the Ground Sub-Sublease dated as of
         November 23, 1998, from Guarantor, as Lessor, to Borrower, as Lessee.

         "GUARANTOR" shall mean TMX Realty Corporation, a Delaware corporation.

         "GUARANTY" shall mean the Guaranty of even date herewith from
         Guarantor.

         "GOVERNMENTAL AUTHORITY" shall mean any nation, country, commonwealth,
         territory, government, state, county, parish, municipality, agency, or
         other political subdivision and any entity exercising executive,
         legislative, judicial, regulatory, or administrative functions of or
         pertaining to government, including, without limitation, any state
         agencies and Persons responsible in whole or in part for environmental
         matters in the states in which Borrower is located or otherwise
         conducting its business activities and the United States Environmental
         Protection Agency.

         "HAZARDOUS SUBSTANCES" shall mean flammables, explosives, radon,
         radioactive materials, hazardous wastes, asbestos, urea formaldehyde
         foam insulation, or any material containing asbestos, polychlorinated

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         biphenyls (PCBs), toxic substances or related materials, petroleum,
         petroleum products, methane, associated oil or natural gas exploration,
         production, and development wastes, or any "hazardous substances,"
         "hazardous materials," "hazardous wastes," "toxic substances," or
         related materials, as defined in the Comprehensive Environmental
         Response, Compensation and Liability Act of 1980, as amended, the
         Superfund Amendments and Reauthorization Act, as amended, the Hazardous
         Materials Transportation Act, as amended, the Resource Conservation and
         Recovery Act, as amended, the Toxic Substances Control Act, as amended,
         or any other law or regulation now or hereafter enacted or promulgated
         by any Governmental Authority.

         "IMPROVED PREMISES" shall mean Suite No. 210, consisting of 11,188
         rentable square feet of the Property.

         "INTELLECTUAL PROPERTY" shall mean patents, patent applications,
         trademarks, tradenames, copyrights, technology, know-how, and
         processes.

         "LAND" shall mean the property described in Exhibit "A" to the
         Leasehold Deed of Trust and to the Second Lien Leasehold Deed of Trust.

         "LEASEHOLD DEED OF TRUST" shall mean the Leasehold Deed of Trust (with
         Security Agreement and Assignment of Rents and Leases) of even date
         herewith from Borrower for the benefit of Lender, as may be modified
         and amended from time to time, which shall grant and create a lien
         against Borrower's leasehold interest in the Property under the Ground
         Sub-Sublease.

         "LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Security
         Instruments, the Guaranty, and such other instruments, documents, and
         agreements evidencing, securing, or pertaining to the loans evidenced
         by the Notes, which have heretofore been or hereafter are from time to
         time executed and delivered to Lender by Borrower, or any other Person
         pursuant to this Agreement (including, without limitation, all
         documents, agreements, instruments, and estoppels delivered pursuant to
         Section 2.1).

         "MATERIAL ADVERSE CHANGE" shall mean any act, circumstance, or event
         (including, without limitation, any announcement of action) which (a)
         causes an Event of Default, (b) otherwise could reasonably be expected
         to be material and adverse to the financial condition or operations of
         Borrower, or (c) in any manner could reasonably be expected to
         materially and adversely affect the validity or enforceability of any
         Loan Document.

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         "MAXIMUM AUTHORIZED AMOUNT" shall mean Tenant's total liability under
         and as provided for in the Authorization Letter, less interest accruing
         on that amount under the Real Estate Note.

         "MAXIMUM RATE" shall mean, on any day, the maximum nonusurious rate of
         interest permitted for that day by whichever of applicable federal or
         Texas law permits the higher interest rate, stated as a rate per annum.
         On each day, if any, that the Texas Finance Code, as supplemented by
         art. 1D.003 of the Texas Credit Title, as it may from time to time be
         amended (the "TEXAS CREDIT CODE"), establishes the Maximum Rate, the
         Ceiling Rate shall be the "weekly rate ceiling", as defined in art.
         1D.003 for that day. Provided, however, that to the extent permitted by
         applicable law, Lender reserves the right to change, from time to time
         by further notice and disclosure to Borrower, the ceiling on which the
         Maximum Rate is based under art. 1D.003; and, provided further, that
         the "highest non-usurious rate of interest permitted by applicable law"
         for purposes of this Agreement shall not be limited to the applicable
         rate ceiling under art. 1D.003 if federal laws or other state laws now
         or hereafter in effect and applicable to this Agreement (and the
         interest contracted for, charged and collected thereunder) shall permit
         a higher rate of interest.

         "M.D. ANDERSON LEASE" shall mean the Lease Agreement to be entered into
         by and between Borrower, as landlord, and Tenant, covering the Improved
         Premises.

         "NOTES" shall mean the Real Estate Note and any other note heretofore
         or hereafter executed and delivered by Borrower to Lender, together
         with all renewals, increases, replacements, extensions, modifications,
         and rearrangements of any of the foregoing, as may be entered into from
         time to time by Borrower and Lender.

         "OBLIGATIONS" shall mean all indebtedness, obligations, and liabilities
         of Borrower to Lender of every nature and description, now or hereafter
         existing or arising, whether such indebtedness is direct or indirect,
         primary or secondary, fixed or contingent or arises out of or is
         evidenced by a promissory note, deed of trust, security agreement, open
         account, overdraft, endorsement, surety agreement, guaranty, or
         otherwise, including, without limitation, all such obligations,
         liabilities, and indebtedness of Borrower to Lender under or in
         connection with the Loan Documents. Obligations shall include all
         renewals, extensions and rearrangements of any of the above described
         obligations and indebtedness.

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         "OSHA" shall mean the Occupational Safety and Health Act and all rules
         and regulations from time to time promulgated thereunder and all
         amendments thereof and thereto.

         "PERMITTED CHANGES" shall mean a nonmaterial change to the plans and
         specifications or Tenant Improvements, which does not significantly
         change or alter the character of the Project.

         "PERSON" shall mean any individual, corporation, partnership, joint
         venture, association, joint stock company, trust, unincorporated
         organization, government or any agency or political subdivision
         thereof, or any other form of entity.

         "PLAN" shall mean an employee benefit plan of Borrower subject to
         ERISA.

         "PROJECT" shall mean the construction of the Tenant Improvements.

         "PROPERTY" shall mean, collectively, the Land, the buildings and other
         improvements on or about the Land, and all other property constituting
         the "Mortgaged Property," as described in the Leasehold Deed of Trust
         and/or the Second Lien Leasehold Deed of Trust, or subject to a right,
         lien or security interest to secure the Real Estate Note pursuant to
         any other Loan Document.

         "REAL ESTATE NOTE" shall mean that certain promissory note of Borrower,
         of even date herewith, in the maximum amount of $3,500,000.00, payable
         to the order of Lender, and any and all renewals, extensions,
         modifications, replacements, substitutions, increases, and
         rearrangements thereof.

         "RELEASE OF HAZARDOUS SUBSTANCES" shall mean any emission, spill,
         release, leak, disposal, or discharge, except in accordance with a
         valid permit, license, certificate, or approval of the relevant
         Governmental Authority, of any Hazardous Substance into or upon (a) the
         air, (b) soils or any improvements located thereon, (c) surface water
         or groundwater, or (d) the sewer or septic system, or the waste
         treatment, storage, or disposal system servicing any of the Property.

         "REPORTABLE EVENT" shall mean a reportable event as defined by ERISA.

         "REQUIRED LAND DUE DILIGENCE" shall mean the following items:

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                  (a) a current title commitment for a leasehold mortgagee's
         policy of title insurance for Borrower's leasehold interest in the
         Property, issued by a company acceptable to Lender on the Texas ALTA
         form, together with copies of all documents referenced therein, and
         payment of the premium charged with respect thereto for the issuance of
         Leasehold Mortgagee's Title Insurance Policy, in the amount of the Real
         Estate Note;

                  (b) a completed Environmental Site Questionnaire for the
         Property, on a form provided by Lender, together with such additional
         environmental site assessments and other environmental due diligence as
         required by Lender;

                  (c) a survey of the Property, prepared in a manner
         satisfactory to Lender;

                  (d) the identity of each Contractor and the construction
         contract entered into by that Contractor and Borrower;

                  (e) the agreement entered into by Borrower with the Project's
         architect with respect to the Tenant Improvements;

                  (f) an appraisal of the Property and/or of the Improved
         Premises performed in a manner and scope satisfactory to Lender;

                  (g) evidence of all hazard, fire, liability, builders risk,
         and other insurance required by this Agreement, the Deed of Trust, and
         otherwise required by Lender;

                  (h) the plans and specifications for the Tenant Improvements;

                  (i) the Budget and total cost breakdown for the Tenant
         Improvements;

                  (j) the construction and draw schedule for the Tenant
         Improvements;

                  (k) each of the Ground Leases and all modifications thereof
         and amendments thereto, together with all documents and instruments
         referenced therein;

                  (l) the M.D. Anderson Lease and all documents and instruments
         issued pursuant thereto;

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                  (m) an Affidavit of No Liens, in which a representative of
         Borrower swears and acknowledges that no work has been performed on the
         Improved Premises or materials supplied or specially fabricated for
         delivery to the Improved Premises, which has not been paid for in full,
         together with any waivers of lien to date required by Lender, each in a
         form acceptable to Lender;

                  (n) if and to the extent required by Lender, proof in form
         and substance satisfactory to Lender that the required permits,
         building and otherwise, and authorizations from all appropriate
         Governmental Authorities necessary or required in connection with the
         construction of the Tenant Improvements, together with copies of all
         other required governmental permits;

                  (o) certificates or other satisfactory evidence (i) of the
         identity of all taxing authorities and utility districts (or similar
         authorities) having jurisdiction over the Property; and (ii) that all
         taxes, standby fees and any other similar charges which could create a
         lien on the particular property or any part thereof have been paid to
         the extent due and payable;

                  (p) evidence of compliance of the Property and the Improved
         Premises (and the construction of Tenant Improvements) with all
         applicable Requirements of Law; and

                  (q) such other documents and certificates as Lender may
         reasonably request in connection with the transactions contemplated in
         this Agreement.

         "REQUIREMENT OF LAW" shall mean, as to any Person, the certificate or
         articles of incorporation and by-laws or other organizational or
         governing documents of such Person, and any applicable law, treaty,
         ordinance, order, judgment, rule, decree, regulation, or determination
         of an arbitrator, court, or other Governmental Authority, including,
         without limitation, rules, decrees, judgments, regulations, orders, and
         requirements for permits, licenses, registrations, approvals, or
         authorizations (and any authoritative interpretation of any of the
         foregoing), in each case as such now exist or may be hereafter amended
         and are applicable to or binding upon such Person or any of its
         property or to which such Person or any of its property is subject.

         "RETAINAGE" shall mean, an amount equal to the sum of the aggregate of
         all amounts required to be retained by Borrower in accordance with
         Section 53.101, and such other applicable Sections, of the Texas
         Property Code in order to secure, for purposes of the Texas Property
         Code, the payment of artisans and mechanics who perform labor or

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         service and the payment of any and all other persons who furnish
         material, material and labor, or specifically fabricated material for
         any contractor, subcontractor, agent, or receiver the construction of
         the Tenant Improvements.

         "RIVERWAY" shall mean Riverway Bank.

         "RIVERWAY CONSTRUCTION LOAN AGREEMENT" shall mean the Construction Loan
         Agreement dated November 23, 1998, between Riverway and Guarantor.

         "SECOND LIEN LEASEHOLD DEED OF TRUST" shall mean the Second Lien
         Leasehold Deed of Trust (with Security Agreement and Assignment of
         Rents and Leases) of even date herewith from Borrower for the benefit
         of Lender, as may be modified and amended from time to time, which
         shall grant and create a line against Borrower's leasehold interest in
         the Property under the Ground Sublease.

         "SECURITY INSTRUMENTS" shall mean the Leasehold Deed of Trust, the
         Second Lien Leasehold Deed of Trust, and any and all other heretofore
         and hereafter existing security and other agreements which create or
         grant a lien or security interest as security for any of the Notes or
         other Obligations.

         "SUBSIDIARY" shall mean, as to any Person, a corporation of which
         shares of stock having ordinary voting power (other than stock having
         such power only by reason of the happening of a contingency) to elect a
         majority of the board of directors or other managers of such
         corporation are at the time owned, or the management of which is
         otherwise controlled, directly or indirectly through one or more
         intermediaries, or both, by such Person.

         "TENANT" shall mean the Board of Regents of the University of Texas
         System, for the use and benefit of the University of Texas M.D.
         Anderson Cancer Center.

         "TENANT IMPROVEMENTS" shall mean all tenant improvements to the
         Improved Premises, to be constructed in accordance with the plans and
         specifications described in and as provided for in the M.D. Anderson
         Lease.

         "UNENCUMBERED LIQUIDITY" shall mean the following types of assets, but
         only to the extent such assets have not been pledged, mortgaged,
         hypothecated, sold, or are subject to any conditional sale or pledge
         agreement, or are in any way subject to a claim of any third party (it

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         being agreed, for purposes of clarification, that any assets of
         Borrower now or hereafter pledged to Lender are not Unencumbered
         Liquidity for purposes of this Agreement): marketable securities which
         have been issued by the federal government or an agency of the federal
         government; marketable securities which constitute debt and other
         obligations of a state or municipality and which are rated by a
         recognized rating system in the industry as A or higher; marketable
         securities which are bonds and other debt instruments issued by
         corporate entities which are nonconvertible and which are rated by a
         recognized rating system in the industry as AA or higher; marketable
         securities which are publicly traded on a nationally recognized
         domestic stock exchange; and cash and cash equivalents. The value of
         the Unencumbered Liquidity shall be based upon the daily closing price
         reported on such exchanges or other markets on which the particular
         securities are traded.

         1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with such
principles. In the event that changes in GAAP shall be mandated by the Financial
Accounting Standards Board and/or the American Institute of Certified Public
Accountants or any similar accounting body of comparable standing, or shall be
recommended by Borrower's certified public accountants, to the extent that such
changes would modify such accounting terms or the interpretation or computation
thereof as contemplated by this Agreement at the time of execution hereof,
then in such event, such changes shall be followed in defining such accounting
terms only after Lender and Borrower amend this Agreement to reflect the
original intent of such terms in light of such changes, and such terms shall
continue to be applied and interpreted without such change until such agreement.

         1.3 Other Terms. All other terms contained in this Agreement shall
have, when the context so indicates, the meanings provided for in the Uniform
Commercial Code, as adopted in Texas, to the extent the same are used or defined
therein.

         1.4 References. References in this Agreement to Section or Exhibit
numbers shall be to Sections and Exhibits of this Agreement, unless expressly
stated to the contrary. References in this Agreement to "hereby," "herein,"
"hereinabove," "hereinafter," "hereinbelow," "hereof," and "hereunder" shall be
to this Agreement in its entirety and not only to the particular Section or
Exhibit in which such reference appears.

         1.5 Sections. This Agreement, for convenience only, has been divided
into Sections; and it is understood that the rights and other legal relations of
the parties hereto shall be determined from this instrument as an entirety and
without regard to the aforesaid division into Sections and without regard to
headings prefixed to such Sections.

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         1.6 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.

         1.7 Incorporation of Exhibits. The Exhibits attached to this Agreement
are incorporated herein and shall be considered a part of this Agreement for all
purposes.

         1.8 Certain Other Matters of Construction. All references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations. All references to any instruments or agreements,
including, without limitation, references to any of the Loan Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof. All references herein to the knowledge of
Borrower shall mean actual or constructive knowledge of any officer, employee,
agent, or other representative of Borrower. Current, for purposes of this
Agreement, shall mean within 30 days from the applicable date. Knowledge, for
purposes of this Agreement, shall mean actual and constructive knowledge. The
term "or," when used herein in a sequence, shall be interpreted as "and/or."

                             SECTION 2 - CONDITIONS

         2.1 Conditions Precedent to the Initial Advance. The obligations of
Lender under this Agreement, including, without limitation, the obligation to
make the first advance under this Agreement, are subject to the full, complete,
and timely satisfaction of each of the following conditions precedent:

                  (a) Lender shall have received and approved each of the
         following:

                           (i) the Loan Documents, each executed by an
                  Authorized Person of Borrower, Guarantor, or such other
                  necessary person;

                           (ii) a commitment fee in the amount of $18,000.00 as
                  independent consideration for Lender's commitment to make the
                  Construction Loan;

                           (iii) evidence of the existence, good standing,
                  authority, and capacity of Borrower and Guarantor, to execute,
                  deliver, and perform the Loan Documents executed by each of
                  them, including, but not limited to: (x) a copy of Borrower's
                  and Guarantor's organizational documents, and all amendments

                                       12
<PAGE>   16

                  thereto; (y) certificates of existence, good standing and
                  qualification to do business in the state of its creation and
                  if different, in the state where the Property is located,
                  issued by the appropriate governmental officials; and (z) all
                  certificates, resolutions, and consents required by Lender
                  applicable to the foregoing;

                           (iv) a copy of the fully executed Authorization
                  Letter, and designation of Lender to receive all amounts due
                  Borrower under and with respect to the Authorization Letter,
                  together with evidence that Michael J. Best is authorized to
                  execute the Authorization Letter;

                           (v) an Estoppel Certificate from Amelang Partners,
                  Inc., agreeing and certifying to, among other things, that the
                  Ground Sublease is in full force and effect and providing
                  Lender with a right to cure default by the lessee thereunder;

                           (vi) an Estoppel Certificate from the United States
                  Department of Veterans Affairs, agreeing and certifying to,
                  among other things, that the Ground Lease is in full force and
                  effect as providing Lender with a right to cure default by
                  the lessee thereunder;

                           (vii) an Intercreditor Agreement between Riverway and
                  Lender, wherein each party recognizes their respective rights
                  and priorities with respect to the Property and the Improved
                  Premises;

                           (viii) reimbursement to Lender for its fees, costs,
                  and expenses incurred in connection with the loan transaction
                  described in this Agreement; provided that Lender's attorneys'
                  fees shall not exceed $15,000.00 unless Borrower has consented
                  in writing to such increased amount;

                           (ix) the Required Land Due Diligence; and

                           (x) a certificate or certificates of a reporting
                  service acceptable to Lender, reflecting the results of
                  searches made not earlier than ten (10) days prior to the date
                  of this Agreement of the central and local Uniform Commercial
                  Code records, showing no filings against any of the collateral
                  for the Construction Loan or against Borrower, or otherwise;

                  (b) No Material Adverse Change shall have occurred in the sole
         reasonable opinion of Lender;

                                       13
<PAGE>   17

                  (c) The representations and warranties contained in Section 4
         hereof shall (except as affected by the transactions contemplated by
         this Agreement) be true and unbreached and no Event of Default shall
         have occurred and be continuing or will have occurred at the completion
         of the making of the initial advance;

                  (d) All legal matters incident to the consummation of the
         transactions contemplated under this Agreement shall be satisfactory to
         Messrs. Gardere Wynne Sewell & Riggs, L.L.P. special counsel for
         Lender; and

                  (e) Lender shall have received, in addition to the items set
         forth elsewhere in this Section, all other instruments and agreements
         reasonably required by Lender, including, without limitation, all
         agreements and instruments necessary to give Lender a first and prior
         perfected security interest and/or lien in and to the assets of
         Borrower used as collateral and security for the Notes.

         2.2 Conditions Precedent to Future Advances. The obligation of the
Lender under this Agreement to make any advances after the date of this
Agreement under the Real Estate Note, in accordance with the terms and
provisions of Section 3 of this Agreement, is subject to the full and complete
satisfaction of each of the following conditions precedent (as applicable) as of
the date of each such advance or payment:

                  (a) All conditions precedent to the first advance listed in
         Section 2.1 have been and continue to be satisfied (including, without
         limitation, any and all such conditions which have been waived in whole
         or in part by Lender in connection with the first advance or any
         subsequent advance unless such wavier expressly applies to future
         advances);

                  (b) No Event of Default or any event which, with the giving of
         notice or the lapse of time, or both, could become an Event of Default
         exists;

                  (c) The representations and warranties made in the Loan
         Documents shall be true and correct on and as of the date of each
         advance;

                  (d) Each of the following conditions (in addition to
         subsections (a), (b), and (c) of this Section 2.2) shall have been
         fully and completely satisfied:

                           (i) Lender shall have received a Draw Request
                  provided in accordance with Section 3.4;

                                       14

<PAGE>   18

                           (ii) Lender shall have been furnished with, and
                  approved, fully executed counterparts, as appropriate, of a
                  Waiver of Lien to Date, in the form of Exhibit "B", from each
                  Contractor and subcontractor and other Persons providing work
                  to and with respect to the Project;

                           (iii) If and to the extent required by Lender, Lender
                  shall have been furnished evidence that Borrower and all other
                  required Persons have jointly executed and filed an Affidavit
                  of Commencement, in a form satisfactory to Lender, with the
                  county clerk of the county in which the Property is located
                  not later than the 30th day after the date of actual
                  commencement of construction of the particular project or
                  delivery of materials to the Improved Premises. Such affidavit
                  shall contain the information required by Section 53.124(c) of
                  the Texas Property Code, shall not be filed prior to approval
                  thereof in writing by Lender, and shall in no event be filed
                  showing a date of commencement of construction or delivery of
                  materials which is prior to the date of filing the applicable
                  deed of trust with the county clerk of the county where the
                  Property is located;

                           (iv) Lender shall have received a satisfactory down
                  date endorsement ("DOWN DATE ENDORSEMENT") to its leasehold
                  mortgagee's policy which Down Date Endorsement shall (x)
                  extend the effective date of the leasehold mortgagee's policy
                  issued in connection with the Property to the date of the
                  requested construction advance and show that since the
                  effective date of the interim construction binder policy (or
                  the effective date of the last such Down Date Endorsement, if
                  any) there has been no change in the status of the title to
                  the Property and no new encumbrances thereon, and (y) state
                  the amount of coverage then committed under the interim
                  construction binder (which shall be the total of all advances
                  of the Real Estate Note including the disbursement which is
                  made concurrently with the Down Date Endorsement);

                           (v) No mechanic's or materialmen's lien claim or
                  other encumbrance shall have been filed and be in effect
                  against the Improved Premises or any other part of the
                  Property, except such liens and encumbrances which are listed
                  on Exhibit "B" to the Leasehold Deed of Trust;

                           (vi) With respect to any advance for hard costs, an
                  AIA Document G-702 and G-703 (1992 Edition), executed by all
                  applicable parties;

                                       15
<PAGE>   19

                           (vii) Lender (through its authorized third party
                  representative) shall have inspected the Improved Premises to
                  confirm all items subject to the requested advance have been
                  performed and delivered, and Borrower shall have reimbursed
                  Lender for all costs and expenses related to such inspection;

                           (viii) Borrower shall have delivered to Lender
                  evidence that construction is proceeding in a manner to assure
                  completion of the Project by the Conversion Date;

                           (ix) The Tenant Improvements shall not have been
                  damaged by fire or other casualty or, in such event, if
                  permitted under the terms and provisions of this Agreement and
                  the Deed of Trust, the Tenant Improvements shall not have been
                  fully repaired and restored, or be in the process of being
                  fully repaired and restored, to the state of completion
                  achieved immediately before the casualty;

                           (x) Borrower shall have delivered to Lender such
                  other information, documents, legal opinions, schedules,
                  affidavits, statements, invoices, bills and other supporting
                  documentation and material required by this Agreement, or
                  otherwise required by Lender to substantiate any of the
                  matters necessary to qualify for the advance; and

                           (xi) All of the terms and provisions of Section 3
                  (including, without limitation, Sections 3.4 or 3.5) shall be
                  fully and completely satisfied or waived in writing by Lender.

         2.3 Conditions to Final Advance for Retainage. The loan proceeds are to
be disbursed under this Agreement subject to a holdback for an amount equal to
the sum of the Retainage. Lender shall not be obligated to make the final
advance of loan proceeds under this Agreement to pay Retainage until all of the
following conditions have been fully satisfied (with proof thereof being
furnished in form and sufficiency to Lender):

                  (a) Thirty-one (31) days have elapsed after the later of (i)
         "completion" of the Tenant Improvements, as defined in and required by
         Section 53.106 of the Texas Property Code, or (ii) the date of filing
         with the county clerk of the county where the Property is located of an
         Affidavit of Completion (the "AFFIDAVIT OF COMPLETION"), executed by
         Borrower and all other requisite persons, in a form satisfactory to
         Lender, or (iii) the date Borrower has otherwise fully and completely
         satisfied the requirements of Section 53.106 of the Texas Property
         Code, including,

                                       16
<PAGE>   20

         without limitation, providing a copy of any such affidavit to all
         parties, and within the time periods, required by such Section 53.106.

                  (b) Lender shall be furnished with, and shall have approved,
         fully executed counterparts, as appropriate, of the following:

                           (i) As required by Lender, evidence that all
                  applicable Requirements of Law have been satisfied, including,
                  without limitation, (x) receipt by Borrower of all necessary
                  governmental permits and other licenses, certificates, and
                  permits with respect to the completion, use, occupancy, and
                  operation of the improvements, together with evidence,
                  satisfactory to Lender that such licenses, certificates, and
                  permits are in full force and effect and have not been
                  revoked, canceled, or modified, it being specifically agreed
                  that Lender shall have received a certified copy of the final
                  Certificate of Occupancy, issued by the requisite municipal
                  authority, evidencing the legal occupancy of the particular
                  property, which must be unqualified and unconditional, and (y)
                  such evidence as Lender may request to show that the
                  improvements and their use comply fully with any and all
                  applicable zoning, subdivision, building, and environmental
                  requirements (such evidence shall include, without limitation,
                  material to establish that the number of parking spaces
                  available on the particular property is sufficient to comply
                  with all codes and ordinances then applicable, or other
                  appropriate Governmental Authority and that all fire systems
                  in the improvements are installed, operational, and sufficient
                  to comply with such codes and ordinances of the appropriate
                  Governmental Authority);

                           (ii) The Affidavit of Completion, executed by
                  Borrower and such other requisite Persons, on a form
                  satisfactory to Lender, and filed with the county clerk of the
                  county in which the Property is located;

                           (iii) An affidavit of bills paid, in a form
                  acceptable to Lender, executed by Borrower and such other
                  Persons who have supplied materials or labor as Lender may
                  require to satisfy itself that the construction of the Tenant
                  Improvements have been completed lien-free and that the costs
                  of all materials furnished and labor performed in connection
                  with such construction have been paid in full;

                           (iv) an endorsement to Lender's leasehold
                  mortgagee's policy of title insurance, acknowledging
                  completion of construction of the Tenant Improvements in
                  compliance with all applicable

                                       17
<PAGE>   21

                  matters of public record, and removing any exception for filed
                  or unfiled mechanics' or materialmen's liens, other exceptions
                  relating to "completion of improvements and pending
                  disbursements," "survey exceptions," and as otherwise required
                  by Lender;

                           (v) If required by Lender, a complete inventory,
                  certified by an Authorized Officer of Borrower, of the
                  personal property constituting Mortgaged Property (as that
                  term is defined in the Leasehold Deed of Trust) furnishings,
                  fixtures, and equipment owned or leased by Borrower and used
                  in the operation of the Tenant Improvements with leased items,
                  if any, designated as such;

                           (vi) Evidence (which may be a written certification
                  from the project's architect on the form of AIA Document
                  G-704) that the Tenant Improvements have been constructed in
                  accordance with the plans and specifications and the M.D.
                  Anderson Lease (and Tenant shall have accepted and occupied
                  the Improved Premises);

                           (vii) If required by Lender, a complete set of "as
                  built" plans and specifications for the Tenant Improvements;

                           (viii) Such evidence as Lender may request to show
                  that there are no outstanding and unpaid conditional sales
                  contracts or indebtedness secured by security agreements and
                  financing statements upon the improvements relating to the
                  particular project or any of the personal property covered by
                  any Loan Document; and

                           (ix) Such other evidence or information concerning
                  completion as Lender shall reasonably require.

                  (c) No Default or Event of Default shall have occurred and be
         continuing.

                  (d) All of the conditions listed in this Section shall be
         fully and completely satisfied by the Conversion Date.

                        SECTION 3 - THE CONSTRUCTION LOAN

         3.1 General Information and Purpose. The proceeds of the Construction
Loan shall be used by Borrower only to pay the cost of the construction of the
Tenant Improvements, and other costs regarding the Property if and to the extent
that such costs are specifically provided for in the Budget. The Loan Documents,
which must

                                       18
<PAGE>   22

be in form, detail, and substance satisfactory to Lender, evidence the
agreements of Borrower and Lender with respect to the Construction Loan.
Borrower shall comply with all Loan Documents.

         3.2 Commitment to Lend. Lender agrees to make the Construction Loan to
Borrower in advances subject to and in accordance with the conditions set forth
in Article 2 hereof, and the other terms and conditions of this Agreement.
Lender's commitment to make advances hereunder shall expire and terminate
(i) automatically on the Conversion Date; (ii) automatically if the Construction
Loan is prepaid in full; and (iii) at Lender's option upon the occurrence of an
Event of Default. The Construction Loan is not revolving. An amount repaid may
not be reborrowed. On the Conversion Date, provided that each of the conditions
to the final advance for Retainage listed in Section 2.3 is then fully satisfied
or waived in writing by Lender, the Construction Loan shall automatically
convert into a nonadvancing term loan which shall be due and payable in
accordance with the terms and provisions of the Real Estate Note and
Sections 3.3 and 3.12. Notwithstanding the foregoing, or anything else to the
contrary herein, unless and until Lender has required and approved a fully
executed counterpart of the M.D. Anderson Lease, Lender shall not be required or
committed to fund more than the Maximum Authorized Amount under or with respect
to the Construction Loan.

         3.3 Payments. All payments made by Borrower under this Agreement or the
Notes, or the other Loan Documents, shall be in federal or other immediately
available funds, not later than 2:00 p.m., Houston time, on the date that such
payment is required to be made, to Lender at 5800 North Mopac, Austin, Texas
78731, as such other address required by Lender. If the date for any payment due
under the Loan Documents falls on a day which is not a Business Day, such
payment date shall be deemed to have fallen on the next following Business Day.

         3.4 Draw Request. A "DRAW REQUEST" shall mean a properly completed and
executed written application by Borrower to Lender, and authorized by M.D.
Anderson, in the form of Exhibit "A" (or in another form approved by Lender)
setting forth the amount of Construction Loan proceeds desired, together with
such schedules, affidavits, releases, waivers, statements, invoices, bills, and
other documents, certificates and information required by Lender. At least five
(5) Business Days before the requested date of each advance, Borrower shall
deliver a Draw Request to Lender. Borrower shall be entitled to an advance only
in an amount approved by Lender in accordance with the terms of this Agreement
and the Loan Documents (which in any event shall be net of Retainage). Lender
shall not be required to make advances more frequently than one time each
calendar month. Lender shall, only upon the satisfaction of all applicable
conditions of this Agreement and the Loan Documents, make the requested advance
to Borrower on a business day within five (5) Business Days after such
satisfaction. Each Draw Request, and Borrower's acceptance of any advance, shall
be deemed to ratify and confirm that all representations and warranties in the

                                       19
<PAGE>   23

Loan Documents remain true and correct as of the date of the Draw Request and
the advance, respectively.

         3.5 Additional Equity Requirement. If, at any time, Lender determines
that the sum of (a) the unadvanced portion of the Construction Loan to which
Borrower is entitled, plus (b) the amount of the Aggregate Costs which are
scheduled to be paid by Borrower from other funds which are available, set aside
and committed, to Lender's satisfaction, is or will be insufficient to pay the
unpaid actual Aggregate Cost, Borrower shall, within seven (7) days after
written notice from Lender, deposit with Lender the amount of the deficiency as
"ADDITIONAL EQUITY". The interest earned on the Additional Equity shall be part
of the Additional Equity. The Additional Equity is hereby pledged as additional
collateral on the Construction Loan, and Borrower hereby grants and conveys to
Lender a security interest in all funds so deposited with Lender, as additional
collateral on the Construction Loan.

         3.6 Construction Advances. All advances of the Construction Loan made
hereunder pursuant to a Draw Request shall be made by Lender first from
Additional Equity, to the extent thereof, and then from amounts advanced by
Lender from the proceeds of the Construction Loan in accordance with the terms
and conditions of the Real Estate Note and this Agreement. Borrower shall
disburse all advances made to Borrower, whether from Additional Equity or
otherwise, for payments of the costs and expenses specified in the Budget for
which the advances were made, and for no other purpose. Following receipt and
approval of a Draw Request, all supporting documentation and information, and
the satisfaction of the other terms of Section 2.2, Lender will determine the
amount of the advance it will make in accordance with this Agreement, the Loan
Documents, and the Budget (which in any event shall be net of Retainage).

         3.7 Direct Advances. Borrower hereby irrevocably authorizes Lender (but
Lender shall have no obligation) to (a) advance Construction Loan funds directly
to itself, whether such funds are taken from Additional Equity or otherwise, to
pay interest due on the Construction Loan, and (b) advance and directly apply
the proceeds of any advance (whether from Additional Equity or otherwise) to the
satisfaction of any of Borrower's obligations under any of the Loan Documents,
even though Borrower did not include that amount in a Draw Request and/or no
Event of Default exists. Each such direct advance (except for application of
Additional Equity) shall be added to the outstanding principal balance of the
Construction Loan and shall be secured by the Loan Documents. Unless Borrower
pays such interest from other resources, Lender may advance Construction Loan
funds and apply Additional Equity pursuant to this Section for interest payments
as and when due. Nothing contained in this Agreement shall be construed to
permit Borrower to defer payment of interest on the Construction Loan beyond the
date(s) due. This Section shall not affect Borrower's absolute obligation to pay
the same in accordance with the Loan Documents. Lender may hold, use, disburse,
and apply the Construction Loan and Additional Equity for payment of any other
obligation of Borrower under the Loan

                                       20
<PAGE>   24

Documents. Borrower hereby assigns and pledges the proceeds of the Construction
Loan and any Additional Equity to Lender for such purposes. Lender may advance
and incur such expenses as Lender deems necessary for the completion of the
Tenant Improvements and to preserve the Property, any Ground Lease, and any
security for the Construction Loan, and such expenses, even though in excess of
the amount of the Construction Loan, shall be secured by the Loan Documents and
shall be payable to Lender on demand. Lender may disburse any portion of any
advance at any time, and from time to time, to persons other than Borrower for
the purposes specified in this Section and the amount of advances to which
Borrower shall thereafter be entitled shall be correspondingly reduced.

         3.8 Conditions and Waivers. All conditions precedent to the obligation
of Lender to make any advance of the Construction Loan are imposed hereby solely
for the benefit of Lender, and no other party may require satisfaction of any
such condition precedent or be entitled to assume that Lender will refuse to
make any advance in the absence of strict compliance with such conditions
precedent. Any requirement of this Agreement may be waived, in whole or in part,
in a specific written waiver intended for that purpose and signed by Lender.
Lender shall have the right to approve and verify the periodic progress, costs
incurred by Borrower, and the estimated costs remaining to be incurred. No
advance shall constitute an approval or acceptance by Lender of any construction
work, a waiver of any condition precedent to any further advance, or preclude
Lender from thereafter declaring the failure of Borrower to satisfy such
condition precedent to be an Event of Default. Unless a written waiver expressly
states otherwise, no waiver by Lender of any condition precedent or obligation
shall preclude Lender from requiring such condition or obligation to be met
prior to making any other advance or from thereafter declaring the failure to
satisfy such condition or obligation to be an Event of Default.

         3.9 Funding. Advances of the Construction Loan shall be made at
Borrower's option, by wire transfer or check payment to Borrower, or by direct
or joint check payment to any or all persons entitled to payment for work or
services performed or material furnished in connection with the Project or the
Construction Loan. Lender shall not be required to, and has no responsibility
to, supervise the proper application or distribution of funds to third parties.

         3.10 Budget. The Budget has been prepared by Borrower and Borrower
represents to Lender that it includes all costs and expenses (the "AGGREGATE
COST") incident to the Construction Loan and the Project, through the maturity
date of the Construction Loan, after taking into account the requirements of
this Agreement. Lender shall not be required to (a) make any advance for any
cost not set forth in the Budget, (b) make any advance for any line item in the
Budget that, when added to all prior advances for that line item, would exceed
the lesser of (i) the actual cost incurred by Borrower for such line item or
(ii) the sum allocated in the Budget for that line item, (c) make any advance
for any contingency line item unless Lender consents to such advance in its sole
discretion or (d) make any advance for interest on the Construction

                                       21
<PAGE>   25

Loan after commencement of operations in the Tenant Improvements if and to the
extent that there is sufficient net operating income from the Property to cover
any such advances. Lender may make advances allocated to line items in the
Budget for other purposes or in different proportions as Lender in its sole
discretion deems necessary or advisable.

         3.11 Execution of M.D. Anderson Lease. Prior to the earlier to occur of
(a) the Conversion Date, or (b) the date which Lender has advanced the Maximum
Authorized Amount under the Real Estate Note, Borrower shall have provided to
Lender (on forms acceptable to Lender) a fully executed counterpart of the M.D.
Anderson Lease and a Subordination, Non-Disturbance and Attornment Agreement
from Tenant to Lender.

         3.12 Tenant Payment. Borrower shall cause Tenant to pay all amounts due
under the M.D. Anderson Lease directly to an account of Borrower located at
Lender. Upon deposit thereof, Lender shall, and is hereby authorized by Borrower
to, apply all such payments to the Real Estate Note and other Obligations in
such order and manner as determined by Lender.

                   SECTION 4 - REPRESENTATIONS AND WARRANTIES

         4.1 Representations and Warranties of Borrower. Borrower represents and
warrants to Lender (which representations and warranties are made in addition to
the warranties and representations made in the Security Instruments and will
survive the delivery of this Agreement) that:

                  (a) Borrower is a corporation duly organized, validly existing
         and in good standing under the laws of the State of Delaware, and has
         full power and authority to consummate the transactions contemplated in
         this Agreement. Borrower has the power to own its properties and carry
         on its business as it is now being conducted, and is duly authorized to
         do business and is in good standing in the State of Texas and in every
         other jurisdiction where qualification is necessary. Borrower is duly
         authorized and empowered to create, issue, execute, and deliver the
         Loan Documents, and all action on its part requisite for the due
         creation, issuance, and delivery of the Loan Documents has been duly
         and effectively taken. The Loan Documents do not violate any provision
         of Borrower's organizational documents, or any contract, agreement, law
         or regulation to which Borrower is subject, and do not require the
         consent or approval of any Governmental Authority;

                  (b) Borrower is not in default in the performance, observance,
         or fulfillment of any of the obligations, covenants, or conditions
         contained in any agreement or instrument to which it is a party, or in
         default under or in violation of any law, order, regulation or demand
         of any Governmental Authority, which default or violation might have

                                       22
<PAGE>   26

         consequences which would materially and adversely affect the business
         or properties of Borrower;

                  (c) The Financial Statements are complete and correct in all
         material respects, have been prepared in accordance with GAAP, and
         fully and accurately reflect the financial condition and results of the
         operations of Borrower as of the date and for the period stated in all
         material respects. No Material Adverse Change has occurred in the
         condition, financial or otherwise, of Borrower since the date of the
         Financial Statements;

                  (d) Borrower has not made investments in, advances to, or
         guaranties of the obligations of any Person, except as disclosed by the
         Financial Statements;

                  (e) Except for liabilities as previously disclosed to Lender
         in the Financial Statements and other liabilities incurred since that
         date in the normal course of business, Borrower does not have any
         material liabilities, direct or contingent. There is no litigation,
         administrative proceeding, investigation, or other action of any nature
         pending or, to the knowledge of Borrower, threatened against Borrower
         before any court or administrative agency which involves the
         possibility of any judgment or liability which is likely to materially
         and adversely affect the business or the assets of Borrower or the
         right of Borrower to carry on business as now conducted. To the best of
         Borrower's knowledge and belief, no unusual or unduly burdensome
         restriction, restraint or hazard exists by contract, law, governmental
         regulation or otherwise relative to the business or assets of Borrower;

                  (f) Borrower has good and indefeasible title to its leasehold
         interest in the real property assets pledged by it pursuant to the
         Security Instruments and has good and marketable title to its personal
         property assets pledged by it pursuant to the Security Instruments,
         free and clear of all security interests, liens, and encumbrances,
         except for (i) liens, security interests, and/or claims on such assets
         as provided in Exhibit "B" to the Leasehold Deed of Trust and as
         otherwise disclosed to and approved by Lender in writing; and (ii)
         restrictions, rights, easements, and minor irregularities in title
         which do not materially (x) interfere with the occupation of Borrower
         and the use and enjoyment by Borrower and of such assets in the normal
         course of Borrower's business as presently conducted or (y) impair the
         value thereof for such business;

                  (g) With respect to the Tenant Improvements, no work of any
         kind has been or will be commenced or performed on or about the
         Improved Premises, no equipment or material has been or will be

                                       23
<PAGE>   27

         delivered to or upon the Improved Premises for any purpose whatsoever,
         and no contract (or memorandum or affidavit thereof) for the supplying
         of labor, materials, or services for the design or construction of the
         Tenant Improvements, nor any affidavit or notice of commencement of
         construction of the Tenant Improvements, has been or will be executed
         or recorded, which could cause a mechanic's or materialman's lien or
         similar lien to have an inception so as to achieve priority over the
         mortgage or the rights of Lender thereunder;

                  (h) The plans and specifications do and the Tenant
         Improvements when constructed will comply with all Requirements of Law,
         including, without limitation, those regarding access and facilities
         for handicapped or disabled persons;

                  (i) To the best of Borrower's knowledge, the construction
         schedule for the Project is realistic and the Conversion Date is a
         reasonable estimate of the time required to complete the Project;

                  (j) Borrower has filed all tax returns required to be filed
         and has paid all taxes shown thereon to be due, including interest and
         penalties, or due pursuant to any assessment received by Borrower,
         except such taxes, if any, under contest in good faith and for which
         adequate reserves have been provided. The charges, accruals and
         reserves on the books of Borrower for any taxes or other governmental
         charges are, in the opinion of Borrower, adequate. Borrower has paid
         all franchise and other taxes which are now due;

                  (k) To the best of Borrower's knowledge and belief, no
         Reportable Event has occurred with respect to any Plan. Borrower has
         not incurred any material accumulated unfunded deficiency within the
         meaning of ERISA, nor has Borrower incurred any material liability to
         the Pension Benefit Guaranties Corporation established under ERISA (or
         any successor thereto under ERISA) in connection with any Plan;

                  (l) The principal place of business and chief executive office
         of Borrower and the place where Borrower keeps its books and records is
         the address of Borrower set forth in Section 9.7 of this Agreement;

                  (m) Borrower is not an "investment company" within the
         meaning of the Investment Company Act of 1940, as amended;

                  (n) Borrower is not engaged principally, or as one of its
         important activities, in the business of extending or obtaining credit
         for the purpose of purchasing or carrying margin stock (within the
         meaning of Regulations U or X of the Board of Governors of the Federal
         Reserve

                                       24
<PAGE>   28
         System). No part of the proceeds of any extension of credit under this
         Agreement will be used to purchase or carry any such margin stock or to
         extend credit to others for the purpose of purchasing or carrying any
         such margin stock. No transaction contemplated by the Loan Documents is
         in violation of any regulations promulgated by the Board of Governors
         of the Federal Reserve System, including, without limitation,
         Regulations U and X;

                  (o) To the best of Borrower's knowledge, no information,
         exhibit, or report prepared by or at the direction or with the
         supervision of Borrower and furnished to Lender in connection with the
         negotiation and preparation of this Agreement or any Loan Document
         contains any material misstatements of fact or omits a material fact
         necessary to make the statements contained therein not misleading as of
         the date made or deemed made. To the best of Borrower's knowledge,
         there is no fact which Borrower has failed to disclose to Lender in
         writing which materially affects adversely or, so far as Borrower can
         now foresee, will materially affect adversely the business, prospects,
         profits, or condition (financial or otherwise) of Borrower or the
         ability of Borrower to perform this Agreement;

                  (p) Borrower is now and, believes that after giving effect to
         initial advances to be made hereunder, at all times will be, solvent
         and will be adequately capitalized to pay its debts as they become due;

                  (q) To the best of Borrowers knowledge, as of the date hereof,
         no event has occurred and no condition exists which would, upon the
         execution and delivery of this Agreement or Borrower's performance
         hereunder, constitute a Default or an Event of Default;

                  (r) No approval or consent is required from any Person in
         connection with the execution and delivery by Borrower of this
         Agreement and the other documents and agreements required by Lender in
         connection with this Agreement, which has not been provided to Lender
         in connection with the delivery of this Agreement;

                  (s) Except in accordance with all Requirements of Law or the
         terms of a valid permit, license, certificate, or approval of the
         Governmental Authority, no Release of Hazardous Substances has been
         made by Borrower or any other Person, from, affecting, or related to
         any of the Property;

                  (t) No Environmental Complaint with respect to the Property
         has been received by Borrower or any other Person;

                                       25
<PAGE>   29

                  (u) Either the Authorization Letter or the M.D. Anderson Lease
         (as applicable) is in full force and effect and no Person is in default
         in its obligation thereunder;

                  (v) Each Ground Lease is in full force and effect and no
         Person is in default of its obligation thereunder;

                  (w) No Event of Default has occurred and is continuing under
         and as defined in the Riverway Construction Loan Agreement; and

                  (x) Each request for advance under the Notes by Borrower to
         Lender pursuant to this Agreement or any of the other Loan Documents
         constitutes (i) an automatic representation and warranty by Borrower to
         Lender that there does not then exist any Default or Event of Default
         and (ii) a reaffirmation as of the date of said request that all of the
         representations and warranties of Borrower contained in this Agreement
         and the other Loan Documents are true in all material respects except
         for any changes in the nature of Borrower's business or operations that
         would render the information contained in any exhibit attached hereto
         either inaccurate or incomplete, so long as Lender has consented to
         such changes in writing or such changes are expressly permitted by this
         Agreement.

                        SECTION 5 - AFFIRMATIVE COVENANTS

         5.1 Covenants of Borrower. In addition to the covenants and agreements
of Borrower made elsewhere in this Agreement, Borrower covenants and agrees,
unless Lender shall otherwise consent in writing, that Borrower shall:

                  (a) Do or cause to be done all things necessary to preserve
         and keep in full force and effect its corporate existence, rights, and
         franchises; and at all times maintain, preserve and protect its assets
         used or useful in the conduct of its business, keep the same in good
         repair, working order and condition, and make, or cause to be made, all
         needful or proper repairs, replacements and improvements thereto so
         that Borrower's business may be properly and advantageously conducted
         at all times;

                  (b) (i) Comply with all applicable statutes, government
         regulations, and other Requirements of Law; (ii) remain licensed with
         all applicable state and federal regulatory and other agencies; (iii)
         pay and discharge promptly all taxes, assessments and governmental
         charges or levies imposed on it, the collateral described in any
         Security Instrument or any part thereof, its income and profits, and
         any of its property, real, personal or mixed, or any part thereof,
         before the same shall be in

                                       26
<PAGE>   30

         default; and (iv) pay all lawful claims for labor, materials, supplies,
         or other claims, which, if unpaid, might become a valid lien or charge
         upon such property or any part thereof;

                  (c) Promptly furnish to Lender such information regarding the
         business affairs, financial condition, assets, liabilities, operations,
         and transactions of Borrower as Lender may reasonably request, and,
         without limiting the foregoing, furnish to Lender the following:

                           (i) As soon as available, and in any event within 45
                  days from the end of each fiscal quarter of Borrower, a
                  financial statement, on a Form acceptable to Lender, signed by
                  an Authorized Officer of Borrower, showing the financial
                  condition of Borrower, on a consolidated and consolidating
                  basis, at the end of such fiscal quarter and the results of
                  operations during such fiscal quarter and on a year to date
                  basis, which financial statement shall include, but shall not
                  be limited to, a balance sheet, income statement, and such
                  other matters as Lender may reasonably request;

                           (ii) As soon as available, and in any event within 45
                  days from the end of each fiscal quarter of Borrower, a
                  Compliance Certificate for such fiscal quarter, signed and
                  certified by an Authorized Officer of Borrower;

                           (iii) As soon as available, and in any event within
                  90 days from the end of Borrower's fiscal year, an audited
                  financial statement, prepared in a manner acceptable to
                  Lender, showing the financial condition of Borrower at the
                  close of its fiscal year on a consolidated and consolidating
                  basis and the results of its operations during such fiscal
                  year, which financial statement shall be materially complete
                  and correct and shall include, but shall not be limited to, an
                  income statement, a balance sheet, and such other matters as
                  Lender may request;

                           (iv) If requested by Lender, not less than 30 days
                  before the commencement of each fiscal year of Borrower, a
                  budget for that fiscal year for Borrower's operations,
                  prepared on a form and in detail satisfactory to Lender; and

                           (v) Within 30 days after the filing thereof, copies
                  of Borrower's and Guarantor's signed federal income tax
                  returns and all requests for the extension of time to the
                  filing thereof.

                                       27
<PAGE>   31

                  (d) Promptly cure any defects in the execution and delivery of
         the Loan Documents and immediately execute and deliver to Lender all
         such other and further instruments as may be reasonably required by
         Lender from time to time in order to satisfy or comply with the
         covenants and agreements of Borrower made in this Agreement;

                  (e) Promptly reimburse Lender upon request for all reasonable
         amounts expended, advanced, or incurred by Lender as are reasonably
         necessary (i) to satisfy any obligation of Borrower under this
         Agreement, (ii) to protect the assets or business of Borrower, (iii) to
         collect the Notes, or any other amounts advanced under this Agreement
         or otherwise on behalf of Borrower, or (iv) to enforce the rights of
         Lender under the Loan Documents, which amounts will include, without
         limitation, all reasonable court costs, attorneys' fees, and fees of
         auditors, accountants, and investigators incurred by Lender in
         connection with any such matters, together with interest at the
         Maximum Rate on each such amount from 30 days after the date of
         notification to Borrower that the same was expended, advanced or
         incurred by Lender until the date it is repaid to Lender;

                  (f) Without in any way limiting any term or provision of the
         Leasehold Deed of Trust and the Second Lien Leasehold Deed of Trust,
         continue to maintain insurance as required by Lender against such
         liabilities, casualties, risks, and contingencies in such types and
         amounts as is normal and customary for carrying on Borrower's business
         (including, without limitation, casualty, workmen's compensation, and
         business interruption insurance). As applicable, Lender shall be the
         named loss payee on all such insurance. On the date hereof, at the
         close of Borrower's fiscal year, and at any other time Lender may
         request, Borrower will furnish Lender a summary of such insurance and,
         if requested, will furnish Lender copies of the applicable policies.
         The proceeds of any such policies insuring physical loss or damage
         shall be used by Borrower either to repair the damaged property,
         replace lost property, or prepay the outstanding balances of the Notes
         (such payment to be applied in reverse order of maturities);

                  (g) Prosecute the construction of the Tenant Improvements with
         diligence and continuity, in a good and workmanlike manner, and in
         accordance with sound building and engineering practices, all
         applicable laws and governmental requirements, the Loan Documents, and
         the plans and specifications. Borrower shall complete construction of
         the Tenant Improvements, and shall obtain a permanent unconditional
         certificate of occupancy and all other permits, licenses, and approvals
         for the occupancy, use and operation of the Tenant Improvements from
         all applicable governmental authorities on or before the Conversion
         Date,

                                       28
<PAGE>   32

         free and clear of all liens except for the liens granted in the Loan
         Documents and the liens listed in Exhibit "B" to the Leasehold Deed of
         Trust. With or without the request of Lender (which request by Lender
         may be given at any time during or after the construction of the Tenant
         Improvements), Borrower shall correct promptly (i) any material defect
         in the Tenant Improvements, or (ii) any material departure from law or
         governmental requirements;

                  (h) Cause all materials supplied for, or intended to be
         utilized in the construction of the Tenant Improvements, but not yet
         affixed to or incorporated into the Tenant Improvements on the Land, to
         be stored on the Land with adequate safeguards as required by Lender to
         prevent loss, theft, damage or commingling with other materials or
         projects;

                  (i) Allow Lender (and its third party inspectors) to enter
         upon the Improved Premises to inspect the Improved Premises, the
         Property and any materials at any reasonable time with at least 24
         hours prior notice (provided that no such notice shall be required
         during the continuance of an Event of Default). Within 24 hours after a
         request is made therefor, Borrower will furnish to Lender at any time
         for inspection and copying all plans and specifications, shop drawings,
         specifications, books and records, and other documents and information
         required by Lender;

                  (j) Maintain at least $3,000,000.00 in Unencumbered Liquidity,
         as reflected on its balance sheet, at all times prior to the date
         Tenant takes possession of its leased premises, and begins paying rent,
         under and as provided for in the M.D. Anderson Lease;

                  (k) Furnish to Lender (i) as soon as possible, and in any
         event within 30 days after Borrower or a duly appointed administrator
         of a Plan knows or has reason to know that any Reportable Event with
         respect to any Plan has occurred, a statement of the chief financial
         officer of Borrower setting forth details as to such Reportable Event
         and the action which Borrower proposes to take with respect thereto,
         together with a copy of the notice of such Reportable Event given to
         the Pension Benefit Guaranty Corporation or a statement that said
         notice will be filed with the annual report to the United States
         Department of Labor with respect to such Plan, if such filing has been
         authorized, and (ii) promptly after receipt thereof, a copy of any
         notice Borrower may receive from the United States Department of Labor,
         the Internal Revenue Service or the Pension Benefit Guaranty
         Corporation with respect to any Reportable Event; and

                                       29
<PAGE>   33

                  (l) In addition to, and without in any way limiting, the other
         requirements in this Agreement, provide certain notices to Lender,
         deliver to Lender, promptly upon any officer of Borrower having
         knowledge of the occurrence of any of the following events or
         circumstances, a written statement with respect thereto, signed by the
         chief financial officer of Borrower, or other authorized representative
         of Borrower designated from time to time pursuant to written
         designation by Borrower delivered to Lender, advising Lender of the
         occurrence of such event or circumstance and the steps, if any, being
         taken by Borrower or any Guarantor with respect thereto:

                           (i) any Default or Event of Default;

                           (ii) any litigation or proceeding involving Borrower
                  or any Guarantor as a defendant or in which any Property of
                  Borrower or any Guarantor is subject, directly or indirectly,
                  to a claim, and the amount in controversy is in excess of
                  $250,000.00;

                           (iii) any Reportable Event or imminently expected
                  Reportable Event with respect to any Plan;

                           (iv) any change in the tax-exempt status of Borrower;
                  and

                           (v) any other event or occasion which could
                  reasonably be expected to cause a Material Adverse Change.

                         SECTION 6 - NEGATIVE COVENANTS

         6.1 Negative Covenants of Borrower. So long as Borrower may borrow
additional advances hereunder and in accordance with the terms and provisions of
this Agreement and until payment in full of the Notes and performance of all
other Obligations of Borrower hereunder, Borrower covenants and agrees, unless
Lender shall otherwise consent in writing, that Borrower will not, either
directly or indirectly:

                  (a) (i) Create, incur, or assume any mortgage, pledge,
         security interest, lien, or encumbrance on any of their respective
         assets (now owned or hereafter acquired), except as specifically
         disclosed in the Financial Statements, (ii) acquire or agree to acquire
         assets under any conditional sale agreement or title retention
         contract, or (iii) sell and leaseback any assets, except that the
         foregoing restrictions shall not apply to:

                           (1) liens for taxes, assessments and other
                  governmental charges not yet due;

                                       30
<PAGE>   34

                           (2) liens of vendors, carriers, warehousemen.
                  landlords, mechanics, laborers, and materialmen arising by law
                  in the ordinary course of business for sums not yet due or
                  being contested in good faith if reserve shall have been made
                  therefor as required by GAAP;

                           (3) pledges or deposits in connection with or to
                  secure worker's compensation, unemployment insurance, pensions
                  or other employee benefits;

                           (4) mortgages, vendor and other pledges, security
                  interests, liens, encumbrances, landlord's liens, or title
                  retention contracts existing as of the date of this Agreement
                  and disclosed to and approved by Lender in writing before the
                  date hereof;

                           (5) liens and security interests against assets and
                  property of Borrower which is not now or hereafter securing
                  the payment of any Note;

                           (6) liens and/or security interests required by this
                  Agreement;

                           (7) landlord's liens consented to by Lender;

                  (b) Permit cessation of work in connection with the
         construction of the Tenant Improvements for a period in excess of ten
         (10) days (whether or not consecutive), except for Excusable Delays;

                  (c) Sell, lease, transfer, convey, or otherwise dispose
         (except in the ordinary course of business) of all or any of its assets
         covered by and described in the Security Instruments;

                  (d) Change the general character of business as conducted as
         of the date hereof or engage in any type of business not reasonably
         related to its business as presently and normally conducted or is a
         normal and logical extension thereof;

                  (e) Materially change accounting practices, methods, or
         standards or the reporting format for any information furnished Lender
         under the terms and provisions of this Agreement, which accounting
         practices shall conform with GAAP throughout the term of this
         Agreement;

                  (f) Permit the proceeds of the Notes to be used for any
         purpose other than the purpose set forth in Section 3.1 of this
         Agreement;

                                       31
<PAGE>   35

                  (g) Enter into any transaction which materially and adversely
         affects or may materially and adversely affect any of the collateral
         securing the Obligations or Borrower's ability to repay the
         Obligations;

                  (h) Own, purchase, or acquire (or enter into any contract to
         purchase or acquire) any "margin security" as defined by any regulation
         of the Federal Reserve Board as now in effect or as the same may
         hereafter be in effect unless, prior to any such purchase or
         acquisition or entering into any such contract, Lender shall have
         received an opinion of counsel satisfactory to the effect that such
         purchase or acquisition will not cause this Agreement to violate
         Regulations U or X or any other regulation of the Federal Reserve Board
         then in effect;

                  (i) Except for the service contract with Tenant which has been
         approved in writing by Lender, enter into any management, leasing,
         maintenance, service, or other contract pertaining to the Property that
         is not unconditionally terminable by Borrower or any successor owner
         without penalty or payment on not more than thirty (30) days notice to
         the other party thereunder; and

                  (j) Use, or knowingly permit any Contractor or subcontractor
         to use, any portion of the proceeds of any advance to pay the wages of
         employees unless a portion of the proceeds or other funds are also used
         to make timely payment to or deposit with the United States all amounts
         of tax required to be deducted and withheld with respect to such wages
         under the Internal Revenue Code, and to make timely payment to or
         deposit with any local and/or state governmental authority or agency
         having jurisdiction all amounts of tax required to be deducted and
         withheld with respect to such wages under any applicable local and/or
         state laws.

                          SECTION 7 - EVENTS OF DEFAULT

         7.1 Events of Default. Each of the following shall constitute an Event
of Default under this Agreement:

                  (a) The failure to pay any fee or any payment under this
         Agreement, the Notes, any of the other payment Obligations, or any of
         the other Loan Documents within 10 days after written notice thereof
         is provided by Lender to Borrower;

                  (b) A default or event of default by Borrower in the due
         observance or performance of any of its obligations under this
         Agreement and the other Loan Documents and such failure is not fully
         cured within

                                       32
<PAGE>   36

         30 days after written notice thereof is provided by Lender to
         Borrower; provided that such notice and cure period shall not be
         required for any monetary Event of Default described in subsection (a)
         or for any other Event of Default specifically enumerated in any other
         subsection of this Section 7.1, the occurrence of any such event shall
         in and of itself constitute an Event of Default;

                  (c) The failure of Borrower to fully and completely satisfy
         the terms and conditions listed in Section 2.3 on or before the
         Conversion Date;

                  (d) The failure of Borrower to comply with the requirements of
         Section 3.11 or Section 5.1(j);

                  (e) Any representation or warranty made by Borrower in any of
         the Loan Documents proves to have been untrue in any material respect
         or any representation, statement (including Financial Statements),
         certificate or data furnished or made to the Lender as an inducement
         for Lender agreeing to enter in to this Agreement, or in accordance
         with the terms of this Agreement, proves to have been untrue in any
         material respect as of the date the facts therein set forth were stated
         or certified;

                  (f) Cessation of the construction of the Tenant Improvements
         continues for more than ten (10) days (whether or not consecutive),
         except for Excusable Delays;

                  (g) The termination, cancellation, or expiration of any Ground
         Lease, or any default by a Person in the performance of its obligations
         under a Ground Lease which is not fully cured within any applicable
         grace or cure period;

                  (h) The termination, cancellation, or expiration of the
         Authorization Letter prior to the execution and delivery of the M.D.
         Anderson Lease or the termination, cancellation, or expiration of the
         M.D. Anderson Lease at any time after its execution, or any default by
         a Person in the performance of its obligations under the Authorization
         Letter or the M.D. Anderson Lease which is not fully cured within any
         applicable grace or cure period;

                  (i) The occurrence of an Event of Default under and as defined
         in the Riverway Construction Loan Agreement;

                  (j) Construction of the Tenant Improvements, or any materials
         for which an advance has been requested, fails to materially comply
         with the plans and specifications, the Loan Documents, or any laws or

                                       33
<PAGE>   37

         governmental requirements and such failure is not fully cured within 30
         days after Borrower first becomes aware of its existence (whether by
         notice from Lender or otherwise);

                  (k) Construction of the Tenant Improvements is abandoned, or
         Borrower fails to complete construction of the Tenant Improvements (and
         obtain all applicable permits, licenses, and approvals) in accordance
         with this Agreement on or before the Conversion Date;

                  (l) Any required permit, license, certificate or approval with
         respect to the Improved Premises lapses or ceases to be in full force
         and effect and such circumstance is not fully cured within 30 days
         after Borrower first becomes aware of its existence (whether by notice
         from Lender or otherwise);

                  (m) Additional Equity is not deposited with Lender in
         accordance with Section 3.5;

                  (n) Construction is enjoined or Borrower or Lender is enjoined
         or prohibited from performing the Loan Documents for a period of thirty
         (30) days or more (whether or not consecutive);

                  (o) A default by Borrower (as principal or guarantor or other
         surety) in the payment or performance of any bond, contract, debenture,
         note, or other evidence of indebtedness owing by Borrower to any
         supplier of equipment or utilities to the Property or to any other
         holder of Debt secured by or relating to the Property, and such default
         shall remain unremedied for in excess of the period of grace, if any,
         with respect thereto;

                  (p) Borrower shall (i) apply for or consent to the appointment
         of a receiver, trustee or liquidator of it or all or a substantial part
         of its assets, (ii) file a voluntary petition commencing a bankruptcy
         or other insolvency proceeding, (iii) make a general assignment for the
         benefit of creditors, (iv) be unable, or admit in writing its
         inability, to pay its debts generally as they become due, or (v) file
         an answer admitting the material allegations of a petition filed
         against it in a bankruptcy or other insolvency proceeding;

                  (q) An order, judgment, or decree shall be entered against
         Borrower by any court of competent jurisdiction or by any other duly
         authorized authority, on the petition of a creditor or otherwise,
         granting relief in a bankruptcy or other insolvency proceeding or
         approving a petition seeking reorganization or an arrangement of its
         debts or appointing a receiver, trustee, conservator, custodian or
         liquidator of it

                                       34
<PAGE>   38

         or all or any substantial part of its assets and such order, judgment
         or decree shall not be dismissed or stayed within 90 days;

                  (r) The levy against any significant portion of the property
         of Borrower (including, without limitation, Borrower's leasehold
         interest in the Property) or any execution, garnishment, attachment,
         sequestration, or other writ or similar proceeding which is not
         permanently dismissed or discharged within 90 days after the levy;

                  (s) A final and non-appealable order, judgment or decree,
         which is uninsured in an amount in excess of $250,000.00, shall be
         entered against Borrower, and either such order, judgment or decree
         shall not be paid, dismissed, or stayed within 90 days or an abstract
         of judgment shall be filed in Harris County, Texas;

                  (t) Any Person shall engage in any "prohibited transaction"
         (as defined in Section 406 of ERISA or Section 4975 of the Internal
         Revenue Code) involving any Plan; any "accumulated funding deficiency"
         (as defined in Section 302 of ERISA), whether or not waived, shall
         exist with respect to any Plan for which an excise tax is due or would
         be due in the absence of a waiver; a Reportable Event shall occur with
         respect to, or proceedings shall commence to have a trustee appointed,
         or a trustee shall be appointed, to administer or to terminate, any
         Single Employer Plan, which Reportable Event or commencement of
         proceedings or appointment of a trustee is, in the reasonable opinion
         of the Lender, likely to result in the termination of such Plan for
         purposes of Title IV of ERISA; any Single Employer Plan shall terminate
         for purposes of Title IV of ERISA; the Borrower, or any Affiliate shall
         incur, or in the reasonable opinion of the Lender, be likely to incur
         any liability in connection with a withdrawal from, or the insolvency
         or reorganization of, a multi-employer plan; or any other event or
         condition shall occur or exist with respect to a Plan and the result of
         such events or conditions referred to in this subsection (j) could
         subject the Borrower, or any Affiliate to any tax (other than an excise
         tax under Section 4980 of the Internal Revenue Code), penalty or other
         liabilities which taken in the aggregate would have an adverse effect
         on Borrower and any such circumstance shall exist for in excess of 90
         days;

                  (u) Cessation of a substantial part of the business of
         Borrower for a period which significantly affects Borrower's capacity
         to continue its particular business; or Borrower shall suffer the loss
         or revocation of any license or permit now held or hereafter acquired
         by Borrower which is necessary to continue the lawful operation of this
         particular business; or Borrower shall be enjoined, restrained, or in
         any way prevented by

                                       35
<PAGE>   39

         court, governmental, or administrative order from conducting all or any
         material part of its respective business affairs;

                  (v) Borrower or any Affiliate shall challenge or contest in
         any action, suit, or proceeding the validity or enforceability of this
         Agreement or any of the other Loan Documents, the legality or
         enforceability of any of the Obligations or the perfection or priority
         of any lien or security interests granted to Lender;

                  (w) Borrower or any Affiliate shall be criminally indicted or
         convicted under any law that could lead to a forfeiture of any material
         portion of the property of Borrower, any Affiliate, or any of the
         Guarantors;

                  (x) Borrower shall fail to comply in any material respect with
         any order, decree, ruling, or plan issued by the Environmental
         Protection Agency or any other Governmental Authority relating to the
         property of Borrower or otherwise, and which order, decree, ruling, or
         plan is not reversed or Borrower's obligations with respect thereto are
         not otherwise discharged within 90 days after the entry thereof;

                  (y) Borrower shall have (i) concealed, removed, or diverted,
         or permitted to be concealed, removed, or diverted, any part of its
         property, with intent to hinder, delay or defraud its creditors or any
         of them; (ii) made or suffered a transfer of any of its property which
         may be fraudulent under any bankruptcy, fraudulent conveyance or
         similar law; or (iii) shall have suffered or permitted, while
         insolvent, any creditor to obtain a lien upon any of their respective
         property through legal proceedings or otherwise which is not vacated
         within 90 days from the date thereof; and

                  (z) The liens and/or security interests granted in any
         Security Instrument shall not constitute a first and prior lien and/or
         security interest upon the collateral described therein, except as
         otherwise disclosed to and agreed by Lender in writing, or as a result
         of the failure of Lender to file a continuation statement in a timely
         manner (provided that Borrower in any event shall provide all documents
         required by Lender to reinstate as a first security interest any such
         lapsed filing).

                     SECTION 8 - RIGHTS AND REMEDIES OF LENDER

         8.1 Remedies. Upon the occurrence of an Event of Default, Lender may,
at its election, but without any obligation to do so, and without presentment,
protest, notice of protest, any notice of intent to accelerate, notice of
acceleration, or any other

                                       36
<PAGE>   40

notice, declaration, or demand of any kind (which notices and demands are each
specifically waived hereby by Borrower), do any one or more of the following:

                  (a) at Lender's option and without any notice of intent to
         accelerate, notice of acceleration, or other notice or demand, declare
         the entire principal amount of the Notes then outstanding and the
         interest accrued thereon immediately due and payable, and the said
         entire principal, interest and all other amounts owing thereunder shall
         thereupon become immediately due and payable without presentment,
         demand, protest, notice of protest or other notice of default or
         dishonor of any kind, all of which are hereby expressly waived by
         Borrower;

                  (b) terminate its commitment to lend and any obligation to
         disburse any Additional Equity hereunder;

                  (c) reduce any claim to judgment;

                  (d) exercise any and all rights and remedies afforded by this
         Agreement, the other Loan Documents, law, equity, or otherwise;

                  (e) set-off and apply, to the extent thereof and to the
         maximum extent permitted by law, any and all deposits, funds, or
         assets at any time held and any and all other indebtedness at any time
         owing by Lender to or for the credit or account of Borrower against any
         liability owing by Borrower to Lender; or

                  (f) in its own name or in the name of Borrower, enter into
         possession of the Property, perform all work necessary to complete the
         construction of the Tenant Improvements substantially in accordance
         with the plans and specifications (as modified as deemed necessary by
         Lender), Loan Documents, laws, and governmental requirements, and
         continue to employ any Contractors pursuant to the applicable contracts
         or otherwise.

         8.2 Attorney-in-Fact. Borrower hereby appoints Lender as the
attorney-in-fact of Borrower, which power of attorney is irrevocable and coupled
with an interest, with full power of substitution and in the name of Borrower,
if Lender elects to do so, upon the occurrence of an Event of Default, to
(without any obligation to do so):

                  (a) use such sums as are necessary, including any proceeds of
         the Construction Loan and any Additional Equity, make such changes or
         corrections in the plans and specifications and employ such architects,
         engineers, and Contractors as may be required for the purpose of
         completing the construction of the Tenant Improvements substantially in
         accordance with the plans and specifications (as modified as deemed

                                       37
<PAGE>   41

         necessary by Lender), Loan Documents, laws and governmental
         requirements, or as otherwise may be necessary or desirable for
         purposes of completing such construction;

                  (b) execute all applications and certificates in the name of
         Borrower which may be required for completion of construction of the
         Tenant Improvements;

                  (c) endorse the name of Borrower on any checks or drafts
         representing proceeds of any insurance policies, or other checks or
         instruments payable to Borrower with respect to the Property;

                  (d) do every act with respect to the construction of the
         Tenant Improvements which Borrower may do;

                  (e) prosecute or defend any action or proceeding incident to
         the Property;

                  (f) cure any default or event of default under a Ground Lease,
         the M.D. Anderson Lease, or the Riverway Construction Loan Agreement;

                  (g) request reimbursement from Tenant under the Authorization
         Letter be paid directly to Lender for application to the Real Estate
         Note, and in connection therewith, submit on behalf of Borrower all
         invoices as other items required by the Authorization Letter (with the
         understanding that Borrower shall remain obligated to perform all of
         its obligations and commitments under the Authorization Letter arising
         in connection with payment by Tenant thereunder);

                  (h) pay, settle, or compromise all bills and claims so as to
         clear title to the Property; and

                  (i) take over and use all or any part of the labor, materials,
         supplies and equipment contracted for, owned by, or under the control
         of Borrower, whether or not previously incorporated into the Tenant
         Improvements. Any amounts expended by Lender shall be a demand
         obligation owing by Borrower to Lender.

                            SECTION 9 - MISCELLANEOUS

         9.1 Other Loans. Borrower and Lender acknowledge and agree that in the
future, Borrower may apply for and Lender may agree to fund additional loans to
Borrower. Borrower and Lender agree that all existing and hereafter created
loans and other advances from Lender, or any of its predecessors or successors
in interest, to Borrower, whether or not such loans are particularly described
in this Agreement, as

                                       38
<PAGE>   42

may be amended from time to time, shall constitute Obligations for purposes of
this Agreement and shall be subject to the terms, provisions, covenants, and
agreements set forth in this Agreement.

        9.2 No Duty or Special Relationship. Borrower acknowledges that Lender
has no duty to Borrower with respect to the loan transactions set forth in this
Agreement except as expressly provided for in this Agreement and the other Loan
Documents, and acknowledge that no fiduciary, trust, or other special
relationship exists between Lender and Borrower.

        9.3 Other Remedies Not Required. Borrower may be required to pay the
Notes in full without the assistance of any other party, or any collateral or
security for the Notes. Lender shall not be required to mitigate damages, file
suit, or take any action to foreclose, proceed against or exhaust any collateral
or security in order to enforce payment of the Notes.

         9.4 NO CONTROL BY LENDER. BORROWER AGREES AND ACKNOWLEDGES THAT ALL
OF THE COVENANTS AND AGREEMENTS PROVIDED FOR AND MADE BY BORROWER IN THIS
AGREEMENT AND IN THE OTHER LOAN DOCUMENTS ARE THE RESULT OF EXTENSIVE AND
ARMS-LENGTH NEGOTIATIONS BETWEEN BORROWER AND LENDER. LENDER'S RIGHTS AND
REMEDIES PROVIDED FOR IN THIS AGREEMENT AND IN THE OTHER LOAN DOCUMENTS ARE
INTENDED TO PROVIDE LENDER WITH A RIGHT TO OVERSEE BORROWER'S ACTIVITIES AS THEY
RELATE TO THE LOAN TRANSACTIONS PROVIDED FOR IN THIS AGREEMENT, WHICH RIGHT IS
BASED ON LENDER'S VESTED INTEREST IN BORROWER'S ABILITY TO PAY THE NOTES AND
PERFORM THE OTHER OBLIGATIONS. NONE OF THE COVENANTS OR OTHER PROVISIONS
CONTAINED IN THIS AGREEMENT SHALL, OR SHALL BE DEEMED TO, GIVE LENDER THE RIGHT
OR POWER TO EXERCISE CONTROL OVER, OR OTHERWISE IMPAIR, THE DAY-TO-DAY AFFAIRS,
OPERATIONS, AND MANAGEMENT OF BORROWER; PROVIDED THAT IF LENDER BECOMES THE
OWNER OF ANY STOCK OF ANY ENTITY, WHICH ENTITY OWNS AN INTEREST IN BORROWER,
WHETHER THROUGH FORECLOSURE OR OTHERWISE, LENDER THEREAFTER SHALL BE ENTITLED TO
EXERCISE SUCH LEGAL RIGHTS AS IT MAY HAVE BY BEING A SHAREHOLDER OF SUCH ENTITY.

        9.5 No Partnership. Nothing herein is intended, nor shall it be deemed
or construed as, to create a partnership, joint venture, or common interest in
profits or income between Borrower and Lender, or to make Lender in any way
responsible for the debts or losses of Borrower or with respect to the
collateral described in the Security Instruments. Borrower and Lender disclaim
any sharing of liabilities, losses, costs or expenses.

        9.6 Representations and Warranties. All representations and warranties
of Borrower herein, and all covenants and agreements made by Borrower herein
made before the effective date of this Agreement, shall survive such date.

                                       39
<PAGE>   43

         9.7 Notice. All notices, demands, requests, and communications
permitted or required under this Agreement shall be in writing, may be
personally served or sent by telex (confirmed by telephone), telecopier
(confirmed by telephone), U.S. mail or any express mail service, and shall be
effective upon receipt, such receipt being deemed to occur 48 hours after its
deposit in the U.S. mail, postage prepaid or 24 hours after its transmission by
telex, telecopier or express mail service, as the case may be, addressed to the
individuals and addresses indicated below:

                (a)    If to Borrower:

                       Introgen Therapeutics, Inc.
                       301 Congress Avenue, Suite 1850
                       Austin, Texas 78701
                       Attention:  Chief Financial Officer

                (b)    If to Lender:

                       Compass Bank
                       P.O. Box 9600
                       Austin, Texas 78766-9600
                       Attention:  Corey Gaskill

Any party may, by proper written notice to the other party, change the
individuals or addresses to which such notices shall thereafter be sent.

        9.8 Assignment of Contracts and Plans. As additional security for the
payment of the Construction Loan, Borrower hereby transfers and assigns to
Lender, and grants a security interest in, all of Borrower's rights and
interest, but not its liability, in, under, and to all construction,
architectural, and design contracts to the extent same pertains to the Improved
Premises, and the plans and specifications, and agrees that all of the same
constitute a portion of the Mortgaged Property, as such term is defined in the
Leasehold Deed of Trust and the Second Lien Leasehold Deed of Trust. Borrower
represents and warrants that the copy of any contract furnished or to be
furnished to Lender is and shall be a true and complete copy thereof, that the
copies of the plans and specifications which may be delivered to Lender will be
true and complete copies of the plans and specifications, that there have been
no modifications thereof which are not fully set forth in the copies delivered,
and that Borrower's interest therein is not subject to any claim, setoff, or
encumbrance. Neither this assignment nor any action by Lender shall constitute
an assumption by Lender of any obligation under any contract or with respect to
the plans and specifications, and Borrower shall continue to be liable for all
obligations of Borrower with respect thereto, Borrower hereby agreeing to
perform all of its obligations under any contract. Lender shall have the right
at any time (but shall have no obligation) to take in its name or in the name of
Borrower such action Lender may determine

                                       40
<PAGE>   44

necessary to cure any default under any contract or with respect to the plans
and specifications or to protect the rights of Borrower or Lender with respect
thereto. Lender shall incur no liability if any action so taken by it or on its
behalf shall prove to be inadequate or invalid. Borrower indemnifies and holds
Lender harmless against and from any loss, cost, liability or expense
(including, but not limited to, attorneys' fees and expenses) incurred in
connection with Borrower's failure to perform such contracts or any action taken
by Lender. Lender may use the plans and specifications for any purpose relating
to the Tenant Improvements. Borrower irrevocably constitutes and appoints Lender
as Borrower's attorney-in-fact, which power of attorney shall be irrevocable and
coupled with an interest, in Borrower's name or in Lender's name to enforce all
rights of Borrower under any contract or with respect to the plans and
specifications.

         9.9 Binding Effect. All covenants and agreements of Borrower under this
Agreement shall bind the respective successors and assigns of Borrower and shall
inure to the benefit of Lender and its successors and assigns. The rights of
Borrower under this Agreement are not assignable.

         9.10 Inconsistencies and Conflicts. To the extent any irreconcilable
conflicts or inconsistencies exist between the terms of this Agreement and any
of the other Loan Documents, the terms of this Agreement shall govern and
control.

         9.11 Renewal of Indebtedness. All provisions of this Agreement relating
to the Notes shall apply with equal force and effect to each and all promissory
notes hereafter executed which in whole or in part represent a renewal,
extension or rearrangement of any part of the indebtedness originally
represented by the Notes, or either of them, provided that nothing herein shall
constitute a commitment or offer by Lender to such a renewal, extension or
rearrangement.

         9.12 No Waiver. No course of dealing on the part of Lender, its
officers or employees, nor any failure or delay by Lender with respect to
exercising any of its rights, remedies, powers or privileges under the Loan
Documents shall operate as a waiver thereof. No indulgence by Lender, or waiver
of compliance with any of the terms, covenants, or provisions of the Loan
Documents, shall be construed as a waiver of Lender's right to subsequently
require strict performance by Borrower and any other Person of the Loan
Documents. The rights and remedies of Lender under the Loan Documents shall be
cumulative and the exercise or partial exercise of any such rights or remedies
shall not preclude the exercise of any other rights or remedies.

         9.13 APPLICABLE LAW. EXCEPT AS OTHERWISE PROVIDED IN THE LOAN
DOCUMENTS, THE LOAN DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER, AND
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS OF THE STATE OF
TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA APPLICABLE TO TRANSACTIONS
WITHIN THE STATE OF TEXAS.

                                       41
<PAGE>   45

         9.14 Amendment. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.

         9.15 Future Advances. No advance under the Notes shall constitute a
waiver of any of the conditions of Lender's obligation to make further advances
nor, in the event Borrower is unable to satisfy any such condition, shall any
such waiver have the effect of precluding Lender from thereafter declaring such
inability to be a Default.

         9.16 Severability. In the event any provision contained in any of the
Loan Documents shall, for any reason, be held invalid, illegal or unenforceable
in any respect, such provision shall be severed from the applicable Loan
Document, and such invalidity, illegality or unenforceability shall not affect
any other provision of the applicable Loan Document.

         9.17 Lender's Discretion. All matters hereunder that require Lender's
discretion, (including, without limitation, whether Borrower has satisfied any
condition precedent), Lender shall use its sole and reasonable discretion,
except as otherwise provided for herein. Further, Lender may in its sole
discretion waive any of its rights with respect to a particular Event of
Default.

         9.18 Entire Agreement. This Agreement and the documents referred to
herein embody the entire agreement with respect to the respective rights,
obligations, and liabilities of the Parties and supersedes all prior agreements
and understandings, if any, relating to the subject matter hereof. THIS
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

         9.19 Counterparts. This Agreement may be executed in two or more
counterparts, and it shall not be necessary that any one counterparts be
executed by all of the parties hereto. Each fully or partially executed
counterpart shall be deemed an original, but all such counterparts taken
together shall constitute but one and the same instrument.

         9.20 Controlling Agreement. Borrower and Lender intend to conform
strictly to the applicable usury laws. All agreements between Lender and
Borrower (or any other party liable with respect to any indebtedness under this
Agreement and the other Loan Documents) are hereby limited by the provisions of
this Section which shall override and control all such agreements, whether now
existing or hereafter arising and whether written or oral. In no way, nor in any
event or contingency (including but not limited to prepayment, default, demand
for payment, or acceleration of the maturity of any obligation), shall the
interest contracted for, charged, or received under the

                                       42
<PAGE>   46

Notes or otherwise exceed the Maximum Rate. If, from any possible construction
of any document, interest would otherwise be payable to Lender in excess of the
Maximum Rate, any such construction shall be subject to the provisions of this
section and such document shall be automatically reformed and the interest
payable to Lender shall be automatically reduced to the Maximum Rate, without
the necessity of execution of any amendment or new document. If Lender shall
ever receive anything of value which is characterized as interest under
applicable law and which would apart from this provision be in excess of the
Maximum Rate, an amount equal to the amount which would have been excessive
interest shall at the option of Lender, be refunded to Borrower or applied to
the reduction of the principal amount owing hereunder in the inverse order of
its maturity and not to the payment of interest. The right to accelerate
maturity of the Notes or any other indebtedness does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to charge or receive any unearned
interest in the event of acceleration. All interest paid or agreed to be paid
to Lender shall, to the extend permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full stated term (including any
renewal or extension) of such indebtedness so that the amount or interest on
account of such indebtedness does not exceed the Maximum Rate.

         9.21 Business Loans. Borrower warrants and represents to Lender, and to
all other holders of any debt evidenced by the Notes, that the loan evidenced by
the Notes are and shall be for business, commercial, investment or other similar
purpose and not primarily for personal, family, household or agricultural use.

                           [INTENTIONALLY LEFT BLANK]

                                       43
<PAGE>   47

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

                                    INTROGEN THERAPEUTICS, INC.

                                    By: /s/ JAMES W. ALBRECHT, JR.
                                        ----------------------------------------
                                        James W. Albrecht, Jr.,
                                        Vice President and Chief
                                        Financial Officer

                                                                        BORROWER

                                    COMPASS BANK

                                    By: /s/ BRIAN J. ANDERSON
                                        ----------------------------------------
                                        Brian J. Anderson, Senior Vice President

                                                                          LENDER

                                       44
<PAGE>   48

                                   EXHIBIT "A"

                                  DRAW REQUEST

         Reference is here made to that certain Construction Loan Agreement (the
"Loan Agreement") dated July 24, 2000, wherein Compass Bank ("Lender") has
agreed to lend to Introgen Therapeutics, Inc. ("Borrower") up to the aggregate
sum indicated in item (a) below (Where the context permits, terms used herein
are as defined in the Loan Agreement).

         Borrower hereby makes a request for advance to Lender, in accordance
with the terms and provisions of the Construction Loan Agreement, in the amount
indicated in item 1(d) below pursuant to the Construction Loan Agreement. In
connection therewith, before me, the undersigned authority, on this day
personally appeared Borrower, who, being by me first duly sworn, certifies as
follows:

         1. The summary of advances to date is as follows:

<TABLE>
<S>                                                         <C>
            a.      Committed Sum                           $3,500,000.00(1)

            b.      Advances to Date                        $
                                                             ---------------
            c.      Remaining Committed Sum                 $
                                                             ---------------
            d.      This Request for Advance                $
                                                             ---------------
</TABLE>

         2. The amount of this request for advance includes payments due for
services actually acquired and delivered to the Project in connection with
construction of the Tenant Improvements pursuant to the Loan Agreement and is
for the following items in the Budget (all items should be supported by copies
of billing statements, vouchers, invoices, affidavits, releases, waivers and
other documents Lender may reasonably request from the parties named therein):

<TABLE>
<CAPTION>
                    Item                          Amount Requested
                    ----                          ----------------
<S>                                           <C>

               ---------------                -------------------------

               ---------------                -------------------------

               ---------------                -------------------------
</TABLE>

         3. This request for advance is within the Budget under the Loan
Agreement, and, in the opinion of the undersigned, the unadvanced portion of the
Budget for all

----------

(1)      Not to exceed the Maximum Authorized Amount Prior to Delivery of the
         M.D. Anderson Lease.

                                       A-i

<PAGE>   49

items is sufficient to complete the Tenant Improvements pursuant to the plans
and specifications and other expenses in connection therewith.

         4. I represent the Borrower and I am duly authorized to make this
affidavit and to execute and deliver the related request for payment.

         5. All reports, statements, and other documentation heretofore or
herewith delivered by or on behalf of Borrower to Lender are substantially true
and correct and in all material respects what they purport and appear to be.

         6. Attached is a summary of this Request for Advance, and if an advance
for hard costs is requested, also attached are AIA Document G-702 and G-703
(1992 Edition) forms executed by Borrower, all completed for the above amount
and period, together with all supporting documentation required by Lender's Loan
Agreement with Borrower for the Project, all of which are true and correct and
in all respects what they purport and appear to be.

         7. The Borrower has not been served with any written notice that a lien
will be claimed for any amount unpaid for materials delivered, labor performed,
or services provided in connection with the properties, or any part thereof,
and, to the Borrower's knowledge, no valid basis exists for the filing of any
mechanic's or materialman's liens or claims with respect to all or any part of
the properties.

         8. I understand that this affidavit is made for the purpose of inducing
Lender to advance funds to Borrower and for Borrower to make payments of such
funds as appropriate under the loan documents and that, in so lending funds or
making payment, Lender and Borrower will rely upon the accuracy of matters
stated in this affidavit.

         9. All representations and warranties contained in the Loan Agreement
and the other Loan Documents are true and accurate in all material respects as
of the date of this request for advance, except as follows (if any):

         10. An Event of Default or fact or condition which with notice, lapse
of time, or both exists (or would result from the advance herein requested),
except as follows (if any):

         11. No part of the Land has been taken by eminent domain proceedings,
and Borrower has not received written notice of any proceedings or negotiations
therefor which are pending, except as follows (if any):

         12. All previously disbursed Construction Loan funds have been
expended, or are being held in trust, for the sole purpose of paying Project
costs included in the Budget and previously incurred by Borrower as set forth in
previous request for advance; no part of said funds has been used for any other
purpose.

                                      A-ii
<PAGE>   50

         13. To the best of Borrower's knowledge, Borrower has previously or
concurrently disclosed to Lender all matters known to Borrower that are required
to be so disclosed under the Loan Documents.

         14. All conditions precedent to Borrower's right to receive the
requested advance have been met in accordance with the terms of the Loan
Documents, except as follows (if any):

         15. To the best of Borrower's knowledge, the amounts and percentages
set forth in this request for advance (including the Advance Request for Work
Completed summary and any AIA Document G-702 and G-703 submitted in connection
herewith) are true and correct.

         16. Upon disbursement by Borrower of the funds advanced by Lender as
requested in this request for advance, all costs heretofore incurred by Borrower
in connection with the construction of the Tenant Improvements and which are due
and payable will be fully paid and satisfied.

         17. To the extent required under the Loan Documents, all change orders
to the Plans and specifications have been submitted to Lender and all change
orders for which an advance is requested hereby have been consented to by
Lender.

         18. All lien waivers or payment receipts required under the terms of
the Loan Documents for this request for advance have been submitted to Lender.

         19. The construction of the Tenant Improvements is progressing in a
satisfactory manner so as to assure completion thereof on or before the
Conversion Date in accordance with the plans and specifications and the Loan
Documents.

         20. Borrower agrees to notify Lender in writing immediately if the
matters certified herein will not be true and correct as of the time of the
requested advance, and the foregoing certifications shall be deemed made and
ratified as of the time of the advance unless Borrower so notifies Lender in
writing before that time.

         21. As of the date hereof, Borrower has no claims, causes of action,
demands against Lender, or defenses or offsets to payment of the Construction
Loan or any other amounts due under the Loan Documents.

         22. Borrower has undertaken all investigation necessary to make all of
the foregoing statements.

         23. Lender's acceptance of this request for advance will in no way
operate as a waiver by Lender of any term, condition, covenant, or agreement
contained in the Loan Documents, or of Lender's right to enforce any term,
condition, covenant or agreement therein.

                                      A-iii

<PAGE>   51

              EXECUTED as of the date first above written.

                                            AFFIANT:

                                            ____________________________________

THE STATE OF TEXAS      )
                        )
COUNTY OF _______       )

         SUBSCRIBED AND SWORN BEFORE ME, on this ___ day of July, 2000, by
_______________________________.

                                            ____________________________________
                                            Notary Public, State of Texas

RECEIVED, REVIEWED, AND APPROVED (THIS DRAW REQUEST AND THE ACCOMPANYING
DOCUMENTATION MAY BE SUBMITTED AS AN INVOICE FOR REIMBURSEMENT PURSUANT TO THE
TERMS OF THE LETTER DATED JUNE 22, 2000, FROM BORROWER AND ALL SUPPLEMENTS,
MODIFICATIONS, AND REPLACEMENTS THEREOF, WITHOUT DEDUCTION, SET_OFF, OR DECREASE
BY THE UNDERSIGNED)

THE UNIVERSITY OF TEXAS
M.D. ANDERSON CANCER CENTER

By: __________________________

Name: ________________________

Title: _______________________

                                      A-iv

<PAGE>   52

                                  EXHIBIT "B"

                       DOWN DATE WAIVER AND SUBORDINATION
                            OF MECHANIC'S LIEN CLAIMS

THE STATE OF TEXAS      )
                        )
COUNTY OF _______       )

         The undersigned is an original Contractor or subcontractor who has
furnished labor and/or material ("Work") in the construction of improvements
upon real property owned by Introgen Therapeutics, Inc. ("Owner") located at
Suite 201 of the office building located at 2250 Holcombe Boulevard, in the City
of Houston, Harris County, Texas, and described in Exhibit "A" which is attached
hereto and incorporated herein by reference (the "Property").

         For work in connection with the Property, the undersigned:

o   received $ _______________ through _____________, ____  ("Prior Down Date"),
o   is owed $ _______________ through ____________, ____ ("Down Date"),

         The undersigned (a) through the Prior Down Date, and (b) additionally,
upon receipt of the amount owed, through the Down Date:

         1. Has been paid in full for all sums owed for work concerning the
Property;

         2. Acknowledges complete satisfaction of, and forever waives and
releases, all claims of every kind against Owner or the Property, including but
not limited to all liens and claims of liens, which the undersigned may have as
a result of or in connection with the work;

         3. Has represented and warranted and does hereby represent and warrant
that all persons or entities who have furnished labor and/or material to the
undersigned in connection with the work have been paid all amounts they are
owed; and

         4. Agrees unconditionally to indemnify Owner and hold Owner harmless
against all liability, loss, cost or expense (including but not limited to
attorneys' fees) now or hereafter incurred, paid or suffered by or asserted
against Owner or the Property because of any claim or action by the undersigned,
or by any person or entity claiming by, through or under the undersigned, with
respect to the claims, liens and rights herein waived and released or arising
out of any breach or untruth of any representation herein made.

                                       B-i

<PAGE>   53

         In consideration of its funding of loan proceeds to be used to pay for
work furnished by the undersigned, the undersigned hereby agrees and
acknowledges for the benefit of ____________ that all mechanic's liens or rights
to the same now or hereafter owned or held by the undersigned are and shall be
subordinate and inferior to the lien of the deed of trust held by Lender on the
Property.

         The person signing this document represents that he or she is duly
authorized to do so on behalf of the undersigned original Contractor or
subcontractor.

                EXECUTED this ____ day of ________________, ____.

                                            ------------------------------------

                                            By:
                                                --------------------------------
                                            Name:
                                                  ------------------------------
                                            Title:
                                                   -----------------------------

THE STATE OF TEXAS      )
                        )
COUNTY OF _______       )

         SUBSCRIBED AND SWORN BEFORE ME, on this ____ day of _______________, by
_______________________, ____________________ of and on behalf of
_______________________, a __________________ corporation.

                                            ------------------------------------
                                            Notary Public, State of Texas

                                      B-ii

<PAGE>   54

                                   EXHIBIT "C"

                         FORM OF COMPLIANCE CERTIFICATE

         This Report dated as of ____________, 19__, is prepared pursuant to
that certain Loan Agreement dated as of July 24, 2000 (the ("LOAN AGREEMENT")
between Introgen Therapeutics, Inc., a Delaware corporation ("Borrower"), and
Compass Bank ("LENDER"). Unless otherwise defined in this certificate,
capitalized terms shall have the meaning given to them in the Loan Agreement.

        Borrower hereby certifies (a) that no Event of Default has occurred or
is continuing, and (b) all of the representations and warranties made by
Borrower in the Loan Agreement are true and correct in all material respects on
the date of this certificate as if made on this date.

                I HEREBY CERTIFY THAT THE FOREGOING REPRESENTATIONS AND
STATEMENTS ARE TRUE AND CORRECT AS OF THE DATE HEREOF.

                                            INTROGEN THERAPEUTICS, INC.,

                                            By:
                                                --------------------------------
                                            Name:
                                                  ------------------------------
                                            Title:
                                                   -----------------------------

                                       C-i<PAGE>   1
                                                                     EXHIBIT 4.1

                    CERTIFICATE OF DESIGNATIONS, PREFERENCES,
                       AND RELATIVE RIGHTS AND LIMITATIONS
                                     OF THE

             SERIES A SENIOR CONVERTIBLE CUMULATIVE PREFERRED STOCK

                                       OF

                           CONTANGO OIL & GAS COMPANY
                               (the "Corporation")

1.       Designation. A series of the Preferred Stock of the Corporation is
hereby designated as "Series A Senior Convertible Cumulative Preferred Stock"
consisting initially of 5,000 authorized shares each having a par value of $0.04
(hereinafter called the "Series A Preferred Stock"). Shares of the Series A
Preferred Stock shall rank prior to the Corporation's Common Stock (and any
Junior Stock (as hereinafter defined) with respect to the payment of dividends
or distributions and upon liquidation, dissolution, winding-up or otherwise.
(All equity securities of the Corporation to which the Series A Preferred Stock
ranks prior, whether with respect to dividends or distributions or upon
liquidation, dissolution, winding-up or otherwise, including the Common Stock,
are collectively referred to herein as "Junior Stock"; all equity securities of
the Corporation with which the Series A Preferred Stock ranks on a parity,
whether with respect to dividends or distributions or upon liquidation,
dissolution, winding-up or otherwise, are collectively referred to herein as
"Parity Stock"; and all equity securities of the Corporation to which the
Preferred Stock ranks junior, whether with respect to dividends or distributions
or upon liquidation, dissolution, winding-up or otherwise, are collectively
referred to herein as "Senior Stock"). Except for shares of Series A Preferred
Stock issuable in accordance with Section 2 hereof, the Corporation shall not
issue any shares of Series A Preferred Stock after the initial issuance of
Series A Preferred Stock.

2.       Dividends.

         (a) The holders of the shares of Series A Preferred Stock shall be
entitled to receive quarterly dividends at a dividend rate equal to 8% per annum
(or 2% per Quarterly Dividend Period) if paid in cash on a current quarterly
basis (the "Cash Dividend Rate") or otherwise at a dividend rate equal to 10%
per annum (or 2.5% per Quarterly Dividend Period) if not paid on a current
quarterly basis or if paid in shares of Series A Preferred Stock (the "PIK
Dividend Rate"), in either case as adjusted pursuant to Section 2(e) below, if
applicable (the applicable dividend rate being hereinafter referred to as the
"Dividend Rate"), in each case computed on the basis of $1,000 per share, when
and as declared by the Board of Directors of the Corporation, out of funds or
shares of Series A Preferred Stock legally available for the payment of
dividends. Quarterly dividend periods (each a "Quarterly Dividend Period") shall
commence on January 1, April 1, July 1 and October 1 in each year, except that
the first Quarterly Dividend Period shall commence on the date of issuance of
the Series A Preferred Stock, and shall end on and include

<PAGE>   2

the day immediately preceding the first day of the next Quarterly Dividend
Period. Dividends on the shares of Series A Preferred Stock shall be payable on
March 31, June 30, September 30 and December 31 of each year (a "Dividend
Payment Date"), commencing September 30, 2000. Each such dividend shall be paid
to the holders of record of the Series A Preferred Stock as they shall appear on
the stock register of the Corporation on such record date, not exceeding 45 days
nor less than 10 days preceding such Dividend Payment Date, as shall be fixed by
the Board of Directors of the Corporation or a duly authorized committee
thereof.

                  If, on any Dividend Payment Date, the holders of the Series A
Preferred Stock shall not have received the full dividends provided for in this
Section 2(a) in cash or in kind, then such dividends shall cumulate, whether or
not earned or declared, with additional dividends thereon, compounded quarterly,
at the PIK Dividend Rate applicable to the Series A Preferred Stock as provided
in this Section 2(a), for each succeeding full Quarterly Dividend Period during
which such dividends shall remain unpaid.

         (b) The amount of any dividends accrued on any share of the Series A
Preferred Stock on any Dividend Payment Date shall be deemed to be the amount of
any unpaid dividends accumulated thereon to and including such Dividend Payment
Date, whether or not earned or declared. The amount of dividends accrued on any
share of the Series A Preferred Stock on any date other than a Dividend Payment
Date shall be deemed to be the sum of (i) the amount of any unpaid dividends
accumulated thereon to and including the last preceding Dividend Payment Date,
whether or not earned or declared, and (ii) an amount determined by multiplying
(x) the Cash Dividend Rate by (y) a fraction, the numerator of which shall be
the number of days from the last preceding Dividend Payment Date to and
including the date on which such calculation is made and the denominator of
which shall be the full number of days in such Quarterly Dividend Period.

         (c) Immediately prior to authorizing or making any distribution in
liquidation with respect to the Series A Preferred Stock (other than a purchase
or acquisition of Series A Preferred Stock pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series A Preferred
Stock), the Board of Directors shall, to the extent of any funds legally
available therefor, declare a dividend in cash on the Series A Preferred Stock
payable on the distribution date in an amount equal to any accrued and unpaid
dividends on the Series A Preferred Stock as of such date.

         (d) The Board of Directors may declare dividends payable in shares of
Series A Preferred Stock in lieu of cash dividends on a Dividend Payment Date.
In the event the Board of Directors elects to declare a dividend payable in
shares of Series A Preferred Stock, each holder of shares of Series A Preferred
Stock shall be entitled to receive such additional shares of Series A Preferred
Stock (or cash in lieu of a fraction thereof) equal to the product of (x) the
number of shares of Series A Preferred Stock held by such holder multiplied by
(y) the PIK Dividend Rate.

         (e) Notwithstanding any other provision hereof, the Dividend Rate shall
be increased by four percent (4%) per annum (1) on (and effective as of 12:01
a.m. on) November 1, 2000 if the Corporation has not filed with the Securities
Exchange Commission (the "SEC") prior to the close of business on October 31,
2000 the "Initial Registration Statement" as defined in and pursuant to Section
7.1 of that certain Securities Purchase Agreement dated as of December 29,

                                       2
<PAGE>   3

1999 between the Corporation and Trust Company of the West in the capacities
described therein, which increase in the Dividend Rate shall remain in effect
until 11:59 p.m. on the date of filing with the SEC of such Initial Registration
Statement if such filing occurs, and (2) on (and effective as of 12:01 a.m. on)
April 1, 2001 if the Initial Registration Statement shall not have been declared
effective by the SEC as of March 31, 2001, which increase in the Dividend Rate
shall remain in effect until 11:59 p.m. on the date the Initial Registration
Statement is declared effective by the SEC. For purposes of this Section 2(e),
the Initial Registration Statement shall not be considered filed with the SEC
unless it is filed by the Corporation in good faith with all required
attachments and financial statements.

3.       Priority.

         (a)      Priority as to Dividends.

                  (i) Holders of shares of the Series A Preferred Stock shall be
entitled to receive the dividends provided for in Section 2 hereof in preference
to and in priority over any dividends or distributions upon any Junior Stock. No
dividends shall be declared or paid or set apart for payment on any Junior Stock
for any period unless at the time of such declaration or payment or setting
apart for payment (A) full cumulative dividends have been or contemporaneously
are declared and paid in cash (or declared and a sum sufficient for the payment
thereof set apart for such payment) on the Series A Preferred Stock for all
Quarterly Dividend Periods terminating on or prior to the date of payment of
such dividends on Junior Stock, (B) an amount equal to the dividends accrued on
the Series A Preferred Stock from the last Dividend Payment Date to the date of
payment of such dividends on Junior Stock has been declared and set apart in
cash for payment on the Series A Preferred Stock and (C) the dividend payment
for the most recent Quarterly Dividend Period on the Series A Preferred Stock
has been paid entirely in cash.

                  (ii) No dividends shall be declared or paid or set apart for
payment on any Parity Stock for any period unless at the time of such
declaration or payment or setting aside for payment dividends have been or
contemporaneously are declared and paid in accordance with Section 2 hereof on
the Series A Preferred Stock for all Quarterly Dividend Periods terminating on
or prior to the date of payment of such dividends on Parity Stock. All dividends
paid upon shares of the Series A Preferred Stock and any Parity Stock shall be
paid pro rata so that the amount of dividends paid per share of the Series A
Preferred Stock and such Parity Stock shall in all cases bear to each other the
same ratio that accrued and unpaid dividends per share on the Series A Preferred
Stock and such Parity Stock bear to each other.

         (b) Priority on Redemption. The Corporation shall not, directly or
indirectly, redeem or purchase or otherwise acquire for value any Junior Stock
or Parity Stock unless, at the time of making such redemption, purchase or other
acquisition, full cumulative dividends have been or contemporaneously are
declared and paid in accordance with Section 2 hereof (or declared and a sum (or
shares of Series A Preferred Stock) sufficient for payment thereof set apart for
such payment) on the Series A Preferred Stock for all Quarterly Dividend Periods
terminating on or prior to the date of redemption of Junior Stock and/or Parity
Stock.

                                       3

<PAGE>   4

4.       Redemption. Upon the sale, conveyance or disposition of all or
substantially all of the assets of the Corporation or a sale, conveyance or
disposition of a majority of the outstanding shares of common stock in a
transaction or series of related transactions (except for a merger or
consolidation after the consummation of which the stockholders of the
Corporation prior to such merger or consolidation own a majority of the voting
securities of the surviving corporation or its parent corporation), each holder
of Series A Preferred Stock shall have the right to require that the Corporation
redeem all or any part of such holder's Series A Preferred Stock for cash out of
legally available funds at a price per share equal to the Liquidation Preference
(as defined in Section 7(d)). If on the date of such sale, conveyance or
disposition funds legally available for such redemption shall be insufficient to
redeem all of the outstanding shares of Series A Preferred Stock held by holders
who have elected to have their shares redeemed, funds to the extent legally
available shall be used for such purpose and the Corporation shall effect such
redemption pro rata according to the number of shares of Series A Preferred
Stock held by each holder thereof. The redemption requirements provided hereby
shall be continuous, so that if on the date of such sale, conveyance or
disposition such requirements cannot be fully discharged, without further action
by any holder of the Series A Preferred Stock funds legally available shall be
applied therefor until such requirements are fulfilled. Upon payment in full of
the amounts owing under this Section 4 to any holder of Series A Preferred Stock
who has elected to have its shares redeemed, then notwithstanding that the
certificate or certificates evidencing such shares shall not have been
surrendered, the dividends with respect to such shares shall cease to accrue
after the date of such payment in full and all rights with respect to such
shares shall forthwith terminate.

5.       Liquidation Preference.

         (a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation, the
holders of shares of the Series A Preferred Stock shall be entitled to receive,
out of the assets of the Corporation, whether such assets are capital or surplus
and whether or not any dividends as such are declared, $1,000 per share plus an
amount equal to all accrued and unpaid dividends thereon to the date fixed for
distribution, and no more, before any distribution shall be made to the holders
of Junior Stock with respect to the distribution of assets. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holders of outstanding shares of the Series A Preferred Stock and any
other Parity Stock, then the holders of all such shares shall share ratably in
such distribution of assets in accordance with the amount which would be
otherwise payable on such distribution to the holders of Series A Preferred
Stock and the holders of such Parity Stock were such liquidation payments paid
in full. Except as provided, in this Section 5(a), in the event of any
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of shares of Series A Preferred Stock shall not be entitled to any
additional payments.

         (b) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, stating a payment
date and the place where the distributive amounts shall be payable, shall be
given by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to the holders of record of the Series A Preferred Stock at
their respective addresses as the same shall appear on the books of the
Corporation.

                                       4

<PAGE>   5

6.       Voting Rights.

         (a) General. In addition to the rights otherwise provided for herein or
by law, holders of Series A Preferred Stock shall be entitled to vote, together
with the holders of Common Stock and any other voting Junior Stock or Parity
Stock, as one class on all matters submitted to a vote of stockholders of the
Corporation, in the same manner and with the same effect as the holders of
Common Stock. In any such vote, each share of Series A Preferred Stock shall
entitle the holder thereof to one vote per share for each share of Common Stock
(including fractional shares) into which each share of Series A Preferred Stock
is then convertible, rounded to the nearest one-tenth of a share.

         (b) Protective Provisions. So long as any Series A Preferred Stock is
outstanding, the holders of the Series A Preferred Stock shall have the voting
power provided for by law and the Corporation covenants and agrees that it shall
not, without the written consent in lieu of a meeting, or the affirmative vote
at a meeting called for such purpose, of holders of Series A Preferred Stock of
record that hold at least a majority of the outstanding Series A Preferred
Stock, voting as a separate class:

                  (i) amend, alter or repeal, in any manner whatsoever, the
designations, powers, preferences, relative, participating, optional or other
special rights, qualifications, limitations and restrictions of the Series A
Preferred Stock;

                  (ii) authorize, issue, or agree to authorize or issue, whether
by reclassification or otherwise, any Senior Stock;

                  (iii) authorize, issue, or agree to authorize or issue,
whether by reclassification or otherwise, any new class or series of stock or
any other securities convertible into equity securities of the Corporation
ranking on a parity with the holders of Series A Preferred Stock with respect to
the rights of redemption, liquidation, preference, voting or dividends, or any
increase in the authorized or designated number of any such new class or series,
other than Series B Preferred Stock of the Corporation (the "Series B
Preferred") issued on material terms and conditions no more favorable to the
holder thereof than the Series A Preferred Stock or as otherwise approved by the
holders of a majority of the Series A Preferred Stock (which approval shall not
be unreasonably withheld), which Series B Preferred shall have a conversion
price per share of not less than $2.00 and shall be designated, issued and sold
prior to June 30, 2001 for an aggregate purchase price not to exceed $7,500,000;

                  (iv) amend, alter or repeal any provision of the Certificate
of Incorporation of the Corporation;

                  (v) directly or indirectly, redeem, purchase or otherwise
acquire for value (including through an exchange), or set apart money or other
property for any mandatory purchase or other analogous fund for the redemption,
purchase or acquisition of, any shares of Common Stock or other Junior Stock;

                  (vi) consolidate or merge with or into any other corporation
where (1) the Corporation is not the surviving corporation or (2) the
Corporation shall issue to any person as consideration in respect of such
consolidation or merger any capital stock of the Corporation

                                       5

<PAGE>   6

representing 20% or more of the Corporation's outstanding capital stock prior to
such consolidation or merger;

                  (vii) sell or convey all or substantially all of the assets of
the Corporation, or dissolve or liquidate the Corporation; or

                  (viii) incur any indebtedness, liabilities or obligations
constituting Restricted Debt (as defined below), which in the aggregate with all
other Restricted Debt of the Corporation (on a consolidated basis) is in excess
of 50% of the NPV10 (as defined below) of the Proved Reserves (as defined below)
attributable to the properties of the Corporation at the time of incurrence.

                   For purposes of this Section 6(b), the following terms shall
have the meanings set forth below:

                   "NPV10" means with respect to any Proved Reserves as expected
to be produced from the properties of the Corporation, the net present value of
the future net revenues expected to accrue to the Corporation's interests in
such Reserves during the remaining expected economic lives of such Reserves,
discounted at 10% per annum. Each calculation of such expected future net
revenues shall be made at the time of incurrence in accordance with the then
existing standards of the Society of Petroleum Engineers and Society of
Petroleum Evaluation Engineers, provided that in any event:

                  (i)      appropriate deductions shall be made for (A) direct
                           taxes and existing burdens, (B) lease operating
                           expenses, (C) transportation, gathering and marketing
                           burdens, (D) capital expenditures (including plugging
                           and abandonment costs), and (E) general and
                           administrative or overhead costs pursuant to the
                           relevant operating agreements (COPAS); and

                  (ii)     the pricing assumptions and escalations used in
                           determining NPV10 for any particular Proved Reserves
                           shall be:

                           (A)      the contract price, if any, during the term
                                    of any written oil and gas sales contract
                                    between Corporation and unrelated persons;
                                    or

                           (B)      if no sales contract exits:

                                    (I)     for volumes of oil and gas swapped
                                            or hedged with investment grade
                                            counter parties, the hedged price
                                            net of any costs, expenses or
                                            deductions relating thereto; and

                                    (II)    for "naked" or long unhedged
                                            volumes, the oil and gas prices
                                            reflected in the NYMEX oil and gas
                                            strips going forward one year with
                                            adjustment for basis (quality and
                                            geographical) differentials.

                  "Proved Reserves" means those reserves which are "proved oil
and gas reserves" within the meaning of Rule 4-10 of Regulation S-X, 17 C.F.R.
Section 210.4-10 of the SEC. In

                                       6

<PAGE>   7

addition, Proved Reserves must have facilities to process and transport those
reserves to market which are operational at the time of the estimate, or there
is a commitment or reasonable expectation to install such facilities in the
future.

                  "Restricted Debt" of any Person means debt in any of the
following categories: (i) debt for borrowed money; (ii) debt constituting an
obligation to pay the deferred purchase price of property or services; (iii)
debt evidenced by a bond, debenture, note or similar instrument; (iv) debt which
(A) would under GAAP be shown on the Corporation's balance sheet as a liability
and (B) is payable more than one year from the date of creation thereof (other
than reserves for taxes and contingent obligations); (v) debt constituting
principal under leases capitalized in accordance with GAAP; (vi) debt arising
under conditional sales or other title retention agreements; (vii) debt owing
under direct or indirect guaranties of debt of any other person or constituting
obligations to purchase or acquire or to otherwise protect or insure a creditor
against loss in respect of debt of any other person (such as obligations under
working capital maintenance agreements, agreements to keep-well, or agreements
to purchase debt, assets, goods, securities or services), but excluding
endorsements in the ordinary course of business of negotiable instruments in the
course of collection; (viii) debt with respect to letters of credit or
applications or reimbursement agreements therefor; provided, however, that the
term "Restricted Debt" shall not include debt which is 60 days or less past due
that was incurred on ordinary trade terms and is owed by the Corporation
incurring the same to vendors, suppliers, or other persons providing goods and
services for use by the Corporation in the ordinary course of its business.

         (c) Dividend Default. In the event of a Dividend Default (as
hereinafter defined), the number of directors on the Board of Directors of the
Corporation shall be increased by two directors, both of whom shall be elected
as soon as practicable pursuant to the Bylaws of the Corporation by the holders
of the Series A Preferred Stock, to serve until the later of (i) the date of the
next annual meeting of stockholders and until such directors' successors are
elected and qualify and (ii) the date in which the Dividend Default is cured;
provided, however, that if permitted under applicable law, the holders of the
Series A Preferred Stock shall have the right to elect the same individual to
serve as both directors and if so elected such individual shall be treated as
constituting two directors for all purposes including without limitation voting
and quorum. A "Dividend Default" shall occur if, at any time, dividends are not
paid in full (either in cash or in kind as provided for herein) with respect to
all shares of Series A Preferred Stock on any two consecutive Dividend Payment
Dates.

         (d) Board of Directors. The Corporation's Board of Directors shall
consist of (a) prior to the issuance of the Corporation's Series B Preferred,
not more than eight (8) members, or ten (10) members if a Dividend Default shall
have occurred entitling the holders of the Series A Preferred Shares to appoint
two additional directors, and (b) after the issuance of the Corporation's Series
B Preferred, not more than nine (9) members, or eleven (11) members if a
dividend default shall occurred entitling the holders of the Series B Preferred
to appoint two additional directors (a "Series B Dividend Default"), or thirteen
(13) members if a Dividend Default and a Series B Dividend Default shall have
occurred. If at any time a majority of the holders of Series A Preferred Stock
has not appointed or nominated for election at least one of the members of the
Corporation's Board of Directors and shares of Series A Preferred Stock remain
outstanding, then the holders of Series A Preferred Stock shall be entitled to
appoint one

                                       7
<PAGE>   8

observer to the Corporation's Board of Directors (the "Observer"). Such Observer
shall have the right to attend, and receive all materials distributed for or at,
all meetings (telephone and otherwise) of the Board of Directors (including
committees thereof) and shall be entitled to the same rights and privileges as
directors of the Corporation, except that such Observer shall not be entitled to
vote on matters presented to or discussed by the Board of Directors. The
Observer will receive compensation from the Corporation for his services as
observer on an equal basis with the directors of the Corporation and shall be
entitled to be reimbursed by the Corporation for all reasonable costs and
expenses incurred in connection with his participation in meetings or other
activities of the Board of Directors. The holders of the Series A Preferred
Stock will use commercially reasonable efforts to cause the Observer to keep all
information provided to the Observer in connection with all meetings of the
Board of Directors confidential prior to its becoming public, except that the
Observer shall be permitted to disclose such information (i) to officers,
directors, employees, representatives, agents, auditors, accountants,
consultants, advisors, lawyers and affiliates of the holders of the Series A
Preferred Stock in the ordinary course of business who have been made aware of
the confidential nature of the information; (ii) to prospective assignees and
their respective directors, employees, agents and representatives who have
agreed in writing to become subject to this confidentiality provision, (iii) as
required by applicable law, or pursuant to subpoenas or other legal process, or
as requested by governmental agencies and examiners; (iv) to the extent such
information (A) becomes available to the Observer other than as a result of a
breach of this provision or (B) becomes available to the Observer on a
non-confidential basis, or (v) to the extent the Corporation shall have
consented to such disclosure in writing.

7.       Conversion Rights.

         (a) Voluntary Conversion. At a holder's election, the Series A
Preferred Stock may be converted, in whole or in part, to fully paid and
nonassessable shares of Common Stock at a conversion price of $1.25 per share,
as adjusted in accordance with Section 8 hereof (the "Conversion Price"). The
number of shares of the Common Stock into which a share of Series A Preferred
Stock is convertible shall be equal to the Liquidation Preference (as defined in
Section 7(d)) of such share of Series A Preferred Stock divided by the
Conversion Price in effect on the Voluntary Conversion Date (as hereinafter
defined).

         (b) Exercise of Voluntary Conversion Privilege. In order to exercise
the voluntary conversion privilege, the registered holder of any share of Series
A Preferred Stock to be converted shall surrender the certificate representing
such share at the office of the Corporation and shall give written notice (the
"Conversion Notice") to the Corporation at said office that the holder elects to
convert such shares of Series A Preferred Stock or a specified portion thereof
into shares of Common Stock. As promptly as practicable after the receipt of the
Conversion Notice (such date of receipt, the "Voluntary Conversion Date") and
the surrender of such shares of Series A Preferred Stock, the Corporation shall
issue and deliver to the registered holder of such shares of Series A Preferred
Stock, at the address set forth on the Conversion Notice, a certificate or
certificates for the number of full shares of Common Stock, as applicable,
issuable upon the conversion of such shares of Series A Preferred Stock (or a
specified portion thereof) and cash in respect of any fraction of a share
issuable upon such conversion. Such conversion shall be deemed to have been
effected at the close of business on the Voluntary Conversion Date, and the
holder of such shares of Series A Preferred Stock shall be deemed to have become
the

                                       8
<PAGE>   9

holder of record of the shares of Common Stock represented thereby as of the
Voluntary Conversion Date.

         (c) Mandatory Conversion. In the event the mean average traded price of
the Corporation's Common Stock on each of the immediately preceding 20
consecutive Trading Days (as hereinafter defined) is equal to or greater than
$2.00 per share (as adjusted for any subdivision or combination of outstanding
Common Stock) (a "Mandatory Conversion Event"), the Corporation may elect to
convert all, but not less than all, of the outstanding shares of Series A
Preferred Stock to fully paid and nonassessable shares of Common Stock at the
Conversion Price (as defined in Section 7(a)). In order to effect the mandatory
conversion of the Series A Preferred Stock, the Corporation shall mail notice
(the "Mandatory Conversion Notice") to all holders of outstanding shares of
Series A Preferred Stock within 10 days after the occurrence of a Mandatory
Conversion Event, specifying a date (which must be at least 10 but not more than
30 days after the date of such notice (the "Mandatory Conversion Date"). The
number of shares of the Common Stock into which a share of Series A Preferred
Stock is convertible shall be equal to the quotient of the Liquidation
Preference (as defined in Section 7(d)) of such share of Series A Preferred
Stock divided by the Conversion Price.

                  On or before the Mandatory Conversion Date, each holder of
Series A Preferred Stock shall surrender the certificate(s) representing the
Series A Preferred Stock to the Corporation at said office, accompanied by a
written statement setting forth the name or names (with address) in which the
certificate or certificates for shares of Common Stock shall be issued. As
promptly as practicable thereafter, the Corporation shall issue and deliver to
the registered holder of such shares of Series A Preferred Stock, at the address
specified by the holder, a certificate or certificates for the full shares of
Common Stock issuable upon mandatory conversion pursuant to this Section 7(c).

                  For purposes of this Section 7(c), "Trading Day" shall mean
(1) (x) if the Common Stock is listed on at least one stock exchange, a day on
which there is trading on the principal stock exchange on which the Common Stock
is listed, (y) if the Common Stock is not listed on a stock exchange, but sale
prices of the Common Stock are reported on an automated quotation system, a day
on which trading is reported on the principal automated quotation system on
which sales of the Common Stock are reported, or (z) if the Common Stock is not
listed on a stock exchange and sale prices of the Common Stock are not reported
on an automated quotation system, a day on which quotations are reported by
National Quotation Bureau Incorporated, and (2) the volume of shares of Common
Stock sold on such day is 50,000 shares (as adjusted in the same manner and
proportion as the adjustment of a Stock Unit in accordance with Section 8(a)
hereof) or more. For purposes of this Section 7(c), Trading Days shall not be
deemed to be "consecutive" if there shall occur any day which meets the criteria
set forth in clause (1) of the preceding sentence but does not meet the criteria
set forth in clause (2) thereof between one Trading Day and the next Trading
Day.

         (d) As used in this Section 7, the term "Liquidation Preference" shall
mean the sum of (i) $1,000 per share of Series A Preferred Stock and (ii)
accrued and unpaid dividends on the applicable Conversion Date calculated in
accordance with Sections 2(a) and (b) hereof.

                                       9
<PAGE>   10

         (e) Fractional Shares. The Corporation shall not be required to issue
fractional shares of Common Stock upon the conversion of shares of the Series A
Preferred Stock. If shares of the Series A Preferred Stock (or specified
portions thereof, if applicable) shall be presented for conversion which would
result in the issuance of any fraction of a share of Common Stock, the
Corporation may instead pay an amount in cash equal to the Conversion Price on
the day immediately preceding the Voluntary Conversion Date or the Mandatory
Conversion Date, as the case may be, multiplied by such fraction.

         (f) Reservation of Shares. The Corporation shall at all times reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Stock, for the purpose of enabling it to set aside shares to
satisfy any obligation to issue shares of Common Stock upon conversion of Series
A Preferred Stock, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series A Preferred
Stock. The shares of Common Stock issuable upon conversion of shares of Series A
Preferred Stock shall, upon issuance, be duly authorized, validly issued, fully
paid, nonassessable, free of preemptive rights and free and clear of all liens,
charges, security interests and other encumbrances whatsoever.

8.       Adjustment of Number of Shares Issuable Upon Conversion and the
Conversion Price. The number of shares issuable upon conversion and the
Conversion Price (and each component thereof) are subject to adjustment from
time to time as set forth in this Section 8 with respect to any fact or event
described herein occurring after the date hereof. Anything contained in this
Section 8 notwithstanding, any adjustment made pursuant to any provision of this
Section 8 shall be made without duplication of an adjustment otherwise required
by and made pursuant to another provision of this Section 8 on account of the
same facts or events.

         (a) Definitions. For purposes of this Section 8, the following terms
shall have the meanings ascribed to such terms below:

                "5-DAY AVERAGE PRICE" per share of Common Stock, for purposes of
            any provision herein at the date specified in such provision, shall
            mean the average closing price of the Common Stock on the securities
            exchange or other national market system on which the Common Stock
            is then traded over the 5-trading day period immediately prior to
            such date or, if the Common Stock is not then traded on a securities
            exchange or national market system, the average of the bid and asked
            prices on the over-the-counter market on which the Common Stock is
            then traded as of the close of such market over the 5-trading day
            period immediately prior to such date.

                "30-DAY AVERAGE PRICE" per share of Common Stock, for purposes
            of any provision herein at the date specified in such provision,
            shall mean the average closing price of the Common Stock on the
            securities exchange or other national market system on which the
            Common Stock is then listed over the 30-trading day period
            immediately prior to such date or, if the Common Stock is not then
            traded on a securities exchange or national market system, the
            average of the bid and asked prices on the over-the-counter market
            on which the Common Stock is then traded as of the close of such
            market over the 30-trading day period immediately prior to such
            date.

                                       10
<PAGE>   11

                "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
            Common Stock issued by the Corporation after the Closing Date other
            than (i) any shares of Common Stock issued pursuant to the
            outstanding warrants and options listed on Attachment 1, (ii) shares
            of Common Stock issued pursuant to options to purchase Common Stock
            issued pursuant to the Corporation's 1999 Stock Incentive Plan,
            including those options issued to date and listed on Attachment 1,
            in an aggregate amount not to exceed 5,000,000 shares, (iii) any
            shares of Common Stock issued upon the exercise of options granted
            to Juneau Exploration Company, LLC ("JEX") pursuant to the
            Corporation's exploration agreement with JEX dated September 1,
            1999, as amended, (iv) any shares of Common Stock issued to Glen
            Dillon in a number not to exceed 1,250 per month, (v) any shares of
            Common Stock issued upon conversion of Series A Preferred Stock
            issued to the Trust Company of the West, in its capacities as
            Investment Manager and Custodian ("TCW"), (vi) any shares of Common
            Stock issued to William Gibbons, the Corporation's treasurer and
            assistant secretary, in a number not to exceed 2,000 shares per
            month through December 31, 2000, (vii) any shares of Common Stock
            issued pursuant to warrants to purchase up to 125,000 shares of
            Common Stock issued to Fairfield Industries Incorporated on or prior
            to the Closing Date, (viii) any shares of Common Stock issued
            pursuant to warrants to purchase up to 125,000 shares of Common
            Stock issued to JEX on or prior to the Closing Date, (ix) any shares
            of Common Stock issued pursuant to warrants to purchase up to
            250,000 shares of Common Stock issued to the Southern Ute Indian
            Tribe doing business as the Southern Ute Indian Tribe Growth Fund
            ("SUIT") on or prior to the Closing Date, (x) any shares of Common
            Stock issued pursuant to warrants to purchase up to 500,000 shares
            of Common Stock issued to TCW on or prior to the Closing Date, (xi)
            any shares of Common Stock issued pursuant to options granted to
            SUIT on a quarterly basis to the same extent such options are
            granted to the Corporation's outside directors under the 1999 Stock
            Incentive Plan, (xii) any shares of Common Stock issued pursuant to
            options granted to TCW on a quarterly basis to the same extent such
            options are granted to the Corporation's outside directors under the
            1999 Stock Incentive Plan, (xiii) any shares of Common Stock issued
            upon conversion of the Corporation's Series B Preferred, at a
            conversion price per share of not less than $2.00, which Series B
            Preferred shall be designated, issued and sold prior to June 30,
            2001 for an aggregate purchase price not to exceed $7,500,000, and
            (xiv) any shares of Common Stock issued pursuant to a 401(k) or
            other qualified retirement plan for officers, directors or employees
            of the Corporation and its affiliates in an aggregate amount not to
            exceed 100,000 shares.

                "APPRAISED VALUE" shall mean the fair market value of all
            outstanding Common Stock, as determined by a written appraisal (the
            "APPRAISAL") prepared by a national or major regional investment
            bank acceptable to the Board of Directors of the Corporation and the
            holders of the Series A Preferred Stock. "Fair market value" is
            defined for this purpose as the price in a single transaction
            determined on a going-concern basis that would be agreed upon by the
            most

                                       11
<PAGE>   12

            likely hypothetical buyer for 100% of the equity capital of the
            Corporation. In the event that the Corporation and the holders of
            the Series A Preferred Stock cannot, in good faith, agree upon an
            investment bank, then the Corporation, on the one hand, and the
            holders of the Series A Preferred Stock, on the other hand, shall
            each select an investment bank, the two investment banks so selected
            shall select a third investment bank who shall be directed to
            prepare the Appraisal and the term Appraised Value shall mean the
            appraised value set forth in the Appraisal prepared in accordance
            with this definition. The Corporation shall pay for the cost of any
            such Appraisal.

                "CLOSING DATE" shall mean August 24, 2000.

                "CONVERTIBLE SECURITIES" shall mean evidences of indebtedness,
            shares of stock or other securities which are convertible or
            exchangeable for Additional Shares of Common Stock, either
            immediately or upon the arrival of a specified date or the happening
            of a specified event.

                "CURRENT CONVERSION PRICE" per share of Common Stock, for the
            purpose of any provision herein at the date herein specified, shall
            mean the amount equal to the quotient resulting from dividing the
            Conversion Price per Stock Unit in effect on such date by the number
            of shares (including any fractional share) of Common Stock
            comprising a Stock Unit on such date.

                "CURRENT MARKET PRICE" per share of Common Stock for the
            purposes of any provision herein at a date herein specified, shall
            mean the greater of (i) the 30-Day Average Price of the Common Stock
            or (ii) the 5-Day Average Price of the Common Stock; provided, that
            if the Current Market Price per share of Common Stock cannot be
            ascertained by such methods, then the Current Market Price per share
            of Common Stock shall be deemed to be the greater of (i) the net
            book value per share of Common Stock, determined in accordance with
            generally accepted accounting principles, or (ii) the fair value per
            share of Common Stock determined pursuant to the Appraised Value.

                "STOCK UNIT" shall mean one share of Common Stock, as such
            Common Stock was constituted on the date of original issue of the
            Series A Preferred Stock and thereafter shall mean such number of
            shares (including any fractional shares) of Common Stock as shall
            result from the adjustments specified in this Section 8.

         (b) Stock Dividends, Subdivisions and Combinations. In case at any time
or from time to time the Corporation shall:

             (i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Common Stock, or

             (ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or

                                       12
<PAGE>   13

             (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,

then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any event described in clauses (i) through (iii) above
shall be adjusted so as to consist of the number of shares of Common Stock which
a record holder of the number of shares of Common Stock constituting a Stock
Unit immediately prior to the happening of such event would own or be entitled
to receive after the happening of event described in clauses (i) through (iii)
above.

         (c) Certain Other Dividends and Distributions. In case at any time or
from time to time the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any dividend or other
distribution of:

             (i) cash (other than a cash distribution made as a dividend and
payable out of earnings or earned surplus legally available for the payment of
dividends under the laws of the jurisdiction of incorporation of the
Corporation, to the extent, but only to the extent, that the aggregate of all
such dividends paid or declared after the date hereof, does not exceed the
consolidated net income of the Corporation and its consolidated subsidiaries
earned subsequent to the date hereof determined in accordance with generally
accepted accounting principles), or

             (ii) any evidence of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of Common
Stock) or any other securities or property of any nature whatsoever (other than
cash and other than Convertible Securities or Additional Shares of Common
Stock), or

             (iii) any warrants, options or other rights to subscribe for or
purchase (x) any evidences of its indebtedness (other than Convertible
Securities), (y) any shares of its stock (other than Additional Shares of Common
Stock) or (z) any other securities or property of any nature whatsoever (other
than cash and other than Convertible Securities or Additional Shares of Common
Stock),

then the number of shares of Common Stock thereafter comprising a Stock Unit
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (A) the numerator of which shall be the Current Market Price per
share of Common Stock at the date of taking such record, and (B) the denominator
of which shall be such Current Market Price per share of Common Stock minus the
portion applicable to one share of Common Stock of any such cash so
distributable (if any) and of the fair value of any and all such evidences of
indebtedness, shares of stock, other securities or property, or warrants,
options or other subscription or purchase rights, so distributable (if any).
Such fair value shall be determined pursuant to the Valuation Procedure. The
"Valuation Procedure" is a determination of fair value of any property made in
good faith by the Board of Directors of the Corporation; provided, that if the
holders of a majority of the Series A Preferred Stock object to such
determination within ten days of receipt of written notification thereof, then
the fair value of such property shall be determined in good faith by a
recognized national or major regional investment bank selected the Board of
Directors, which investment bank is not reasonably objected to by the holders of
a majority of the Series A Preferred Stock.

                                       13
<PAGE>   14

The fees and expenses of such investment bank shall be paid by the Corporation.
A reclassification (other than a change in par value) of the Common Stock into
shares of Common Stock and shares of any other class of stock shall be deemed a
distribution by the Corporation to the holders of its Common Stock of such
shares of such other class of stock within the meaning of this Section 8(c) and,
if the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such reclassification,
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 8(b).

         (d) Issuance of Additional Shares of Common Stock. In case at any time
or from time to time the Corporation shall (except as hereinafter provided)
issue, whether in connection with the merger of a corporation into the
Corporation or otherwise, any Additional Shares of Common Stock for a
consideration per share less than the greater of (i) the Current Conversion
Price or (ii) the Current Market Price per share of Common Stock, then the
number of shares of Common Stock thereafter comprising a Stock Unit shall be
adjusted to be the greater of (A) that number determined by multiplying the
number of shares of Common Stock comprising a Stock Unit immediately prior to
such adjustment by a fraction (i) the numerator of which shall be the Current
Conversion Price per share of Common Stock, and (ii) the denominator of which
shall be the consideration per share received by the Corporation for such
Additional Shares of Common Stock or (B) that number determined by multiplying
the number of shares of Common Stock comprising a Stock Unit immediately prior
to such adjustment by a fraction (x) the numerator of which shall be the number
of shares of Common Stock outstanding, plus the number of such Additional Shares
of Common Stock so issued, and (y) the denominator of which shall be the number
of shares of Common Stock outstanding, plus the number of shares of Common Stock
which the aggregate consideration for the total number of such Additional Shares
of Common Stock would purchase at the greater of the Current Conversion Price
and the Current Market Price per share of Common Stock. For purposes of this
Section 8(d), the date as of which the Current Market Price per share of Common
Stock shall be computed shall be the earlier of (i) the date on which the
Corporation shall enter into a firm contract for the issuance of such Additional
Shares of Common Stock, or (ii) the date of actual issuance of such Additional
Shares of Common Stock. The provisions of this Section 8(d) shall not apply to
any issuance of Additional Shares of Common Stock for which an adjustment is
provided under Section 8(b). No adjustment of the number of shares of Common
Stock comprising a Stock Unit shall be made under this Section 8(d) upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any warrants, options or other subscription or purchase rights
or pursuant to the exercise of any conversion or exchange rights in any
Convertible Securities, if any such adjustment shall previously have been made
upon the issuance of such warrants, options or other rights or upon the issuance
of such Convertible Securities (or upon the issuance of any warrants, options or
other rights therefor) pursuant to Section 8(e) or Section 8(f).

         (e) Issuance of Warrants, Options or Other Rights. In case at any time
or from time to time the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a distribution of, or
shall otherwise issue, any warrants, options or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible Securities and
the consideration per share for which Additional Shares of Common Stock may at
any time thereafter be issuable pursuant to such warrants, options or other
rights or pursuant to the terms of such Convertible Securities shall be less
than the greater of (A) the Current

                                       14
<PAGE>   15

Conversion Price per share of Common Stock or (B) the Current Market Price per
share of Common Stock, then the number of shares of Common Stock thereafter
comprising a Stock Unit shall be adjusted to be the greater of those numbers
determined pursuant to the first sentence of Section 8(d). All adjustments made
pursuant to this Section 8(e) shall be made on the basis that (i) the maximum
number of Additional Shares of Common Stock issuable pursuant to all such
warrants, options or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
as of the date specified in the last sentence of this Section 8(e), (ii) the
aggregate consideration for such maximum number of Additional Shares of Common
Stock shall be deemed to be the minimum consideration received and receivable by
the Corporation for the issuance of such Additional Shares of Common Stock
pursuant to such warrants, options or other rights or pursuant to the terms of
such Convertible Securities and (iii) the consideration per share received by
the Corporation for such Additional Shares of Common Stock shall be that number
determined by dividing (x) the aggregate consideration for such maximum number
of Additional Shares of Common Stock (determined as set forth in clause (ii) of
this sentence) by (y) the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants, options or other rights or necessary to
effect the conversion or exchange of all such Convertible Securities (determined
as set forth in clause (i) of this sentence). For purposes of this Section 8(e),
the computation date for subclause (i) above and as of which the Current Market
Price and the Current Conversion Price per share of Common Stock shall be
computed shall be the earliest of (A) the date on which the Corporation shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any such warrants, options or other rights, (B) the date on
which the Corporation shall enter into a firm contract for the issuance of such
warrants, options or other rights, and (C) the date of actual issuance of such
warrants, options or other rights.

         (f) Issuance of Convertible Securities. In case at any time or from
time to time the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a distribution of, or shall
otherwise issue, any Convertible Securities and the consideration per share for
which Additional Shares of Common Stock may at any time thereafter be issuable
pursuant to the terms of such Convertible Securities shall be less than the
greater of (A) the Current Conversion Price per share of Common Stock or (B) the
Current Market Price per share of Common Stock, then the number of shares of
Common Stock thereafter comprising a Stock Unit shall be adjusted to be the
greater of those numbers determined pursuant to the first sentence of Section
8(d). All adjustments made pursuant to this Section 8(f) shall be made on the
basis that (i) the maximum number of Additional Shares of Common Stock necessary
to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued as of the computation date specified in the
penultimate sentence of this Section 8(f), (ii) the aggregate consideration for
such maximum number of Additional Shares of Common Stock shall be deemed to be
the minimum consideration received and receivable by the Corporation for the
issuance of such Additional Shares of Common Stock pursuant to the terms of such
Convertible Securities and (iii) the consideration per share received by the
Corporation for such Additional Shares of Common Stock shall be that number
determined by dividing (x) the aggregate consideration for such maximum number
of Additional Shares of Common Stock (determined as set forth in clause (ii) of
this sentence) by (y) the maximum number of Additional Shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities (determined as set forth in clause (i) of this sentence). For
purposes of this Section 8(f), the computation date for clause (i) above and as
of

                                       15
<PAGE>   16

which the Current Market Price and the Current Conversion Price per share of
Common Stock shall be computed shall be the earliest of (A) the date on which
the Corporation shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any such Convertible Securities, (B) the
date on which the Corporation shall enter into a firm contract for the issuance
of such Convertible Securities, and (C) the date of actual issuance of such
Convertible Securities. No adjustment of the number of shares of Common Stock
comprising a Stock Unit shall be made under this Section 8(f) upon the issuance
of any Convertible Securities which are issued pursuant to the exercise of any
warrants, options or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants,
options or other rights pursuant to Section 8(e).

         (g) Superseding Adjustment of Stock Unit. If, at any time after any
adjustment of the number of shares of Common Stock comprising a Stock Unit shall
have been made pursuant to the foregoing Section 8(e) or Section (f) on the
basis of the issuance of warrants, options or other rights or the issuance of
other Convertible Securities, or after any new adjustment of the number of
shares of Common Stock comprising a Stock Unit shall have been made pursuant to
this Section 8(g),

                  (i) such warrants, options or rights or the right of
conversion or exchange in such other Convertible Securities shall expire, and a
portion or all of such warrants, options or rights, or the right of conversion
or exchange in respect of a portion of such other Convertible Securities, as the
case may be, shall not have been exercised, or

                  (ii) the consideration per share for which Additional Shares
of Common Stock are issuable pursuant to such warrants, options or rights or the
terms of such other Convertible Securities, shall be increased solely by virtue
of provisions therein contained for an automatic increase in such consideration
per share upon the arrival of a specified date or the happening of a specified
event,

such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such warrants, options
or rights or other Convertible Securities on the basis of:

                  (iii) treating the number of Additional Shares of Common
Stock, if any, theretofore actually issued or issuable pursuant to the previous
exercise of such warrants, options or rights or such right of conversion or
exchange, as having been issued on the date or dates of such issuance as
determined for purposes of such previous adjustment and for the consideration
actually received and receivable therefor, and

                  (iv) treating any such warrants, options or rights or any such
other Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such expiration or of such
increase of the consideration per share for which such Additional Shares of
Common Stock are issuable under such warrants, options or rights or other
Convertible Securities,

                                       16
<PAGE>   17

and, if and to the extent called for by the foregoing provisions of this Section
8 on the basis aforesaid, a new adjustment of the number of shares of Common
Stock comprising a Stock Unit shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.

         (h) Other Provisions Applicable to Adjustments Under this Section 8.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock comprising a Stock Unit hereinbefore provided
for in this Section 8:

             (i) Treasury Stock. The sale or other disposition of any issued
shares of Common Stock owned or held by or for the account of the Corporation
shall be deemed an issuance thereof for purposes of this Section 8.

             (ii) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any warrants,
options or other rights to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities shall be issued solely for cash
consideration, the consideration received by the Corporation therefor shall be
deemed to be the amount of cash received by the Corporation therefor, or, if
such Additional Shares of Common Stock or Convertible Securities are offered by
the Corporation for subscription, the subscription price, or, if such Additional
Shares of Common Stock or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of any compensation,
discounts or expenses paid or incurred by the Corporation for and in the
underwriting of, or otherwise in connection with, the issue thereof. To the
extent that such issuance shall be for a consideration other than solely for
cash, then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at the
time of such issuance as determined pursuant to the Valuation Procedure. The
consideration for any Additional Shares of Common Stock issuable pursuant to any
warrants, options or other rights to subscribe for or purchase the same shall be
the consideration received or receivable by the Corporation for issuing such
warrant, options or other rights, plus the additional consideration payable to
the Corporation upon the exercise of such warrants, options or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration received or
receivable by the Corporation for issuing any warrants, options or other rights
to subscribe for or purchase such Convertible Securities (if any), plus the
consideration paid or payable to the Corporation in respect of the subscription
for or purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the exercise of the right
of conversion or exchange in such Convertible Securities.

             (iii) When Adjustments To Be Made. The adjustments required by the
preceding Sections 8(b) through (h) inclusive shall be made whenever and as
often as any specified event requiring an adjustment shall occur. For the
purpose of any adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence.

                                       17
<PAGE>   18

             (iv) Fractional Interests. In computing adjustments under this
Section 8, fractional interests in Common Stock shall be taken into account to
the nearest 1/100th of a share.

             (v) When Adjustment Not Required. If the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution thereof to shareholders, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.

         (i) Merger, Consolidation or Disposition of Assets. In case the
Corporation shall merge or consolidate into another corporation, or shall sell,
transfer or otherwise dispose of all or substantially all of its property,
assets or business to another corporation and pursuant to the terms of such
merger, consolidation or disposition, shares of common stock of the successor or
acquiring corporation are to be received by or distributed to the holders of
Common Stock of the Corporation, then each holder of Series A Preferred Stock
shall have the right thereafter to receive Stock Units each comprising the
number of shares of common stock of the successor or acquiring corporation
receivable upon or as a result of such merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock comprising a Stock
Unit immediately prior to such event. If, pursuant to the terms of such merger,
consolidation or disposition of assets, any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants, options or
other subscription or purchase rights) are to be received by or distributed to
the holders of Common Stock of the Corporation in addition to common stock of
the successor or acquiring corporation, there shall be an adjustment in the
number of shares of Common Stock thereafter comprising a Stock Unit to that
number determined by multiplying the number of shares of Common Stock comprising
a Stock Unit immediately prior to such adjustment by a fraction (x) the
numerator of which shall be the Current Market Price per share of Common Stock
at the date of such merger, consolidation or disposition, and (y) the
denominator of which shall be such Current Market Price per share minus the
portion applicable to one share of Common Stock of any cash so distributed and
of the fair value of any and all such shares of stock, securities or other
property. Such fair value shall be determined pursuant to the Valuation
Procedure. In case of any such merger, consolidation or disposition of assets,
the successor or acquiring corporation shall expressly assume the due and
punctual observance and performance of each and every covenant and condition
contained herein to be performed and observed by the Corporation and all of the
obligations and liabilities hereunder and thereunder, subject to such
modification as shall be necessary to provide for adjustments of Stock Units
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 8. For the purposes of this Section 8 "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption. The
foregoing provisions of this Section 8(i) shall similarly apply to successive
mergers, consolidations or dispositions of assets.

         (j) Other Action Affecting Common Stock. In case at any time or from
time to time the Corporation shall take any action affecting its Common Stock,
other than an action described

                                       18
<PAGE>   19

in any of the foregoing Sections 8(b) to Section 8(i), inclusive, of this
Section 8 and the actions described in clauses (i) through (xiv) of the
definition of Additional Shares of Common Stock, then, unless in the reasonable
opinion of the Board of Directors of the Corporation such action will not have a
materially adverse effect upon the rights of the holders of the Series A
Preferred Stock, the number of shares of Common Stock or other stock comprising
a Stock Unit, or the Conversion Price thereof, shall be adjusted in such manner
and at such time as the Board of Directors of the Corporation may in good faith
determine to be equitable in the circumstances.

         (k) No Adjustments for Certain Transactions. Notwithstanding anything
to the contrary contained herein, the number of shares of Common Stock
comprising a Stock Unit and the Current Conversion Price per Stock Unit shall
not be adjusted, nor be subject to adjustment, on account of the granting of any
rights under a phantom stock plan, stock appreciation rights plan or other
deferred compensation plan to officers, directors or employees of the
Corporation or its affiliates, if (i) no shares of Common Stock are issued or
required to be issued under any such plan and (ii) the only consideration paid
or payable to any participant in such plan is cash.

9.       Notice to Holders of Series A Preferred Stock.

         (a) Notice of Adjustment of Stock Unit or Current Conversion Price.
Whenever the number of shares of Common Stock comprising a Stock Unit or the
Current Conversion Price per Stock Unit shall be adjusted pursuant to Section 8,
the Corporation shall forthwith obtain a certificate signed by the president of
the Corporation and the principal financial officer of the Corporation, setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a statement of the fair
value, as determined by the Board of Directors of the Corporation, of any
evidences of indebtedness, shares of stock, other securities or property or
warrants, options or other subscription or purchase rights referred to in
Section 8(c), Section 8(h)(ii) or Section 8(i)) and specifying the number of
shares of Common Stock comprising a Stock Unit and (if such adjustment was made
pursuant to Section 8(i) or Section 8(j)) describing the number and kind of any
other shares of stock comprising a Stock Unit, and any change in the Current
Conversion Price thereof after giving effect to such adjustment or change. The
Corporation shall promptly, and in any case within 10 days after the making of
such adjustment, cause a signed copy of such certificate to be delivered to each
holder of Series A Preferred Stock. The Corporation shall keep at its office or
agency copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any holder of Series A
Preferred Stock or any prospective purchaser of Series A Preferred Stock
designated by a holder.

         (b) Notice of Certain Corporate Action. In case the Corporation shall
propose (i) to pay any dividend payable in cash or in stock of any class to the
holders of its Common Stock or to make any other distribution to the holders of
its Common Stock, or (ii) to offer to the holders of its Common Stock rights to
subscribe for or to purchase any Additional Shares of Common Stock or shares of
stock of any class or any other securities, rights or options, or (iii) to
effect any reclassification of its Common Stock (other than a reclassification
involving only the subdivision or combination of outstanding shares of Common
Stock), or (iv) to effect any capital reorganization, or (v) to effect any
consolidation, merger or sale, change to the Corporation's charter or bylaws,
transfer or other disposition of all or substantially all of its property,
assets or business, or (vi) to effect the liquidation, dissolution or winding up
of the Corporation, then in

                                       19
<PAGE>   20

each such case, the Corporation shall give to each holder of Series A Preferred
Stock, a notice, certified by the president of the Corporation and the principal
financial officer of the Corporation, of such proposed action, which shall
specify the date on which a record is to be taken for the purposes of such stock
dividend, distribution or rights, or the date on which such reclassification,
reorganization, consolidation, merger, sale, change to the Corporation's charter
or bylaws, transfer, disposition, liquidation, dissolution, or winding up is to
take place and the date of participation therein by the holders of Common Stock,
if any such date is to be fixed, and shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action on the Common Stock and the number and kind of any other shares of stock
which will comprise a Stock Unit, and the Current Conversion Price thereof,
after giving effect to any adjustment which will be required as a result of such
action. Such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty days prior to the record date for
determining holders of the Common Stock for purposes of such action, and in the
case of any other such action, at least thirty days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.

10.      No Impairment. Other than in connection with the amendment of its
Articles of Incorporation approved by the requisite number of stockholders, the
Corporation will not, through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but will at all times in good
faith assist in the carrying out of all the provisions of this Certificate and
in the taking of all action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Series A Preferred Stock
against impairment. Without limiting the generality of the foregoing, the
Corporation (i) will not permit the par value of any shares of stock at the time
receivable upon the conversion of the Series A Preferred Stock to exceed the
Current Conversion Price then in effect, (ii) will take all such action as may
be necessary or appropriate in order that the corporation may validly and
legally issue fully paid non-assessable shares of stock on the conversion of the
Series A Preferred Stock, and (iii) will not issue any Additional Shares of
Common Stock or Convertible Securities or take any action which results in any
adjustment of the Current Conversion Price or the number of shares comprising a
Stock Unit if the total number of shares of Common Stock issuable after such
issuance or action upon the conversion or payment of all outstanding dividends
on, all of the then outstanding shares of Series A Preferred Stock will exceed
the total number of shares of Common Stock then authorized by the Corporation's
Articles of Incorporation and available for the purpose of issue upon such
conversion or payment of such dividend.

                                       20

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