Document:

exv10w13w3

 

Exhibit 10.13.3

FINAL

Sealy Properties

May 2004

TA Texas

(5101 Statesman Dr.)

LEASE AGREEMENT

	 	 	PARTIES

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

	1.	 	LEASED PREMISES

     LESSOR hereby leases to LESSEE, and LESSEE hereby leases from LESSOR, on
the terms, conditions and covenants in this Lease, the space described,
outlined and/or set forth on Exhibit “A”, consisting of 91,364 rentable square
feet, and all fixtures, systems and equipment located thereon (collectively,
the “Leased Premises”). The municipal address of the Leased Premises is 5101
Statesman Drive, Irving, Texas 75063 and is located on the land more
particularly described on Exhibit “B” (the “Land”). The term “Building” in
this Lease shall mean the physical structure(s) and all other improvements
located on the Land in which the Leased Premises is located.

	2.	 	TERM

     TO HAVE AND TO HOLD said Leased Premises for a period of five (5) years
and six (6) months or sixty-six (66) months, commencing on the date (the
“Commencement Date”) that is the earlier of (i) the date on which LESSEE first
occupies the Leased Premises for the purpose of conducting its business, or
(ii) thirty (30) days after the date on which the Work Items (hereinafter
defined) have been substantially completed in accordance with Exhibit “C” or
would have been substantially completed but for LESSEE Delays (as hereafter
defined) (but in no event prior to January 1, 2005), and ending on the last day
of the month that is sixty-six (66) full calendar months following the
Commencement Date (the “Expiration Date”), unless sooner terminated, renewed or
extended as provided for herein (such period as renewed, extended or terminated
hereinafter referred to as the “Term”).

	3.	 	ACCEPTANCE OF LEASED PREMISES; CONDITION AND SUITABILITY

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

     B. As used herein, the term “substantially completed” or a like term shall
mean that the Work Items have been completed in accordance with Exhibit “C”,
except for minor punch list items which do not affect LESSEE’S use or occupancy
of the Leased Premises. As soon as the Work Items have been substantially
completed, LESSOR will notify LESSEE in writing and LESSOR and LESSEE shall
inspect the Work Items together and prepare one (1) written punch list of items
needing completion or correction. LESSOR will complete such items within thirty
(30) days after the receipt of such notice.

     C. Upon the following terms and conditions, on November 15, 2004, LESSOR
shall permit LESSEE to occupy the Leased Premises prior to the date of
substantial completion of the Work Items: (i) LESSEE shall be permitted such
early occupancy of the Leased Premises only for the purposes of installing
LESSEE’S racks and other furniture, fixtures, and equipment, and to make
general preparations for operations, but not for any other purpose; (ii)
LESSEE’S early occupancy of the Leased Premises shall not materially, adversely
interfere with the construction of the Work Items; and (iii) such early
occupancy shall be subject to all of the terms and conditions of this Lease
(other than the payment of Base Monthly Rent or Operating Expenses, the payment
of which shall commence as provided in Article 4.E. of this Lease). Such early
occupancy by LESSEE in accordance with the terms of this Article 3.C. shall not
trigger the Commencement Date or be construed as LESSEE’S approval of the Work
Items. LESSEE shall be responsible for reimbursing LESSOR for the reasonable
cost of any damage to the Work Items caused by LESSEE’S early occupancy of the
Leased Premises.

     D. If the Commencement Date has not occurred by January 1, 2005 (which
date shall be extended to a later date by one day for each day constituting a
LESSEE Delay, and which date, as so extended, shall be referred to herein as
the “Deadline Date”), then LESSEE shall be entitled to receive from LESSOR, as
LESSEE’S sole and exclusive remedy, the lesser of (i) a credit against the
first Base Monthly Rent due hereunder in an amount equal to one day’s rent per
day for each day that shall elapse from the Deadline Date until the
Commencement Date and (ii) LESSEE’S actual out of pocket costs incurred due to
delivery of the Leased Premises to LESSEE after the Deadline Date (as evidenced
by invoices and other reasonable supporting documentation).

     E. If the Commencement Date has not occurred by April 1, 2005 (which date
shall be extended to a later date by one day for each day constituting a LESSEE
Delay, and which date, as so extended, shall be referred to herein as the
“Termination Date”), LESSEE shall have the right, as its sole and exclusive
remedy, to terminate this Lease by written notice delivered to LESSOR within
ten (10) days following the occurrence of the Termination Date (but, in all
events, prior to the date on which the Commencement Date occurs in accordance
with the terms hereof).

 

 

If LESSEE so timely terminates this Lease within such ten (10) day period (but,
in all events, prior to the date on which the Commencement Date occurs in
accordance with the terms hereof), then neither LESSOR nor LESSEE shall have
any further rights or obligations hereunder (except as expressly provided
otherwise herein) and LESSOR shall promptly refund to LESSEE any prepaid sums
(including the Security Deposit).

     F. As used herein, the term “LESSEE Delay” shall mean any delay in the
substantial completion of the Work Items solely as a result of LESSEE’S request
for any change to the Work Items, whether or not LESSOR consents to make such
change, or any other delay in the substantial completion of the Work Items
caused solely by LESSEE or any agent, employee or contractor of LESSEE.

	4.	 	BASE MONTHLY RENT, SECURITY DEPOSIT AND ESCROW

     A. As rental for the Leased Premises, LESSEE agrees to pay as rent to
LESSOR, without notice, reduction, deduction or offset, except as expressly set
forth in Articles 17 and 18 of this Lease and Paragraph 5 of Exhibit “C” to
this Lease, at LESSOR’S office at P.O. Box 11407, Birmingham, Alabama
35246-1081, or at such other place as LESSOR may from time to time designate in
writing in advance, the “Base Monthly Rent” as set forth in Article 4.E. herein
on or before the first day of each calendar month through the Term.

     B. LESSEE has deposited with LESSOR upon delivery of this Lease,
$32,829.84 to be applied as follows: $7,545.00 as the first monthly payment of
Operating Expenses (as defined herein) and $25,284.84 as a Security Deposit.
Any amount designated herein as “Security Deposit” shall not bear interest, may
be commingled with LESSOR’S general funds, and shall not be considered an
advance payment of rent or a measure of LESSOR’S damages. In the event of a
Default (as defined in Article 20), including but in no way limited to the
non-payment of rent, LESSOR may, from time to time without forfeiting,
compromising, releasing, novating or waiving any right or remedy, use the
Security Deposit to the extent necessary to pay past due rent and other amounts
due LESSOR. Following any such application of the Security Deposit, LESSEE
shall pay to LESSOR the amount so applied in order to restore the Security
Deposit to its original amount within five (5) days after written request.

     C. Notwithstanding anything to the contrary contained herein, if no event
of Default exists on the first day of the twenty-fifth (25th) month of the Term
of this Lease or any earlier day of termination, LESSOR (or, in the event of an
assignment of LESSOR’S interest in the Leased Premises and the Security Deposit
during the Term, LESSOR’S assignee) shall refund the Security Deposit to LESSEE
on such date, subject to deduction for LESSOR’S prior application of the
Security Deposit in accordance with the terms hereof. The Security Deposit
shall be deemed the property of LESSOR, except to the extent of LESSEE’S right
to a refund of the Security Deposit in accordance with the terms hereof.
LESSEE hereby expressly waives the requirements and applicability of Tex. Prop.
Code §§ 93.005 – 93.011, and agrees that LESSOR shall timely return to LESSEE
the balance of the Security Deposit not applied to satisfy LESSEE’S obligations
as set forth above, provided LESSEE has performed all of its obligations
accrued and due and payable hereunder as of such time. If such waiver is not
effective under applicable law, LESSOR shall, within the time required by
applicable law, return to LESSEE the portion of the Security Deposit remaining
after deducting all damages, charges and other amounts permitted by law.
LESSOR and LESSEE agree that such deductions shall include, without limitation,
all damages and losses that LESSOR has suffered or that LESSOR reasonably
estimates that it will suffer as a result of any breach of this Lease by
LESSEE. LESSOR shall be released from any obligation with respect to the
Security Deposit upon transfer of this Lease and the Leased Premises and the
Security Deposit to a person or entity assuming LESSOR’S obligations under this
Article 4.C.

     D. In addition to the Base Monthly Rent, LESSEE agrees to pay to LESSOR as
additional rent its Proportionate Share (as defined in Article 31) of expenses
with respect to the Building and/or Land, consisting of: (i) Taxes pursuant to
Article 13; (ii) insurance costs pursuant to Article 8; (iii) utility costs
pursuant to Article 12; and (iv) Common Area costs pursuant to Article 11.E.
(all of the foregoing expenses being collectively referred to herein as the
“Operating Expense” or “Operating Expenses”). During each month of the Term,
on the same day that rent is due hereunder and without notice or demand, LESSEE
shall pay to LESSOR an amount equal to 1/12 of the estimated annual cost of
LESSEE’S Proportionate Share of the Operating Expenses as reasonably determined
by LESSOR. The initial monthly payments are based upon the estimated amounts
for the first calendar year of the Lease, and may be increased or decreased in
good faith by LESSOR to reflect the projected actual cost of all such items
during each calendar year. If LESSEE’S total Operating Expense payments
applicable to a calendar year are less than LESSEE’S Proportionate Share of all
such items, LESSEE shall pay the difference to LESSOR within thirty (30) days
after written request. If after such adjustment, the payments for Operating
Expenses by LESSEE applicable to a calendar year are more than LESSEE’S actual
Proportionate Share of all such items, LESSOR shall retain such excess and
credit such excess payment against LESSEE’S future Operating Expense payments
due unless the overpayment occurs in the final year of the Term of the Lease,
in which case it shall be refunded to LESSEE within thirty (30) days following
expiration of the Term, or if any uncured Default then exists, LESSOR shall
retain such overpayment until such Default is cured. This obligation survives
the termination of this Lease.

     E. The amount of the Base Monthly Rent and the monthly Operating Expense
payments beginning on the Commencement Date and continuing through the fourth
month of the Term are as follows (Base Monthly Rent for the remainder of the
Term is outlined in “Exhibit “C” – Special Stipulations”):

	 	 	 	 	 
	(1) Base Monthly Rent

	 	$	0.00	 
	(2) Taxes

	 	$	4,886.00	 
	(3) Insurance

	 	$	631.00	 
	(4) Common Area Maintenance (CAM)

	 	$	2,028.00	 
	

	 	 	
 	 
	      Total Monthly Payment

	 	$	7,545.00	 

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

     LESSOR agrees to keep and maintain books and records reflecting the
Operating Expenses in accordance with sound accounting principles consistently
applied. LESSEE shall have the right, upon at least ten (10) days advance
written notice to LESSOR (“Audit Notice”) and at LESSEE’S sole expense (except
as expressly set forth in this Lease), to audit LESSOR’S books and records for
the immediately preceding calendar year (but in no event for any calendar year
prior to 2005) in order to verify actual Operating Expenses. Any such audit
shall be performed during LESSOR’S normal business hours. No subtenant shall
have any right to conduct an audit and no assignee shall conduct an audit for
any period during which such assignee was not in possession of the Leased
Premises. Such audit must be conducted by a certified public accountant who is
not being compensated by LESSEE on a contingency fee basis. All information
obtained through the LESSEE’S audit with respect to financial matters
(including, without limitation, costs, expenses, income) and any other matters
pertaining to LESSOR and/or the Building shall be held in strict confidence by
LESSEE and its officers, agents, and employees; and LESSEE shall cause its
auditor and any of its officers, agents, and employees to be similarly bound;
provided, however, the disclosure of audit results to third parties shall be
permitted on a reasonable need-to-know basis (subject to such third parties’
agreement if such third party is not a court or public or quasi-public body to
preserve the confidentiality of the disclosed information in accordance with
the terms hereof) and as may be required by court order, applicable security
regulations, legal process or applicable law. Public disclosure is permitted
if LESSEE in its reasonable discretion determines that such disclosure is
necessary to comply with applicable security regulations. LESSOR shall have
the right to dispute the result of any such audit by LESSEE. If LESSOR so
disputes such audit, and if LESSOR and LESSEE are unable to resolve such
dispute within thirty (30) days, then the dispute shall be submitted to a
reputable independent accounting firm (“Firm”) reasonably acceptable to LESSOR
and LESSEE for resolution. The reasonable determination of the Firm shall be
binding on LESSOR and LESSEE. If the parties’ mutual agreement as to the
Operating Expenses in question, or the determination of the Firm (as
applicable), establishes that LESSEE underpaid or overpaid its Proportionate
Share of Operating Expenses (as required pursuant to this Lease), then LESSOR
shall refund to LESSEE any such overpayment, or LESSEE shall pay to LESSOR any
such underpayment (as applicable), promptly upon the agreement of the parties
or conclusion of such determination (as the case may be). In addition, if the
Firm is engaged as provided hereinabove and the determination of such Firm
establishes: (i) that LESSEE overpaid or underpaid its Proportionate Share of
Operating Expenses by five percent (5%) or more, then (A) LESSOR shall pay all
costs of engaging the Firm and LESSEE’S reasonable expenses in connection with
such audit in case of any such overpayment, and (B) LESSEE shall pay all costs
of engaging the Firm and LESSOR’S reasonable expenses in connection with such
audit in case of any such underpayment; or (ii) that the variance was less than
five percent (5%), LESSEE shall pay the entire cost of engaging the Firm and
LESSOR’S reasonable expenses in connection with such audit. In all other
circumstances (other than those provided in the immediately preceding sentence)
each party shall pay its own expenses in connection with any such audit.
Payment by LESSEE of Operating Expenses shall not be deemed to constitute a
waiver by LESSEE of its rights to audit Operating Expenses.

	5.	 	LATE CHARGES

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

	6.	 	PURPOSE, USE AND OCCUPANCY; COMPLIANCE WITH LAWS

     A. The Leased Premises are leased for the purpose of, and shall be used
and occupied for general office purposes and the purpose of receiving, storing,
warehousing, shipping and selling products, materials and merchandise and for
such other lawful purposes as may be incidental thereto, and for no other
purpose. The Leased Premises shall not be used for any unlawful purpose nor in
any manner creating a public or private nuisance or trespass. Neither
sidewalks nor loading docks nor any other area outside the Leased Premises
shall be used for sale, storage (other than outdoor trailer storage) or display
(other than signage permitted under this Lease) in any manner whatsoever.

     B. LESSEE shall, at its sole cost and expense, obtain all licenses,
certificates, permits and all other approvals necessary for such purpose, use
and occupancy of the Leased Premises (other than the certificate of occupancy,
which shall be LESSOR’S responsibility, at its sole cost and expense, as herein
provided), and shall provide LESSOR with copies of same within thirty (30) days
of LESSEE’S occupancy and additional copies as may be reasonably requested
within five (5) days after written request. LESSEE shall comply with all
governmental statutes, laws, ordinances and orders applicable to LESSEE’S
specific use of the Leased Premises, all at LESSEE’S sole expense. LESSEE will
not permit the Leased Premises to be used for any purpose or in any manner, or
take any action or inaction, which would not be covered by the insurance
described in Article 8 or Article 9 or which would render the insurance thereon
void or voidable or the insurance risk significantly more hazardous. If there
is any increase in the cost of any such insurance described in Article 8 or
Article 9 directly resulting from LESSEE’S proposed or actual actions or
inactions, LESSEE shall pay 1/12 of the amount of such annual increase on a
monthly basis as a part of Operating Expenses.

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

	7.	 	RELEASE AND INDEMNITY, WAIVER OF SUBROGATION, RELEASE FROM NEGLIGENCE

     A. Subject to Section 7.B below, except for the gross negligence or the
intentional act or omission of LESSOR or the wrongful failure of LESSOR to
perform its obligations hereunder, LESSOR shall not be liable to LESSEE or
those claiming by, through, or under LESSEE for any injury to or death of any
person or persons or the damage to or theft, destruction, loss, or loss of use
of any property or inconvenience (a “Loss”) caused by casualty, theft, fire,
third parties, or any other matter (including Losses arising through repair or
alteration of any part of the Building, or failure to make repairs, or from any
other cause), regardless of whether the negligence of any party caused such
Loss in whole or in part and occurring within the Leased Premises. Subject to
Section 7.B below, LESSEE agrees to defend, indemnify and hold LESSOR, its
employees, representatives, agents, contractors, patrons, invitees, and
licensees harmless from any and all liability for and against any injury or
damage relating to, arising from or connected with (i) the actions or inactions
of LESSEE, its employees, agents, invitees, licensees or others under its
control, in or about the Leased Premises; (ii) all costs, reasonable attorney’s
fees, expenses and liability incurred by LESSOR in connection with any suit,
claim or action or proceeding brought on account of the events and transactions
described in the immediately preceding item (i); provided, however, LESSEE
shall not be required to indemnify and hold LESSOR harmless from or against any
such injury or damage caused by the gross negligence or intentional act or
omission of LESSOR or the wrongful failure of LESSOR to perform its obligations
hereunder. LESSOR shall not be liable or responsible for any loss of or damage
to the property of LESSEE or others by theft, all of which property of LESSEE
shall be insured or self-insured by LESSEE, at LESSEE’S sole cost and expense.
LESSEE shall not be liable or responsible for any loss of or damage to the
property of LESSOR or others by theft, all of which property of LESSOR shall be
insured or self-insured by LESSOR. Subject to Section 7.B below, LESSOR agrees
to defend, indemnify and hold LESSEE, its employees, representatives, agents,
contractors, patrons, invitees, and licensees harmless from any and all
liability for and against any injury or damage relating to, arising from or
connected with (i) the actions or inactions of LESSOR, its employees, agents,
invitees, licensees or others under its control, in or about the Common Areas;
(ii) all costs, reasonable attorney’s fees, expenses and liability incurred by
LESSEE in connection with any suit, claim or action or proceeding brought on
account of the events and transactions described in the immediately preceding
item (i); provided, however, LESSOR shall not be required to indemnify and hold
LESSEE harmless from or against any such injury or damage caused by the gross
negligence or intentional act or omission of LESSEE or the wrongful failure of
LESSEE to perform its obligations hereunder.

     B. NOTWITHSTANDING ANYTHING IN THIS LEASE TO THE CONTRARY, LESSOR and
LESSEE each hereby release each other and their employees from all loss or
damage caused by perils required by this Lease to be insured through, by or
under them, by way of subrogation or otherwise, even if such loss or damage
shall have been caused by the actions or inactions of the other party or anyone
for whom such party may be responsible, INCLUDING A LOSS OR DAMAGE CAUSED BY A
PARTY’S NEGLIGENCE. LESSOR and LESSEE agree that they have obtained such a
clause or endorsement in their respective insurance policies and shall use all
commercially reasonable efforts to maintain such clause or endorsement in
effect in their respective insurance policies at all times during the Term of
this Lease. THIS SECTION RELEASES A PARTY FROM ITS OWN NEGLIGENCE IN CERTAIN
CIRCUMSTANCES.

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

	8.	 	LESSOR’S INSURANCE

     LESSOR shall procure insurance policies and charge a Proportionate Share
of the premium cost to the LESSEE pursuant to Articles 4.D. and 4.E. of,
casualty, liability and other insurance coverage for the Leased Premises, Land,
Building and/or project of which the Leased Premises are a part, as is
commercially practicable and customary. Such insurance shall include, but in
no way be limited to (i) casualty insurance covering the Building in an amount
of not less than full replacement cost, and (ii) insurance covering the
releases and indemnities of LESSOR set forth in this Lease relating to
negligence.

	9.	 	LESSEE’S INSURANCE

     LESSEE, at its sole expense, shall obtain and maintain in full force and
effect at all times during the Term the following insurance coverage: (a)
worker’s compensation insurance; (b) “All Risk” fire and extended coverage
insurance covering all contents, fixtures and improvements installed by LESSEE
in the Leased Premises in an amount not less than 100% of their full
replacement cost; (c) public general liability insurance against liability for
property damage and personal injury suffered by anyone by reason of the use or
occupancy of the Leased Premises with minimum limits of $1,000,000 on account
of bodily injury to or death of one person, $1,000,000 on account of any one
occurrence affecting more than one person and $500,000 on account of damage to
property; and (d) insurance covering the releases and indemnities of LESSEE set
forth in this Lease relating to negligence. All of such insurance shall be
provided by an insurance company or companies with A.M. Best ratings of A-VII
or better and licensed to do business in the state in which the property is
located, shall name LESSOR as an additional insured (as to the liability
policy), and shall be non-

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cancelable except upon thirty (30) days written notice to LESSOR and any
designees of LESSOR. Within ten (10) days after the date of this Lease, and
thereafter within ten (10) days after written request, LESSEE shall provide
certificates of insurance evidencing the aforementioned coverage, or other such
evidence acceptable to LESSOR in its reasonable discretion.

	10.	 	MAINTENANCE AND REPAIR BY LESSOR

     A. LESSOR at its own cost and expense, shall maintain, repair and replace
only the roof, foundation and the structural components of the exterior walls
of the Building in good repair, reasonable wear and tear excepted. The term
“exterior walls” as used herein shall not include windows, glass or plate
glass, doors, special storefronts, or office entries. LESSOR shall maintain
proper functioning of the fire sprinkler system and shall conduct quarterly
pressure tests and an annual hydrant test.

     B. [Intentionally Blank]

     C. LESSEE shall promptly give LESSOR written notice of any defect or need
for repairs after which LESSOR shall have reasonable opportunity to repair same
or cure such defect. LESSOR’S liability with respect to any defects, repairs
or maintenance for which LESSOR is responsible under any of the provisions of
this Lease shall be limited to the cost of such repairs or maintenance or the
curing of such defect. Following notice (written or oral) to LESSEE (except in
the event of an emergency, in which case no notice shall be required), LESSOR
shall be allowed full access to the Leased Premises at reasonable times (or in
the event of an emergency at any time) for the purpose of fulfilling or
attempting to fulfill LESSOR’S obligations under this Article 10.

     D. LESSOR shall cause the Building’s mechanical, electrical, plumbing,
sprinkler, HVAC and life-safety systems to be in good working order as of the
Commencement Date.

     E. LESSOR agrees that if a defect (“HVAC System Defect”) in the Building’s
HVAC system rendering same inoperable for its intended purpose is discovered by
LESSEE prior to the twenty-fourth (24th) month following the Commencement Date
(the “Second Anniversary”), LESSEE shall give LESSOR written notice thereof
(“HVAC System Defect Notice”) on or prior to the Second Anniversary (time being
of the essence with respect thereto). If LESSOR receives a HVAC System Defect
Notice prior to the Second Anniversary, LESSOR shall, at its sole expense,
expeditiously cause such HVAC System Defect to be repaired or remedied.

     F. Notwithstanding the foregoing, nothing contained in Article 10.E.
shall: (i) require LESSOR to repair or remedy any HVAC System Defect to the
extent such repair or remediation is necessitated due to the negligence, or
intentional acts or omissions of, or misuse of the item requiring such repair
or remediation by, LESSEE or its employees, agents, contractors or invitees; or
(ii) require LESSOR to repair or remedy any HVAC System Defect if the coverage
afforded by any warranty or maintenance/service contract relating to the item
in question has been impaired or invalidated by LESSEE or its employees, agents
or invitees; or (iii) require LESSOR to repair or remedy any HVAC System Defect
with respect to which a HVAC System Defect Notice is not received by LESSOR on
or prior to the Second Anniversary.

	11.	 	MAINTENANCE AND REPAIR BY LESSEE; COMMON AREA MAINTENANCE

     A. LESSEE shall, at its sole expense, repair and maintain all parts of the
Leased Premises, except those for which LESSOR is expressly responsible under
this Lease, in good condition (reasonable wear and tear excepted), making all
necessary repairs, maintenance and replacements, including but not limited to,
ceiling tiles, windows, glass, doors, signs, office entries, railings, interior
walls and finish work, floors and floor covering, heating and ventilation
systems (subject to Article 10.E.), air conditioning systems (subject to
Article 10.E.), dock boards and ramps, truck doors, dock bumpers, plumbing
fixtures, termite and pest extermination, removal of trash and debris, interior
handicap access areas, and shall keep the whole of the Leased Premises in a
safe, clean and sanitary condition. LESSEE shall not cause or permit trash to
accumulate in or around the Building due to the activities of LESSEE or its
employees, agents or visitors.

     B. Intentionally Deleted.

     C. LESSEE shall not be obligated to repair any damage caused by fire,
tornado or other Act of God or Force Majeure (as defined in Article 40 of this
Lease) to the extent of insurance proceeds actually paid to LESSOR or which
would have been paid to LESSOR if LESSOR carried the insurance required of
LESSOR in Article 8, except that LESSEE shall be obligated to repair all wind
damage to all glass and signage except with respect to tornado or hurricane
damage.

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

     E. LESSOR shall operate and perform maintenance, repair, and replacement
as necessary to the Common Areas. The Common Areas are the parts of the Land
and Building outside of the Leased Premises, including, but not limited to,
plumbing, drains, electrical systems, fire sprinkler systems, gutters,
downspouts, exterior painting, trees, shrubs, landscaping, parking areas,
driveways, sidewalks, curbs, bollards, loading areas, rail spur areas, private
streets and alleys, lighting, hallways, and other areas and improvements
provided by LESSOR outside the Leased Premises, exclusive of the roof,
foundation and other structural components of the Building (which are addressed
in Article 10), all of which shall be operated and maintained by LESSOR in a
safe, clean and sanitary condition. LESSOR shall charge to LESSEE pursuant to
Articles 4.D. and 4.E. LESSEE’S Proportionate

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Share of the cost of operation and maintenance of the Common Areas
(including, but not limited to, costs incurred for management fees not to
exceed five percent (5%) of the annual total of Base Monthly Rent), including
the costs of maintenance, personnel, lighting, utility consumption, water,
sewage, painting, termite control, pest extermination, trash and debris
removal, cleaning, inspecting and landscaping the Common Areas and lawn
sprinkler systems costs, in each case incurred in the operation and maintenance
of the Common Areas and which may be reasonably incurred by LESSOR. Common
Areas expenses shall exclude the costs of any capital expenses, except those
which, in Landlord’s good faith estimate, will reduce Common Area expenses or
improve safety (and as to the amortized portion only as described below), and
those made to keep the Building and the Land in compliance with governmental
requirements enacted subsequent to the date hereof and applicable from time to
time (and as to the amortized portion only as described below); provided,
however it is agreed that each capital expenditure shall be amortized and
charged as a Common Area expense over its useful life in accordance with
generally accepted accounting principles, and provided further that if
subsequent to any such expenditure LESSEE exercises any renewal option, the
portion of the cost included within Common Area expenses shall be recalculated
to include the length of the renewal term if such affects the generally
accepted calculation of amortization.

     F. LESSOR reserves the right but is not obligated to perform necessary
repairs to common sewage line plumbing and all other repairs, maintenance and
replacements which are otherwise LESSEE’S obligation under this Article 11, and
LESSEE shall, with respect to such items, be liable for and pay to LESSOR the
cost of same within ten (10) days after written request and receipt of
reasonable supporting documentation therefor.

     G. Intentionally Deleted.

     H. LESSEE shall, at its sole expense, enter into a regularly scheduled
preventive maintenance/service contract with a maintenance contractor for
servicing all hot water, heating, ventilation and air conditioning systems and
other equipment within the Leased Premises. LESSOR reserves the right to
approve or disapprove of any maintenance contract and the contractor(s)
performing work on equipment serving the Leased Premises, but LESSOR’S approval
shall not be unreasonably withheld, conditioned or delayed. The service
contract must include all services recommended by the equipment manufacturer
and must become effective and a copy thereof delivered to LESSOR without demand
within thirty (30) days of the date of this Lease.

     I. Notwithstanding anything herein to the contrary, in no event shall
LESSEE’S Proportionate Share of Controllable Operating Expenses (as defined
below) in calendar year 2005 or any subsequent calendar year during the Term
exceed 108% of LESSEE’S Proportionate Share of Controllable Operating Expenses
applicable to the then prior calendar year, calculated on a cumulative basis.
There shall be no limitation on LESSEE’S Proportionate Share of
Non-Controllable Operating Expenses (as defined below). Assume, for example,
LESSEE’S Proportionate Share of Controllable Operating Expenses for calendar
year 2005 was $100.00. In calendar year 2006, LESSEE’s Proportionate Share of
Controllable Operating Expenses would be the lesser of (i) LESSEE’s
Proportionate Share of Controllable Operating Expenses for calendar year 2006,
or (ii) $108.00 ($100.00 plus 8%). In calendar year 2007, LESSEE’s
Proportionate Share of Controllable Operating Expenses would be the lesser of
(i) LESSEE’s Proportionate Share of Controllable Operating Expenses for
calendar year 2007, or (ii) $116.64 ($108 plus 8%). As used herein, the terms
(a) “Controllable Operating Expenses” shall mean all Operating Expenses other
than Taxes, insurance premiums, utility charges, snow and ice removal charges
and other Operating Expenses outside the reasonable control of LESSOR; and (b)
“Non-Controllable Operating Expenses” shall mean all Operating Expenses, other
than Controllable Operating Expenses.

	12.	 	UTILITIES

     LESSOR agrees to provide, at its sole expense, the connections to the
Leased Premises for sewer, water, electricity, natural gas and telephone
service; but LESSEE shall pay for all charges (excluding the cost of the Work
Items and associated charges) for water, gas, heat, light power, telephone,
sewer, fire sprinklers and all other utilities and services used on or from the
Leased Premises, together with any taxes, assessments, deposits, surcharges or
other additional charges, penalties or the like pertaining thereto and any
repair and maintenance charges for utilities, and LESSEE shall furnish all
electric light bulbs and tubes and elements. If any such services are not
separately metered to LESSEE, LESSEE shall pay its Proportionate Share of the
cost of such services pursuant to Articles 4.D. and 4.E. of all charges jointly
metered with other tenants of the Building; provided, however, LESSOR shall
have the right to charge LESSEE with a greater share of the cost of such
services on an equitable basis to the extent LESSEE is using a
disproportionately large amount of the services in relation to the other
tenants of the Building and/or project. LESSOR reserves the right to cause any
of said services to be separately metered to LESSEE at LESSEE’S sole expense.
LESSOR shall not be liable or pay for any interruption, re-establishment or
failure of utility services to the Leased Premises, except that LESSOR shall
promptly cure any interruption caused by LESSOR’S negligence or willful
misconduct.

	13.	 	TAXES

     A. LESSEE shall pay LESSEE’S Proportionate Share pursuant to Articles 4.D.
and 4.E., of all taxes, assessments and governmental charges of any kind and
nature imposed upon the Leased Premises, Land and/or Building (referred to
herein as “Taxes”). If at any time during the Term, there shall be levied,
assessed or imposed on LESSOR a capital levy or other tax directly on the rents
received from the Leased Premises, Land or Building and/or an assessment, levy
or charge measured by or based, in whole or in part upon such rents from the
Leased Premises, Land or Building, in which the Leased Premises is located, and
such taxes, assessments, levies or charges do not exist as of the date hereof,
then all such taxes, assessments, levies or charges, or the part thereof so
measured or based, shall be deemed to be included within the term “Taxes.”
Notwithstanding the foregoing, in no event shall Taxes include LESSOR’S income
or franchise taxes.

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     B. LESSEE shall be liable for and pay all taxes, assessments, levies and
governmental charges imposed against any personal property or fixtures of
LESSEE placed in the Leased Premises. If any such taxes, assessments, levies
or governmental charges are against LESSEE’S property and (i) LESSOR pays same
or (ii) the assessed value of LESSOR’S property is increased by inclusion of
LESSEE’S personal property and fixtures and LESSOR pays all or part of same,
then, within thirty (30) days after written request, LESSEE shall pay same to
LESSOR.

     C. LESSOR shall have the option, but not the obligation, to pay any and
all taxes, assessments, levies and charges (whether or not included in the
aforementioned definition of Taxes) payable by LESSEE under this Lease or by
law. If LESSOR does so, LESSEE shall pay to LESSOR the amount so paid within
thirty (30) days after written request.

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

     E. LESSEE has no right to protest the real estate tax rate assessed
against the Project and/or the appraised value of the Project determined by any
appraisal review board or other taxing entity with authority to determine tax
rates and/or appraised values (each a “Taxing Authority”). LESSEE hereby
knowingly, voluntarily and intentionally waives and releases any right, whether
created by law or otherwise, to (a) file or otherwise protest before any Taxing
Authority any such rate or value determination even though LESSOR may elect not
to file any such protest; (b) receive, or otherwise require LESSOR to deliver,
a copy of any reappraisal notice received by LESSOR from any Taxing Authority;
and (c) appeal any order of a Taxing Authority which determines any such
protest. The foregoing waiver and release covers and includes any and all
rights, remedies and recourse of LESSEE, now or at any time hereafter, under
Section 41.413 and Section 42.015 of the Texas Tax Code (as currently enacted
or hereafter modified) together with any other or further laws, rules or
regulations covering the subject matter thereof. LESSEE acknowledges and
agrees that the foregoing waiver and release was bargained for by LESSOR and
LESSOR would not have agreed to enter into this Lease in the absence of this
waiver and release. If, notwithstanding any such waiver and release, LESSEE
files or otherwise appeals any such protest, then LESSEE will be in default
under this Lease and, in addition to LESSOR’S other rights and remedies, LESSEE
must pay or otherwise reimburse LESSOR for all costs, charges and expenses
incurred by, or otherwise asserted against, LESSOR as a result of any tax
protest or appeal by LESSEE, including, appraisal costs, tax consultant
charges and attorneys’ fees (collectively, the “Tax Protest Costs”). If, as a
result of LESSEE’S tax protest or appeal, the appraised value for the Project
is increased above that previously determined by the Taxing Authority (such
increase, the “Value Increase”) for the year covered by such tax protest or
appeal (such year, the “Protest Year”), then LESSEE must pay LESSOR, in
addition to all Tax Protest Costs, an amount (the “Additional Taxes”) equal to
the sum of the following: (i) the product of the Value Increase multiplied by
the tax rate in effect for the Protest Year; plus (ii) the amount of additional
taxes payable during the five (5) year period following the Protest Year, such
amount to be calculated based upon the Value Increase multiplied by the tax
rate estimated to be in effect for each year during such five (5) year period.
During the Term, LESSEE must pay all Additional Taxes — even those in excess of
LESSEE’S proportionate share. The Additional Taxes will be conclusively
determined by a tax consultant selected by LESSOR, without regard to whether
and to what extent LESSOR may be able in years following the Protest Year to
reduce or otherwise eliminate any Value Increase. All Tax Protest Costs and
Additional Taxes must be paid by LESSEE within five (5) days following written
demand by LESSOR. LESSOR shall exercise customary and reasonable practices in
an effort to minimize real estate taxes assessed against the Building and Land,
including without limitation, protesting the real estate tax rate assessed
against the Building and Land and/or the appraised value of the Building and
Land when appropriate.

	14.	 	ALTERATIONS AND FIXTURES

     LESSEE shall not make any alterations, additions or improvements
(“Alterations”) to the Leased Premises, Land or Building (including but in no
way limited to roof and wall penetrations) without the express prior written
consent of LESSOR (such consent not to be unreasonably withheld, conditioned or
delayed). LESSEE may, without the consent of LESSOR, but at its sole expense
and in a good workmanlike manner, erect such shelves, bins, machinery and trade
fixtures (“Fixtures”), without altering the structural soundness, aesthetics or
basic character of the Leased Premises, Land or Building or its walls, and in
any case complying with all applicable governmental laws, ordinances,
decisions, orders, decrees, regulations and other requirements. All
Alterations and Fixtures erected by LESSEE that are affixed to the Leased
Premises or the Building shall be and remain the property of LESSOR during the
Term of this Lease; however, LESSEE shall, unless LESSOR otherwise elects in
writing, remove all Alterations and Fixtures erected by LESSEE and restore the
Leased Premises to its original condition (reasonable wear and tear excepted)
by the end of the Term or upon earlier vacating of the Leased Premises,
whichever comes first. Notwithstanding the foregoing, if LESSOR so elects in
writing prior to the end of the Term of this Lease or upon LESSEE’S earlier
vacating of the Leased Premises, such Alterations and Fixtures (other than
trade fixtures) as LESSOR elects to have remain in the Leased Premises shall
remain the property of LESSOR upon and after such end of the Term or LESSEE’S
earlier vacating of the Leased Premises. All removals and restorations by
LESSEE shall be accomplished in a good and workmanlike manner so as not to
damage the Leased Premises, Land or Building or their structural, aesthetic or
functional qualities, and LESSEE shall repair any such damage at its sole cost
and expense.

	15.	 	SIGNS AND SIGN REMOVAL

     After first obtaining express written approval from LESSOR (not to be
unreasonably withheld, conditioned or delayed), LESSEE shall have the right to
erect signs on the exterior walls of the Building in accordance with reasonable
signage specifications established by LESSOR. Any such signs shall be securely
attached parallel to the walls and shall be in keeping with the general scheme
of the signs and aesthetic characteristics in the immediate vicinity of the
Leased Premises and shall not be other than customary trade signs identifying
the business of LESSEE. LESSEE shall not erect any sign over the public way,
over the roofline or on the roof, nor paint or otherwise deface or alter the
exterior walls of the Building or Leased Premises. The erection of any signs by
LESSEE shall be subject to and in conformity with all

7

 

applicable laws, zoning ordinances, and building restrictions, covenants of
record and in accordance with LESSOR’S reasonable signage standards. On or
before the end of the Term, LESSEE shall remove all signs thus erected, and
shall repair any damage or disfigurement, and close any holes, caused by such
removal.

	16.	 	ASSIGNMENT OR SUBLETTING

     LESSEE may not assign this Lease or sublease the Leased Premises in whole
or in part without LESSOR’S prior express written consent (except as expressly
provided in Article 16.E. below) (such consent not to be unreasonably withheld,
conditioned or delayed), and then only in accordance with and subject to the
following conditions:

     A. If LESSEE desires to assign this Lease or sublet the Leased Premises in
whole, then, at least ten (10) days prior to the proposed effective date of any
assignment or sublease, the LESSEE shall deliver to LESSOR a written notice of
intention to assign or to sublease, setting forth a proposed commencement date
for the assignment or sublease and shall attach to such notice a copy of the
proposed assignment or sublease agreement and all agreements collateral
thereto. The LESSOR shall then have the right, to be exercised by giving
written notice to LESSEE within ten (10) business days after receipt of
LESSEE’S notice of intention to assign or sublease, to cancel and terminate
this Lease, as of the day before the proposed effective date of the assignment
or sublease; provided, however, if LESSOR so elects to cancel and terminate the
Lease, LESSEE shall have the right to prevent such cancellation and termination
by withdrawing its request for consent to the proposed assignment or subletting
by delivery of a withdrawal notice to LESSOR within ten (10) business days
following receipt of LESSOR’S notice of disapproval of the proposed assignment
or subletting.

     B. In the event of the assignment of this Lease or sublease of all or any
portion of the Leased Premises where the rental reserved in the assignment or
sublease exceeds the rental or the pro-rata portion of the rental, as the case
may be, for such space reserved in this Lease, LESSEE shall pay the LESSOR
monthly, as additional rent, at the same time and at the same place as the
monthly installments of rent hereunder, the excess of the rental reserved in
the assignment or sublease over the rental reserved in this Lease applicable to
the assigned or subleased space.

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

     D. LESSEE acknowledges and agrees that, among other matters, LESSOR has no
obligation to consent to any assignment or subletting if: (a) [Intentionally
Deleted]; (b) [Intentionally Deleted]; (c) a proposed assignee’s or subtenant’s
business will impose a burden on the Building’s parking facilities, Common
Areas or utilities that is greater (other than a de minimus increase) than the
burden imposed by LESSEE, in LESSOR’S reasonable judgment; (d) the terms of a
proposed assignment or subletting will allow the proposed assignee or subtenant
to exercise a right of renewal, right of expansion, right of first offer, right
of first refusal or similar right held by LESSEE, except to the extent
expressly permitted in this Lease; (e) a proposed assignee or subtenant refuses
to enter into a written assignment agreement or sublease, reasonably
satisfactory to LESSOR, which provides that it will abide by (and, with respect
to an assignee, assume) all of the applicable terms and conditions of this
Lease accruing during the term of any assignment or sublease (except that in
the case of a sublease, such subtenant’s rental obligations shall be as set
forth in the sublease) and containing such other terms and conditions as LESSOR
reasonably deems necessary; (f) the use of the Leased Premises by the proposed
assignee or subtenant will not be for a use permitted by this Lease; (g) LESSEE
is in Default at the time of the request; (h) LESSOR has sued or been sued by
the proposed assignee or subtenant or has otherwise been involved in a legal
dispute with the proposed assignee or subtenant; (i) the assignee or subtenant
is involved in a business which is not in keeping with the then current
standards of the Building; (j) the proposed assignee or subtenant is an
existing tenant of the Building or is a person or entity then negotiating with
LESSOR for the lease of space in the Building or another facility owned by
LESSOR or an affiliate of LESSOR within the project of which the Leased
Premises are a part; or (k) the assignee or subtenant is a governmental or
quasi-governmental entity or an agency, department or instrumentality of a
governmental or quasi-governmental agency. LESSEE acknowledges and agrees that
the list set forth above has been included for illustration purposes only and
does not represent the sole or exclusive basis upon which LESSOR may reasonably
withhold LESSOR’S consent to any assignment or subletting.

     E. Notwithstanding the foregoing, LESSEE may assign this Lease or sublease
all or part of the Leased Premises (a “Transfer”) to the following types of
entities (each, a “Permitted Transferee”) without the written consent of LESSOR
(each, a “Permitted Transfer”), provided that the conditions set forth below
are satisfied:

   (1) any person or entity who or which controls, is controlled by, or
is under common control with LESSEE;

   (2) any entity in which or with which LESSEE, or its corporate
successors or assigns, is merged or consolidated, in accordance with
applicable statutory provisions governing merger and consolidation of
entities, so long as (A) LESSEE’S obligations hereunder are assumed by
the entity surviving such merger or created by such consolidation; and
(B) the net worth of the surviving or created entity is not less than the
net worth of LESSEE as of the date of the Permitted Transfer; or

   (3) any corporation acquiring all or substantially all of LESSEE’S
assets if such corporation’s net worth after such acquisition is not less
than the net worth of LESSEE as of the date of the Permitted Transfer.

8

 

LESSEE shall promptly notify LESSOR of any such Permitted Transfer. As a
condition precedent to any Permitted Transfer, the proposed Permitted
Transferee must deliver to LESSOR a written agreement whereby it expressly
assumes the LESSEE’S obligations hereunder; however, any transferee of less
than all of the space in the Leased Premises shall be liable only for
obligations under this Lease that are properly allocable to the space subject
to the Permitted Transfer, and only to the extent of the rent it has agreed to
pay LESSEE therefor. The occurrence of a Permitted Transfer shall not waive
LESSOR’S right as to any subsequent Transfer. As used herein, “net worth”
shall mean the excess of total assets over total liabilities (in each case,
determined in accordance with generally accepted accounting principles)
excluding from the determination of total assets all assets which would be
classified as intangible assets under generally accepted accounting principles,
including, without limitation, goodwill, licenses, patents, trademarks, trade
names, copyrights, and franchises. Any subsequent Transfer by a Permitted
Transferee shall be subject to LESSOR’S prior written consent (which consent
shall not be unreasonably withheld or delayed).

	17.	 	DAMAGE OR DESTRUCTION

     A. Subject to Article 17.E. below, if, at any time prior to the
Commencement Date or during the Term, the Leased Premises or the Building
should be destroyed or damaged to any extent which may require repairs in an
amount in excess of thirty percent (30%) of the replacement cost of the Leased
Premises or the Building, LESSOR shall have the right and option of either:

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

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

     B. Subject to Article 17.E. below, if during the Term there should be any
such damage or destruction, but to an extent less than the said thirty percent
(30%) of the replacement cost as discussed above, this Lease shall continue and
LESSOR shall expeditiously repair or rebuild the damaged or destroyed portions
of the Leased Premises as set forth in Article 17.A. above, and the rent shall
be reduced in proportion to the actual loss of physical occupancy suffered by
LESSEE for the period of the repair or rebuilding, provided LESSOR shall have
no obligation to spend or incur costs for such repair or rebuilding in excess
of the insurance proceeds actually paid to LESSOR.

     C. Intentionally Deleted.

     D. Subject to Article 17.E. below, within forty five (45) days after the
occurrence of any damage or destruction which gives rise to the option of
LESSOR to terminate or repair or rebuild, LESSOR has not given LESSEE notice of
its decision, then this Lease shall continue in full effect, the option by
LESSOR to terminate this Lease shall be deemed to have been waived, and LESSOR
shall expeditiously repair or rebuild the Leased Premises, provided LESSOR
shall have no obligation to spend or incur costs for such repair or rebuilding
in excess of the insurance proceeds actually paid to LESSOR.

     E. Notwithstanding anything herein to the contrary, in the event that the
Leased Premises are damaged or destroyed by fire or other casualty so as to
materially impair the use and occupancy by LESSEE of the Leased Premises for
the purposes contemplated hereunder, then LESSOR shall be obligated to provide
written notice (the “Restoration Notice”) to LESSEE within forty-five (45) days
of such event of casualty stating a good faith estimate, certified by an
independent architect, of the period of time (the “Stated Restoration Period”)
which shall be required for the repair and restoration of the Leased Premises.
LESSEE shall have the right, at its election, to terminate the Lease if either
(i) the Stated Restoration Period shall be in excess of one hundred forty (140)
days following the event of casualty and LESSEE terminates this Lease with
written notice thereof to LESSOR within ten (10) business days following
delivery of the Restoration Notice, or (ii) LESSOR shall fail to substantially
complete the repair and restoration of the Leased Premises within the Stated
Restoration Period and LESSEE delivers written notice of such termination to
LESSOR within ten (10) business days following the expiration of the Stated
Restoration Period.

	18.	 	CONDEMNATION

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

     B. Should there be such a partial taking or transfer in lieu thereof, but
not to such an extent as to make such continued occupancy and operation by
LESSEE unreasonable, then this Lease shall continue on all of its same terms
and conditions subject only to a reduction in rent as may be fair and
equitable. It is provided, however, that LESSOR and LESSEE shall each have the
right and option to terminate this Lease in the event there is a partial taking
or transfer in lieu thereof which affects a portion of Land to the extent that,
in LESSOR’S or LESSEE’S reasonable

9

 

opinion, it is commercially impractical to continue the operation of the
Building or the project in a manner that will justify the continuation of this
Lease.

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

	19.	 	ENTRY DURING TERM

     A. LESSOR shall have the right to enter the Leased Premises throughout the
Term during LESSEE’S regular hours of operation (except in the case of an
emergency when LESSOR may enter at any time) for the following purposes: (1)
inspecting the general condition and state of repair of the Leased Premises;
(2) performing such maintenance and other obligations as may be required or
permitted by this Lease of LESSOR; (3) showing the Leased Premises to any
prospective purchasers, lenders; (4) showing the leased premised to prospective
tenants during the last six (6) months of the Term or in the event of Default
by LESSEE, at any time; (5) taking any emergency action which LESSOR in its
reasonable discretion deems necessary to protect the Leased Premises, Land or
Building; (6) determining whether there has been a Default under this Lease;
and (7) any other reasonable purposes.

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

	20.	 	DEFAULT

     The following, whether one or more and whether occurring together or
separately, shall each be considered a breach and default by LESSEE under and
of this Lease following the expiration of any applicable cure period
(“Default”): (i) failure to pay all or part of any amount payable under this
Lease within ten (10) days following written notice to LESSEE of such failure;
provided, however, that LESSOR shall not be required to send such written
notice to LESSEE more than twice in any one calendar year and after such two
(2) written notices, LESSOR shall have no obligation to give LESSEE written
notice of any subsequent default during the remainder of such calendar year and
LESSEE’S failure or refusal to timely pay all or any part of any amount payable
under this Lease within five (5) days after the same shall be due during the
remainder of such calendar year shall constitute a Default; (ii) failure, for
any reason whatsoever, of LESSEE to perform or effect performance of any of the
other terms, conditions, obligations, agreements or covenants to be observed or
performed by LESSEE under this Lease, within thirty (30) days after written
notice to LESSEE of its failure to do so; provided, however, that in the event
LESSEE’S failure to perform or effect performance of any of the other terms,
conditions, obligations, agreements or covenants to be observed or performed by
LESSEE under this Lease cannot reasonably be cured within thirty (30) days
following written notice to LESSEE, LESSEE shall not be in default if LESSEE
commences to cure same within the thirty (30) day period and thereafter
diligently prosecutes the curing thereof to completion; (iii) failure, without
any grace period, to comply with the provisions of Article 28 entitled
“Environmental Hazards”; (iv) LESSEE or any officer, agent, successor,
employee, director, legal representative or assign of LESSEE shall falsify any
report or information furnished to LESSOR; (v) LESSEE or any guarantor of this
Lease shall become bankrupt or insolvent or file or have filed against it any
debtor or bankruptcy proceeding pursuant to any statute, either of the United
States or of any state, or for the reorganization or for the appointment of a
receiver or trustee of all or a material portion of its property and such case,
proceeding or other action (a) results in the entry of an order for relief
against it which is not fully stayed within seven (7) business days after the
entry thereof or (b) remains undismissed for a period of one hundred twenty
(120) days; (vi) LESSEE or any guarantor of this Lease makes an assignment for
the benefit of creditors, or petitions for or enters into a plan of
arrangements; and (vii) LESSEE shall abandon the Leased Premises or suffer this
Lease to be seized or otherwise taken under any levy, turnover order, writ of
execution or any other order, decree, writ or judgment.

	21.	 	REMEDIES

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

   (1) Terminate this Lease; and/or

   (2) Enter upon and take possession of the Leased Premises with or
without terminating this Lease; and/or

   (3) Alter and/or change all locks and other security devices at the
Leased Premises with or without terminating this Lease;

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

10

 

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

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

     D. Upon Default, in addition to any amount provided to be paid herein,
LESSEE also shall be liable for and shall pay to LESSOR (i) brokers’ fees
incurred by LESSOR in connection with reletting the whole or any part of the
Leased Premises; (ii) the costs of removing and storing LESSEE’S or other
occupant’s property; (iii) the costs of repairing, altering, remodeling or
otherwise putting the Leased Premises and the fixtures, equipment and systems
located therein into condition acceptable to a new tenant; and (iv) all
reasonable expenses and fees, including but in no way limited to attorney’s
fees, incurred by LESSOR in enforcing or defending LESSOR’S rights and/or
remedies, (v) interest at the rate of twelve percent (12.00%) per annum on all
sums due and owed to LESSOR by virtue of any provision of this Lease including
without limitation, Base Monthly Rent and late charges, from the time they are
due and payable until they are paid.

     E. LESSEE acknowledges that LESSOR has entered into this Lease in reliance
upon, among other matters, LESSEE’S agreement and continuing obligation to pay
all rent due throughout the Term. Upon termination of LESSEE’S right to
possession of the Leased Premises due to a Default, LESSOR shall use reasonable
efforts to relet the Leased Premises; provided, however, that, LESSEE agrees
that LESSOR has no obligation to: (i) relet the Leased Premises prior to
leasing any other space within the Building; (ii) relet the Leased Premises (A)
at a rental rate or otherwise on terms below market, as then determined by
LESSOR in its reasonable discretion; (B) to any entity not satisfying LESSOR’S
then standard financial credit risk criteria; (C) for a use (1) not consistent
with LESSEE’S use prior to the Default; (2) which would violate then applicable
law or any restrictive covenant or other lease affecting the Building; (3)
which would impose a greater burden upon the Building’s parking, HVAC or other
facilities; and/or (4) which would involve any use of Hazardous Materials;
(iii) divide the Leased Premises, install new demising walls or otherwise
reconfigure the Leased Premises to make same more marketable; (iv) pay any
reasonable leasing or other commissions arising from such reletting, unless
LESSEE unconditionally delivers LESSOR, in good and sufficient funds, the full
amount thereof in advance; (v) pay, and/or grant any allowance for, tenant
finish or other costs associated with any new lease, even though same may be
amortized over the applicable lease term, unless LESSEE unconditionally
delivers LESSOR, in good and sufficient funds, the full amount thereof in
advance; and/or (vi) relet the Leased Premises, if to do so, LESSOR would be
required to alter other portions of the Building, make ADA-type modifications
or otherwise install or replace any sprinkler, security, safety, HVAC or other
Building operating systems.

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

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

	22.	 	CONDITION AT TERMINATION AND KEYS

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

11

 

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

	23.	 	HOLDING OVER

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

	24.	 	FINANCIAL STATEMENTS

     If LESSEE’S financial statements cease to be publicly available, then
within ten (10) days after written request, LESSEE shall furnish to LESSOR
copies of LESSEE’S income statements and balance sheets covering LESSEE’S last
four (4) quarterly accounting periods, and shall include all corresponding
notes, comments, opinions and statements and such financial information shall
be certified once per annum by LESSEE or a Certified Public Accountant to be
materially accurate.

	25.	 	SUBORDINATION AND ATTORNMENT

     A. LESSEE agrees that this Lease is and shall remain subject to and
subordinate to all present and future mortgages, deeds to secure debt, deeds of
trust, security agreements, financing statements and all other security
instruments and other similar encumbrances (the “Encumbrances”) affecting the
Land or the Building, or any part thereof, and within ten (10) days after
written request, LESSEE shall execute, acknowledge, verify and deliver to
LESSOR such certificate(s), letters, representations and agreements in writing
as LESSOR or its lender may reasonably request, acknowledging the subordination
of this Lease to such Encumbrances. Notwithstanding the foregoing, any such
lender may at any time subordinate its Encumbrance to this Lease, without
notice or LESSEE’S consent, and thereupon this Lease shall be deemed prior to
such Encumbrance without regard to their respective dates of execution,
delivery or recording and in that event such lender shall have the same rights
with respect to this Lease as though this Lease had been executed prior to the
execution, delivery and recording of such Encumbrance and had been assigned to
such lender. LESSEE hereby irrevocably appoints LESSOR as LESSEE’S
attorney-in-fact, coupled with an interest, and grants LESSOR power of attorney
to subordinate LESSEE’S interest under this Lease to all Encumbrances on the
Land and the Building, and any part thereof; provided that such subordination
contains reasonable non-disturbance protection.

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

     C. Notwithstanding any contrary provision contained herein, LESSOR shall
attempt to obtain from LESSOR’S current mortgagee a non-disturbance and
attornment agreement substantially in the form attached hereto as Exhibit “F”
and made a part hereof for all purposes (the “SNDA”). If LESSOR does not
deliver the fully executed SNDA to LESSEE by not later than the date five (5)
business days from the date hereof, LESSOR or LESSEE may terminate this Lease
by not later than the date eight (8) business days from the date hereof by
written notice to the other, in which event this Lease shall terminate, all
prepaid sums (including the Security Deposit) shall be refunded to LESSEE and
the parties shall have no further obligations hereunder. LESSEE shall execute
the SNDA promptly after receiving the counterpart executed by LESSOR and the
named Lender. In addition, notwithstanding any contrary provision contained
herein, the subordination of this Lease to any mortgage, deed of trust or other
lien hereafter placed upon the Leased Premises and LESSEE’S agreement to attorn
to the holder of such mortgage, deed of trust or other lien as provided in this
Article 25 shall be conditioned upon such holder’s entering into a
non-disturbance and attornment agreement providing LESSEE with substantially
the same protection as to LESSEE’S use and enjoyment of LESSEE’S leasehold
estate, use, possession, tenancy and other rights hereunder as is afforded
LESSEE under the form instrument attached hereto as Exhibit “F”.

	26.	 	EXCULPATION

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

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	27.	 	ESTOPPEL REPRESENTATIONS

     Within ten (10) business days after written request from a party hereto,
the other party shall execute, acknowledge, verify and deliver to the
requesting party or its designee written statements certifying that this Lease
is in full force and effect (and, if there has been a modification thereof,
that the same is in full force and effect as modified), that there are no
uncured defaults (or if any such default exists, the specific nature and extent
thereof), the date to which any rent or other charges have been paid in
advance, if any, that all tenant finish allowances and related costs owed by
LESSOR have been paid in full (or, if not, the specific amount owed) and such
other matters as the requesting party may, in its reasonable discretion
request. It is understood and agreed that each party’s obligation to furnish
each estoppel certificate in a timely fashion is a material inducement for the
execution of this Lease. No cure or grace period provided in this Lease shall
apply to the obligations to timely deliver an estoppel certificate.

	28.	 	ENVIRONMENTAL HAZARDS

     A. The term “Hazardous Substances”, as used in this Lease shall mean all
pollutants, contaminants, explosives, flammable materials, compressed
materials, corrosives and toxic, radioactive and hazardous materials, and all
other substances, the use, containment, existence, monitoring, transporting,
maintenance prevention and/or removal of which is monitored, restricted,
prohibited or penalized by an “Environmental Law”, which term shall mean all
federal, state or local laws, ordinances, statutes, orders, directives and
decrees, and all orders, directives, rulings, rules, regulations and decisions
of a governmental or quasi-governmental authority, and all decisions, orders,
decrees and judgments of a judicial or quasi-judicial body, and all rules,
regulations, rulings, orders, directives and decisions of any regulatory or
quasi-regulatory body relating to the foregoing or the pollution,
contamination, regulation, monitoring, cleansing or protection of the
environment. LESSEE hereby agrees that: (i) no activity or inactivity will be
conducted on the Leased Premises that will produce any Hazardous Substances,
except for such activities that are part of the ordinary course for LESSEE’S
business activities and which are conducted in accordance with all
Environmental Laws and have been expressly and specifically approved in advance
in writing by LESSOR in its sole discretion (“Permitted Activities”); LESSEE
shall be responsible for obtaining any required permits, certificates
(excluding the Certificate of Occupancy), variances and all approvals and for
paying any fees and providing any testing required by any governmental agency
related to LESSEE’S specific use of the Leased Premises; (ii) the Leased
Premises will not be used in any manner for the storage of any Hazardous
Substances except for the temporary storage of “Permitted Materials” (as
defined in Article 28.B.), which are properly stored in a manner and location
meeting all Environmental Laws and are expressly and specifically approved in
advance in writing by LESSOR in its sole discretion; (iii) no portion of the
Leased Premises will be used as a landfill, waste disposal facility, waste
storage facility or a dump; (iv) there will be no installation of any above
ground or underground tanks or other storage facilities of any type; (v) LESSEE
will not cause or permit any surface or subsurface conditions to exist or come
into existence that constitute, or with the passage of time may constitute a
public or private nuisance; (vi) there will be no Hazardous Substances brought
onto the Leased Premises, except for the Permitted Materials, and if so brought
or found located thereon, the same shall be immediately removed by LESSEE, with
proper disposal pursuant to all Environmental Laws, and all required cleanup
procedures shall be diligently undertaken pursuant to all Environmental Laws.
LESSOR shall have the right but not the obligation to enter the Leased Premises
during LESSEE’S regular business hours (except in case of an emergency when
LESSOR may enter at any time) for the purpose of inspecting the storage, use
and disposal of Permitted Materials to ensure compliance with this Lease and
all Environmental Laws. Should it be determined, in LESSOR’S sole discretion,
that said Permitted Materials are being improperly stored, used, or disposed
of, then LESSEE shall take such corrective action in accordance with
Environmental Law within 24 hours after written demand from LESSOR. If such
corrective action is not so taken, LESSOR shall have the right, but not the
obligation, to perform such work and LESSEE shall reimburse LESSOR for all
costs associated with said work within ten (10) business days after written
request. If at any time during or after the Term, the Leased Premises are
found to be so contaminated or subject to said conditions, LESSEE shall
immediately institute proper and thorough cleanup procedures in accordance with
Environmental Law at LESSEE’S sole cost, and LESSEE agrees to indemnify and
hold LESSOR harmless from all claims, demands, actions, liabilities, costs,
expenses, damages and obligations of any nature arising from, in connection
with or as a result of said conditions caused by LESSEE or LESSEE’S employees,
agents, contractors or invitees. If such corrective action is not so taken,
LESSOR shall have the right, but not the obligation, to perform such work and
LESSEE shall reimburse LESSOR for all costs associated with said work within
ten (10) business days after written request. At the expiration or earlier
termination of the Lease, if LESSOR has good reason to believe that LESSEE
violated the provisions of this Section 28, LESSOR shall have the right, at its
option and at LESSEE’S sole cost and expense, to undertake an environmental
assessment of the Leased Premises to determine LESSEE’S compliance with all
Environmental Laws. LESSOR and LESSEE agree that LESSOR’S receipt of or
satisfaction with any environmental assessment in no way waives any rights that
LESSOR holds against LESSEE. The foregoing indemnification and the
responsibilities of LESSEE in this Article 28 shall survive the end of the
Term.

     B. PERMITTED MATERIALS:

        Cleaning agents and materials incidental to Lessee’s business

        De minimis items incidental to LESSEE’S business

     C. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, LESSEE shall have no
responsibility or liability relating to or arising from the existence of
Hazardous Substances located in or on the Building, the Leased Premises or any
part of the Land unless LESSEE or LESSEE’S employees, agents, contractors or
invitees create, place or dispose of Hazardous Substances in or on the
Building, the Leased Premises or any part of the Land.

	29.	 	PROHIBITION OF LIENS

     LESSEE has no authority, express or implied, to create, place or allow any
lien or encumbrance of any kind or nature whatsoever upon the Leased Premises,
Land or Building, or in any manner to bind the interest of LESSOR or

13

 

LESSEE in the Leased Premises, Land or Building or to charge any amount payable
under this Lease for any claim in favor of any person dealing with LESSEE,
including those who may furnish materials or perform labor for any construction
or repairs. LESSEE agrees that it will pay or cause to be paid all sums for
labor performed or materials furnished in connection with any work performed on
the Leased Premises by or on behalf of LESSEE (except as otherwise provided
herein in Exhibit “C”), and that it will save and hold LESSOR harmless from any
and all loss, cost or expense based on or arising out of asserted claims or
liens against the Leased Premises, Land or Building or against the right, title
and interest of the LESSOR in the Leased Premises, Land or Building or under
this Lease. LESSEE agrees to give LESSOR written notice within five (5) days
of the placing of any lien or encumbrance against the Leased Premises, Land or
Building caused by LESSEE.

	30.	 	LESSOR’S LIEN

     LESSOR hereby waives any statutory or contractual lien (excluding judgment
liens) on the goods, wares and equipment of LESSEE in the Leased Premises and
shall sign such confirmations of the foregoing as LESSEE shall reasonably
request. The foregoing waiver shall not waive, release or otherwise affect any
unsecured claim that LESSOR may have against LESSEE.

	31.	 	PROPORTIONATE SHARE

     “Proportionate Share”, as used in this Lease, shall mean the percentage
which is the ratio of the rentable square feet of the Leased Premises to the
total rentable square feet contained in the Building. The Proportionate Share
as of the date of the Lease is one hundred percent (100%).

	32.	 	SEVERABILITY

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

	33.	 	FURNISHING NOTICE

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

	 	 	 	 	 
	

	 	LESSOR:
	 	Sealy TA Texas, L.P.
	

	 	 	 	Attn: Mark P. Sealy
	

	 	 	 	Sealy & Company, Inc.
	

	 	 	 	333 Texas Street, Suite 1050
	

	 	 	 	Shreveport, Louisiana 71101
	 
	 	 	 	 
	

	 	 	 	Telephone No.: 318-222-8700
	

	 	 	 	Telecopier No.: 318-222-4124
	 
	 	 	 	 
	

	 	LESSEE:
	 	Legal Notice Address:
	

	 	 	 	Legal Department
	

	 	 	 	Emerson Radio Corp.
	

	 	 	 	9 Entin Road
	

	 	 	 	Parsippany, New Jersey 07054-0430
	 
	 	 	 	 
	

	 	 	 	Telephone No.: 973 428-2026 / 973 428-2074
	

	 	 	 	Telecopier No.: 973 428-2010
	 
	 	 	 	 
	 	 	LESSEE Billing Address:
	

	 	 	 	Emerson Radio Corp.
	

	 	 	 	Attn: Frank Guerriero
	

	 	 	 	9 Entin Road
	

	 	 	 	Parsippany, New Jersey 07054-0430
	 
	 	 	 	 
	

	 	 	 	Telephone No.: 973-428-2020
	

	 	 	 	Telecopier No.: 973-428-2019
	 
	 	 	 	 
	 	 	On-Site Contact Address:
	

	 	 	 	Emerson Radio Corp.
	

	 	 	 	Attn: Rodney Powers
	

	 	 	 	5101 Statesmen Drive
	

	 	 	 	Irving, Texas 75063
	 
	 	 	 	 
	

	 	 	 	Telephone No.: To Be Provided in Suite Acceptance Memorandum
	

	 	 	 	Telecopier No.: To Be Provided in Suite Acceptance Memorandum

14

 

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

	34.	 	TITLES

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

	35.	 	NON-WAIVER

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

	36.	 	ENTIRE AGREEMENT

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

	37.	 	RECORDATION OF LEASE OR SHORT FORM

     LESSEE shall not record this Lease or a short form of this Lease, unless
expressly approved by LESSOR in writing. Within five (5) days after written
request by LESSOR, LESSEE shall join LESSOR in the execution of a memorandum or
“short form” of this Lease for the purposes of recordation at LESSOR’S sole
discretion and expense. The memorandum shall describe the parties, the Leased
Premises, and the Term of this Lease, and shall incorporate this Lease by
reference.

	38.	 	TIME OF ESSENCE

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

	39.	 	GOVERNING LAW; JURISDICTION; VENUE

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

	40.	 	ACTS OF GOD; FORCE MAJEURE

     A party shall not be required to perform any term, condition or covenant
of this Lease, or be liable for any damages to the other party, so long as the
performance or nonperformance of the term, condition or covenant is delayed,
caused by or prevented by an Act of God or Force Majeure; provided, however,
the foregoing shall be inapplicable to, and shall not in any way excuse
LESSEE’S or LESSOR’S failure to timely pay Base Monthly Rent or other monetary
amount due hereunder, as applicable, from one party to the other at the time
such payments are due. For purposes of this Lease, Act of God and Force
Majeure are defined as strikes, lock-outs, sit-downs, material or labor
restrictions by any governmental authority, unusual transportation delay,
riots, floods, washouts, explosions, earthquakes, fire, storms, weather
(including wet grounds or inclement weather which prevents construction), acts
of terrorism and public enemy, wars, insurrections or any other cause not
reasonably within the control of the party required to take such action and
which by the exercise of due diligence is unable, fully or in part, to prevent
or overcome; provided, however, the inability to secure a certificate of
occupancy from the appropriate governmental authority shall not permit an Act
of God or Force Majeure delay.

	41.	 	LESSEE’S AUTHORITY

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

15

 

	42.	 	COMPLIANCE WITH LAW

     All agreements between LESSOR and LESSEE, whether now existing or
hereafter arising, are hereby limited so that in no contingency, whether by
reason of demand or acceleration or otherwise, shall any amount contracted for,
charged, received, paid or agreed to be paid to LESSOR exceed the maximum
amount permissible under applicable law. If, from any circumstances
whatsoever, any amount would otherwise be payable to LESSOR in excess of the
maximum lawful amount, such amount payable to LESSOR shall be reduced to the
maximum amount permitted under applicable law; and if from any circumstances
LESSOR shall ever receive anything of value deemed interest by applicable law
in excess of the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the amounts due and to become due
under this Lease and not the payment of interest, or if such excessive amount
exceeds amounts due and to become due under this Lease, such excess shall be
refunded to LESSEE. This Article 42 shall control all agreements between the
LESSOR and LESSEE.

	43.	 	WAIVER OF CONSUMER RIGHTS

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

	44.	 	CERTAIN CALCULATIONS

     LESSOR and LESSEE are knowledgeable and experienced in commercial
transactions and agree that the provisions set forth in this Lease for
determining charges, amounts and additional rent payable by LESSEE are
commercially reasonable and valid even though such methods may not state a
precise mathematical formula for determining such charges. ACCORDINGLY, LESSEE
HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ALL RIGHTS AND BENEFITS OF LESSEE UNDER
SECTION 93.012 OF THE TEXAS PROPERTY CODE, AS SUCH SECTION NOW EXISTS OR AS MAY
BE HEREAFTER AMENDED OR SUCCEEDED.

	45.	 	INTENTIONALLY DELETED

	46.	 	NO IMPLIED WARRANTY

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

16

 

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

	 	 	 	 	 	 	 
	WITNESS:

	 	LESSEE:	 	 	 	 
	 	 	EMERSON RADIO CORP.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	/S/

	 	 	 	 	 	 
	 	 	By:/S/ Frank Guerriero	 	 
	 	 	Printed Name: Frank Guerriero
	/S/

	 	 	 	 	 	 
	 	 	Its: Vice President of Operations
	 	 	Emerson Radio Consumer Products Corporation
	 
	 	 	 	 	 	 
	 	 	Date: October 1, 2004	 	 
	 
	 	 	 	 	 	 
	WITNESS:

	 	LESSOR:	 	 	 	 
	 	 	SEALY TA TEXAS, L.P.,	 	 
	 	 	a Georgia limited partnership
	 
	 	 	By:	 	Sealy TA Texas General Partner, L.L.C.,
	 	 	 	 	a Delaware limited liability company,
	 	 	 	 	its general partner
	/S/

	 	 	 	 	 	 
	 	 	 	 	By: /S/ Mark P. Sealy
	

	 	 	 	Printed Name:
	Mark P. Sealy
	

	 	 	 	Its:
	 	President
	 	 	Date: 10/8/04	 	 

17exv10w28w2

 

Exhibit 10.28.2

	 	 	THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
OTHER SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN
EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933 AND ANY OTHER APPLICABLE SECURITIES LAWS, OR (2)
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

COMMON STOCK PURCHASE WARRANT AGREEMENT

       EMERSON RADIO CORP., a Delaware corporation (the “Company”), hereby
certifies that, for value received, EPOCH FINANCIAL SERVICES, INC. (the
“Holder”), is the registered holder of warrants (the “Warrants”) to subscribe
for and purchase 50,000 shares of Common Stock (as adjusted pursuant to Section
3 hereof, the “Shares”) of the Company, at a purchase price per share equal to
the Warrant Exercise Price (as defined below), subject to the provisions and
upon the terms and conditions hereinafter set forth. As used herein, (a) the
term “Common Stock” shall mean the Company’s presently authorized Common Stock,
par value $.01 per share, and any stock into or for which such Common Stock may
hereafter be converted or exchanged, (b) the term “Grant Date” shall mean as of
August 1, 2004, and (c) the term “Warrant” shall be deemed to include any
warrant issued upon transfer or partial exercise of this Warrant, unless the
context clearly requires otherwise.

     1. Exercise of Warrants. (a) The Warrants may be exercised by the
Holder, in whole at any time or in part from time to time, at any time up to
August 1, 2009 (the “Expiration Date”) at 5:00 p.m. New York City time, when
such Warrants shall expire, at an exercise price of $3.00 per share (the
“Warrant Exercise Price”). The Holder shall deliver to the Company written
notice of the Holder’s intent to exercise the Warrants at Nine Entin Road,
Parsippany, New Jersey 07054-0430, or at such other address as the Company
shall designate in writing to the Holder, together with this Warrant Agreement
and a certified or official bank check payable to the order of the Company for
the aggregate purchase price of the Shares so purchased. Upon exercise of the
Warrants as aforesaid, the Company shall as promptly as practicable, and in any
event within 10 days thereafter, execute and deliver to the Holder a
certificate or certificates in the name of the Holder for the total number of
whole Shares for which the Warrants are being exercised. If the Warrants shall
be exercised with respect to less than all of the Shares, the Holder shall be
entitled to receive a similar warrant of like tenor and date covering the
number of Shares in respect of which the Warrants were not exercised. The
Warrants covered by this Warrant Agreement shall lapse and be null and void if
not

1

 

exercised by the Holder on or before 5:00 p.m., New York City time, on the
Expiration Date.

          (b) In lieu of exercising this Warrant in the manner set forth in
paragraph 1(a) above, this Warrant may be exercised prior to the Expiration
Date by surrender of the Warrant without payment of any other consideration,
commission or remuneration, together with the cashless exercise subscription
form at the end hereof, duly executed. The number of Shares to be issued in
exchange for the Warrant shall be the product of (x) the excess of the market
price of the Common Stock on the date of surrender of the Warrant and the
exercise subscription form over the Warrant Exercise Price and (y) the number
of shares subject to issuance upon exercise of the Warrant, divided by the
market price of the Common Stock on such date. Upon such exercise and
surrender of this Warrant, the Company will (i) issue a certificate or
certificates in the name of the Holder for the number of whole shares of the
Common Stock to which the Holder shall be entitled, rounded down to the nearest
whole number of Shares so that no fractional Shares shall be issued, and (ii)
deliver the other securities and properties receivable upon the exercise of
this Warrant, pursuant to the provisions of this Warrant. If the Warrants
shall be exercised with respect to less than all of the Shares, the Holder
shall be entitled to receive a similar warrant of like tenor and date covering
the number of Shares in respect of which the Warrants were not exercised.

          (c) The market price of Common Stock shall mean the price of a share of
Common Stock on the relevant date, determined on the basis of the last reported
sale price of the Common Stock as reported on the American Stock Exchange
(“AMEX”), or, if there is no such reported sale on the day in question, on the
basis of the average of the closing bid and asked quotations as so reported,
or, if the Common Stock is not listed on AMEX, the last reported sale price of
the Common Stock on such other national securities exchange or market upon
which the Common Stock is listed, or, if the Common Stock is not listed on any
national securities exchange, on the basis of the average of the closing bid
and asked quotations on the day in question in the over-the-counter market as
reported by the National Association of Securities Dealers’ Automated
Quotations System, or, if not so quoted, as reported by National Quotation
Bureau, Incorporated or a similar organization.

     2. Covenants of the Company. The Company covenants and agrees that all
the Shares which may be issued upon the exercise of the Warrants represented by
this Warrant Agreement will, upon issuance, be fully paid and nonassessable and
free from all taxes, liens, and charges with respect to the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue). The Company further covenants and agrees that during the period
within which the Warrants represented by this Warrant Agreement may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of Shares to provide for the exercise of the Warrants
represented by this Warrant Agreement.

2

 

     3. Adjustments of Warrant Exercise Price and Number of Shares.

          (a) If the Company shall at any time declare a stock dividend on its
outstanding shares of Common Stock or effectuate a stock split or reverse stock
split, by subdivision or consolidation in any manner, regarding the number of
shares of the Common Stock then outstanding into a different number of shares
of the Common Stock, with or without par value, then thereafter the number of
Shares which the holder shall have the right to purchase (calculated
immediately prior to such change), shall be increased or decreased, as the case
may be, in direct proportion to the increase or decrease in the number of
shares of the Common Stock of the Company issued and outstanding by reason of
such dividend or change, and the Warrant Exercise Price of the Shares after
such change shall in the event of an increase in the number of shares of the
Common Stock be proportionately reduced, and in the event of a decrease in the
number of shares of the Common Stock be proportionately increased.

          (b) No adjustment in the Warrant Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this sub-section (b) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment; and provided further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this sub-section (b)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock. All calculations
under this Section 3 shall be made to the nearest cent or to the nearest
1/100th of a share, as the case may be. Anything in this Section 3 to the
contrary notwithstanding, the Company shall be entitled to make such reductions
in the Warrant Exercise Price, in addition to those required by this Section 3,
as it in its discretion shall deem to be advisable in order that any stock
dividend, subdivision of shares or distribution of rights to purchase stock or
securities convertible or exchangeable for stock hereafter made by the Company
to its shareholders shall not be taxable.

          (c) Notwithstanding anything herein to the contrary, for purposes of this
Section 3, the Holder agrees that no adjustment shall be made to the Warrant
Exercise Price or the number of Shares issuable upon the exercise of this
Warrant Agreement upon issuance of Common Stock (or any other securities) of
the Company for any purposes other than as set forth in Sections 3(a) and 4
herein.

          (d) Notwithstanding anything herein to the contrary, the Holder agrees
that no adjustment shall be made to the Warrant Exercise Price or the number of
Shares issuable upon the exercise of this Warrant Agreement upon issuance of
Common Stock (or any other securities) of the Company in connection with a
transaction concerning or involving Sport Supply Group, Inc.

     4. Survival in the Event of Mergers and Reorganizations. In the event of
the reclassification or change in the outstanding Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a

3

 

result of a subdivision, combination or stock dividend), or in the event of a
sale of all or substantially all of the assets of the Company, or in the event
of any consolidation of the Company with, or merger of the Company into,
another corporation, the Company, or such successor corporation, as the case
may be, shall provide that, the Holder shall thereafter be entitled to purchase
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, sale, or merger
by a holder of the number of Shares which this Warrant Agreement entitled the
holder thereof to purchase immediately prior to such reclassification, change,
consolidation, sale, or merger. Such corporation, which thereafter shall be
deemed to be the Company for purposes of this Warrant Agreement, shall provide
for adjustments, if any, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant Agreement.

     5. Sale of Assets, Dissolution. Notwithstanding paragraph 4 hereof, in
the event of a sale of all or substantially all the assets of the Company, or
in the event of any distribution of all or substantially all of its assets in
dissolution or liquidation, or in the event of any other distribution or
dividend (other than cash dividends) or other event described in Section 4, the
Company shall mail notice thereof by registered mail to the Holder and shall
make no distribution to the stockholders of the Company until the expiration of
10 days from the date of mailing of the aforesaid notice; provided, however,
that in any such event, if the Holder shall not exercise the Warrants within 10
days from the date of mailing such notice, all rights herein granted and not so
exercised within such 10 day period shall thereafter become null and void. The
Company shall not, however, be prevented from consummating any such merger,
consolidation, sale or distribution without awaiting the expiration of such 10
day period, it being the intent and purpose hereof to enable the Holder, upon
exercise of the Warrants, to participate in the distribution of the
consideration to be received by the Company upon any such merger,
consolidation, or sale or in the distribution of assets upon any dissolution or
liquidation or in the event of any other distribution or dividend (as provided
above).

     6. No Fractional Shares. The number of Shares subject to issuance upon
the complete exercise of the Warrants shall be rounded down to the nearest
whole number of Shares so that no fractional Shares shall be issued upon the
complete exercise of the Warrants. The Holder shall not be entitled to receive
any compensation or property for such fractional Share to which it may have
been entitled to in the absence of this provision.

     7. Notices. If there shall be any adjustment in accordance with this
Warrant Agreement, or if securities or property other than Shares of the
Company shall become purchasable in lieu of Shares upon exercise of the
Warrants, the Company shall forthwith cause written notice thereof to be sent
by registered mail, postage prepaid, to the Holder at its address shown on the
books of the Company, which notice shall be accompanied by a certificate of
either independent public accountants of recognized standing or the Chairman,
President, or any Vice President of the Company setting forth in reasonable
detail the basis for the Holder becoming entitled to purchase such Shares and
the number of Shares which may be purchased and the exercise price thereof, or
the

4

 

facts requiring any such adjustment, or the kind and amount of any such
securities or property so purchasable upon the exercise of the Warrants, as the
case may be.

     8. Taxes. The issue of any stock or other certificate upon the exercise
of the Warrant shall be made without charge to the Holder for any stamp, duty,
excise, or similar tax (but not including the Holder’s income or similar taxes)
in respect of the issue of such certificate. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name other than that
of the Holder, as the registered holder of this Warrant Agreement, and the
Company shall not be required to issue or deliver any such certificate unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.

     9. Non-Transferability. This Warrant is not transferable or assignable
by the Holder, other than to Holder’s officers, directors, employees or any of
their respective family members.

     10. Warrant Holder Not Stockholder. This Warrant Agreement does not
confer upon the Holder any right to vote or to consent or to receive notice as
a stockholder of the Company, as such in respect of any matters whatsoever, or
any other rights or liabilities as a stockholder, prior to the exercise hereof
as provided herein.

     11. Investment Representations. The Holder, by acceptance hereof, and
with reference to the Warrants and the Shares issuable upon exercise of the
Warrants, represents and warrants that:

          (a) The Holder is acquiring such securities for investment purposes only,
for its own account, and not with a view toward resale or other distribution
thereof, and has no present intention of selling or otherwise disposing of such
securities.

          (b) The Holder is aware that the offer and sale of the securities have
not been registered under the Securities Act of 1933, as amended (“Securities
Act”), or any state securities law, that upon exercise of the Warrants, the
Shares must be held indefinitely unless they are subsequently registered or an
exemption from such registration is available and that the Company is under no
obligation to register the offer and sale of the Shares under the Securities
Act or any applicable state securities laws, except as otherwise set forth in
Section 13 hereof.

          (c) The Holder acknowledges that the Warrants may not be made subject to
a security interest, pledged, hypothecated, sold, or otherwise transferred in
the absence of an effective registration statement for such Warrants under the
Securities Act and such applicable state securities laws or there is an
applicable exemption therefrom. The Holder further acknowledges that, unless
the offer and sale of the Shares issuable upon exercise of the Warrants have
been registered under the Securities Act, the Shares issued upon the exercise
of the Warrants shall be restricted in the same manner and to the

5

 

same extent as the Warrants and the certificates representing such Shares shall
bear the following legend:

	 	 	“THESE SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY OTHER SECURITIES LAWS. SUCH
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933 AND ANY OTHER APPLICABLE SECURITIES LAWS, OR (2) AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.”

     In making the above representations and warranties, the Holder intends
that the Company rely thereon and understands that, as the result of such
reliance, such securities are not being registered under the Securities Act or
any applicable state securities laws in reliance upon the applicability of
certain exemptions relating to transactions not involving a public offering.

     12. Lost Warrants. In case this Warrant Agreement shall be mutilated,
lost, stolen, or destroyed, the Company will issue a new Warrant Agreement of
like date, tenor, denomination and terms and conditions, and deliver the same
in exchange and substitution for and upon surrender and cancellation of the
mutilated Warrant Agreement, or in lieu of any Warrant Agreement lost, stolen,
or destroyed, upon receipt of evidence satisfactory to the Company of the loss,
theft, or destruction of such Warrant Agreement, and upon receipt of indemnity
satisfactory to the Company.

     13. Registration Rights.

     (a) The Company agrees that if at any time hereafter the Company proposes
to file with the Securities and Exchange Commission (the “Commission”) a
registration statement (“Registration Statement”) under the Securities Act on a
form suitable for registering the Shares issuable upon exercise of the Warrants
(other than on Form S-4, S-8, or comparable registration statement; other than
any registration statement which has been declared effective by the Commission
prior to the date hereof or has been filed with the Commission prior to the
date hereof but has not yet been declared effective), it will give written
notice to such effect to the Holder, at least 30 days prior to such filing,
and, at the written request of the Holder, made within 10 days after the
receipt of such notice, will include therein at the Company’s cost and expense
(except for the fees and expenses of counsel to the Holder and underwriting
discounts and commissions attributable to the Shares of Warrant Common Stock
(as defined below) included therein) such number of Shares of Warrant Common
Stock held by the Holder as it shall request. If the registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriter(s) advise the Company in writing that in their good faith opinion,
based upon market conditions, the number of securities

6

 

requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Warrant Common
Stock (as hereinafter defined) requested to be included in such registration
and any other securities requested to be included in such registration pursuant
to contractual arrangements between Company and such other security holders
(“Registration Rights Holders”), pro rata among the holders of the Warrant
Common Stock and the Registration Rights Holders on the basis of the number of
securities requested to be included in such registration by such holders and
the Registration Rights Holders, and (iii) third, other securities requested to
be included in such registration. The Company, at its own expense, will use
its commercial reasonable efforts to file and seek the effectiveness of such
Registration Statement with the Commission and will cause the prospectus
included in such Registration Statement to meet the requirements of the
Securities Act necessary to effect the sale of the Shares included at the
request of the Holder and keep such Registration Statement effective for a
period of 180 days thereafter. The term “Warrant Common Stock” shall mean the
Shares issuable and issued pursuant to this Warrant Agreement.

     (b) The Company promptly shall notify the Holder, as a participating
holder of Warrant Common Stock, of the occurrence of any event as a result of
which any prospectus included in a registration statement filed pursuant to
this Section 13 includes any misstatement of a material fact or omission of any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.

     (c) The Company’s obligations under this Section 13 with respect to the
Holder, as the holder of Warrant Common Stock, are expressly conditioned upon
the Holder promptly, completely, and accurately furnishing to the Company in
writing such information concerning the Holder and the terms of the Holder’s
proposed offering as the Company shall request for inclusion in the
Registration Statement.

     14. Indemnification.

     (a) The Company agrees to indemnify and hold harmless each selling holder
of shares of Warrant Common Stock and each person who controls any such selling
holder within the meaning of Section 15 of the Securities Act, and each and all
of them, from and against any and all losses, claims, damages, liabilities or
actions, joint or several, to which any selling holder of shares of Warrant
Common Stock or they or any of them may become subject under the Securities Act
or otherwise and to reimburse the persons indemnified above for any legal or
other expenses (including the reasonable cost of any investigation and
preparation) incurred by them in connection with any litigation or threatened
litigation, whether or not resulting in any liability, but only insofar as such
losses, claims, damages, liabilities or actions arise out of, or are based
upon, any untrue statement or alleged untrue statement of a material fact
contained in any registration statement pursuant to which shares of Warrant
Common Stock were registered under the Securities Act (hereinafter called a
“Registration Statement”), any preliminary prospectus, the final prospectus or
any amendment or supplement thereto (or in any

7

 

application or document filed in connection therewith) or document executed by
the Company based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to register or qualify the shares of
Warrant Common Stock under the securities laws thereof or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
indemnity agreement contained in this sub-section (a) shall not extend to any
selling holder of shares of Warrant Common Stock in respect of any such losses,
claims, damages, liabilities or actions arising out of, or based upon, any such
untrue statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission was based upon and made in conformity
with information furnished in writing to the Company by a selling holder of
shares of Warrant Common Stock specifically for use in connection with the
preparation of such Registration Statement, any final prospectus, any
preliminary prospectus or any such amendment or supplement thereto. The
Company agrees to pay any reasonable legal and other expenses for which it is
liable under this sub-section (a) from time to time (but not more frequently
than monthly) within 30 days after its receipt of a bill therefor.

     (b) Each selling holder of shares of Warrant Common Stock, severally and
not jointly, will indemnify and hold harmless the Company, its directors, its
officers who shall have signed the Registration Statement and each person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act to the same extent as the foregoing indemnity from the Company,
but in each case to the extent, and only to the extent, that any statement in
or omission from or alleged omission from such Registration Statement, any
final prospectus, any preliminary prospectus or any amendment or supplement
thereto was made in reliance upon information furnished in writing to the
Company by such selling holder specifically for use in connection with the
preparation of the Registration Statement, any final prospectus or the
preliminary prospectus or any such amendment or supplement thereto; provided,
however, that the obligation of any holder of shares of Warrant Common Stock to
indemnify the Company under the provisions of this sub-section (b) shall be
limited to the product of the number of shares of Warrant Common Stock being
sold by the selling holder and the market price of the Common Stock on the date
of the sale to the public of these shares of Warrant Common Stock. Each
selling holder of shares of Warrant Common Stock agrees to pay any legal and
other expenses for which it is liable under this sub-section (b) from time to
time (but not more frequently than monthly) within 30 days after receipt of a
bill therefor.

     (c) If any action is brought against a person entitled to indemnification
pursuant to the foregoing Sections 14(a) or (b) (an “indemnified party”) in
respect of which indemnity may be sought against a person granting
indemnification (an “indemnifying party”) pursuant to such Sections, such
indemnified party shall promptly notify such indemnifying party in writing of
the commencement thereof; but the omission so to notify the indemnifying party
of any such action shall not release the indemnifying party from any liability
it may have to such indemnified party otherwise than on account of the
indemnity agreement contained in sub-sections (a) or (b) of this Section 14,
except to the extent that such failure or delay in providing notice of an
indemnifiable claim shall have

8

 

materially prejudiced the defense of such indemnifiable claim. In case any
such action is brought against an indemnified party and it notifies an
indemnifying party of the commencement thereof, the indemnifying party against
which a claim is to be made will be entitled to participate therein at its own
expense and, to the extent that it may wish, to assume at its own expense the
defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that (i) if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded based upon advice of counsel that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party shall have the right to select separate counsel to assume
such legal defenses and otherwise to participate in the defense of such action
on behalf of such indemnified party or parties, and (ii) in any event, the
indemnified party shall be entitled to have counsel chosen by such indemnified
party participate in, but not conduct, the defense at the expense of the
indemnifying party. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable to such indemnified party under this Section 14 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defenses in accordance
with proviso (i) to the next preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more than
one separate counsel), (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party. An
indemnifying party shall not be liable for any settlement of any action or
proceeding effected without its written consent.

     (d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for this Section 14 is
unavailable in accordance with its terms, the Company and the selling holder of
shares of Warrant Common Stock shall contribute to the aggregate losses,
claims, damages and liabilities, of the nature contemplated by said indemnity
agreement, incurred by the Company and the selling holder of shares of Warrant
Common Stock, in such proportions as is appropriate to reflect the relative
benefits received by the Company and the selling holder of shares of Warrant
Common Stock from any offering of the shares of Warrant Common Stock; provided,
however, that if such allocation is not permitted by applicable law or if the
indemnified party failed to give the notice required under sub-section (c) of
this Section 14, then the relative fault of the Company and the selling holder
of shares of Warrant Common Stock in connection with the statements or
omissions which resulted in such losses, claims, damages and liabilities and
other relevant equitable considerations will be considered together with such
relative benefits.

     (e) The respective indemnity and contribution agreements by the Company
and the selling holder of shares of Warrant Common Stock in sub-sections (a),
(b), (c) and (d)

9

 

of this Section 14 shall remain operative and in full force and effect
regardless of (i) any investigation made by any selling holder of shares of
Warrant Common Stock or by or on behalf of any person who controls such selling
holder or by the Company or any controlling person of the Company or any
director or any officer of the company, (ii) payment for any of the shares of
Warrant Common Stock, or (iii) any termination of this Agreement, and shall
survive the delivery of the shares of Warrant Common Stock, and any successor
of the Company, or of any selling holder of shares of Warrant Common Stock, or
of any person who controls the Company or of any selling holder of shares of
Warrant Common Stock, as the case may be, shall be entitled to the benefit of
such respective indemnity and contribution agreements. The respective
indemnity and contribution agreements by the Company and the selling holder of
shares of Warrant Common Stock contained in sub-sections (a), (b), (c) and (d)
of this Section 14 shall be in addition to any liability which the Company and
the selling holder of shares of Warrant Common Stock may otherwise have.

     15. Applicable Law. This Warrant Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the conflict of laws provisions thereof.

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

	 	 	 	 	 
	 	EMERSON RADIO CORP.

 	 
	 	By:  	/s/ Elizabeth J.Calianese, SVP-HR, Secretary
 	 
	 	 	Elizabeth J. Calianese, SVP-HR, Secretary 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	EPOCH FINANCIAL SERVICES, INC.

 	 
	 	By:  	/s/ J. Todd Atenhan, President
 	 
	 	 	J. Todd Atenhan, President 	 
	 	 	 	 
	 

10

 

NOTICE OF EXERCISE

To: Emerson Radio Corp.

1. The undersigned hereby elects to purchase            shares of Common Stock of
                 pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.

2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name or names as are specified below:

	 	 	 
	__________________________________
	 	 
	 	 	 
	__________________________________
	 	 
	                     (Name)
	 	 
	 
	 	 
	__________________________________
	 	 
	                    (Address)
	 	 

3. The undersigned represents that the aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned
has no present intention of distributing or reselling such shares.

__________________________________(Signature)

__________________________________

        (Date)

4. Please issue a new Warrant of equivalent form and tenor for the unexercised
portion of the attached Warrant in the name of the undersigned or in such other
name as is specified below:

____________________________________________________________________

Date: _________________________

(Warrantholder) _________________________

Name: (Print) ______________________________

Its: __________________________________

11

 

SUBSCRIPTION FOR CASHLESS WARRANT SUBSCRIPTION

     The undersigned,          , pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe to that number of shares of the
Common Stock as are issuable in accordance with the formula set forth in
paragraph 1(b) of the Warrant, and makes payment therefor in full by surrender
and delivery of this Warrant.

	 	 	 	 	 
	Dated:

	 	 	 	Signature:
	

	 	 	Address:	 

12

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