Document:

Exhibit 10.2

 

INDEMNIFICATION
AGREEMENT

(TGC
Industries, Inc.)

 

THIS AGREEMENT is made to be effective the 26th day of August, 2005,
between TGC Industries, Inc.,
a Texas corporation (the “Company”),
and                            
(“Indemnitee”).

 

Competent and experienced persons are becoming more reluctant to serve
as directors and/or officers of corporations unless they are provided with
adequate protection against claims and actions against them for their
activities on behalf or at the request of such corporations, generally through
insurance and/or indemnification.

 

Uncertainties in the interpretations of the statutes and regulations,
laws, and public policies relating to indemnification of corporate directors
and officers are such as to make adequate, reliable assessment of the risks to
which directors and officers of such corporations may be exposed difficult,
particularly in light of the proliferation of lawsuits against directors and
officers generally.

 

The Board of Directors of the Company, based upon its business
experience, has concluded that the continuation of present trends in litigation
against corporate directors and officers will inevitably make it more difficult
for the Company to attract and retain directors and officers of the highest degree
of competence committed to the active and effective direction and supervision
of the business and affairs of the Company and its subsidiaries and affiliates
and the operation of its and their facilities. In fact, the Board deems such
potential adverse consequences to be so detrimental to the best interests of
the Company that it has concluded that the Company should act to provide its
directors and officers with enhanced protection against inordinate risks
attendant on their positions in order to assure that the most capable persons
otherwise available will be attracted to, or will remain in, such positions. In
such connection, such directors have further concluded that it is not only
reasonable and prudent but necessary for the Company to obligate itself
contractually to indemnify, to the fullest extent permitted by applicable law,
financial responsibility for expenses and liabilities which might be incurred
by such individuals in connection with claims lodged against them for their
decisions and actions in such capacities.

 

Article 2.02-1 of the Texas Business Corporation Act of the State
of Texas, under which law the Company is organized, empowers a corporation
organized in Texas to indemnify persons who serve as directors and/or officers
of the corporation, or persons who serve at the request of the corporation as
directors and/or officers of an affiliated corporation, and further empowers a
corporation to “purchase and maintain
insurance” on behalf of any such person “against any liability asserted against him and incurred by him in such
a capacity or arising out of his status as such a person, whether or not the
corporation would have the power to indemnify him against that liability under
this [Article].”

 

The Articles of Incorporation and Bylaws of the Company permit
indemnification to the fullest extent permitted by applicable law.

 

 

The Company is aware of the fact that it currently has, and from time
to time in the future may have, directors and officers insurance coverage.  However, the Company is also aware of the
fact that, even though such insurance coverage may be in effect, the current
insurance policy has, and any future insurance policies are likely to have,
significant exclusions and limitations that leave the insureds personally exposed.

 

The Company desires to have the Indemnitee serve or continue to serve
as a director and/or officer of the Company, and/or as a director, officer,
employee, partner, trustee, agent, and/or fiduciary of such other corporations,
partnerships, joint ventures, employee benefit plans, trusts, and/or other
enterprises (herein referred to as “Company Affiliate”) of which he has been or
is serving, or will serve on behalf of or at the request of or for the
convenience of, or to represent the interests of the Company, free from undue
concern for unpredictable, inappropriate, or unreasonable claims for damages by
reason of his being, or having been, a director and/or officer of the Company,
and/or a director, officer, employee, partner, trustee, agent, and/or fiduciary
of a Company Affiliate, or by reason of his decisions or actions on their
behalf.

 

The Indemnitee is willing to serve, or to continue to serve, or to take
on additional service for, the Company and/or the Company Affiliate in such
aforesaid capacities on the condition that he be indemnified as provided for
herein.

 

Accordingly, in consideration of the premises and the covenants
contained herein, the Company and the Indemnitee do hereby covenant and agree
as follows:

 

1                                          Services to the Company: The Indemnitee
shall serve or continue to serve as a director and/or officer of the Company
(in the case of a Company officer at the will of the Company or under separate
contract, if any such contract exists or shall hereafter exist), and/or as a
director, and/or officer, or fiduciary of a Company Affiliate, faithfully and
to the best of his ability so long as he is duly elected and qualified in
accordance with the provisions of the Bylaws or other applicable constitutive
documents thereof; provided, however that: (a) the Indemnitee may at any
time and for any reason resign from such position (subject to any contractual
obligations which the Indemnitee has assumed apart from this Agreement); and (b) neither
the Company nor the Company Affiliate will have any obligation under this
Agreement to continue the Indemnitee in any such position.

 

2                                          Right to Indemnification: The Company
shall, except to the extent prohibited by applicable law as then in effect,
indemnify any Indemnitee who is or was involved in any manner (including,
without limitation, as a party or witness), or is threatened to be made so
involved, in any threatened, pending, or completed investigation, claim,
action, suit, or proceeding whether civil, criminal, administrative, or
investigative (including, without limitation, any action, suit, or proceeding
by or in the right of the Company to procure a judgment in its favor) (herein
referred to as a “Proceeding”) by
reason of the fact that such person is or was a director or officer of the
Company, and/or is or was serving at the request of the Company as a director
or officer of any Company affiliate, against all expenses (including attorneys’
fees), judgments, fines, and amounts paid in

 

2

 

settlement actually and reasonably incurred
by such person in connection with such Proceeding; provided, however,
that (except as provided in Paragraph 3.4) the foregoing shall not apply to a
director or officer of the Company with respect to a Proceeding that was
commenced by such director or officer. Such indemnification shall include the
right to receive payment in advance of any expenses incurred by the Indemnitee
in connection with such Proceeding, consistent with the provisions of
applicable law as then in effect.

 

3                                          Advancement of Expenses; Procedures; Presumptions, and
Effect of Certain Proceedings; Remedies:  In furtherance, but not in limitation, of the
foregoing provisions, the following procedures, presumptions, and remedies
shall apply with respect to advancement of expenses and the right to
indemnification hereunder:

 

3.1                                 Advancement of Expenses:  All reasonable expenses incurred by or on
behalf of the Indemnitee in connection with any Proceeding shall, after initial
approval in accordance with Paragraph 3.2, be advanced to the Indemnitee by the
Company within twenty (20) calendar days after the receipt by the Company of a
statement or statements from the Indemnitee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the expenses
incurred by the Indemnitee and, if required by law at the time of such advance,
shall include or be accompanied by an undertaking by or on behalf of the
Indemnitee to repay the amounts advanced if it should ultimately be determined
that the Indemnitee is not entitled to be indemnified against such expenses
hereunder.

 

3.2                                 Procurement for Determination of Entitlement to
Indemnification:

 

3.2.1                        To
obtain indemnification as herein provided, an Indemnitee shall submit to the
President or Secretary of the Company a written request, including such
documentation and information as is reasonably available to the Indemnitee and
reasonably necessary to determine whether and to what extent the Indemnitee is
entitled to indemnification (herein referred to as the “Supporting Documentation”). The
determination of the Indemnitee’s entitlement to indemnification shall be made
not later than sixty (60) calendar days after receipt by the Company of the
written request for Indemnification together with the Supporting Documentation.
The Secretary or President of the Company shall, promptly upon receipt of such
a request for indemnification, advise the Board of Directors in writing that
the Indemnitee has requested indemnification.

 

3.2.2                        The
Indemnitee’s entitlement to indemnification hereunder shall (except as provided
in Subparagraph 3.2.3 below) be determined in

 

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one of the following ways (each of which
shall give effect to the presumptions set forth in Paragraph 3.3): (a) by
a majority vote of the Disinterested Directors (as hereinafter defined) if they
constitute a quorum of the Board of Directors; (b) by a written opinion of
Independent Counsel (as hereinafter defined) if a quorum of the Board of
Directors consisting of Disinterested Directors is not obtainable or, even if
obtainable, a majority of such Disinterested Directors so directs: (c) by
the stockholders of the Company (but only if a majority of the Disinterested
Directors, if they constitute a quorum of the Board of Directors, presents the
issue of entitlement to indemnification to the stockholders for their
determination); or (d) as provided in Paragraph 3.3. In the event that this
Subparagraph 3.2.2 applies, stockholder approval will be deemed to have been
received if the holders of a majority of the Company’s total common stock
outstanding vote in favor of such approval.

 

3.2.3                        Notwithstanding
what is stated above, in the event of a Change in Control (as hereinafter
defined) the Indemnitee’s entitlement to indemnification shall be determined by
a written opinion of Independent Counsel in a written opinion to the Board of
Directors, a copy of which shall be delivered to the Indemnitee. The
Independent Counsel shall be selected by the Indemnitee. In the event the
Company objects to the Independent Counsel so selected, within seven days after
written notice of the selection has been given by the Indemnitee to the
Company, the Company may object to such selection by written notification given
to the Indemnitee. Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirement of “Independent Counsel” as hereafter defined,
and the objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. The Company shall pay any and
all reasonable fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with the performance of his responsibilities
hereunder, and the Company shall pay all reasonable fees and expenses instant
to the implementation of the procedures referred to above. Upon the due
commencement of any judicial proceeding or arbitration pursuant to Subparagraph
3.4.1 hereof, the Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).

 

4

 

3.2.4                        In
the event of a Potential Change in Control (as hereinafter defined), the
Company, upon written request by the Indemnitee, shall create a trust for the
benefit of the Indemnitee and from time to time upon written request of the
Indemnitee shall fund such trust in an amount sufficient to satisfy any and all
expenses which at the time of each such request it is reasonably anticipated
will be incurred in connection with a Proceeding for which the Indemnitee is
entitled to rights of indemnification under Paragraph 2 hereof, and any and all
judgments, fines, penalties, and settlement amounts of any and all proceedings
for which the Indemnitee is entitled to rights of indemnification under
Paragraph 2 from time to time actually paid or claimed, reasonably anticipated,
or proposed to be paid. The amount or amounts to be deposited in the trust
pursuant to the foregoing funding obligation shall be determined by the
Independent Counsel referred to in Subparagraph 3.2.2 above. The terms of the
trust shall provide that upon a Change in Control:  (i) the trust shall not be revoked, or
the principal thereof invaded, without the written consent of the Indemnitee; (ii) the
trustee shall advance, within two (2) business days of a request by the
Indemnitee, any and all expenses to the Indemnitee; (iii) the trust shall
continue to be funded by the Company in accordance with the funding obligations
set forth above; (iv) the trustee shall promptly pay to the Indemnitee all
amounts for which the Indemnitee is entitled to indemnification pursuant to
this Agreement or otherwise; and (v) all unexpended funds in such trust
shall revert to the Company upon a final determination by such Independent
Counsel that the Indemnitee has been fully indemnified under the terms of this
Agreement. The trustee shall be an institutional trustee with a highly regarded
reputation chosen by the Indemnitee. Nothing in this Subparagraph 3.2.4 shall
relieve the Company of any of its obligations under this Agreement. Nothing
contained in this Subparagraph 3.2.4. shall prevent the Board of Directors of
the Company in its discretion at any time and from time to time, upon request
of the Indemnitee, from providing security to the Indemnitee for the Company’s
obligations hereunder through an irrevocable line of credit, funded trust as
described above, or other collateral. Any such security, once provided to the
Indemnitee, may not be revoked or released without the Indemnitee’s prior
written consent.

 

3.3                                 Presumptions and Effect of Certain Proceedings:  Except as otherwise expressly provided
herein, the Indemnitee shall be presumed to be entitled to indemnification
hereunder upon submission of a request for indemnification together with the
Supporting Documentation in accordance with Subparagraph 3.2.1, and thereafter
the Company shall have the burden of proof to overcome that presumption in
reaching a

 

5

 

contrary determination. In any event, if the
person or persons empowered under Paragraph 3.2 to determine entitlement to
indemnification have not been appointed or have not made a determination within
sixty (60) calendar days after receipt by the Company of the request therefor
together with the Supporting Documentation, the Indemnitee shall be deemed to
be entitled to indemnification, and the Indemnitee shall be entitled to such
indemnification unless the Company establishes as provided in the final
sentence of Paragraph 3.4.2 or by written opinion of Independent Counsel that: (a) the
Indemnitee misrepresented or failed to disclose a material fact in making the
request for indemnification or in the Supporting Documentation; or (b) such
indemnification is prohibited by law. The termination of any Proceeding
described in Paragraph 2, or of any claim, issue, or matter therein, by
judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not act in good
faith and in a manner which the Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Company or, with respect to any criminal
Proceeding, that the Indemnitee had reasonable cause to believe that his
conduct was unlawful.

 

3.4                                 Remedies of Indemnitee:

 

3.4. 1                     In
the event that a determination is made pursuant to Paragraph 3.2 that the
Indemnitee is not entitled to indemnification hereunder:  (a) the Indemnitee shall be entitled to
seek an adjudication of his entitlement to such indemnification either, at the
Indemnitee’s option, in (x) an appropriate court of the State of Texas or any
other court of competent jurisdiction, or (y) an arbitration to be conducted by
a single arbitrator selected by mutual agreement of the Company and the
Indemnitee (or, failing such agreement by the then sitting Chief Judge of the
United States District Court for the Northern District of Texas), pursuant to
the commercial arbitration rules of the American Arbitration Association; (b) any
such judicial proceeding or arbitration shall be de novo, and the Indemnitee shall not be prejudiced by
reason of such adverse determination; and (c) in any such judicial
proceeding or arbitration the Company shall have the burden of proving that
indemnification is prohibited by applicable law. If any such determination is
made, the Indemnitee shall be entitled, on five (5) days’ written notice
to the Secretary of the Company, to receive the written report of the persons
making such determination, which report shall include the reasons and factual
findings, if any, upon which such determination was based.

 

6

 

3.4.2                        If
a determination has been made, or is deemed to have been made, pursuant to
Paragraph 3.2 or 3.3 that the Indemnitee is entitled to indemnification, the
Company shall be obligated to pay the amounts constituting such indemnification
within five (5) days after such determination has been made or deemed to
have been made and shall be conclusively bound by such determination unless the
Company establishes as provided in the final sentence of this paragraph that: (a) the
Indemnitee misrepresented or failed to disclose a material fact in making the
request for indemnification or in the Supporting Documentation; or (b) such
indemnification is prohibited by law. If either (x) advancement of expenses is
not timely made pursuant to Paragraph 3.1, or (y) payment of indemnification is
not made within five calendar days after a determination of entitlement to
indemnification has been made or deemed to have been made pursuant to Paragraph
3.2 or 3.3, the Indemnitee shall be entitled to seek judicial enforcement of
the Company’s obligation to pay to the Indemnitee such advancement of expenses
or indemnification. Notwithstanding the foregoing, the Company may bring an
action, in an appropriate court in the State of Texas or any other court of
competent jurisdiction, contesting the right of the Indemnitee to receive
indemnification hereunder due to the occurrence of an event described in
subclause (a) or (b) of this Subparagraph 3.4.2 (herein referred to
as a “Disqualifying Event”); provided,
however, that in any such action the Company will have the burden of
proving the occurrence of such Disqualifying Event.

 

3.4.3                        The
Company shall be precluded from asserting in any judicial proceeding or
arbitration commenced pursuant to this Paragraph 3.4 that the procedures and
presumptions of this Paragraph 3.4 are not valid, binding, and enforceable, and
shall stipulate in any such court or before any such arbitrator that the
Company is bound by all of the provisions of this Agreement.

 

3.4.4                        If
the Indemnitee, pursuant to this Paragraph 3.4, seeks a judicial adjudication
of, or an award in arbitration to enforce, his rights under, or to recover
damages for breach of, this Agreement, the Indemnitee shall be entitled to
recover from the Company, and shall be indemnified by the Company against, any
expenses actually and reasonably incurred by the Indemnitee if the Indemnitee
prevails in such judicial adjudication or arbitration.  If it is determined in such judicial
adjudication or arbitration that the Indemnitee is entitled to receive part but
not all of the indemnification or advancement of expenses sought, the expenses
incurred by the Indemnitee in connection with such judicial adjudication or
arbitration shall be prorated accordingly.

 

7

 

3.5                                 Definitions:  For purposes of this Paragraph 3:

 

“Disinterested
Director” means a director of the Company who is not or was not a
party to the Proceeding in respect of which indemnification is sought by the
Indemnitee.

 

“Independent
Counsel” means a law firm or a member of a law firm that neither
presently is, nor in the past five years has been, retained to represent: (a) the
Company or the Indemnitee in any matter material to either such party; or (b) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under
the applicable standards of professional conduct then prevailing under the laws
of the State of Texas, would have a conflict of interest in representing either
the Company or the Indemnitee in an action to determine the Indemnitee’s rights
hereunder.

 

“Change in
Control” means:

 

(i)  the consummation of any consolidation or merger of Company
into or with another corporation or other legal person, and as a result of such
consolidation or merger less than a majority of the combined voting power of
the then-outstanding securities of such corporation or person immediately after
such transaction are held in the aggregate by holders of Voting Stock (as
defined below) of Company immediately prior to such transaction;

 

(ii)  any sale, lease, exchange, or other transfer, whether in one
transaction or any series of related transactions, of all or significant
portions of the assets of Company to any other corporation or other legal
persons, less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
sale, lease, exchange, or transfer is held in the aggregate by the holders of
Voting Stock of Company immediately prior to such sale, lease, exchange, or
transfers;

 

(iii)  the shareholders of Company approve any plan for the
liquidation or dissolution of Company;

 

(iv)  any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) other than an existing director of Company becomes, either directly or
indirectly, the beneficial owner (within the meaning of Rule 13d-3 under
the Exchange Act) of securities representing more than 33% of the combined
voting power of the then-outstanding

 

8

 

securities
entitled to vote generally in the election of directors of Company (“Voting
Stock”); or

 

(v)  if at any time during a fiscal year a majority of the Board
of Directors are replaced by persons who were not recommended for those
positions by at least two-thirds of the directors of Company who were directors
of Company at the beginning of the fiscal year.

 

Notwithstanding
the preceding, a “Change of Control” shall not be deemed to have occurred with
respect to any of the foregoing transactions conducted by any employee benefit
plan (or related trust) sponsored or maintained by Company, any corporation
controlled by Company, or any affiliate of Company.

 

“Potential
Change in Control” shall be deemed to have occurred if:  (i) the Company enters into an agreement
the consummation of which would result in the occurrence of a Change in
Control; (ii) a person (including the Company) publicly announces a
legitimate intention to take or to consider taking actions which if consummated
would constitute a Change in Control; or (iii) the Board of Directors
adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.

 

4                                          Other Rights to Indemnification:  The indemnification and advancement of costs
and expenses (including attorneys’ fees and disbursements) provided by this
Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may now or in the future be entitled under any provision of
applicable law, the Articles of Incorporation, or any Bylaw of the Company or
any other agreement, or any vote of directors or stockholders or otherwise,
whether as to action in his official capacity or in another capacity while
occupying any of the positions or having any of the relationships referred to
in Paragraph 1 of this Agreement.

 

5                                          Duration of Agreement:

 

5. 1                              This
Agreement shall be effective from and after the date hereof, and shall continue
until and terminate upon the later of: (i) the tenth (10th)
anniversary after the Indemnitee has ceased to occupy any of the positions or
have any of the relationships described in Paragraph 1 of this Agreement; or (ii) (a) the
final termination or resolution of all proceedings with respect to the
Indemnitee commenced during such ten (10) year period, and (b) either
(x) receipt by the Indemnitee of the Indemnification to which he or she is
entitled hereunder with respect thereto, or (y) a final adjudication or binding
arbitration that the Indemnitee is not entitled to any further indemnification
with respect thereto, as the case may be.

 

9

 

5.2                                 This
Agreement shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of the Indemnitee and his heirs, devisees,
executors, administrators, or other legal representatives.

 

6                                          Severability:  If any provision or provisions of this
Agreement are held to be invalid, illegal, or unenforceable under any
particular circumstances or for any reason whatsoever: (a) the validity,
legality, and enforceability of the remaining provisions of this Agreement
(including, without limitation, all other portions of any paragraph or clause
of this Agreement that contains any provision that has been found to be
invalid, illegal, or unenforceable, that are not themselves invalid, illegal,
or unenforceable) or the validity, legality, or enforceability under any other
circumstances shall not in any way be affected or impaired thereby; and (b) to
the fullest extent possible consistent with applicable law, the provisions of
this Agreement (including, without limitation, all other portions of any
paragraph or clause of this Agreement that contains any such provision that has
been found to be invalid, illegal, or unenforceable, that are not themselves
invalid, illegal, or unenforceable) shall be deemed revised and shall be
construed so as to give effect to the intent manifested by this Agreement
(including the provision held invalid, illegal, or unenforceable).

 

7                                          Identical Counterparts:  This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original,
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought
needs to be produced to evidence the existence of this Agreement.

 

8                                          Headings:  The headings of the paragraphs of this
Agreement are inserted for convenience and shall not be deemed to constitute
part of this Agreement or to affect the construction thereof.

 

9                                          Modification and Waiver:  No supplement, modification, or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.

 

10                                    Notification and Defense of Claim:  The Indemnitee agrees to notify the Company
promptly in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information, or other document relating to any matter
which may be subject to indemnification hereunder, whether civil, criminal, or
investigative; provided, however, that the failure of the Indemnitee to
give such notice to the Company shall not adversely affect the Indemnitee’s
rights under this Agreement except to the extent the Company has been
materially prejudiced as a direct result of such failure. Nothing in this
Agreement shall constitute a waiver of the Company’s right to seek
participation at its own expense in any Proceeding which may give rise to
indemnification hereunder.

 

10

 

11                                    Notices:  All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if: (i) delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed; or (ii) mailed
by certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed, in either case:

 

(a)                                  if
to the Indemnitee, at the address below;

 

(b)                                 if
to the Company:

 

TGC Industries, Inc.

1304 Summit Avenue, Suite 2

Plano, TX 75074

 

or to such address as may have been furnished
to either party by the other party.

 

12                                    Governing Law:  The parties hereto agree that this Agreement
shall be governed by, and construed and enforced in accordance with, the laws
of the State of Texas.

 

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

 

	
   

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  TGC Industries, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Wayne A. Whitener,

  
	
   

  	
   

  	
   

  	
  President and CEO

  
	
   

  	
   

  	
   

  	
  Date: August         ,
  2005

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INDEMNITEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date: August        ,
  2005

  
							

 

11Exhibit 10.3

 

COMMERCIAL
LEASE AGREEMENT

 

Lease
Summary

 

	
  Landlord:

  	
   

  	
  JSS / Capital Avenue, L.P.

  
	
   

  	
   

  	
   

  
	
  Landlord’s Address:

  	
   

  	
  c/o Jackson-Shaw Company, 4890 Alpha Road,
  #100, Dallas, TX 75244

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Contact Person:

  	
  Debra Spears

  
	
   

  	
   

  	
  Phone:

  	
  972-628-7446

  
	
   

  	
   

  	
  Fax:

  	
  972-628-7444

  
	
   

  	
   

  	
  Email:

  	
  dspcars@jacksonshaw.com

  
	
   

  	
   

  	
   

  
	
  Tenant:

  	
   

  	
  TGC Industries, Inc.

  
	
   

  	
   

  	
   

  
	
  Tenant’s Address:

  	
   

  	
  Before the Commencement Date: 1304 Summit
  Avenue, Suite 2, Plano, TX 75074

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Contact Person:

  	
  Wayne A. Whitener

  
	
   

  	
   

  	
  Phone:

  
	
   

  	
   

  	
  Fax:

  
	
   

  	
   

  	
  Email:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  From and after the Commencement Date: 1104
  Capital Avenue, #100, Plano, TX 75074

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Contact Person:

  	
  Wayne A. Whitener

  
	
   

  	
   

  	
  Phone:

  
	
   

  	
   

  	
  Fax:

  
	
   

  	
   

  	
  Email:

  
	
   

  	
   

  	
   

  
	
  Tenant’s Broker:

  	
   

  	
  Stream Realty Partners, L.P.

  
	
   

  	
   

  	
   

  
	
  Leased Premises: approximately

  	
   

  	
  10,000

  	
  square feet of space located in the
  Building, as outlined on Exhibit “A-1”
  attached hereto

  
	
   

  	
   

  	
   

  
	
  Project:

  	
   

  	
  (containing approximately 20,000 square
  feet)

  
	
   

  	
   

  	
   

  
	
  Building:

  	
   

  	
  (containing approximately 10,000 square
  feet)

  
	
   

  	
   

  	
   

  
	
  Tenant’s Proportionate Share of Project:

  	
  50                                    %

  
	
   

  	
   

  	
   

  	
   

  
	
  Tenant’s Proportionate Share of Building:

  	
  50                                    %

  
	
   

  	
   

  	
   

  
	
  Term:                  38                                    Months

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commencement Date:

  	
   

  	
  September 1, 2005

  
	
   

  	
   

  	
   

  
	
  Termination Date:

  	
   

  	
  The last day of the 38thth month following
  the Commencement Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Landlord

  
	
   

  	
   

  
	
   

  	
  /s/ Wayne A. Whitener

  
	
  Tenant

  
							

 

1

 

Base Rent:

 

	
  Months

  	
   

  	
  Annual Rate Per Sq. Ft.

  	
   

  	
  Monthly Base Rent

  
	
  1-2

  	
   

  	
  Base rent abated

  	
   

  	
  Base rent abated

  
	
  3-38

  	
   

  	
  $

  	
  42,500

  	
   

  	
  $

  	
  3,541,67

  
							

 

	
  Initial Estimated Additional Rent Payments

  	
   

  	
  1. Common Area

  	
   

  	
  $

  	
  .48

  	
   

  
	
  (expressed per square foot/year):

  	
   

  	
  2. Taxes

  	
   

  	
  $

  	
  .91

  	
   

  
	
  (estimates only and subject to

  	
   

  	
  3. Insurance

  	
   

  	
  $

  	
  .14

  	
   

  
	
  adjustment to actual costs and

  	
   

  	
  4. Others

  	
   

  	
  $

  	
   

  	
   

  
	
  expenses according to the provisions of
  this Lease)

  	
   

  	
  Total:

  	
   

  	
  $

  	
  1.53

  	
   

  

 

	
  Total
  Initial Estimated Monthly Additional Rent Payments:

  	
   

  	
  $

  	
  1,275.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  Initial Monthly Base Rent and  Estimated
  Monthly Additional Rent Payments:

  	
   

  	
  $

  	
  4,816.67

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Security
  Deposit:

  	
   

  	
  $

  	
  4,816.67

  	
   

  

 

2.                                       Defined Terms.  The following terms used herein and denoted by
their initial capitalization shall have the meanings set forth below:

 

“Additional Rent”
shall mean the Tax and Insurance Costs, the Common Area Maintenance Expenses
and all sums of money, other than Base Rent, which become due by Tenant under
this Lease.

 

“Adjacent Buildings”
shall mean any building or buildings, other than the Building, located upon the
Land and within the Project.

 

“Applicable Laws”
shall mean any and all ordinances, orders, directives, codes, permits and other
rules and regulations of state, federal, municipal, or other agencies or
bodies having jurisdiction with respect to the Project.

 

“Base Rent” shall
mean the annualized amounts computed for the applicable period using the
Monthly Base Rent shown in Section 1,
above and payable as provided herein.

 

“Building” shall
have the meaning given in Section 1,
above.

 

“Commencement Date”
shall have the meaning given in Section 1,
above.

 

“Common Areas” means
all areas, spaces, facilities and equipment (whether or not located within the
Building) made available by Landlord for the common and joint use of Landlord,
Tenant and others designated by Landlord using or occupying space in the
Building or the Project, including, but not limited to, loading docks,
walkways, sidewalks and driveways necessary for access to the Building, parking
areas, building lobbies, atriums, landscaped areas, public corridors, public
rest rooms, Building stairs, drinking fountains and any such other areas and
facilities within the Project, if any, as are designated by Landlord from time
to time as Common Areas.

 

“Common Area Maintenance Expense”
shall mean any and all expenses for the maintenance, repair, replacement and
operation of the Common Areas and any portions of the Project for which
Landlord is responsible

 

2

 

hereunder, including, but not limited to, management fees, utility
expenses (if furnished by Landlord), wages and fringe benefits payable to
employees of Landlord responsible for the management of the Project, amounts
paid to contractors for work performed in connection with the Project. The term
“Common Area Maintenance Expenses” shall not include any capital improvement to
the Project other than replacements required for normal maintenance and repair,
nor shall it include repairs, restoration or other work occasioned by fire,
windstorm or other insured casualty, expenses incurred in leasing or procuring
tenants, leasing commissions, advertising expenses, expenses for renovating
space for new tenants, legal expenses incident to enforcement by Landlord of
the terms of any lease, interest or principal payments on any mortgage or other
indebtedness of Landlord, compensation paid to any employee of Landlord above
the grade of property manager, depreciation allowance or expense. Notwithstanding
the foregoing, in the event Landlord installs equipment in or makes
improvements or alterations to the Building which are for the purpose of
reducing energy costs, maintenance costs or other Common Area Maintenance
Expenses or which are required under any Applicable Laws which were not
required at the date of commencement of the Term. Landlord may include in
Common Area Maintenance Expenses reasonable charges for interest on such
investment and reasonable charges for depreciation on the same so as to
amortize such investment over the reasonable life of such equipment,
improvement or alteration on a straight line basis.

 

“Default Rate” shall
mean the lesser of (i) maximum rate of interest permitted by applicable
law or the Prime Rate plus five percent (5%).

 

“Effective Date”
shall mean the date of execution of this Lease.

 

“Event of Default”
shall have the meaning given in this Lease, below.

 

“Hazardous Material”
shall mean any substance, material, waste, pollutant, or contaminant that is or
could be regulated under any statute, regulations, ordinance, rule, code,
judgment, permit, or other similar requirement of any governmental authority,
agency or court or that may adversely affect human health or the environment.

 

“Land” shall mean the
land upon which the Building is located, as described in the attached Exhibit “A”.

 

“Landlord” shall
have the meaning given in Section 1,
above.

 

“Lease” shall this
Commercial Lease Agreement.

 

“Leased Premises”
shall have the meaning given in Section 1,
above.

 

“Mortgage” shall
mean any mortgage, deed to secure debt or security deed any other instrument
creating a lien in connection with any method of financing or refinancing.

 

“Mortgage” shall
mean the holder(s) of the indebtedness secured by a Mortgage.

 

“Project” shall mean
the Land, the Building and the Adjacent Buildings, landscaping, parking and
driveway areas, sidewalks and other improvements thereon; however, Landlord
shall have the right to modify the definition of “Project” by eliminating the Adjacent
Buildings, together with the allocable share of the Land, landscaping, parking
and driveway areas, sidewalks and other improvements relating thereto, in which
event the term “Project” shall be limited to the Building and the allocable
share of the landscaping, parking, driveway areas, sidewalks and other
improvements thereon.

 

“Permitted Exceptions”
shall mean any encumbrances, easements, covenants, conditions, restrictions and
other matters of record.

 

“Prime Rate” shall
mean the prime interest rate as announced or published in The Wall
Street Journal, or its successor, from time to time, or, in the
event The Wall Street Journal does not
announce or publish a prime

 

3

 

interest rate, the prime interest rate announced or published from time
to time by such national publication as may be selected by Landlord.

 

“Punchlist Items” shall
mean details of construction, decoration or adjustment which individually or in
the aggregate do not materially impair Tenant’s use of the Leased Premises.

 

“Rent” shall mean
the Base Rent, the Additional Rent, and other sums of money becoming due and
payable to Landlord hereunder. Base Rent shall be payable in monthly
installments in advance, the first monthly installment of which, together with
the Initial Estimated Monthly Additional Rent Payments, being payable
concurrently with the execution of this Lease and thereafter on or before the
first day of each month of the Term in the amount set forth above.

 

“Security Deposit” shall
mean the deposit held by Landlord in the amount set forth in Section 1, above.

 

“Substantial Completion”
shall have the meaning set forth in Section 8(b).

 

“Tangible Net Worth”
shall mean the excess of total assets over total liabilities, in each case as
determined in accordance with generally accepted accounting principles
consistently applied (“GAAP”),
excluding, however, from the determination of total assets all assets which
would be classified as intangible assets under the GAAP including goodwill,
licenses, patents, trademarks, trade names, copyrights, and franchises.

 

“Tax and Insurance Cost”
shall mean all of the following paid or payable by Landlord with respect to the
Project or any portion thereof: (a) all federal, state and local sales,
use, ad valorem, rental, value added or other taxes and special assessments and
other governmental charges, together with all costs, fees and expense incurred
by Landlord in monitoring or contesting same (collectively, “Taxes”), and (b) all
insurance premises.

 

“Tenant” shall have
the meaning given in Section 1,
above.

 

“Tenant Delay” shall
mean any delay caused or contributed to by act or neglect of Tenant, or those
acting for or under Tenant.

 

“Tenant Improvements”
shall mean those improvements to the Leased Premises described in Exhibit “B”.

 

“Tenant’s Proportionate Share”
shall mean the percentage set forth in Section 1
above, determined by dividing the area of the Leased Premises by the area of
the Building or Project, as applicable. Tenant’s Proportionate Share shall be
adjusted if the size of the Leased Premises is modified.

 

“Termination Date”
shall have the meaning given in Section 1
above.

 

3.                                       Grant of Lease; Use.  Subject to and upon the terms herein set
forth, this Lease is entered into by and between Landlord and Tenant, to be
effective as if the Effective Date. In consideration of the rents, terms and
covenants of this Lease, Landlord leases Tenant the Lease Premises during the
Term and any extension thereto pursuant to this Lease, all as is more particularly
described herein. The Leased Premises shall be used solely for general office
and warehouse purposes and for no other purpose. Tenant hereby accepts this
Lease and the Leased Premises upon the covenants and conditions set forth
herein and subject to any and all Permitted Exceptions, and Tenant agrees to
comply with such Permitted Exceptions. Tenant will not use, nor permit others
to use, the Leased Premises for any purpose other than the purposes stated
hereinabove, nor will Tenant commit, nor allow others to commit, any waste upon
the Leased Premises. In the event Tenant occupies all or a portion of the
Leased Premises prior to the Commencement Date, all terms and conditions of
this Lease shall apply.

 

4

 

4.                                       Term.

 

(a)                                  This Lease shall
continue in force during a period beginning on the Commencement Date and
continuing until the Termination Date, unless this Lease is sooner terminated
or extended under any other term or provision hereof (See Exhibit “B”
for Renewal Option). Tenant shall be responsible for any cost or other loss
incurred by Landlord, including but not limited to loss of Rent, if any,
arising out of any event of Tenant Delay, which cost or loss shall be deemed
Additional Rent. If Tenant remains in possession after expiration or
termination of this Lease with or without Landlord’s written consent, there
shall be no renewal of this Lease by operation of law. During the period of any
such holding over, all provisions of this Lease shall be and remain in effect
except that the Base Rent shall equal an amount equal to 125% the amount of the
Base Rent set forth in Section 1
above (which amount shall be increased to 150% after 15 days). No holding over
by Tenant, whether with or without consent of Landlord, shall operate to extend
the Term.

 

(b)                                 Early Termination
Right. Tenant shall the one (1) time right to terminate (the “Termination
Right”) this Lease effective on the date (the “Early Termination Date”) which
is twenty-four (24) months after the Commencement Date, provided each of the
following conditions has been satisfied: (i) Tenant has given Landlord
written notice (the “Termination Notice”) of such termination at least six (6) months
prior to the Early Termination Date and Tenant is not in default hereunder at
the time Tenant gives such notice to Landlord or at any time thereafter prior
to the Early Termination Date; (ii) Tenant has paid to Landlord, on or
before the Early Termination Date, a termination fee in an amount equal to one (1) months
Base Rent and Additional Rent. In the event Tenant exercises the Termination
Right pursuant to this Section 4(b), Tenant shall vacate Leased Premises
not later than ten (10) days after the Early Termination Date.

 

5.                                       Rent.  Tenant agrees to pay all Rent to Landlord
during the Term at the times and in the manner provided in this Lease, without
demand, set-off or counterclaim. The Base Rent shall be due and payable on the
first day of each calendar month, commencing on the Commencement Date and
continuing thereafter throughout the Term. Tenant hereby agrees to pay the Rent
to Landlord at Landlord’s address as provided herein (or such other address as
may be designated by Landlord from time to time) monthly in advance. If the
Commencement Date is other than the first day of a calendar month or if this
Lease terminates on a day other than the last day of a calendar month, then the
installments of the Base Rent for such month or months shall be prorated on a
daily basis and the installment or installments so prorated shall be paid in
advance. Notwithstanding the foregoing, however, if the Commencement Date is
delayed due to any Tenant Delay, Tenant shall be obliged to pay Rent commencing
on the date which would have been the Commencement Date by for any Tenant Delay.

 

Base Rent payment required to be paid or
which becomes due under this Lease is not paid by the tenth (10th) day
following the day on which it is due, a service charge of five percent (5%) of
such amounts due shall become due and payable in addition to the amounts due. Said
service charge is for the purpose of reimbursing Landlord for the extra costs
and expenses in connection with the handling and processing of late payments. In
addition to such service charge, if any Base Rent payment is not paid by the
tenth (10th) day following the day on which it becomes due, Tenant shall pay to
Landlord, in addition to such Base Rent payment and the service charge,
interest on such Base Rent payment calculated at the Default Rate from the date
such Base Rent payment was due until paid by Tenant. If any Additional Rent
required to be paid or which becomes due under this Lease is not paid when due,
Tenant shall pay to Landlord, in addition to such amounts, interest on such
amounts at the Default Rate from the date such amounts were due until paid by
Tenant. Such service charge and interest shall be cumulative of any other
remedies Landlord may have for nonpayment of Rent and other sums payable under
this Lease. If three (3) consecutive monthly Base Rent payments or any ten
(10) [in total, cumulative from the beginning of the Term] monthly Base Rent payments
during the Term (or any renewal or extension thereof) are not received by
Landlord within ten (10) days of the due date, the Base Rent hereunder
shall automatically become due and payable by Tenant in advance in quarterly
installments equal to three (3) months’ Base Rent each. Landlord shall
notify Tenant of such change in the time for payment of Base Rent and,
thereafter, the first of such quarterly Base Rent payments shall be due and
payable on the first day of the next succeeding month and on the first day of
every third (3rd) month thereafter. This remedy shall be cumulative of any
other remedies of Landlord under this Lease for nonpayment of Rent.

 

5

 

6.                                       Security Deposit.  Tenant
shall deposit with Landlord on the date of execution of this Lease, the
Security Deposit. If Tenant defaults under this Lease, Landlord may use any part
of the Security Deposit to make any defaulted payment, to pay for Landlord’s
cure of any defaulted obligation, or to compensate Landlord for any loss or
damage resulting from any default. To the extent any portion of the deposit is
used, Tenant shall within five (5) days after demand from Landlord restore
the deposit to its full amount. Tenant’s failure to do so shall be an Event of
Default under this Lease. Landlord may keep the Security Deposit in its
general funds and shall not be required to pay interest to Tenant on the
deposit amount. If Tenant shall perform all of its obligations under this Lease
and return the Leased Premises to Landlord at the end of the Term in the same
good order and condition as existed at the Commencement Date, ordinary wear and
tear excepted, Landlord shall return all of the remaining Security Deposit to
Tenant within thirty (30) days after the end of the Term. The Security Deposit
shall not serve as an advance payment of Rent or a measure of Landlord’s
damages for any default under this Lease. If Landlord transfers its interest in
the Project or this Lease, Landlord may transfer the Security Deposit to its
transferee. Upon such transfer, Landlord shall have no further obligation to
return the Security Deposit to Tenant, and Tenant’s right to the return of the
Security Deposit shall apply solely against Landlord’s transferee.

 

7.                                       Common Area Maintenance and Taxes and
Insurance.

 

(a)                                  Tenant agrees to pay as Additional Rent Tenant’s
Proportionate Share of the
Common Area Maintenance Expenses. Along with the Base Rent, Tenant shall
pay one-twelfth of Tenant’s Proportionate Share of the annualized Common Area Maintenance Expenses as
estimated from time to time by Landlord during the Term. As soon as available
after the expiration of each calendar year, Landlord shall submit a statement to
Tenant setting forth Tenant’s
Proportionate Share of the Common Area Maintenance Expenses due from
Tenant for the preceding year and the amount,
if any, remaining due from Tenant to Landlord. Within ten (10) days
after receipt of such statement,
Tenant shall remit to Landlord the
amount said statement shows to be
due from Tenant. Notwithstanding the
foregoing, Tenant shall pay the
full cost of any repair, replacement or service which benefits only the Leased Premises or is the result of Tenant’s use or occupancy of the Leased Premises. Tenant
shall pay to Landlord as Additional
Rent Tenant’s Proportionate Share
of the Tax and Insurance Cost. If any use of the Leased Premises by Tenant causes an increase
in insurance costs, Tenant shall pay as Additional Rent the entire amount of any
such increase. Along with the Base Rent, Tenant shall pay, monthly, one-twelfth
of Tenant’s Proportionate Share of the annualized Tax and Insurance Costs as
estimated from time to time by Landlord during the Term. As Soon as available
after the expiration of each calendar year, Landlord shall submit a
reconciliation statement to Tenant setting forth Tenant’s Proportionate Share
of the Tax and Insurance Costs due from Tenant for any preceding calendar year
and the amount, if any, remaining due from Tenant to Landlord. Within ten (10) days
after receipt of such statement, Tenant shall pay Landlord the amount said
statement shows to be due from Tenant. Tenant shall be responsible for paying
all taxes upon Tenant’s furniture, machinery, fixtures and other property on the
Project. Landlord shall have the right to employ a tax consulting firm to
attempt to assure a fair tax burden on the Premises within the applicable
taxing jurisdiction. Tenant shall pay to Landlord upon demand from time to
time, as Additional Rent, Tenant’s Proportionate Rate Share of the cost of such
service. Tenant acknowledges that the Building is a multi-tenant facility, that
any filing of a protest of appraised value by Tenant will give the appraisal
district discretion to increase or decrease the appraised value, that an
increase in the appraised value will affect Landlord and the other tenants of
the Building, and that an increase in the appraised value may increase the
taxes not only for the year in question
but for future years, potentially beyond expiration of the Term. Accordingly,
to the extent permitted by Applicable Law, Tenant hereby waives the provisions
of Section 41.413 of the Texas Property Tax Code (or successor thereto) to
protest the appraised value of the Project or any portion thereof. In the
alternative, if Section 41.413 of the Texas Property Tax Code may
not be waived, Tenant agrees not to protest any valuation unless Tenant
notifies Landlord in writing of Tenants intent so to protest and Landlord fails
to file a protest of the valuation within thirty (30) days after Landlord receives
Tenant’s written notice. If Tenant files a protest without giving written
notice required by the preceding sentence, such filing shall be an event of
default under this Lease without the necessity of any notice from Landlord. Furthermore,
if Tenant exercises the right of protest granted by Section 41.413 of the
Texas Property Tax Code, Tenant shall be solely responsible for, and shall pay, all costs of such protest. If as
a result of any protest filed by Tenant, the appraised value of the Building or
Project is increased, Tenant shall be solely responsible for, and shall pay upon demand by Landlord,
all taxes (not

 

6

 

only Tenant’s Proportionate Share) assessed against
the Building or Project in excess of the taxes which would have been payable in
the absence of the protest. Tenant shall continue to pay such excess taxes,
regardless of whether the increased taxes are incurred during the Term or
thereafter. Landlord agrees, upon written request by Tenant, to provide to
Tenant to a copy of the
determination of appraised value for any year. Tenant agrees that if Landlord,
in Landlord’s sole discretion, elects to protest a determination of the
appraised value of the Project or any portion thereof. Tenant shall pay to
Landlord Tenant’s Proportionate Share of the cost of such protest. The
provisions of this Section 7
pertaining to Section 41.413 of the Texas Property Tax Code expressly
shall survive the expiration or other termination of this Lease.

 

(b)                                 Notwithstanding anything to the contrary
contained herein. Tenant’s Proportionate Share for “Controllable Common Area
Maintenance Expenses” shall not be increased by more than ten percent (10%)
over Tenant’s Share of “Controllable Common Area Maintenance Expenses” for
the previous calendar year. For the purposes hereof, the term “Controllable
Common Area Maintenance Expense”
shall be limited to those Common Area Maintenance Expenses which are within the direct control and discretion
of Landlord but shall not include, without limitation, utility charges, Taxes
and Insurance Costs and the cost of effecting compliance with any applicable
laws.

 

8.                                       Condition of Leased Premises;
Tenant Improvement; Common Areas; Maintenance; Alterations.

 

(a)                                  Condition of Leased Premises.  Tenant
acknowledges that it accepts the Leased Premises as suitable far Tenant’s purposes subject only to Section 8(b) below, if applicable, and to all
Applicable Laws. Notwithstanding any other provision of this Lease to the
contrary, if this Lease is executed before the Leased Premises become available
for occupancy, or if Landlord cannot acquire possession of the Leased Promises
prior to the Commencement Date stated above, Tenant agrees to accept possession
of the Leased Premises at such time as Landlord is able to tender the same,
which date shall then be the Commencement
Date of the Term. TENANT WAIVES ANY IMPLIED WARRANTY THAT THE LEASED
PREMISES ARE SUITABLE FOR TENANT’S INTENDED PURPOSE. TENANT ACKNOWLEDGES THAT (1) TENANT
HAS INSPECTED AND ACCEPTS THE LEASED PREMISES IN AN “AS IS, WHERE IS” CONDITION
(EXCEPT AS MAY BE PROVIDED IN SECTION 8(b),
BELOW), (2) THE BUILDING AND THE LEASED PREMISES ARE SUITABLE FOR THE
PURPOSE FOR WHICH THE LEASED PREMISES ARE LEASED, AND LANDLORD HAS MADE NO
WARRANTY, REPRESENTATION, COVENANT, OR AGREEMENT WITH RESPECT TO THE MERCHANTABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE LEASED PREMISES, (3) THE LEASED PREMISES
ARE IN GOOD AND SATISFACTORY CONDITION, (4) NO REPRESENTATIONS AS TO THE
REPAIR OF THE LEASED PREMISES, NOR PROMISES TO ALTER, REMODEL OR IMPROVE THE LEASED
PREMISES HAVE BEEN MADE BY LANDLORD (EXCEPT AS MAY BE PROVIDED IN SECTION 8(b), BELOW), AND (5) THERE ARE NO
REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY, THAT EXTEND
BEYOND THE DESCRIPTION OF THE LEASED PREMISES.

 

(b)                                 Tenant Improvements.
 See attached Exhibits “D” and D- 1”.

 

(c)                                  Maintenance of the Common Areas.  Landlord
shall perform the work which gives rise to Common Area Maintenance Expenses,
subject to payment therefor by Tenant pursuant to the provisions of Section 7 above. If the need for any such work shall
come to the attention of Tenant, Tenant will promptly so notify Landlord in
writing.

 

(d)                                 Maintenance of the Leased Premises.

 

(i)                                     Landlord’s
Obligations: Landlord shall maintain (except in the event casualty or other damage contemplated in Section 16 hereof, in which event the terms of Section 16 will control) only the roof, foundation and
the structural soundness of the exterior walls of the Building (excluding all
windows, window glass, plate glass, and all doors) in good repair and
condition, except for reasonable wear
and tear. Landlord’s

 

7

 

maintenance and repair costs under this Section 8(d) shall
be included as a Common Area Maintenance Expense, except as expressly excluded
from the definition of “Common Area Maintenance Expenses” above. Tenant shall
give immediate written notice to Landlord of the need for repairs or
corrections and Landlord shall proceed within a reasonable time after receiving
such notice to make such repairs or corrections. Landlord’s liability hereunder
shall be limited to the cost of such repairs or corrections.

 

(ii)                                  Tenant’s
Obligations: Tenant shall repair and pay for any damage caused by the
negligence or default hereunder of or by Tenant, its employees, agents or
invitees; the cost of any such damage which is paid by Landlord shall be deemed
Additional Rent which is immediately due and owing from Tenant. Subject to the
provisions of item (i) above, Tenant shall during the Term, at Tenant’s
expense, keep the Leased Premises (including the glass signs, ceilings,
interior walls, interior side of perimeter walls, floor, floor coverings,
plumbing, electric, heating and air conditioning, sprinklers and lighting
fixtures) in as good order, condition and repair as they were at the time
Tenant took possession of the same, reasonable wear and tear and damage from
fire and other casualties excepted. Tenant shall, at its own cost and expense,
enter into a regularly scheduled preventive maintenance/service contract with a
maintenance contractor for servicing all hot water, heating and air
conditioning systems and equipment within or serving the Leased Premises. The
maintenance contractor and the contract must be approved by Landlord. The
service contract must include all services suggested by the equipment
manufacturer within the operation/maintenance manual and must become effective
(and a copy thereof delivered to Landlord) within thirty (30) days of the date
Tenant takes possession of the Leased Premises. Tenant shall keep the Leased
Premises in a neat and sanitary condition, and Tenant shall no commit any
nuisance or waste on the Leased Premises or in, on, or about the Project, throw
foreign substances in the plumbing facilities, or waste any of the utilities
furnished by the Landlord. All uninsured damage or injury to the Leased
Premises, or to the Project caused by Tenant moving furniture, fixtures,
equipment, or other devices in or out of the Leased Premises or the Building or
by installation or removal of furniture, fixtures, equipment, devices or other
property of Tenant or its agents, contractors, servant or employees, due to
carelessness, omission, neglect, improper conduct, or other cause of Tenant or
its servants, employees, agents, visitors, or licensees, shall be repaired,
restored and replaced promptly by Tenant at its sole cost and expense to the
satisfaction of Landlord. All repairs, restorations and replacements shall be
in quality and class equal to the original work and shall comply with all
requirements of this Lease.

 

(e)                                  Alterations; Signs.
 No improvements, alterations, additions
or other changes shall be made to the Leased Premises without Landlord’s prior
written consent. All property of Tenant installed upon the Leased Premises
pursuant to the terms of this Lease shall be at the sole risk of Tenant, and Landlord
shall not be liable for any loss, damage or theft of such property (INCLUDING
THE LOSSES, DAMAGES OR THEFTS STEMMING FROM THE STRICT LIABILITY, NEGLIGENCE OR
OTHER TORTUOUS CONDUCT, ACTS OR OMISSIONS OF LANDLORD OR ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR INVITEES) except for those losses, damages or
thefts stemming from the willful misconduct or gross negligence of the Landlord.
Subject to Landlord’s approval thereof, Tenant shall be allowed to install, at
Tenant’s cost and expense, Tenant’s sign on the exterior of the Building above
the front and rear entrances to the Leased Premises.

 

9.                                       Insurance.

 

(a)                                  Landlord Policies.
 Landlord shall at all times during the
Term maintain a policy or policies of business or rental interruption insurance
and a policy or policies of insurance insuring the Building (exclusive of the
foundation) for loss or damage by fire, explosion, and other customary hazards,
subject to commercially reasonable deductible amounts. Such policies will not
insure any personal property (including, but not limited to any furniture,
machinery, goods, or supplies) of Tenant or which Tenant may have in the Leased
Premises or any fixtures installed by or paid for by Tenant upon or within the
Leased Premises or any alterations or other improvements which Tenant may
construct or install on the Leased Premises, insurance for all of which shall
be Tenant’s responsibility.

 

(b)                                 Effect of Tenant’s
Use.  Tenant shall not permit the
Leased Premises to be used in any way which would be hazardous or which would
in any way increase the cost of or render void any insurance on the Project,
and Tenant shall immediately, on demand, cease any use which violates the
foregoing or to which Landlord’s insurer or any governmental or regulatory
authority objects. If, at any time during the Tonn, Tenant’s use or occupancy
(or an

 

8

 

abandonment by Tenant) shall cause an increase in premiums, and in
particular, but without limitation, if the State Board of Insurance or other
insurance authority disallows any of Landlord’s sprinkler credits or imposes an
additional penalty or surcharge in Landlord’s insurance premiums because of
Tenant’s original or subsequent placement or use of storage racks or bins or
method of storage or because of the nature of Tenant’s inventory or any other
act of Tenant, Tenant agrees to pay as Additional Rent the increase in Landlord’s
insurance premiums.

 

(c)                                  Tenant Insurance.
 Tenant, at its sole cost and expense,
shall procure and maintain throughout the Term a policy or policies of insurance from insurance companies
satisfactory to Landlord, insuring (i) Landlord; (ii) Landlord’s
management company; (iii) Jackson-Shaw Company; (iv) Landlord’s
lender, if any; and (v) Tenant against all claims for property damages,
personal injury or death of others occurring on or in connection with: (i) the
Leased Premises; (ii) the condition of the Leased Premises; (iii) Tenant’s
operations in and maintenance and use of the Leased Premises; (iv) Tenant’s
use of the Common Areas of the Project, and (v) Tenant’s liability assumed
under this Lease. The limits of such policy or policies shall be not less than
$2,000,000.00 combined single limit coverage per occurrence for injury to
persons (including death) and/or property damage or destruction, including loss
of use. Certified copies of such policies, together with receipt for payment of
premiums, shall be delivered to Landlord prior to the Commencement Date. Not
less than fifteen (15) days prior to the expiration date of any such policies,
certified copies of renewal policies and evidence of the payment of renewal
premiums shall be delivered to Landlord. All such original and renewal policies
shall provide for at least thirty (30) days written notice to Landlord before
such policy may be canceled or changed to reduce insurance coverage provided
thereby.

 

(d)                                 Waiver of
Subrogation.  Notwithstanding
anything in this Lease to the contrary, to the extent that and so long as the
same is permitted under the laws and regulations governing the writing of
insurance within the State of Texas, all insurance carried by either Landlord
or Tenant shall provide for a waiver of rights of subrogation against Landlord
and Tenant on the part of the insurance carrier. Except as expressly otherwise
provided herein, Landlord and Tenant each hereby waive any and all rights of
recovery, claims, actions or causes of action against the other, its agents,
officers, or employees, for any loss or damage to property or any injuries to
or death of any person which is covered or would have been covered under the
insurance policies required under this Lease (REGARDLESS OF WHETHER SUCH LOSS
OR DAMAGE IS CAUSED BY THE FAULT, NEGLIGENCE OR OTHER TORTUOUS CONDUCT, ACTS OR
OMISSIONS OF LANDLORD OR TENANT OR THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR INVITEES). The foregoing release shall not apply to losses
or damages in excess of actual
or required policy limits (whichever is greater) nor to any deductible (up to a
maximum of $10,000) applicable under any policy obtained by the waiving party. The
failure of either party (as used in this paragraph, the “defaulting party”) to
take our or maintain any insurance policy required under this Lease shall be a
defense to any claim asserted by the defaulting party against the other party
hereto by reason of any loss sustained by the defaulting party that would have
been covered by any such required policy. The waivers set forth in this Section 9(d) shall
be in addition to, and not in substitution for, any other waivers, indemnities,
or exclusions of liabilities set forth in this Lease.

 

10.                                 Utility
Services.  Tenant shall
pay the cost of all utility services respecting the Leased Premises including,
but not limited to, initial connection charges and deposits and charges for gas,
water, trash disposal, sewer, telephone and electricity respecting the Leased
Premises. Landlord shall in no event be liable for any interruption or failure
of utility services on the Leased Premises. Prior to the Commencement Date,
Tenant shall pay for all utilities or services at the Leased Premises used by
it or its agents, employees or contractors. Tenant hereby acknowledges and
agrees that the electricity provider chosen by Landlord may not necessarily be
the least expensive provider of electricity, but Landlord shall have the sole
and absolute discretion to choose such electricity providers.

 

11.                                 Assignment;
Subletting.  Except for a “Permitted
Transfer” (as hereinafter defined), Tenant shall not, without the prior consent
of Landlord in each case, (i) make or allow any assignment or transfer, by
operation of law or otherwise, of any part of Tenant’s interest in this Lease, (ii) grant
or allow any lien or encumbrance, by operation of law or otherwise, upon any
part of Tenant’s interest in this Lease, (iii) sublet the Leased Premises
or permit anyone other than Tenant and its employees to occupy any part of the
Leased Premises. No consent granted

 

9

 

by Landlord shall be deemed to be a consent to any subsequent
assignment or transfer, lien or encumbrance, sublease or occupancy. Any
assignment or transfer, grant of lien or encumbrance, or occupancy without
Landlord’s prior written consent shall be void. Landlord shall be reimbursed by
Tenant for any costs or expenses incurred as a result of Tenant’s request for
consent to any such assignment or subletting, including reasonable legal costs.
In the event Tenant subleases the Leased Premises, or any portion thereof, or
assigns this Lease with the consent of the Landlord at an annual Base Rent
exceeding that stated herein, fifty percent (50%) of such excess shall be paid
by Tenant to Landlord as Additional Rent hereunder within ten (10) days
after receipt by Tenant. Upon the occurrence of an Event of Default by Tenant
under this Lease, if all or any part of the Leased Premises is the assigned or
sublet, Landlord may, in addition to any other remedies provided by this Lease
or provided by law, collect directly from the assignee or subtenant all rents
due to Tenant. To secure payment of such sums, Landlord shall have a security
interest in and a landlord’s lien on all property on the Leased Premises. Any
collection directly by Landlord from the assignee or subtenant shall not be
construed, however, to constitute a novation or a release of Tenant from the
further performance of its obligations under this Lease. For the purpose of
this Section 11, a “transfer” shall
include the transfer, assignment or encumbrance of any controlling interest in
Tenant. Notwithstanding the above prohibitions, Tenant may, upon thirty (30)
days prior written notice to Landlord, assign this Lease to a surviving entity
following Tenant’s merger therein (so long as the surviving entity has a
financial, Tangible Net Worth equal to or greater than Tenant’s Tangible Net
Worth immediately prior to such merger) or sublet the Leased Premises or any
part thereof to its parent corporation or one of its wholly owned subsidiaries
or an “affiliate”; however, no assignment or subletting shall relieve Tenant or
any guarantor of this Lease of its respective obligations under this Lease or
any guaranty, and Tenant shall continue to be liable as a principal (and not as
a guarantor or surety) to the same extent as though no assignment or subletting
had been made. Any assignment or sublease effected pursuant to the preceding
sentence is hereinafter referred to as a “Permitted Transfer”. As used herein,
an “affiliate” is an entity that “controls”, “is controlled by” or “is under
common control with” the Tenant.

 

12.                                 Landlord’s
Right of Entry.  Landlord
shall have the right, at its option, at Tenant’s own cost and expense, to
repair or replace any damage done to the Building, or any part thereof, caused
by Tenant or Tenant’s agents, employees, invitees, or visitors, and Tenant
shall pay the reasonable cost thereof to Landlord on demand as Additional Rent.
Landlord shall retain duplicate keys to all doors of the Leased Premises and
Landlord and its agents, employees and independent contractors shall have the
right to enter the Leased Premises at reasonable hours to inspect and examine
same, to make repairs, additions, alterations and improvements, to exhibit the
Leased Premises to Mortgagees, prospective Mortgagees, purchasers or tenants,
and to inspect the Leased Premises upon 24-hour prior notice, except in cases
of emergency or when an Event of Default has occurred in which case Landlord
may enter at any time and without notice. During such time as such work is
being carried on, in or about the Leased Premises, the Rent provided herein
shall not abate.

 

13.                                 Applicable
Laws.  Tenant agrees to
comply with all Applicable Laws with respect to the Building. Tenant will
comply with the rules and regulations of the Building as adopted and
altered by Landlord from time to time (including those attached hereto as Exhibit “C”) and will cause all of its employees, agents,
invitees and visitors to do so. Tenant shall not permit or cause any party to
bring any Hazardous Material upon the Leased Premises or transport, store, use,
generate, manufacture, dispose or release any Hazardous Material on or from the
Leased Premises. Tenant shall indemnify, defined and hold Landlord harmless
from and against any losses, claims, demands, actions, suits, damages, expenses
and costs which are brought or recoverable against Landlord as a result of any
release of Hazardous Material by Tenant, its agents, employees, contractors,
subtenants, assignees or invitees.

 

14.                                 Default.

 

(a)                                  The following events
shall be deemed to be Events of Default by Tenant under this Lease: (i) Tenant
shall fail to pay any Rent pursuant to the terms hereof within five (5) days
after the due date thereof; or (ii) Tenant shall fail to comply with any
term, provision, covenant or warranty made under this Lease by Tenant, other
than the payment of Rent payable by Tenant, and shall not cure such failure
within ten (10) days after notice thereof to Tenant, or (iii) any
affirmative act of insolvency by Tenant, or the filing by Tenant of any
petition or action under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of, or relating to,
debtors, or Tenant’s transfer in fraud of creditors or assignment for the
benefit of creditors of all or substantially

 

10

 

all of Tenant’s assets; or (iv) the filing of any involuntary
petition under any bankruptcy statute against Tenant (that fails to be
dismissed within thirty (30) days of filing), or the appointment of any
receiver or trustee to take possession of the properties of Tenant; or (v) Tenant’s
abandonment or vacation of any part of the Leased Premises, whether or not
Tenant is in default of the Rent due under this Lease; or (vi) Tenant
doing or permitting to be done any act which results in a lien being filed
against the Leased Premises and the same is not removed within sixty (60) days.

 

(b)                                 Upon the occurrence of
an Event of Default, Landlord shall have the option to pursue any one or more
of the following remedies without any notice or demand whatsoever: (i) terminate
this Lease, in which event Tenant shall immediately surrender the Leased
Premises to Landlord and if Tenant fails to do so, Landlord may without
prejudice to any other remedy which it may have, enter upon and take possession
of the Leased Premises and expel or remove Tenant, by force, if necessary,
without being liable for prosecution or any claim of damages therefor; (ii) enter
upon the Leased Premises by force, if necessary, without being liable for
prosecution or any claim of damages therefor, and do whatever Tenant is
obligated to do under the terms of this Lease; (iii) without terminating this
Lease unless Landlord so notifies Tenant in writing, enter upon the Leased
Premises, and, without court order or other process of law, take possession of
and remove the equipment and personal property of Tenant; (iv) exercise
any other remedy permitted by law or at equity or by statute or otherwise; (v) without
terminating this Lease, enter upon the Leased Premises, expel or remove Tenant
and relet the Leased Premises on behalf of Tenant and receive directly the rent
from the reletting and Tenant agrees to pay Landlord on demand any deficiency
that may result from the reletting. Tenant agrees that Landlord shall not be
liable for any damages resulting to Tenant from Landlord’s enforcement of this
Lease, whether caused by negligence of Landlord or otherwise (INCLUDING THE
FAULT, NEGLIGENCE OR OTHER TORTUOUS CONDUCT, ACTS OR OMISSIONS OF LANDLORD OR
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR INVITEES). Pursuit of any of the
foregoing remedies shall not preclude pursuit of any other remedy herein
provided or any other remedy provided by law or at equity, nor shall pursuit of
any remedy herein provided constitute an election of remedies thereby excluding
the later election of an alternate remedy, or a forfeiture or waiver of any
Rent payable by Tenant and due to Landlord hereunder or of any damages accruing
to Landlord by reason of violation of any of the terms, covenants, warranties
and provisions herein contained. Forbearance by Landlord to enforce one or more
of the remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default. Tenant agrees to pay to
Landlord all costs and expenses incurred by Landlord in the enforcement of this
Lease or which Landlord may incur or suffer by reason of Tenant’s default or
the termination of this Lease, including without limitation, the fees of
Landlord’s attorneys, reasonable reconfiguration expenses, rental concessions
and other inducements to new tenants, advertising expenses and broker’s
commissions. No waiver of any breach of the covenants, warranties, agreements,
provisions, or conditions contained in this Lease shall be construed as a
waiver of said covenant, warranty, provision, agreement or condition or of any
subsequent breach thereof. All rights, powers and privileges conferred
hereunder upon the parties hereto shall be cumulative to, but not restrictive
of, or in lieu of those conferred by law.

 

15.                                 Subordination
and Estoppel Certificates. 
Tenant agrees that this Lease and all rights of Tenant hereunder are and
shall be subject and subordinate to any ground or underlying lease which may
now or hereafter be in effect regarding the Leased Premises or any component
thereof, to any Mortgage now or hereafter encumbering the Leased Premises or
any component thereof, to all advances made or hereafter to be made upon the
security of such Mortgage, to all amendments, modifications, renewals, consolidations,
extensions and restatements of such Mortgage, and to any replacements and
substitution for such Mortgage. The terms of this provision shall be
self-operative and no further instrument of subordination shall be required.
Tenant, however, upon request of any party in interest, shall execute and
deliver within ten (10) days after request such instrument or certificates
as may be reasonably required to carry out the intent hereof. If the interests
of Landlord under this Lease shall be transferred to any purchaser by reason of
foreclosure or other proceedings for enforcement for any Mortgage, at the
election of the purchaser, Tenant shall be bound to the purchaser under the
terms and conditions of this Lease for the balance of the remaining Term. Tenant
shall execute and deliver within ten (10) days after request a statement
certifying that the Tenant is in possession of the Leased Premises, the Leased
Premises are acceptable, this Lease is in full force and effect and is
unmodified, and such other matters as requested by Landlord or Landlord’s
Mortgagee.

 

16.                                 Destruction;
Condemnation.  In no event
shall Landlord be liable for any loss or damage sustained by Tenant by reason
of casualty. If a fire or other casualty causes substantial damage to the
Building or the

 

11

 

Leased
Premises, and if the time needed to rebuild or repair exceeds six (6) months
from the beginning of the restoration, then either Landlord or Tenant may
terminate this Lease by notice to the other party. Tenant agrees that if the
Leased Premises or the Building are damaged by fire or other casualty caused by
the fault or negligence of Tenant or Tenant’s subtenants, assignees, employees,
contractors or agents, Tenant shall have no option to terminate this Lease and
the Rent shall not be abated during the repair period. If all or part of the
Leased Premises shall be taken for any public or quasi-public use by virtue of
the exercise of the power of eminent domain or by private purchase in lieu thereof,
this Lease shall terminate as to the part so taken as of the date of taking,
and all compensation awarded or paid to Landlord upon a total or partial taking
of the Building or any portion thereof shall belong to and be the property of
Landlord without any participation by Tenant.

 

17.                                 Notices.  All
notices required or permitted to be given hereunder shall be in writing and
shall be deemed to have been fully given, whether actually received or not,
when delivered in person, or deposited with an overnight commercial courier, or
deposited, postage prepaid, in the United States Mail, certified, return
receipt requested, and addressed to Landlord or Tenant at their respective
address set forth in Section 1
or at such other address as either party shall have theretofore given to the
other by notice as provided above.

 

18.                                 Transfers by Landlord.  Landlord shall have the right to transfer and
assign, in whole in part, all its rights and obligations hereunder and in the
Building, and Leased Premises, referred to herein, and in such event and upon
such transfer Landlord shall be released from any further obligations
hereunder, and Tenant agrees to look solely to such successor in interest of
Landlord for the performance of such obligations.

 

19.                                 Removal of Personal Property.  On or before the expiration or earlier
termination of this Lease, Tenant agrees to remove all of its personal effects
from the Leased Premises and to deliver up the Leased Premises to Landlord in
their original condition, ordinary wear and tear expected, as at the
Commencement Date. If it shall not do so within such period, it shall be deemed
to have abandoned such personal property and the same shall become the property
of Landlord for Landlord to use, remove, destroy or otherwise dispose of at its
discretion and without responsibility for accounting to Tenant therefor.

 

20.                                 Landlord’s Liability.  Landlord
shall have no personal liability under this Lease; its liability shall be
limited to its interest in the Building, and shall not extend to any other
property or assets of the Landlord. In no event shall any officer, director,
employee, agent, shareholder, partner, member or beneficiary of Landlord be
personally liable for any of Landlord’s obligations hereunder.

 

21.                                 Mechanic’s Liens.  Tenant
will not permit any mechanic’s liens or other liens to be placed upon the
Building, Land or the Leased Premises and nothing in this Lease shall be deemed
or construed in any way as constituting the consent or request of Landlord,
express or implied, by inference or otherwise, to any person for the
performance of any labor or the furnishing of any materials to the Building,
Land or to the Leased Premises or any portion thereof, nor as giving Tenant any
right, power, or authority to contract for or permit the rendering of any
services of the furnishing of any materials that would give rise to any
mechanic’s or other liens against the Building, Land or the Leased Premises. In
the event any such lien is attached to the Building, Land or to the Leased
Premises, then, in addition to any other right or remedy of Landlord, Landlord
may, but shall not be obligated to, discharge the same. Any amount paid by
Landlord for any of the aforesaid purposes shall be paid by Tenant to Landlord
on demand as Additional Rent.

 

22.                                 Miscellaneous.  Landlord
and Tenant each represents to the other that it has full power and authority to
execute and perform this Lease. This Lease shall be effective only upon
execution hereof by Landlord and Tenant. Time is of the essence of this Lease
and whenever a certain day is stated for payment or performance of any
obligation of Tenant or Landlord, the same enters into and becomes a part of
the consideration hereof. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, the remainder of this
Lease shall not be affected thereby, and in lieu of each clause or provision of
this Lease which is illegal, invalid or unenforceable, there shall be added as
a part of this Lease a clause or provision as nearly identical to the said
clause or provision as may be legal, valid and enforceable. This Lease contains
the entire agreement of the parties and no representations, inducements,
promises or agreements, oral or otherwise, between the parties not embodied

 

12

 

herein shall be of any force or effect. No failure of Landlord to
exercise any power given Landlord hereunder, or to insist upon strict
compliance by Tenant with any obligation of Tenant hereunder, and no custom or
practice of the parties at variance with the terms hereof, shall constitute a
waiver of Landlord’s right to demand exact compliance with the terms hereof. This
Lease may not be altered, waived, amended or extended except by an instrument
in writing signed by landlord and tenant. The laws of the State of Texas shall
govern the validity, performance and enforcement of this Lease. The rights and
interest of Tenant hereunder are and shall continue at all times to be subject,
subordinate and junior in all respects to any conditional sale contract or
security agreement, whether heretofore or hereinafter executed by Landlord. The
obligations of Tenant under this Lease shall survive the termination of this Lease.

 

23.                                 Commissions.
 Landlord and Tenant each represent
to the other that no brokers, other than Stream Realty Partners, L.P., have
been or will be involved in the negotiation of this Lease. Landlord will be
responsible to pay the commission, if any, owed to Stream Realty Partners,
L.P., pursuant to the terms of a separate agreement. Landlord and Tenant hereby
indemnify each other from any claims, losses, damages (including attorneys’
fees) resulting from a breach of the above representation.

 

24.                                 Landlord’s
Lien. Intentionally omitted.

 

25.                                 General
Indemnification; Indemnification Parameters.  TENANT AGREES TO INDEMNIFY, DEFEND, AND
HOLD HARMLESS LANDLORD, AND LANDLORD’S AGENTS, EMPLOYEES AND CONTRACTORS (THE “INDEMNIFIED
PARTIES”), FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LOSSES, LIABILITIES,
CAUSES OF ACTION, SUITS, JUDGMENTS, DAMAGES, COSTS AND EXPENSES TO THE EXTENT
ARISING FROM ANY OCCURRENCE ON THE LEASED PREMISES, THE USE AND OCCUPANCY OF
THE LEASED PREMISES, OR FROM ANY ACTIVITY DONE, PERMITTED OR SUFFERED BY TENANT
IN OR ABOUT THE LEASED PREMISES. TENANT ACKNOWLEDGES THAT THIS LEASE CONTAIN
PROVISIONS RELEASING EACH INDEMNIFIED PARTY FROM LIABILITY AND/OR INDEMNIFYING AND
HOLDING HARMLESS EACH INDEMNIFIED PARTY FOR, AMONG OTHER THINGS, INDEMNIFIED
PARTY’S STRICT LIABILITY AND ITS OWN NEGLIGENCE. TENANT AGREES THAT THE RELEASE
AND/OR INDEMNITY PROVISIONS CONTAINED IN THIS LEASE ARE CAPTIONED TO CLEARLY
IDENTIFY THE RELEASE AND/OR INDEMNIFY PROVISIONS AND, THEREFORE, ARE SO CONSPICUOUS
THAT TENANT HAS FAIR NOTICE OF THE EXISTENCE AND CONTENTS OF SUCH PROVISIONS.

 

26.                                 Financial
Statements.  In the event
Landlord’s lender requests financial statements on this property, within
fifteen (15) days following Landlord’s written request. Tenant shall use its
best effort to provide Landlord with current, unaudited financial statement of
Tenant, Tenant’s general partner and any guarantor of this Lease. Any unaudited
financial statement shall be prepared in accordance with generally accepted
accounting principles consistently applied and certified to be true and correct
by the chief financial officer of the entity providing such financial
statements.

 

27.                                 Parking.  Landlord shall license vehicle parking spaces
to Tenant and Tenant’s business on the terms and conditions set forth in this Section 27. Landlord shall provide vehicular parking
spaces on an unreserved basis for Tenant and its employees on the surface
parking facilities on the Property. This license is for parking spaces in the
general parking area to be designated and redesignated from time to time by
Landlord; provided, however, Landlord may require Tenant to park in a specific
location. Landlord shall not be liable to Tenant for the failure of any of its
tenants, invitees, employees, agents or customers or any third parties to
comply with the designation of the parking spaces. This license is for parking
only and does not include the rights to any additional services, which services
may be made available by Landlord from time to time at an additional charge.

 

28.                                 Guaranty.
 Intentionally omitted.

 

13

 

29.                                 Texas
Property Code Section 93.012.  Landlord and Tenant agree that each provision
of this Lease for determining charges, amounts and Additional Rent payable by
Tenant is commercially reasonable and, as to each such charge or amount,
constitutes a “method by which the charge is to be computed” for purposes of Section 93.012
of the Texas Property Code (as same may be amended).

 

30.                                 Texas
Property Code Section 91.004.  Tenant hereby waives any statutory lien
provided under Section 91.004 of the Texas Property Code (as same may be
amended).

 

31.                                 Prohibited
Persons and Transactions. 
Tenant represents and warrants that neither Tenant nor any of its
affiliates, nor any of their respective partners, members shareholders or other
equity owners, and none of their respective employees, officers, directors,
representatives or agents is, nor will they become, a person or entity with
whom U.S. persons or entities are restricted from doing business under regulations
of the Office of Foreign Asset Control (“QFAC”) of the Department of the
Treasury (including those named on QFAC’s Specially Designated and Blocked
Persons List) or under any stature, executive order (including the September 24,
2001, Executive Order Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit, or Support Terrorism), or other
governmental section and is not and will not Transfer this Lease to,
contract with or otherwise engage in any dealings or transactions or be
otherwise associated with such persons or entities.

 

32.                                 Waiver of
Jury Trial.  Landlord
and Tenant hereby waive any right to trial by jury in any claim, action,
proceeding or counterclaim by either Landlord or Tenant (or any guarantor of
Tenant’s obligations hereunder) against the other(s) pertaining to any matters
arising out of or in any way connected with the Lease, the relationship of
Landlord and Tenant, or Tenant’s use of the Leased Premises. In the event that
Tenant (and/or any guarantor of Tenant’s obligations hereunder) demands a jury
trial in connection with any of the foregoing matters, then Tenant shall be
liable to Landlord for an amount equal to One Hundred Dollars ($100.00) per day
(on account of the delay caused by such demand) for each day that trial of any
such matter is delayed by such jury trial demand.

 

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

 

EXHIBITS:

 

Exhibit “A” – Legal Description of the Land

Exhibit “B” – Renewal Option

Exhibit “C” – Rules and Regulations

Exhibit “D” – Tenant Improvement Agreement

Exhibit “D-1” – Plan

 

(SIGNATURES
ON FOLLOWING PAGE)

 

14

 

IN WITNESS WHEREOF, Landlord and Tenant have
caused this Lease to be duly authorized, executed, sealed and delivered as of
the
                        day
of August, 2005.

 

	
  “Landlord”:

  	
   

  	
  “Tenant”:

  
	
   

  	
   

  	
   

  
	
  JSS/CAPITAL AVENUE, L.P.,

  	
   

  	
  TGC INDUSTRIES, INC

  
	
  a Texas limited partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  JSS Realty Holdings,

  	
   

  	
   

  
	
   

  	
  General Partner

  	
   

  	
  By:

  	
  /s/ Wayne A. Whitener

  
	
   

  	
   

  	
   

  
	
  Name: Janet Spencer Shaw

  	
   

  	
  Name: Wayne A. Whitener

  
	
   

  	
   

  	
   

  
	
  Title: President

  	
   

  	
  Title: President/CEO

  

 

15

 

EXHIBIT “A”

LEGAL
DESCRIPTION OF THE LAND

 

BEING a 1.349 acre tract of land situated in the James Beverly Survey,
Abstract Number 12, in the city of Plano, Collin County. Texas and being all of
LOT 15, BLOCK B of the DALLAS NORTH INDUSTRIAL DISTRICT SECTION FOUR, an
addition to the city of Plano according to the plat recorded in Cabinet C, Page 113 of the Plat Records of
Collin County, Texas (PRCCT) an being more particularly described as follows:

 

BEGINNING at a 1/2 inch iron rod found for the northwest corner of said
Lot 15 and being located in the southerly right-of-way of Capital Avenue (a 60 feet wide Tight-of-way);

 

THENCE along the southerly right-of-way line of said Capital Avenue
south 89’48’l0” EAST a distance of 232.00 feet to a one inch rod
found for the
northeast corner of said Lot 15;

 

THENCE departing the southerly right-of-way line of said Capital Avenue
DUE SOUTH a distance of 242.88 feet to a PK NAIL found for the southeast corner
of said Lot 15;

 

THENCE DUE WEST a distance of 232.00 feet to an “X” cut in concrete
found for the southwest corner of said Lot 15;

 

THENCE along the westerly line of said Lot 15 DUE NORTH a distance of
253.68 feet to the POINT OF BEGINNING;

 

CONTAINING within these metes and bounds 1.349 acres or 58.761 square
feet of land, more or less, all according to that survey prepared by
Kurtz-Bedford and Associates, Inc., dated March 1994 and signed by
Austin J. Bedford, Registered Professional Land Surveyor No. 4132; to
which reference for all purposes is hereby made.

 

16

 

EXHIBIT “B”

RENEWAL
OPTION

 

Subject to the terms and conditions of this
Exhibit, Tenant may at its option extend the Term for the entire Leased
Premises for one period of three year each (“Renewal Term”) upon the same terms contained in this Lease.
Tenant shall have no additional Renewal Option.

 

A.                                   The
Base Rent during the Renewal Term shall be the then prevailing market rate for a
comparable term commencing on the first day of the applicable Renewal Term for
tenants of comparable size and creditworthiness for comparable space in the
Building and other first class office buildings in the general vicinity of the Building as reasonably
determined by Landlord, and Tenant shall not be entitled to any rental
abatement or other concessions.

 

B.                                     To exercise its
option, Tenant must deliver an initial non-binding notice to Landlord not less
than six (6) months
prior to the proposed commencement of the applicable Renewal Term and not more
than twelve (12) months prior to the proposed commencement of the
applicable Renewal Term. Within thirty (30) days after Landlord’s receipt of
Tenant’s initial non-binding notice. Landlord shall calculate and inform Tenant of
the Base Rent for the Leased Premises. Landlord and Tenant shall work together
in good faith to agree upon the Base Rent. Within fifteen (15) days after the date on which
Landlord advises Tenant of the applicable Base Rent, Tenant shall either (i)
give Landlord final binding written notice (“Binding Notice”) of Tenant’s
exercise of its Renewal Term at the Base Rent determined by Landlord or (ii) if Tenant
disagrees with Landlord’s determination, provide Landlord with written
notice of rejection (the “Rejection Notice”). If Tenant fails to provide
Landlord with either a Binding
Notice or a Rejection Notice, within such
fifteen (15) day period, Tenant will be deemed to have waived its option to
extend. If Tenant provides Landlord with a Rejection Notice, Tenant will be
deemed to have waived its option to extend.

 

C.                                     Tenant’s option to
extend this Lease is subject to the conditions that: (i) on the data that
Tenant delivers its final binding notice exercising its option to extend,
Tenant is not
in default under this Lease after the expiration of any applicable notice and
cure periods, and (ii) Tenant shall not have assigned this Lease, or sublet any
portion of the Leased Premises under a sublease which is in effect at any time during the
final twelve (12) months prior to the applicable Renewal Term.

 

D.                                    Tenant agrees to
provide Landlord with financial statements evidencing Tenant’s (and any
guarantor’s) financial condition and to provide additional security if
reasonably requested by Landlord.

 

F                                         Upon Tenant’s
exercise of the renewal option, Tenant agrees to convert to Landlord’s Standard
Lease form

 

17

 

EXHIBIT “C”

RULES AND REGULATIONS

 

The following Rules and Regulations are
prescribed by Landlord in order to provide and maintain, to the best of
Landlord’s ability, orderly, clean and desirable Leased Premises, building and
parking facilities for the tenants therein and to regulate conduct in and use
of the Leased Premises, the Building and parking facilities in such a manner as
to minimize interference by others in the proper use of the Lease Premises by
Tenant. All references to Tenant include not only the Tenant, but also Tenant’s
agents, employees, invitees, licensees, visitors, assignees, and/or sublessees:

 

1.                                       Tenant shall not block or obstruct any of the
entries, passages, or doors of the Building or parking area, or place, empty,
or throw rubbish, litter, trash, or material of any nature into such areas, or
permit such areas to be used at any time except for ingress or egress of
Tenants.

 

2.                                       Landlord will not be responsible for lost or
stolen personal property, equipment, money, or any article taken from the
Leased Premises, Building, or parking facilities regardless of how or when loss
occurs.

 

3.                                       The plumbing facilities shall not be used for
any other purpose than that of which they are constructed, and no foreign
substance of any kind shall be placed therein, and the expense of any breakage,
stoppage, or damage resulting from a violation of this provision by Tenant or
its employees shall be borne by Tenant.

 

4.                                       Any additional keys or locks required by
Tenant during the term of the Lease shall be the Tenant’s responsibility.

 

5.                                       The common parking facilities are available
for use by any and all tenants. Landlord reserves the right, in Landlord’s sole
discretion, to assign or allocate parking in the event of conflicts, abuse, or
improper use. It is generally understood that any tenant should utilize only
those parking spaces immediately adjacent to the tenant’s leased premises.

 

6.                                       Vehicles that are abandoned, disabled, have
expired registration stickers, obstructing any means of ingress or egress to
any leased Premises, or in any way a general nuisance or hazard are subject to
removal without notice by Landlord. All costs associated with such removal shall
be at the Tenant’s/vehicle owner’s expense.

 

18

 

EXHIBIT “D”

TENANT IMPROVEMENT AGREEMENT

 

Landlord has agreed to install, at Landlord’s
expense, and HVAC system of the appropriate tonnage for the 2,210 square feet
of spaced located off the main office area as shown on the attached Exhibit D-1 (the “Plan”). Upon termination of the
Lease, the Tenant Improvements shall remain in the Leased Premises and shall be
deemed Landlord’s property.

 

19

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