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R2009-003 - 2009-01-05RESOLUTION NO. R2009-3 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO ENTER INTO A DEVELOPMENT LEASE AGREEMENT WITH THE UNIVERSITY OF HOUSTON SYSTEM. APPROVED AS TO FORM: BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. That certain Development Lease Agreement by and between the City of Pearland and the University of Houston System, a copy of which is attached hereto as Exhibit "A" and made a part hereof for all purposes, is hereby authorized and approved. Section 2. That the City Manager or his designee is hereby authorized to execute and the City Secretary to attest a Development Lease Agreement with the University of Houston System. PASSED, APPROVED and ADOPTED this the 5t" day of January, A.D., 2009. T EID MAYOR ATTEST: s ok , .,< Y NG L I G, ''~ M .v`.. C SEC TARY .. , ~L.-Ic~.~... / t DARRIN M. COKER CITY ATTORNEY LEASE AGREEMENT BY AND BETWEEN THE CITY OF PEARLAND, TEXAS ("LANDLORD") AND THE UNIVERSITY OF HOUSTON SYSTEM ("TENANT") HOU:2798218. l2 TABLE OF CONTENTS Page SEC. 1 LEASED PREMISES ........................................................................................................................................1 SEC. 2 TERM ............................................................................................................................................................... .1 SEC. 3 USE .................................................................................................................................................................. .2 SEC. 4 SECURITY DEPOSIT :.................................................................................................................................... .2 SEC. 5 BASE RENT :................................................................................................................................................... .2 SEC. 6 ADDITIONAL RENT :..................................................................................................................................... .3 SEC. 7 TAXES :............................................................................................................................................................ .5 SEC. 8 MAINTENANCE AND REPAIRS :................................................................................................................. .6 SEC. 9 REQUIRED SERVICES; ADDITIONAL SERVICES :...................................................................................8 SEC. 10 QUIET ENJOYMENT; RIGHTS RESERVED :........................................................................................... 10 SEC. 11 ALTERATIONS :.......................................................................................................................................... 11 SEC. 12 FURNITURE, FIXTURES AND PERSONAL PROPERTY :...................................................................... 11 SEC. 13 SUBLETTING AND ASSIGNMENT :......................................................................................................... 12 SEC. 14 FIRE AND CASUALTY :............................................................................................................................. 13 SEC. 15 CONDEMNATION :..................................................................................................................................... 14 SEC. 16 DEFAULT BY TENANT :............................................................................................................................ 14 SEC. 17 REMEDIES OF LANDLORD UPON EVENT OF DEFAULT :.................................................................. 15 SEC. 18 REMEDIES OF LANDLORD UPON EVENT OF NONAPPROPRIATION :............................................ 18 SEC. 19 LIEN FOR RENT :......................................................................................................................................... 18 SEC. 20 NON-WAIVER :............................................................................................................................................ 18 SEC. 21 COMPLIANCE WITH LAWS :.................................................................................................................... 18 SEC. 22 ASSIGNMENT BY LANDLORD; LIMITATION OF LANDLORD'S LIABILITY :................................ 18 SEC. 23 SEVERABILITY :......................................................................................................................................... 19 SEC. 24 SIGNS :.......................................................................................................................................................... 19 SEC. 25 SUCCESSORS AND ASSIGNS :.................................................................................................................. 19 SEC. 26 SUBORDINATION ...................................................................................................................................... 19 SEC. 27 TAX PROTEST ............................................................................................................................................. 19 SEC. 28 HOLDING OVER :........................................................................................................................................ 20 SEC. 29 INDEPENDENT OBLIGATION TO PAY RENT :...................................................................................... 20 SEC. 30 INDEMNITY; RELEASE AND WAIVER :................................................................................................. 20 SEC. 31 INSURANCE :............................................................................................................................................... 21 SEC. 32 ENTIRE AGREEMENT :.............................................................................................................................. 21 SEC. 33 NOTICES :..................................................................................................................................................... 21 SEC. 34 COMMENCEMENT DATE :........................................................................................................................ 21 SEC. 3 5 INSPECTION :............................................................................................................................................... 22 SEC. 36 BROKERS :................................................................................................................................................... 22 SEC. 37 ESTOPPEL CERTIFICATES :...................................................................................................................... 22 SEC. 38 BANKRUPTCY :........................................................................................................................................... 22 SEC. 39 FINANCIAL STATEMENTS :...................................................................................................................... 23 SEC. 40 HAZARDOUS SUBSTANCES :................................................................................................................... 23 SEC. 41 NO MONEY DAMAGES FOR FAILURE TO CONSENT; WAIVER OF CERTAIN DAMAGES :.................................................................................................................................................. 2 3 SEC. 42 ACKNOWLEDGMENT OF NON-APPLICABILITY OF DTPA :.............................................................. 24 SEC. 43 ATTORNEYS' FEES :................................................................................................................................... 24 SEC. 44 AUTHORITY OF TENANT :........................................................................................................................ 24 SEC. 45 INABILITY TO PERFORM :........................................................................................................................ 24 SEC. 46 JOINT AND SEVERAL TENANCY :.......................................................................................................... 24 SEC. 47 EXECUTION OF THIS LEASE AGREEMENT :........................................................................................ 24 SEC. 48 COUNTERCLAIM :......................................................................................................................................24 SEC. 49 CALCULATION OF TIME PERIODS :...................................................................................................... .24 SEC. 50 RENEWAL OPTIONS ................................................................................................................................. .25 HOU:2798218.12 SEC. 51 PREVAILING MARKET RENTAL RATE DETERMINATION :..............................................................25 SEC. 52 PURCHASE OPTION ...................................................................................................................................26 SEC. 53 CONVEYANCE AT EXPIRATION OF TERM :.........................................................................................26 SEC. 54 TAX EXEMPTION OF BONDS :.................................................................................................................26 SEC. 55 EXHIBITS AND SCHEDULES :..................................................................................................................27 SCHEDULES: SCHEDULE 1 -BASE RENT SCHEDULE 2 -BUILDING BUDGET EXHIBITS: EXHIBIT A -LEGAL DESCRIPTION OF THE LAND EXHIBIT B -FLOOR PLAN EXHIBIT C -LANDLORD IMPROVEMENTS EXHIBIT D -FORM OF AMENDMENT TO LEASE AGREEMENT EXHIBIT E -INSURANCE REQUIREMENTS EXHIBIT F - ACCEPTANCE OF LEASED PREMISES MEMORANDUM EXHIBIT G -TENANT'S ESTOPPEL CERTIFICATE EXHIBIT H -FORM OF PURCHASE AGREEMENT EXHIBIT I - AIR CONDITIONING AND HEATING SERVICES HOU:2798218.12 LEASE AGREEMENT This Lease Agreement (this "Lease Agreement") is made and entered into as of the Effective Date (as defined on the signature page attached hereto) by and between the City of Pearland, Texas, ahome-rule municipality of the State of Texas, hereinafter referred to as "Landlord," and the University of Houston System, an agency and institution of higher education of the State of Texas, hereinafter referred to as "Tenant": WITNESSETH: SEC. 1 LEASED PREMISES In consideration of the mutual covenants as set forth herein, Landlord and Tenant hereby agree as follows: A. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, for the rental and on the terms and conditions hereinafter set forth, the following described property (the "Leased Premises"): approximately 22,616 Rentable Square Feet (as defined on Schedule 1) of the approximately 30,659 square foot building to be constructed by Landlord (the "Building") on the real property described on Exhibit A hereto (the "Property"), in accordance with the terms of this Lease Agreement, as marked on the floor plan attached hereto as Exhibit B. The final determination of the Rentable Square Feet of the Leased Premises will be made according to Schedule 1. Landlord and Tenant hereby agree that this Lease Agreement is made pursuant to the authority of Section 272.001(j), Texas Local Government Code, as amended, to promote a public purpose related to higher education and that the Rent (as defined herein) to be collected hereunder by Landlord may or may not represent the fair market rent value of the Leased Premises. B. So long as Tenant is not in default under this Lease Agreement on the date or dates such option is exercised, and unless otherwise agreed to by Landlord and Tenant, Tenant shall have the right to expand the Leased Premises (the "Expansion Option") to include (i) all, but not less than all, of the Rentable Square Feet in the Building which Landlord occupies or intends to occupy, and/or (ii) all, but not less than all, of the Rentable Square Feet in the Building which is leased to any other party, including the Pearland Economic Development Corporation. Tenant shall provide the City with no less than one (1) year's written notice of its intention to exercise the Expansion Option and the details of the additional Rentable Square Feet that Tenant intends to occupy (the "Expansion Premises"). If Tenant exercises the Expansion Option, Landlord and Tenant shall promptly execute an appropriate amendment to this Lease Agreement (the "Amendment") amending the Leased Premises to include the Expansion Premises and providing for the date (the "Expansion Commencement Date") on which Tenant may occupy the Expansion Premises. From and after the Expansion Commencement Date, (i) the Leased Premises shall be expanded to include the Expansion Premises for all purposes of this Lease Agreement, including calculation of Base Rent according to Schedule 1, and (ii) Tenant shall lease the Expansion Premises from Landlord on the terms and conditions set forth in this Lease Agreement. C. Landlord, at Landlord's expense, will construct the Landlord Improvements (as defined in Exhibit C in accordance with the terms and provisions of Exhibit C attached hereto. SEC.2 TERM: A. The term of this Lease Agreement (the "Term") shall commence on the date Substantial Completion (as defined in Exhibit C) occurs (such date being herein referred to as the "Commencement Date") and, unless sooner terminated or renewed and extended in accordance with the terms and conditions set forth herein, shall expire at 11:59 p.m. on the day preceding the twentieth (20`h) anniversary thereof (the "Expiration Date"). "Lease Year" shall be defined as each twelve consecutive month period throughout the Term, beginning on the Commencement Date and each anniversary thereof. B. This Lease Agreement shall be effective as of the Effective Date and in the event Landlord consents to Tenant or its agents, employees or contractors entering the Leased Premises prior to the Commencement Date, such entry shall be subject to the terms and conditions of this Lease Agreement, except that the Rent (as hereinafter defined) shall not commence to accrue as a result of such entry until the Commencement Date. HOU:2798218.12 SEC. 3 USE: The Leased Premises shall be used and occupied by Tenant (and any of its permitted subtenants and assignees) solely as an institution of higher education, as defined in Section 61.003, Texas Education Code, as amended, and for no other purpose. As a material consideration for Landlord's execution of this Lease Agreement, Tenant (and any of its permitted subtenants and assignees) shall maintain, open and operate its business in the Leased Premises during, at a minimum, all normal business hours of the Building throughout the Term of this Lease Agreement. Notwithstanding anything contained in this Lease Agreement to the contrary, Tenant will not use, occupy, or permit the use or occupancy of the Leased Premises for any purpose which is, directly or indirectly, forbidden by law, ordinance, or governmental or municipal regulation or order, or which may be dangerous to life, limb or property, or permit the maintenance of any public or private nuisance. Tenant will not permit anything to be done which would increase the fire and extended coverage insurance rate on the Building or contents, and if there is any increase in such rates by reason of acts of Tenant, then Tenant agrees to pay such increase promptly upon demand therefor by Landlord. SEC. 4 SECURITY DEPOSIT: [RESERVED.] SEC. 5 BASE RENT: A. Tenant shall pay to Landlord in advance, without demand, deduction or set off, a sum (the "Base Rent" and, together with Additional Rent (defined herein), "Rent") equal to the amounts for the corresponding intervals as indicated on Schedule 1 attached hereto. B. After the Construction Drawings (defined in Exhibit C have been approved in accordance with Section 1B. of Exhibit C, Tenant may make written requests for modifications to the Construction Drawings, specifying in detail the requested modification (each, a "Tenant Request"). Subject to Section SC. below, Landlord shall use reasonable efforts to accommodate the Tenant Request, and shall provide Tenant with a written response (a "Landlord Response") within five (5) business days of Landlord's receipt of the Tenant Request indicating: (i) the new Building Budget (defined below) associated with the Tenant Request (subject to the limitation set forth in Section SC. below); (ii) the amount, if any, that the increase in Building Budget resulting from the Tenant Request exceeds the Building Budget Cap (defined below); and Request. (iii) the number of days of Tenant Delay (defined in Exhibit C associated with the Tenant Landlord's indication in the Landlord Response as to the new Building Budget and the number of days of Tenant Delay shall be based upon the reasonable determination of the increase or decrease associated with the Tenant Request by the subcontractors of Landlord who are constructing the Building. "Building Budget" shall mean the line item budget attached hereto as Schedule 2. C. Notwithstanding anything to the contrary in Section SB. above, Tenant and Landlord hereby agree that Landlord shall not be required to accommodate any Tenant Request that would, if accepted by Landlord, result in the Building Budget exceeding $11,495,401 (the "Building Budget Cap") unless Tenant pays to Landlord immediately upon Tenant's delivery of the Amendment (defined below) associated with such Tenant Request, the difference between the new Building Budget resulting from the Tenant Request and the Building Budget Cap. Landlord hereby covenants and agrees to apply any funds deposited with it pursuant to this Section SC. to the payment of Building costs as and when due. D. After receiving the Landlord Response, should Tenant desire to make the modifications described in the Tenant Request, Tenant shall execute an Amendment to Lease Agreement (an "Amendment") in the form attached hereto as Exhibit D and deliver such Amendment to Landlord. If the Amendment is delivered to Landlord, along with any payment, if necessary, pursuant to Section SC. and the Amendment (i) accurately depicts HOU:2798218.12 the modification described in the Tenant Request, and (ii) contains the new Building Budget and the number of days of Tenant Delay that was included in Landlord's Response (along with the aggregate number of Tenant Delays as of the date of such Amendment inclusive of the number of Tenant delays in connection with such Amendment), Landlord shall execute the Amendment within five (5) days from Landlord's receipt thereof. E. Beginning with the month immediately following the Commencement Date, installments of Base Rent shall be due monthly, in advance, on the first calendar day of each month following the Commencement Date. Base Rent accrued through the month in which the Commencement Date occurs shall be due and payable on the Commencement Date and Base Rent for any partial month shall be prorated. F. Notwithstanding anything to the contrary in Section SB. above, Landlord and Tenant hereby agree to promptly execute an amendment to this Lease Agreement and to the Construction Drawings each time there is a change in applicable Law taking effect after the Effective Date but prior to the Commencement Date that would cause the Landlord Improvements, if completed in accordance with the Construction Drawings prior to such amendment, to fail to comply with applicable Law. If any amendment executed pursuant to this Section SF. shall result in an increase in the Building Budget, such increase to be determined by Landlord in the same manner as that set forth in Section SB. above. "Laws" means all federal, state, and local laws, rules, ordinances, statutes and regulations, all court orders, governmental directives, and governmental orders, and all restrictive covenants affecting the Property. G. In addition to the foregoing Base Rent and the Additional Rent (defined below) to be paid by Tenant pursuant to Section 6 below, Tenant agrees to pay to Landlord as Additional Rent all charges for any services, goods or materials furnished by Landlord at Tenant's request which are not required to be furnished by Landlord under this Lease Agreement, as well as other sums payable by Tenant hereunder, within thirty (30) days after Landlord renders a statement therefor to Tenant. All Rent (as hereinafter defined) shall bear interest from the date due until paid at the rate or rates specified by Chapter 2251, Texas Government Code, as amended, or any successor statute; provided, however, in no event shall the rate of interest hereunder exceed the maximum non- usurious rate of interest (hereinafter called the "Maximum Rate") permitted by the applicable laws of the State of Texas or the United States of America. In addition thereto, if Tenant has failed to pay Rent as and when due, then Tenant shall pay Landlord a "Late Charge" of five percent (5%) of the overdue amount. Tenant agrees that the Late Charge is not a penalty, and will compensate Landlord for costs not contemplated under this Lease Agreement that are impracticable or extremely difficult to fix. Landlord's acceptance of a Late Charge does not waive Tenant's default. SEC. 6 ADDITIONAL RENT: A. In addition to Base Rent, Tenant shall pay in advance, without demand, deduction or set off, (i) Tenant's share of Operating Expenses (as set forth in Subsection B below); and Tenant's Capital Renewal Fund Contributions (as set forth in Subsection C below) (collectively, "Additional Rent" and, together with Base Rent, "Rent"). B. The term "Operating Expenses" shall mean all expenses, costs and disbursements of every kind and character, subject to the limitations set forth below, which Landlord shall pay in connection with the ownership, management, operation, repair, maintenance and security of the Property, including, without limitation, the following: (i) Wages, salaries and fees of all personnel or entities (exclusive of Landlord's executive personnel) engaged in the operation, management, repair, replacement, maintenance or monitoring of the Property, including taxes, insurance and benefits relating thereto; provided however, that if during the Term such personnel or entities are working on other projects operated by Landlord as well as working on the Property, their wages, salaries, fees and related expenses shall be appropriately allocated among all of such projects and only those portions of such expenses reasonably allocable to the Property shall be included as Operating Expenses; (ii) All supplies, equipment and materials used in the operation, ownership, management, repair, maintenance and monitoring of the Property; HOU:2798218.12 (iii) Cost of all monitoring, service and leasing agreements for the Property and the equipment thereon, including, without limitation, if applicable for this Property, monitoring service, energy management system, controlled access system, janitorial service, trash removal service, window cleaning, elevator maintenance, landscaping, lawn irrigation service, and parking area maintenance; (iv) Cost of all insurance relating to the Property for which Landlord is responsible hereunder, or which Landlord considers reasonably necessary for the operation of the Property, or which is required by any Landlord's mortgagee, including, without limitation, the cost of casualty and liability insurance applicable to the Property and Landlord's equipment, fixtures and personal Property used in connection therewith, and the cost of business interruption insurance in such amounts as will reimburse Landlord for all losses of earnings and other income attributable to such perils as are commonly insured against by prudent Landlords; (v) Cost of Property repairs, replacements, and general maintenance, and cost of legal expenses and related costs reasonably incurred for the general benefit of the Tenants of the Property (e.g. legal fees and consultant fees in Property tax disputes); (vi) Amortized cost of all capital improvements made to the Property (a) which although capital in nature are for either (i) installation of a controlled access system for the Building or (ii) can reasonably be expected to reduce the normal operating costs of the Property, (b) in order to comply with the Americans with Disabilities Act (42 U.S.C. §§ 12101 et seq.) (the "ADA") (unless such compliance is solely caused by another tenant's use) or any other law or regulation that was not applicable to the Property when originally constructed or any law or regulation that is hereafter promulgated by any governmental authority, or (c) which enhance the Property for the general benefit of Tenant or occupants thereof, amortized over the useful economic life of such improvements as determined by Landlord in its reasonable discretion, without regard to the period over which such improvements may be depreciated or amortized for federal income tax purposes; (vii) All charges for utilities, including, but not limited to, water, sewer, electricity and gas, which are paid by Landlord and not actually reimbursed to Landlord by the Property's Tenants; and (viii) The management fee, if any, for the Property (not to exceed the prevailing management fee for professional buildings of comparable size and quality in Pearland, Texas), and reasonable legal fees, consulting fees, and accounting fees incurred in the maintenance, use, or operation of the Property. B 1. Operating Expenses shall not include repairs and general maintenance paid from proceeds of insurance or by a tenant or other third parties, and alterations attributable solely to individual tenants of the Property. Further, Operating Expenses shall not include the cost of Capital Improvements (defined below) or leases (except as set forth above), depreciation, interest (except as provided above with respect to the amortization of capital improvements), lease commissions and expenses, and principal payments on mortgages, costs incurred in negotiating, leasing or litigating with any other tenant, and other non-operating debts of Landlord. "Capital Improvements" are more specifically defined as: (i) Costs incurred in connection with the original construction of the Landlord Improvements or with any major changes to same, including but not limited to, additions or deletions of corridor extensions, renovations and improvements of the common areas beyond the costs caused by normal wear and tear, and upgrades or replacement of major Property systems; and (ii) Costs of correcting defects (including latent defects), including any allowances for same, in the construction of the Landlord Improvements or its related facilities; and (iii) Costs incurred in renovating or otherwise improving, designing, redesigning, decorating or redecorating space for tenants or other occupants of the Property or other space leased or held for lease in the Property. HOU:2798218. l2 B2. Beginning the month immediately following the Commencement Date, installments of Operating Expenses shall be due monthly on the first calendar day of each month following the Commencement Date. B3. Tenant's annual share of Operating Expenses, which include utility expenses, shall be initially calculated at $7.75 dollars per gross square foot annually. The $7.75 rate is determined by combining (i) the initial rate of $5.50 per gross square foot for Tenant's share of projected utility expenses and insurance costs (collectively, the "Non-Controllable Costs"), and (ii) the initial rate of $2.25 per gross square foot for Tenant's share the remaining Operational Expenses identified in this Subsection B (collectively, the "Controllable Costs"). Tenant shall pay its share of Operating Expenses in monthly installments equal to 1/12th of Tenant's annual share of Operating Expenses. Tenant's annual share of Operating Expenses shall not exceed $175,274 for the first Lease Year. Beginning the second Lease Year, the parties agree that Tenant's annual share of the Operating Expenses shall be based upon Landlord's estimate of Operating Expenses based on the prior year's actual Operating Expenses; provided, however, that the Controllable Cost portion of Operating Expenses may be increased by no more than five percent (5%) over the amount of Tenant's annual share of the actual Controllable Costs for the immediately preceding Lease Year. B4. Within one hundred twenty (120) days after each calendar year or as soon thereafter as is reasonably practicable, Landlord shall deliver to Tenant a statement setting forth the actual Operating Expenses for such year, and Tenant's share thereof. If Tenant's total payments in respect of it share of Operating Expenses (excluding insurance) for any year are less than its actual share of such Operating Expenses for that year, Tenant shall pay the difference to Landlord within thirty (30) days after Landlord's request therefor. If such payments made by Tenant are more than its actual share of such Operating Expenses for that year, Landlord shall repay such excess to Tenant within thirty (30) days. There shall be no duplication of costs for reimbursements in calculating Tenant's share of such Operating Expenses, and any excess retained by Landlord at the end of the Term shall be refunded to Tenant within thirty (30) days after the end of the Term. B5. Landlord shall deliver to Tenant a statement for the property insurance within thirty (30) days of the expiration of the preceding years' policy. Tenant shall pay to Landlord its proportionate share of the difference between the prior year's insurance premium and any current increase in premiums related to the Building and Property for which Landlord is responsible. This payment shall be made by the Tenant to the Landlord within thirty (30) days of receipt of the statement. Tenant shall be entitled to a credit for any decrease in premiums for the previous year. Landlord shall (i) credit such excess against Tenant's next accruing Rent hereunder, or (ii) repay such excess to Tenant within thirty (30) days. C. The term "Capital Renewal Fund Contributions" shall mean, for each Bond Year, as follows: Bond Year Annual Capital Renewal Fund Requirement 1 - 3 $0 4 - 5 1% of replacement value of the Building 6+ 2% of replacement value of the Building C 1. Capital Renewal Fund Contributions under this Subsection C shall be payable by Tenant to Landlord in monthly installments equal to 1/12th of the Capital Renewal Fund Contributions as specified in Subsection C above. Landlord and Tenant shall agree upon how amounts in the Capital Renewal Fund shall be spent prior to expenditure of any amounts in such fund. SEC.7 TAXES: A. Prior to delinquency, Landlord shall pay all taxes and assessments and other governmental charges (whether federal, state, county or municipal and whether they be by taxing districts or authorities presently taxing the Property or the Building or by others subsequently created or otherwise) and any other taxes and improvement assessments attributable to the Property or the Building, or its operation or the revenues or rents received therefrom (whether directly or indirectly through the use of a franchise, margin or other similar tax and whether or not such taxes allow for the deduction of expenses in calculating the base amount on which the tax is levied) but excluding, however, federal and state taxes on income (collectively, "Taxes"); provided, however, that if at any time during HOU:2798218.12 the Term, new taxes, assessments, levies, impositions or charges are imposed on the rents received from the Property or the Building or the rents reserved herein or any part thereof (whether directly or indirectly through the use of a franchise, margin or other similar tax), or the present method of taxation or assessment shall be so changed that the whole or any part of the taxes, assessments, levies, impositions or charges now levied, assessed or imposed on real estate and the improvements thereof shall be discontinued and as a substitute therefor, or in lieu of an increase to the tax rate thereof, taxes, assessments, levies, impositions or charges shall be levied, assessed and/or imposed wholly or partially as a capital levy or otherwise on the rents received from the Property or the Building or the rents reserved herein or any part thereof (whether directly or indirectly through the use of a franchise, margin or similar tax and whether or not such taxes allow for the deduction of expenses in calculating the base amount on which the tax is levied), then such substitute or additional taxes, assessments, levies, impositions or charges, to the extent so levied, assessed or imposed, shall be deemed to be included within the term "Taxes" to the extent that such substitute or additional tax would be payable if the Property or the Building were the only property of the Landlord subject to such tax. Upon the request of Tenant, Landlord shall deliver to Tenant copies of receipts from the applicable taxing authorities or other evidence acceptable to Tenant to verify that the Taxes have been paid. B. Tenant shall, before delinquency, pay all taxes levied or assessed against any personal property, fixtures or alterations placed in the Leased Premises and upon the request of Landlord, deliver to Landlord receipts from the applicable taxing authority or other evidence acceptable to Landlord to verify that such taxes have been paid. If any such taxes are levied or assessed against Landlord or Landlord's property and Landlord pays them or the assessed value of Landlord's property is increased thereby and Landlord pays the increased taxes, then Tenant shall pay to Landlord such taxes within ten (10) days after Landlord's request therefor. C. Landlord shall, at Tenant's expense, contest the validity or amount of any Taxes in accordance with Law if and only if (i) in Landlord's reasonable estimation, the amount of Taxes sought to be imposed exceeds the amount of Taxes that, in Landlord's reasonable estimation, should be imposed by an amount great enough to justify the expense (including court costs and attorneys' fees) of such contest, and (ii) there is a substantial likelihood of such contest achieving a successful result. If Landlord contests the validity of any Taxes, the payment thereof shall be deferred, as permitted by Law, during the pendency of such contest. However, notwithstanding anything to the contrary in this Section 7, Landlord shall pay the Taxes contested if such payment is necessary to avoid the Leased Premises, or any part thereof, having any lien attached thereto, or being sold or seized by any governmental authority for the nonpayment of Taxes. D. If Landlord does not contest the validity or amount of any Taxes pursuant to Section 7C. above, Tenant may, at its expense, contest the validity or amount of any Taxes in accordance with Law, in which event the payment thereof may be deferred, as permitted by Law, during the pendency of such contest, if diligently prosecuted. Nothing herein, however, shall permit any Taxes to remain unpaid for any interval that would permit the Property or the Building, or any part thereof, having any lien attached thereto, or being sold or seized by any governmental authority for the nonpayment of Taxes. If at any time, in the reasonable judgment of Landlord, it shall become necessary to do so, Landlord may, after written notice to Tenant, under protest if so requested by Tenant, apply the amounts so deposited or so much thereof as may be required to prevent a sale or seizure of the Property or the Building or foreclosure of any lien created thereon to secure payment of such unpaid Taxes. Tenant shall pay all penalties, interest, and fees assessed because of Tenant's failure to pay Taxes when due, and to the extent permitted by the Texas Constitution and the laws of the State of Texas, Tenant shall indemnify, defend, and hold harmless Landlord from and against any costs, liability, or damage incurred by Landlord arising out of or attributable to Tenant's failure to pay Taxes when due. If required by Law, Landlord shall join in any contest proceedings brought by Tenant, at Tenant's expense. SEC. 8 MAINTENANCE AND REPAIRS: A. LANDLORD'S REPAIR AND MAINTENANCE. (1) Landlord shall maintain the Property, the Common Areas (defined below) and the Building (excluding the interior of the Leased Premises and space leased to other occupants of the Building and subject to the provisions of Section 7B below) in good condition and repair. Landlord shall make all structural repairs to the Building, the Leased Premises and the Common Areas, including but not limited to all repairs to the HOU:2798218.12 foundation, load bearing walls, roof and any other structural members; provided, however, all costs and expenses for such repairs shall be included in the Operating Expenses to the extent provided in Section 6 above. In addition, Landlord shall: (i) keep the roof of the Building free of leaks and (ii) maintain the underground and otherwise concealed electrical and plumbing, and the exterior surface of the outside walls of the Leased Premises, the Building and the Property, excluding window glass in the Premises, (iii) maintain all heating, air conditioning and electrical systems serving the Leased Premises, the Building, the Common Areas and the Property, (iv) maintain all fire protection systems serving the Building (excluding any fire alarm system which only serves the Leased Premises, which fire alarm system, if any, shall be the responsibility of Tenant) and the Common Areas; provided, however, all costs and expenses shall be included in the Operating Expenses to the extent provided in Section 6 above. (2) The term "Common Areas" shall mean the areas within the Building and the Property which are available for use of the tenants in the Building and which are not part of the Leased Premises or the premises of other tenants. The Common Areas shall include, as applicable, corridors, lobbies, elevator foyers, restrooms, parking areas and similar areas of the Building and Property designated by Landlord for the general and non-exclusive common use or benefit of Tenant and other tenants of the Building. (3) Landlord's obligation to maintain the aforementioned items shall be limited solely to the reasonable cost of such repairs or maintenance or the curing of any defect in the same. Except as specifically provided in this Section 8(A), Landlord shall not be responsible for maintaining the Leased Premises. (4) Landlord reserves the right, but does not have the obligation, to perform any obligations that are otherwise Tenant's obligations, in which event Tenant shall, within thirty (30) days, promptly reimburse Landlord for the entirety of the costs of such performance, plus interest at the lesser of ten percent (10%) per annum or the highest rate then allowed under Texas law; provided, however, Landlord shall have given Tenant written notice of Tenant's obligation(s) and Tenant shall not have commenced to cure such obligation within thirty (30) days from receipt of such notice and diligently proceeded to finish such obligation. (5) Landlord reserves the right to alter or modify the Building of which the Leased Premises are a part, when such alterations or modifications are required or will be required by governmental laws, codes, ordinances, regulations, or any other applicable authorities, including, without limitation, the ADA, in which event Tenant shall be liable for its proportionate share of such cost. B. TENANT'S REPAIR AND MAINTENANCE. (1) Tenant, at its own cost and expense, shall (i) maintain all parts of the Leased Premises in good condition, and (ii) promptly make all necessary repairs and replacements to the Leased Premises, including, but not limited to, windows, glass and plate glass, wiring, building sprinkler systems, exterior doors, any special office entry, interior walls and finish work, interior doors and floor covering, utility connections, heating and air conditioning systems, light bulbs, plumbing work and fixtures, termite and pest extermination, and any damage due to vandalism or malicious mischief, unless the damage is due to the negligence of the Landlord or his agent or is a result of defect of premises resulting from initial construction. (2) Any and all security of any kind for Tenant, Tenant's agents, employees or invitees, the Leased Premises, or any personal property thereon (including, without limitation, any personal property of any sublessee) shall be the sole responsibility and obligation of Tenant, and shall be provided by Tenant at Tenant's sole cost and expense. Tenant HOU:2798218. l2 acknowledges and agrees that Landlord shall have no obligation or liability whatsoever with respect to same. Landlord shall not be liable for any loss, cost, damage or other liability arising directly or indirectly from security measures or the absence thereof with respect to the Leased Premises unless caused by the gross negligence or willful misconduct of Landlord. Tenant may, at Tenant's sole cost and expense, install alarm systems in the Leased Premises provided such installation complies with the applicable terms of this Lease Agreement. Removal of such alarm systems shall be Tenant's sole responsibility and, at Tenant's sole cost and expense, shall be completed prior to lease termination and all affected areas of the Leased Premises shall be repaired and/or restored in a good and workmanlike manner to the condition that existed prior to such installation unless Landlord agrees that such system may remain. Notwithstanding the foregoing, Landlord may elect in Landlord's sole discretion to contract for common security services, to whatever extent Landlord may deem appropriate, for the Leased Premises, provided, however Tenant acknowledges and agrees that Landlord shall in no event be obligated to provide any such services and the provision of such services shall not alter or modify Tenant's obligation to provide its own security as set forth herein for the Leased Premises. The cost of any security services contracted for by Landlord shall be treated as Additional Rent pursuant to Section 6. (3) Tenant agrees, at its own cost and expense, to repair or replace any damage or injury done to the Property, or any part thereof, by Tenant or Tenant's agents, employees, invitees, or visitors; provided, however, if Tenant fails to make such repairs or replacement, within thirty (30) days after the occurrence of such damage or injury, Landlord may, at its option, make such repairs or replacement, and Tenant shall pay the cost thereof (plus an additional charge of fifteen percent 15% of such cost to cover overhead) to Landlord within fifteen (15) days after Tenant's receipt of a request from Landlord to do so. Tenant further agrees not to commit or allow any waste or damage to be committed on any portion of the Property, and at the termination of this Lease, by lapse of time or otherwise, Tenant shall deliver up said Premises to Landlord in as good condition as at the commencement date, ordinary wear and tear excepted. Unless otherwise expressly stipulated herein, Landlord shall not be required to make any improvements or repairs of any kind or character on or to the Property, or any portion thereof, during the term of this Lease. C. It is hereby agreed by Landlord and Tenant that any repairs or replacements that are necessary as a result of any casualty or condemnation, then the sections of this Lease Agreement governing casualty and condemnation shall control the responsibility and obligations of Landlord and Tenant. SEC. 9 REQUIRED SERVICES; ADDITIONAL SERVICES: A. Provided no Event of Default (as hereinafter defined) has occurred and is continuing hereunder for which Landlord has terminated this Lease Agreement or Tenant's right of possession of the Leased Premises, and subject to the provisions set out below, Landlord shall furnish the following services and amenities (collectively, the "Required Services") to Tenant (and its assignees and subtenants permitted hereunder) while occupying the Leased Premises, subject to temporary interruptions due to scheduled maintenance, in the event of emergencies or otherwise due to causes beyond Landlord's control: (1) Hot and cold domestic water at all times at those points of supply provided for general use of the tenants of the Building; (2) Central heat, ventilation and air conditioning in season, during normal Building business hours (and at all other times subject to Tenant's payment of a separate charge, as set forth in Exhibit I attached hereto and made a part hereof for all purposes), at such temperatures and in such amounts as are considered by Landlord to be standard, but in keeping with the standards of other Class A office buildings in the Pearland, Texas area of comparable size as the Building ("Similar Suburban Buildings"), all as more HOU:2798218.12 particularly described on Exhibit I attached hereto and made a part hereof for all purposes; (3) Electric lighting service for all public areas and special service areas of the Building in the manner and to the extent deemed by Landlord to be in keeping with the standards of Similar Suburban Buildings; (4) Janitorial service comparable to that provided by landlords of Similar Suburban Buildings and consistent with other tenants in the Building on a five (5) day week basis in accordance with the specifications for Similar Suburban Buildings; provided, however, if Tenant's floor coverings or other improvements require special cleaning or care in excess of that provided for by Landlord, Landlord will provide such additional cleaning or care only upon special agreement with Tenant; (5) On-site access control personnel and equipment for the Building at all times; provided, however, that Tenant agrees that Landlord shall not be responsible for the adequacy or effectiveness of such access control service provided that (i) Landlord has exercised reasonable care in the selection of the access control contractor and equipment, and (ii) the scope and extent of the access control services contracted for by Landlord are in keeping with the standards of Similar Suburban Buildings; (6) Sufficient electrical capacity distributed to a panel box located at the core of each floor of the Leased Premises in the amount of (i) five (5) watts per square foot of net rentable area for low voltage electrical consumption (120/208 volts) to operate typewriters, voice writers, calculating machines and other machines of similar low voltage electrical consumption and (ii) two (2) watts per square foot of net rentable area for standard high voltage electrical consumption (277/480 volts) for lighting and other equipment of standard high voltage electrical consumption utilized by Tenant in the Leased Premises. If Tenant's non-linear electrical load (created by equipment such as personal computers, television sets, laser printers, copiers or other electronic devices connected to the power system) result in harmonic distortion conditions which cause any adverse effects in the Building, including but not limited to, the derating of any transformer, distribution stepdown transformer failures, overheating or melting of neutral conductors, or malfunctioning of various electronic components, Tenant acknowledges that Tenant, at Tenant's sole cost, shall be obligated to eliminate such harmonic distortion conditions and to repair any damage which results from such harmonic distortion within thirty (30) days of receipt of Landlord's written request. If Tenant fails to eliminate such harmonic distortion and repair such damage caused thereby within such thirty (30) day period, Landlord, at its option, may make such corrections deemed necessary by Landlord to eliminate such harmonic distortion and make such repairs, and Tenant shall pay to Landlord on demand Landlord's cost thereof plus a charge equal to fifteen percent (15%) of such costs for administrative cost recovery. Tenant shall cause Tenant's electrical system serving any equipment producing non-linear electrical loads to be designed to accommodate such non-linear electrical loads, including but not limited to, over-sizing neutral conductors, derating transformers and/or providing power line filters. If Tenant's electrical equipment and lighting require electrical circuits, transformers or other additional equipment in excess of Tenant's pro rata share of the Building's electrical or HVAC systems (which additional equipment shall be hereinafter referred to as the "Additional Electrical Equipment"), Tenant may (at Tenant's cost, including the cost to design, install, maintain and replace the Additional Electrical Equipment, including the meters) install same, provided such installation is compatible with existing Building systems, will not compromise Landlord's ability to provide services to Tenant or other tenants of the Building and will not be burdensome to the Building or to Landlord, in Landlord's opinion, and Tenant shall pay all operating costs related to that requirement (including, without limitation, the cost of electricity, water or other services consumed through, or in connection with, the Additional Electrical Equipment). HOU:2798218. l2 The method of design and installation of any Additional Electrical Equipment (including any related meter) required by Tenant shall be subject to the prior written approval of Landlord (such approval not to be unreasonably withheld, conditioned or delayed by Landlord) and shall be performed by Landlord at Tenant's sole cost (including a charge equal to fifteen percent (15%) of such cost for the review and installation of such Additional Electrical Equipment for administrative cost recovery). Tenant shall pay to Landlord the cost of electricity consumed in excess of the Building standard rated electrical design load as determined by meter, or if not metered, as otherwise reasonably estimated by Landlord, plus any actual accounting expenses incurred by Landlord in connection with the metering thereof. Landlord may cause the entire Leased Premises to be separately metered (at Tenant's expense, including, without limitation, the cost of installing, maintaining, repairing and replacing such meters to the extent necessary), in which event Tenant shall pay the actual cost of electricity consumed by Tenant. (7) All Building standard fluorescent bulb replacement in all areas and all incandescent bulb replacement in public areas outside of the Leased Premises, restrooms and stairwells; (8) Non-exclusive passenger elevator service to the Leased Premises twenty-four (24) hours per day and non-exclusive freight elevator service during normal business hours; and (9) Maintenance of the roof, exterior walls, load-bearing columns, foundations, floor slabs, and other structural components of the Building, the mechanical, electrical, plumbing and other Building operating systems, Building common areas, and exterior lighting and landscaping of the Building. B. The obligations of Landlord to provide the Required Services shall be subject to governmental regulation thereof (i. e., rationing, temperature control, etc.) and any such regulation that impairs Landlord's ability to provide the Required Services as herein stipulated shall not constitute a default hereunder but rather providing the applicable Required Services to the extent allowed pursuant to such regulations shall be deemed to be full compliance with the obligations and agreements of Landlord hereunder. C. To the extent any of the Required Services require electricity, gas and water supplied by public utilities or others, Landlord's covenants hereunder shall only impose on Landlord the obligation to use its good faith efforts to cause the applicable public utilities or other providers to furnish the same. Failure by Landlord to furnish any of the Required Services to any extent, or any cessation thereof, due to failure of any public utility or other provider to furnish service to the Building, or any other cause beyond the reasonable control of Landlord, shall not render Landlord liable in any respect for damages to either person or property, nor be construed as an eviction of Tenant, nor result in an abatement of Rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof, except as provided herein. In the event of any failure by Landlord to furnish any of the Required Services to any extent, or any cessation thereof, due to malfunction of any equipment or machinery, or any other cause within the reasonable control of Landlord (a "Service Interruption"), Landlord shall utilize commercially reasonable efforts to promptly repair said equipment or machinery and to restore said Required Services as soon thereafter as is reasonably possible under the circumstances. D. Tenant hereby acknowledges and agrees that Landlord is obligated to provide only the Required Services under this Lease Agreement, and that Landlord, its agents and representatives, have made no representations whatsoever of any additional services or amenities to be provided by Landlord now or in the future under this Lease Agreement. Notwithstanding the foregoing, Tenant recognizes that Landlord may, at Landlord's sole option, elect to provide additional services or amenities for the tenants of the Building from time to time, and hereby agrees that Landlord's discontinuance of any provision of any such additional services or amenities shall not constitute a default of Landlord under this Lease Agreement nor entitle Tenant to any abatement of or reduction in Rent. Any such additional services or amenities that Landlord elects to provide to tenants of the Building shall be provided to those tenants requesting such services or amenities at Landlord's cost therefor which cost may include an administrative cost recovery charge not to exceed fifteen percent (15%). l0 HOU:2798218. l2 SEC. 10 QUIET ENJOYMENT; RIGHTS RESERVED: A. Landlord covenants that on or before the Commencement Date it will have good title to the Leased Premises, free and clear of all liens and encumbrances, excepting only the lien for current taxes not yet due, such mortgage or mortgages as are permitted by the terms of this Lease Agreement, zoning ordinances and other building and fire ordinances and governmental regulations relating to the use of such property, and any easements, restrictions and other conditions of record. Landlord represents that it has the authority to enter into this Lease Agreement and that so long as Tenant pays all amounts due hereunder and performs all other covenants and agreements herein set forth, Tenant shall peaceably and quietly have, hold and enjoy the Leased Premises for the term hereof without hindrance or molestation from Landlord, subject to the terms and provisions of this Lease Agreement. B. Any diminution or shutting off of light, air or view by any structure which is now or may hereafter be effected on lands adjacent to the Building shall in no way affect this Lease Agreement or impose any liability on Landlord. Noise, dust or vibration or other incidents caused by or arising out of any new construction of improvements on lands adjacent to the Leased Premises, whether or not owned by Landlord, or on the Land shall in no way affect this Lease Agreement or impose any liability on Landlord. SEC. 11 ALTERATIONS: A. Tenant shall not make or allow to be made (except as otherwise provided in this Lease Agreement) any alterations or physical additions (including fixtures) in or to the Leased Premises, or place safes, vaults or other heavy furniture or equipment within the Leased Premises, without first obtaining the written consent of Landlord. In addition, Tenant shall not be permitted to take x-rays or core drill or penetrate the floor of the Leased Premises without first obtaining the Landlord's consent. The full cost of any consultant or engineer hired by Landlord in connection with such work undertaken by Tenant shall be paid for by Tenant as Additional Rent hereunder. Tenant shall submit requests for consent to make alterations or physical additions together with copies of the plans and specifications for such alterations. Subsequent to obtaining Landlord's consent and prior to commencement of construction of the alterations or physical additions, Tenant shall deliver to Landlord the building permit, a copy of the executed construction contract covering the alterations and physical additions and evidence of contractor's and subcontractor's insurance, such insurance being with such companies, for such periods and in such amounts as Landlord may reasonably require, naming the Landlord Parties as additional insureds. Tenant shall pay to Landlord upon demand a review fee in the amount of Landlord's actual costs incurred to compensate Landlord for the cost of review and approval of the plans and specifications and for additional administrative costs incurred in monitoring the construction of the alterations. Tenant shall deliver to Landlord a copy of the "as-built" plans and specifications for all alterations or physical additions so made in or to the Leased Premises, and shall reimburse Landlord for the cost incurred by Landlord to update its current architectural plans for the Building. B. To the extent allowed by Texas law, Tenant shall indemnify, defend (with counsel reasonably acceptable to Landlord) and hold harmless the Landlord Parties from and against all costs (including attorneys' fees and costs of suit), losses, liabilities, or causes of action arising out of or relating to any alterations, additions or improvements made by Tenant to the Leased Premises, including but not limited to any mechanics' or materialmen's liens asserted in connection therewith. C. Tenant shall not be deemed to be the agent or representative of Landlord in making any such alterations, physical additions or improvements to the Leased Premises, and shall have no right, power or authority to encumber any interest in the Leased Premises in connection therewith other than Tenant's leasehold estate under this Lease Agreement. However, should any mechanics' or other liens be filed against any portion of the Leased Premises or any interest therein (other than Tenant's leasehold estate hereunder) by reason of Tenant's acts or omissions or because of a claim against Tenant or its contractors, Tenant shall cause the same to be canceled or discharged of record by bond or otherwise within ten (10) days after notice by Landlord. If Tenant shall fail to cancel or discharge said lien or liens, within said ten (10) day period, which failure shall be deemed to be an Event of Default hereunder without the necessity of any further notice or cure period, Landlord may, at its sole option and in addition to any other remedy of Landlord hereunder, cancel or discharge the same and upon Landlord's demand, Tenant shall promptly reimburse Landlord for all costs incurred in canceling or discharging such lien or liens. HOU:2798218.12 D. Tenant shall cause all alterations, physical additions, and improvements (including fixtures), constructed or installed in the Leased Premises by or on behalf of Tenant to comply with all applicable Laws. Tenant acknowledges and agrees that neither Landlord's review and approval of Tenant's plans and specifications nor its observation or supervision of the construction or installation thereof shall constitute any warranty or agreement by Landlord that same comply with Laws or release Tenant from its obligations under this Section 11D. E. Following the Commencement Date, and so long as the Building is constructed in accordance with the Construction Drawings (as defined in Exhibit C hereto), and is delivered in compliance with governmental laws, codes, ordinances, regulations, or any other applicable authorities, including, without limitation, the ADA, Tenant shall be wholly responsible for any accommodations or alterations that are required by applicable governmental codes, ordinances, rules, regulations and laws to be made to the Leased Premises to accommodate disabled employees and invitees of Tenant, including, without limitation, compliance with the ADA (collectively, the "Accommodation Laws"). SEC. 12 FURNITURE, FIXTURES AND PERSONAL PROPERTY: Tenant may remove its trade fixtures, office supplies and movable office furniture and equipment not attached to the Building provided: (a) such removal is made prior to the termination of this Lease Agreement; (b) Tenant is not in default of any obligation or covenant under this Lease Agreement at the time of such removal; and (c) Tenant promptly repairs all damage caused by such removal. All other property at the Leased Premises and any alterations or additions to the Leased Premises (including wall-to-wall carpeting, paneling or other wall covering) and any other article attached or affixed to the floor, wall or ceiling of the Leased Premises shall become the property of Landlord and shall remain upon and be surrendered with the Leased Premises as a part thereof at the termination of the Lease Agreement by lapse of time or otherwise, Tenant hereby waiving all rights to any payment or compensation therefor. If, however, Landlord so requests in writing within sixty (60) days prior to the termination of this Lease Agreement, Tenant will, prior to termination of this Lease Agreement, remove any and all alterations, additions, fixtures, equipment and property placed or installed by Tenant in the Leased Premises and will repair any damage caused by such removal. In addition, Tenant shall be required prior to the termination of this Lease Agreement to remove all of its telecommunications equipment, including, but not limited to, all switches, cabling, wiring, conduit, racks and boards located in the Leased Premises. If Tenant does not complete all removals prior to the termination of this Lease Agreement, Landlord may remove such items (or contract for the removal of such items), Tenant shall reimburse Landlord upon demand for the costs incurred by Landlord in connection therewith and Tenant shall be deemed to be holding over pursuant to Section 27 below until such time as such items have been removed from the Leased Premises. This Section 12 shall survive the expiration or termination of this Lease Agreement. SEC. 13 SUBLETTING AND ASSIGNMENT: A. In the event Tenant should desire to assign this Lease Agreement or sublet the Leased Premises or any part thereof or allow same to be used or occupied by others, Tenant shall give Landlord written notice (which shall specify the duration of said desired sublease or assignment, the date same is to occur, the exact location of the space affected thereby, the proposed rentals on a square foot basis chargeable thereunder and sufficient information of the proposed sublessee or assignee regarding its intended use, financial condition and business operations) of such desire at least forty-five (45) days in advance of the date on which Tenant desires to make such assignment or sublease or allow such a use or occupancy. Landlord shall then have a period of thirty (30) days following receipt of such notice within which to notify Tenant in writing that Landlord elects: (1) in the event such assignee or sublessee fails to meet the conditions set forth in subparagraph (3) below, to refuse to permit Tenant to assign this Lease Agreement or sublet such space, and in such case this Lease Agreement shall continue in full force and effect in accordance with the terms and conditions hereof; or (2) to terminate this Lease Agreement as to the space so affected as of the date so specified by Tenant in which event Tenant shall be relieved of all obligations hereunder as to such space arising from and after such date; or (3) to permit Tenant to assign this Lease Agreement or sublet such space for the duration specified in such notice, such approval not to be unreasonably withheld if (a) the nature l2 HOU:2798218. l2 and character of the proposed assignee or sublessee and the principals thereof, their business and activities and intended use of the Leased Premises are in Landlord's reasonable judgment consistent with the current standards of the Building (b) the form and substance of the proposed sublease or instrument of assignment are acceptable to Landlord (which acceptance by Landlord shall not be unreasonably withheld) and is expressly subject to all of the terms and provisions of this Lease Agreement and to any matters to which this Lease Agreement is subject, (c) Tenant enters into a written agreement with Landlord whereby it is agreed that any rent realized by Tenant as a result of said sublease or assignment in excess of the Base Rent and Additional Rent payable to Landlord by Tenant under this Lease Agreement and any and all sums and other considerations of whatsoever nature paid to Tenant by the assignee or sublessee for or by reason of such assignment or sublease, including, but not limited to, sums paid for the sale of Tenant's fixtures, leasehold improvements, equipment, furniture, furnishings or other personal property in excess of the fair market value thereof (that is, after deducting and giving Tenant credit for Tenant's reasonable costs directly associated therewith, including reasonable brokerage fees and the reasonable cost of remodeling or otherwise improving the Leased Premises for said assignee or sublessee but excluding any free rentals or the like offered to any such sublessee or assignee) shall be payable to Landlord as it accrues as Additional Rent hereunder, (d) the granting of such consent will not constitute a default under any other agreement to which Landlord is a party or by which Landlord is bound or cause Landlord to otherwise be in violation of any applicable laws and (e) the creditworthiness of the proposed assignee or sublessee and the principals thereof is acceptable to Landlord, in Landlord's sole discretion. B. No assignment or subletting by Tenant shall be effective unless Tenant shall execute, have acknowledged and deliver to Landlord, and cause each sublessee or assignee to execute, have acknowledged and deliver to Landlord, an instrument in form and substance acceptable to Landlord in which (i) such sublessee or assignee adopts this Lease Agreement and assumes and agrees to perform jointly and severally with Tenant, all of the obligations of Tenant under this Lease Agreement, as to the space transferred to it, (ii) such sublessee or assignee agrees to use and occupy the transferred space solely for the purpose specified in Section 3 and otherwise in strict accordance with this Lease Agreement, and (iii) Tenant acknowledges and agrees that, notwithstanding such subletting or assignment, Tenant remains directly and primarily liable for the performance of all the obligations of Tenant hereunder (including, without limitation, the obligation to pay Rent), and Landlord shall be permitted to enforce this Lease Agreement against Tenant or such sublessee or assignee, or both, without prior demand upon or proceeding in any way against any other persons. Tenant shall, upon demand, reimburse Landlord for all reasonable expenses incurred by Landlord in connection with a request made by Tenant pursuant to this Section 13, including, without limitation, any investigations as to the acceptability of the proposed assignee or sublessee, all legal costs reasonably incurred in connection with the granting of any requested consent and a charge reasonably determined by Landlord to cover in-house time spent in respect of such request. C. Any consent by Landlord to a particular assignment or sublease shall not constitute Landlord's consent to any other or subsequent assignment or sublease, and any proposed sublease or assignment by any assignee or sublessee shall be subject to the provisions of this Section 13 as if it were a proposed sublease or assignment by Tenant. The prohibition against an assignment or sublease described in this Section 13 shall be deemed to include a prohibition against (i) Tenant's mortgaging or otherwise encumbering its leasehold estate, (ii) an assignment or sublease which may occur by merger or operation of law and (iii) permitting the use or occupancy of the Leased Premises, or any part thereof, by anyone other than Tenant, each of which shall be ineffective and void and shall constitute an Event of Default under this Lease Agreement unless consented to by Landlord in writing in advance. For purposes hereof, the transfer of the ownership or voting rights in a controlling interest of the voting stock of Tenant (if Tenant is a corporation) or the membership interests of Tenant (if Tenant is a limited liability company) or the transfer of a general partnership interest or a majority of the limited partnership interest in Tenant (if Tenant is a partnership) at any time throughout the Term shall be deemed to be an assignment of this Lease Agreement. 13 HOU:2798218.12 SEC. 14 FIRE AND CASUALTY: A. In the event of a fire or other casualty in the Leased Premises, Tenant shall immediately give notice thereof to Landlord. If the Leased Premises shall be partially destroyed by fire or other casualty so as to render the Leased Premises untenantable in whole or in part, Rent shall not abate. Landlord agrees to commence and prosecute such repair work promptly and with all due diligence; provided, however, in the event such destruction (i) results in total or substantial damages to or destruction of the Building and Landlord shall decide not to rebuild, or (ii) results in the Leased Premises being untenantable in whole or in substantial part and the reasonable estimation of a contractor selected by Landlord as to the amount of time necessary to rebuild or restore such destruction to the Leased Premises exceeds six (6) months from the time such work is commenced, then in either event, Landlord shall have a right to terminate this Lease Agreement effective as of the date of casualty or destruction, and upon such termination, all Rent owed up to the time of such destruction or termination shall be paid by Tenant. Subject to reasonable delays for insurance adjustments, Landlord shall give Tenant written notice of its decisions, estimates or elections under this Section 14 within sixty (60) days after any such damage or destruction. B. Notwithstanding anything in this Lease Agreement to the contrary, if the Leased Premises are damaged by fire or other casualty resulting from the fault or negligence of Tenant, or the agents, employees, licensees, customers or invitees of Tenant, such damage shall be repaired by and at the expense of Tenant under the direction and supervision of Landlord, and Rent shall also continue without abatement. C. Notwithstanding anything contained in this Section 14, in no event shall Landlord be required to expend more to reconstruct, restore and repair the Building than the amount actually received by Landlord from the proceeds of the property insurance carried by Landlord and Landlord shall have no duty to repair or restore any portion of any alterations, additions, installation or improvements in the Leased Premises or the decorations thereto except to the extent that the proceeds of the insurance carried by Landlord and Tenant are timely received by Landlord. If Tenant desires any other additional repairs or restoration, and if Landlord consents thereto, it shall be done at Tenant's sole cost and expense subject to all of the applicable provisions of this Lease Agreement. Tenant acknowledges that Landlord shall be entitled to the full proceeds of any insurance coverage whether carried by Landlord or Tenant, for damage to any alterations, addition, installation, improvements or decorations which would become the Landlord's property upon the termination of this Lease Agreement. SEC. 15 CONDEMNATION: A. If during the Term of this Lease Agreement all or a substantial part of the Leased Premises should be taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or should be sold to the condemning authority under threat of condemnation (in each case, a "Taking" or "Taken," as the context requires), this Lease Agreement shall terminate and the Rent shall be abated during the unexpired portion of this Lease Agreement, effective from the date of the Taking of the Leased Premises by the condemning authority. B. If less than a substantial part of the Leased Premises is Taken, Landlord may, at its election, terminate this Lease Agreement as of the date of the Taking or the date Tenant is deprived of possession of the Leased Premises (whichever is later). Landlord's election to terminate this Lease Agreement is exercisable by the giving of written notice to Tenant within sixty (60) days after the date of the Taking. If this Lease Agreement is not terminated as a result of a Taking, Landlord shall restore the Leased Premises remaining after the Taking to a tenantable condition. During the period of restoration, Base Rent shall be abated. C Landlord and Tenant shall each be entitled to receive and retain such separate awards and portions of lump sum awards as may be allocated to their respective interests in any condemnation proceedings. The termination of this lease shall not affect the rights of the respective parties to such awards. 14 HOU:2798218.12 SEC. 16 DEFAULT BY TENANT: The occurrence of any one or more of the following shall constitute an "Event of Default" under this Lease Agreement: A. The failure of Tenant to pay any Rent as and when due under this Lease Agreement, and the continuance of such failure for fifteen (15) days after written notice thereof from Landlord, other than by reason of an Event of Nonappropriation; B. The failure of Tenant to perform, comply with or observe any of the other covenants or conditions contained in this Lease Agreement and the continuance of such failure for the period of time as may be specified elsewhere in this Lease Agreement for such specific covenant or condition, or should no period of time be specified elsewhere in this Lease Agreement with respect to such specific covenant or condition, a period of twenty (20) days after written notice to Tenant; or, if such failure cannot reasonably be cured within said twenty (20) day period despite Tenant's diligent good faith efforts, the failure of Tenant to promptly commence its diligent good faith efforts to cure such failure within said twenty (20) day period and/or the continuance of such failure for a period of twenty (20) days notwithstanding Tenant's efforts to cure; C. Tenant shall fail to continuously operate its business at the Leased Premises for the permitted use set forth in Section 3, whether or not Tenant is in default on payment of Rent, for any period greater than thirty (30) consecutive days; D. A decree or order for relief is entered by a court having jurisdiction over Tenant in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Tenant or for any substantial part of Tenant's property, or ordering the winding- up or liquidation of either of said parties' affairs; E. The Tenant shall (i) become insolvent; (ii) generally fail to pay its debts as such debts become due; (iii) make a general assignment for the benefit of creditors; (iv) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property; or (v) take any action to authorize or in contemplation of any of the actions set forth above in this Section; F. The attempt by Tenant to assign this Lease Agreement or to sublet all or any part of the Leased Premises without the prior written consent of Landlord in accordance with Section 13; G. Any holding over by Tenant in accordance with Section 28 with respect to all or any portion of the Leased Premises after the expiration or termination of the Lease Agreement; or H. Tenant shall fail to discharge any lien placed upon the Leased Premises within twenty (20) days after any such lien or encumbrance is filed against the Leased Premises. "Appropriation" shall mean the adoption by the Board of Regents of Tenant of a budget or amendments to the budget for a Fiscal Year which includes the Rent and other payments required or elected, if any, to be made by Tenant under this Lease Agreement during the respective Fiscal Year of Tenant. "Available Funds" shall mean money Appropriated by the Board of Regents of Tenant from money appropriated by the Legislature of the State of Texas that may lawfully be used with respect to any payment obligated or permitted under this Lease Agreement, provided, however, that upon receipt of an approving opinion of nationally recognized bond counsel, Available Funds shall also include any other funds Appropriated by Tenant that are hereafter determined to be available for the payment of Rent as a result of a final, nonappealable judgment of a court of competent jurisdiction, legislation hereafter enacted or other change in Texas law. 15 HOU:2798218.12 "Event of Nonappropriation" shall mean either of (i) the failure of the Board of Regents of Tenant to Appropriate from Available Funds sufficient funds to pay the Rent to be paid hereunder during the upcoming Fiscal Year; or (ii) the reduction of any Appropriation to an amount that is insufficient to permit Tenant to pay Rent. "Fiscal Year" shall mean the fiscal year of Tenant, being the period beginning on September 1 and ending on August 31 of the following year. SEC. 17 REMEDIES OF LANDLORD UPON EVENT OF DEFAULT: A. Upon any Event of Default, Landlord may exercise any one or more of the following described remedies, in addition to all other rights and remedies provided at law or in equity: (1) Terminate this Lease Agreement by written notice to Tenant and forthwith repossess the Leased Premises and be entitled to recover forthwith as damages a sum of money equal to the total of (i) the cost of recovering the Leased Premises (including attorneys' fees and costs of suit), (ii) the cost of removing and storing any personal property, (iii) the unpaid Rent earned at the time of termination, plus interest thereon at the rate described in Section SG., (iv) the present value (discounted at the rate of eight percent (8%) per annum) of the balance of the Rent for the remainder of the Term less the present value (discounted at the same rate) of the fair market rental value of the Leased Premises for said period, taking into account the period of time the Leased Premises will remain vacant until a new tenant is obtained, and the cost to prepare the Leased Premises for occupancy and the other costs (such as leasing commissions, tenant improvement allowances and attorneys' fees) to be incurred by Landlord in connection therewith, and (v) any other sum of money and damages owed by Tenant to Landlord under this Lease Agreement. (2) Terminate Tenant's right of possession (but not this Lease Agreement) and may repossess the Leased Premises by forcible detainer suit or otherwise, without thereby releasing Tenant from any liability hereunder and without demand or notice of any kind to Tenant and without terminating this Lease Agreement. (3) Alter any and all locks and other security devices at the Leased Premises, with or without terminating this Lease Agreement, and if Landlord does so, Landlord shall not be required to provide a new key or other access right to Tenant unless Tenant has cured all Events of Default; provided, however, that in any such instance, during Landlord's normal business hours and at the convenience of Landlord, and upon the written request of Tenant accompanied by such written waivers and releases as Landlord may require, Landlord will escort Tenant or its authorized personnel to the Leased Premises to retrieve any personal belongings or other property of Tenant. The provisions of this Section 17.C are intended to override and control any conflicting provisions of the Texas Property Code. B. If after an Event of Default Tenant abandons the Leased Premises or vacates the Leased Premises, or Landlord repossesses the Leased Premises without terminating the Lease, Tenant, at Landlord's option, shall be liable for and shall pay Landlord on demand all Rent and other payments owed to Landlord hereunder, accrued to the date of such repossession, plus all amounts required to be paid by Tenant to Landlord until such date, diminished by all good funds received by Landlord through reletting of the Leased Premises during the remaining Term. Actions to collect amounts due by Tenant to Landlord under this Section 17C may be brought from time to time, on one or more occasions, without the necessity of Landlord's waiting until expiration of the Term. Landlord agrees that Landlord will use "objectively reasonable efforts" to relet or attempt to relet the Leased Premises in whole or in part and for any period, to any tenant, and for any use and purpose as determined by Landlord in its commercially reasonable discretion if the events set forth above occur. The term "objectively reasonable efforts" by Landlord shall be met if Landlord, or Landlord's agent, has taken the following actions within thirty (30) days after Tenant no longer occupies or has possession of the Leased Premises: (i) place a "For Rent" or "For Lease" sign at the Leased Premises or at a suitable site on the Property, (ii) request in writing that a licensed real estate broker list the Leased Premises as available for lease and that such broker use its reasonable and ordinary efforts to relet the Leased Premises, in whole or in part, including but not limited to listing the Leased Premises in a multiple listing service and advertising the Leased Premises as being for lease in the Houston Business Journal at least once per month, and (iii) showing the Leased Premises to any prospective tenant who requests to see the Leased Premises. Landlord may decline to relet the Leased Premises to a prospective tenant who is unable to demonstrate the same financial capacity that the Landlord would require as a condition to lease other space in the Building to a 16 HOU:2798218.12 prospective tenant and may decline to lease to a prospective tenant if such prospective tenant's business is not consistent with the tenant mix of the Building. In any proceedings to this Lease Agreement under this Section 17, Landlord shall be presumed to have used objectively reasonable efforts to relet the Leased Premises and Tenant expressly assumes the burden of proof to demonstrate otherwise. Tenant also recognizes that the value of the Leased Premises after an Event of Default by Tenant is reduced by various factors, including, but not limited to, Landlord's expenses of reletting the Leased Premises, whether or not such expenses were actually incurred or paid out of pocket by Landlord (Tenant agrees that while such expenditures by Landlord might increase the value of the Leased Premises, Landlord is expressly not required to expend such sums to relet the Leased Premises, other than normal commissions and legal fees to finalize a lease); to the length of time remaining on the Lease Agreement; and the condition of the Leased Premises at the time of Tenant's default and abandonment or vacating the Leased Premises. In no event will Tenant be entitled to any excess if any rent obtained by reletting over and above the Rent herein reserved. C. All agreements and provisions to be performed by Tenant under any of the terms of this Lease Agreement shall be at Tenant's sole cost and expense and without any abatement of Rent. If Tenant shall fail to pay any sum of money, other than Base Rent, required to be paid by it hereunder or shall fail to cure any default and such failure shall continue for thirty (30) days after notice thereof by Landlord, then Landlord may, but shall not be obligated so to do, and without waiving or releasing Tenant from any obligations, make any such payment or perform any such act on Tenant's part. All sums so paid by Landlord and all costs incurred by Landlord in taking such action shall be deemed Additional Rent hereunder and shall be paid to Landlord on demand, and Landlord shall have (in addition to all other rights and remedies of Landlord) the same rights and remedies in the event of the non-payment thereof by Tenant as in the case of default by Tenant in the payment of Rent. D. Exercise by Landlord of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance by Landlord of surrender of the Leased Premises by Tenant, whether by agreement or by operation of law, it being understood that such surrender can be effected only by the written agreement of Landlord and Tenant. Tenant and Landlord further agree that forbearance by Landlord to enforce its rights pursuant to this Lease Agreement, at law or in equity, shall not be a waiver of Landlord's right to enforce one or more of its rights in connection with any subsequent Event of Default. E. Landlord shall also have the right to remove from the Leased Premises (without the necessity of obtaining a distress warrant, writ of sequestration or other legal process) all or any portion of the furniture, fixtures, equipment and other property located thereon and either deliver the same to Tenant at Tenant's main campus at 4800 Calhoun Road, Houston, Texas 77204 or place same in storage at any location in Harris County, Texas, or any other place reasonably convenient to Landlord. And in such event, Tenant shall be liable to Landlord for all costs incurred by Landlord in connection with such delivery or removal and storage and to the extent authorized by the constitution and laws of the State of Texas, shall indemnify and hold harmless Landlord from all loss, damage, cost, expense and liability in connection with such removal and delivery or storage. Landlord shall have the right to relinquish possession of all or any portion of such furniture, fixtures, equipment, and other property to any person ("Claimant") claiming to be entitled to possession thereof who presents to Landlord a copy of any instrument represented to Landlord by Claimant to have been executed by Tenant (or any predecessor of Tenant) 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 Landlord to inquire into the authenticity of said instrument copy of Tenant's (or Tenant's predecessor's) signature thereon and without the necessity of Landlord's making any nature of investigation or inquiry as to the validity of the factual or legal basis upon which Claimant purports to act. To the extent authorized by the constitution and laws of the State of Texas, Tenant will indemnify and hold harmless Landlord from all cost, expense, loss, damage and liability incident to Landlord's relinquishment of possession of all or any portion of such furniture, figures, equipment or other property to Claimant. The rights of Landlord herein stated shall be in addition to any and all other rights which Landlord has or may hereafter have at law or in equity, and Tenant stipulates and agrees that the rights herein granted Landlord are commercially reasonable. F. Notwithstanding anything in this Lease Agreement to the contrary, all amounts payable by Tenant to or on behalf of Landlord under this Lease Agreement, whether or not expressly denominated as Rent, shall constitute Rent. l7 HOU:2798218.12 G. Except as otherwise expressly provided for in this Lease Agreement, in the event that Landlord fails to perform any of its obligations hereunder, and such failure continues for a period of thirty (30) days after written notice thereof from Tenant, Tenant's exclusive remedies shall be (at Tenant's option) either an action for injunctive relief/specific performance or damages (Tenant hereby waiving the benefit of any laws granting it a lien upon the property of Landlord and/or upon Rent due Landlord). Before Tenant commences any legal action against Landlord for a default, Tenant will give Landlord at least thirty (30) days prior written notice specifying the default with particularity, and Landlord shall thereupon have thirty (30) days in which to cure the default, or if the default is not reasonably susceptible of being cured within 30 days, then such period of time as is reasonably needed to cure the default so long as Landlord commences the remedy within the 30 day period and diligently and continuously prosecutes the remedy to completion. Unless and until Landlord fails to so cure the default after notice, Tenant shall not have any remedy or cause of action by reason thereof. All obligations of Landlord hereunder will be construed as covenants, not conditions, and all such obligations will be binding upon Landlord only during the period of Landlord's ownership of the Leased Premises and not thereafter. All obligations of Landlord under this Lease Agreement will be subject to enforcement through an action for specific performance or injunction as ordered by a court of competent jurisdiction. Under circumstances wherein the violations of this Lease Agreement create an emergency situation and threaten Tenant's ability to use the Leased Premises for state purposes, Tenant may correct all or any part of Landlord's violations and invoice the actual and reasonable cost of corrective actions upon giving Landlord written notice of such emergency and an accurate and complete statement of costs to correct. This extraordinary remedy will only be undertaken in the best interest of the state when a relocation following termination would be disruptive to Tenant and detrimental to its statutory functions. The term "Landlord" shall mean only the owner for the time being of the Leased Premises, and in the event of the transfer by such owner of its interest in the Leased Premises, such owner shall thereupon be released and discharged from all covenants and obligations of the Landlord thereafter accruing, but such covenants and obligations shall be binding during the Term upon each new owner for the duration of such owner's ownership. In the event of any breach or default by Landlord in any term or provision of this Lease Agreement, Tenant agrees to look solely to the equity or interest then owned by Landlord in the Leased Premises or Building; however, in no event, shall any deficiency judgment or any money judgment of any kind be sought or obtained against Landlord. SEC. 18 REMEDIES OF LANDLORD UPON EVENT OF NONAPPROPRIATION: A. Tenant shall provide Landlord with written notice within ten (10) business days of the occurrence of action by the Board of Regents of Tenant which constitutes an Event of Nonappropriation. If funds sufficient to pay the Rent due during the next succeeding Fiscal Year are not Appropriated, then this Lease Agreement shall terminate effective at the end of the Fiscal Year for which sufficient funds have been Appropriated (and, in the case of a reduction of an Appropriation to an amount insufficient to pay Rent, which termination shall be self-operative without notice or demand. Upon the effective date of termination under this Section 18, Tenant shall peaceably surrender possession and control of the Leased Premises to Landlord as required by the other terms of this Lease Agreement. B. To the extent allowed by law, if this Lease Agreement is terminated pursuant to this Section 18 and Tenant fails timely to surrender possession or control of the Leased Premises to Landlord, Tenant, as a tenant at sufferance, shall pay, from and to the extent of Available Funds, damages in an amount equal to 150% of the Rent that accrues on a daily basis for the period from the effective date of termination to the date of delivery of possession and control of the Leased Premises. 18 HOU:2798218. l2 SEC. 19 LIEN FOR RENT: [RESERVED.] SEC. 20 NON-WAIVER: Neither acceptance of Rent by Landlord nor failure by Landlord to exercise available rights and remedies, whether singular or repetitive, shall constitute a waiver of any of Landlord's rights hereunder. Waiver by Landlord of any right for any Event of Default of Tenant shall not constitute a waiver of any right for either a subsequent Event of Default of the same obligation or any other Event of Default. No act or thing done by Landlord or its agent shall be deemed to be an acceptance or surrender of the Leased Premises and no agreement to accept a surrender of the Leased Premises shall be valid unless it is in writing and signed by a duly authorized officer or agent of Landlord. SEC. 21 COMPLIANCE WITH LAWS: Tenant shall comply with, and Tenant shall cause its visitors, students, employees, contractors, agents, invitees and licensees to comply with, all Laws relating to the use, condition or occupancy of the Leased Premises. SEC. 22 ASSIGNMENT BY LANDLORD; LIMITATION OF LANDLORD'S LIABILITY: To the extent allowed by the Texas Constitution and the laws of the State of Texas, Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Leased Premises, and in such event and upon such transfer no further liability or obligation shall thereafter accrue against Landlord hereunder. Furthermore, Tenant specifically agrees to look solely to Landlord's interest in the Leased Premises for the recovery of any judgment from Landlord, it being agreed that the Landlord Parties shall never be personally liable for any such judgment. This provision does not cancel, void, terminate or otherwise alter Tenant's right to acquire the Building and the Property, either by exercise of the Purchase Option pursuant to Section 52 or at the expiration of the Term pursuant to Section 53. SEC. 23 SEVERABILITY: This Lease Agreement shall be construed in accordance with the laws of the State of Texas. If any clause or provision of this Lease Agreement is illegal, invalid or unenforceable, under present or future laws effective during the Term hereof, then it is the intention of the parties hereto that the remainder of this Lease Agreement shall not be affected thereby, and it is also the intention of both parties that in lieu of each clause or provision that is illegal, invalid or unenforceable, there be added as part of this Lease Agreement a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. SEC. 24 SIGNS: Other than the signage expressly referred to in the Plans, Tenant shall not place, install or attach any signage, window or door lettering, decals, window or storefront stickers, advertising media of any type, exterior lights, or exterior decorations, balloons, flags, pennants, banners, paintings, or bars on windows, or security installations on or to the Leased Premises or the Building without Landlord's prior written approval, which shall not be unreasonably withheld. Other than the signage expressly referred to in the Plans, or otherwise consented to by Landlord, Tenant shall repair, paint, and/or replace any portion of the Leased Premises or the Building damaged or altered as a result of its signage when it is removed (including, without limitation, any discoloration of the Building). Landlord shall not be required to notify Tenant of whether it consents to any sign until it has received detailed, to- scale drawings thereof specifying design, material composition, color scheme, and method of installation, and has had a reasonable opportunity to review them. SEC. 25 SUCCESSORS AND ASSIGNS: Landlord and Tenant agree that all provisions hereof are to be construed as covenants and agreements as though the words imparting such covenants were used in each separate paragraph hereof, and that, except as restricted by the provisions of Section 13, this Lease Agreement and all the covenants herein contained shall be binding upon the parties hereto, their respective heirs, legal representatives, successors and assigns. SEC. 26 SUBORDINATION: Tenant agrees that its interest under this Lease Agreement shall be subordinate to any mortgage, deed of trust or similar security interest now or hereafter placed upon the Leased Premises or all or any portion of the Leased Premises by Landlord if the mortgagee or beneficiary under said deed of trust or lender for whose benefit any other security interest is created so elects; provided, however, that this sentence shall be self- operative and no further instrument of subordination need be required by any owner or holder of any such mortgage, deed of trust or security agreement. Upon notice to Tenant of such election, Tenant will execute any instruments required to evidence such subordination. Likewise, such mortgagee or beneficiary under said deed of trust or lender 19 HOU:2798218. l2 for whose benefit any other security interest is created may elect, by notice to Tenant, to make this Lease Agreement superior to such mortgage or deed of trust or other security interest; and in the event of such election, Tenant will execute any instruments required to evidence such superiority. In the event of the enforcement by the trustee, the beneficiary or the secured party under any such mortgage, deed of trust or security agreement of the remedies provided for by law or by such mortgage, deed of trust or security agreement, Tenant, upon request of the party succeeding to the interest of Landlord as a result of such enforcement, will automatically become the Tenant of such successor in interest without any change in the terms or other provisions of this Lease Agreement; provided, however, that such successor in interest shall not be (a) bound by any payment of Rent for more than one month in advance except prepayments in the nature of security for the performance by Tenant of its obligations under this Lease Agreement, (b) bound by any amendment or modification of this Lease Agreement made without the written consent of such lender or successor in interest (c) liable for any previous act or omission of the Landlord, (d) subject to any credit, demand, claim, counterclaim, offset or defense which theretofore accrued to Tenant against the Landlord, or (e) responsible for any monies owing by Landlord to Tenant. Upon request by such lender or successor in interest, whether before or after the enforcement of its remedies, Tenant shall execute and deliver an instrument or instruments confirming and evidencing the attornment herein set forth. This Lease Agreement is further subject to and subordinate to all matters of record in Hams County, Texas. SEC. 27 TAX PROTEST: Subject to Section 7, Tenant waives all rights under the Texas Property Tax Code, now or hereafter in effect, including all rights under Section 41.413 thereof, granting to tenants of real property or lessees of tangible personal property the right to protest the appraised value, or receive notice of reappraisal, of all or any part of the Property or the Building, irrespective of whether Landlord has elected to protest such appraised value. To the extent such waiver is prohibited, Tenant appoints Landlord as its attorney-in-fact, coupled with an interest, to appear and take all actions on behalf of Tenant which Tenant may take under the Texas Property Tax Code. Landlord agrees to use commercially reasonable judgment in determining whether to file tax protests on its own behalf. SEC. 28 HOLDING OVER: At the termination of this Lease Agreement by its expiration or otherwise, Tenant immediately shall deliver possession of the Leased Premises to Landlord with all repairs and maintenance required herein to be performed by Tenant completed. If, for any reason, Tenant retains possession of the Leased Premises after the expiration or termination of this Lease Agreement (including any period of time spent by Tenant in performance of the repairs and maintenance required herein), without the execution of a new lease agreement, such possession shall be subject to termination by either Landlord or Tenant at any time upon not less than ten (10) days advance written notice, and all of the other terms and provisions of this Lease Agreement shall be applicable during such period, except that Tenant shall pay Landlord, upon demand, as Rent for the period of such possession, an amount equal to 150% of the Rent in effect on the date of such termination, computed on a daily basis for each day of such period and including both the Base Rent and Additional Rent set forth herein. No holding over by Tenant shall operate to extend this Lease Agreement except as otherwise expressly provided. The preceding provisions of this Section 28 shall not be construed as consent for Tenant to retain possession of the Leased Premises in the absence of written consent thereto by Landlord. SEC. 29 INDEPENDENT OBLIGATION TO PAY RENT: A. It is the intention of the parties hereto that the obligations of Landlord and Tenant hereunder shall be separate and independent covenants and agreements, that the Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease Agreement. B. Except as otherwise expressly provided herein, Tenant waives the right (a) to quit, terminate or surrender this Lease Agreement or the Leased Premises or any part thereof, or (b) to any abatement, suspension, deferment or reduction of the Rent or any other sums payable under this Lease Agreement. SEC. 30 INDEMNITY; RELEASE AND WAIVER: A. Subject to the constitution and laws of the State of Texas, Tenant hereby agrees to indemnify, protect, defend and hold the Landlord Parties harmless from and against any and all liabilities, claims, causes of 20 HOU:2798218. l2 action, fines, damages, suits and expenses, including attorneys' fees and necessary litigation expenses (collectively, the "Claims"), arising from Tenant's use, occupancy or enjoyment of the Leased Premises and its facilities for the conduct of its business or from any activity, work or thing done, permitted, omitted or suffered by Tenant and its partners, officers, directors, employees, agents, servants, contractors, customers, licensees and invitees in or about the Leased Premises, and Tenant further agrees to indemnify, protect, defend and hold the Landlord Parties harmless from and against any and all Claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this Lease Agreement or arising from any negligence or willful misconduct of Tenant or any of its partners, officers, directors, employees, agents, servants, contractors, customers, licensees and invitees. In case any action or proceeding shall be brought against the Landlord Parties by reason of any such Claim, Tenant, upon notice from Landlord, shall provide a separate defense to same at Tenant's sole cost and expense by the Office of the Attorney General of Texas. The indemnity obligations of Tenant under this Section 30 shall survive the expiration or earlier termination of this Lease Agreement. B. Landlord shall not be liable or responsible to Tenant for (a) any loss or damage to any property or person occasioned by theft, criminal act, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition or order of governmental body or authority, or any cause beyond Landlord's control, or (b) any damage or inconvenience which may arise through repair or alteration of any part of the Building made necessary by virtue of any such cause; provided, however, Landlord shall use commercially reasonable efforts to minimize such damage or inconvenience to Tenant, except as set forth in this Lease Agreement and the property insurance policy. C. Each indemnification provision contained in this Lease Agreement, as it applies to Tenant's indemnification of Landlord, is given by Tenant and accepted by Landlord subject to Tenant's sovereign immunity as provided by the constitution and the laws of the State of Texas at the time such claim for indemnification arises. SEC. 31 INSURANCE: Tenant shall satisfy the insurance requirements as more particularly described on Exhibit E attached hereto and made a part hereof for all purposes. In no event shall Tenant's liability under this Lease Agreement be limited by the amount of insurance required to be carried under Exhibit E. SEC. 32 ENTIRE AGREEMENT: This instrument and any attached addenda or exhibits signed by the parties constitute the entire agreement between Landlord and Tenant; no prior written or prior or contemporaneous oral promises or representations shall be binding. This Lease Agreement shall not be amended, changed or extended except by written instrument signed by both parties hereto. Section captions herein are for Landlord's and Tenant's convenience only, and neither limit nor amplify the provisions of this instrument. Tenant agrees, at Landlord's request, to execute a recordable memorandum of this Lease Agreement. SEC. 33 NOTICES: Whenever in this Lease Agreement it shall be required or permitted that notice, notification or demand be given or served by either party to this Lease Agreement to or on the other, such notice or demand shall be given or served and shall not be deemed to have been given or served unless in writing and (i) delivered personally, (ii) forwarded by facsimile, (iii) sent by Certified or Registered Mail, postage prepaid, with a copy also sent by facsimile or (iv) sent by a reputable common carrier guaranteeing next-day delivery, addressed as follows: To the Landlord: City of Pearland, Texas 3519 Liberty Drive Pearland, Texas 77581 Attention: City Manager Telephone: 281-652-1663 Facsimile: 281-652-1708 To the Tenant: At the address noted for Tenant on the signature page hereof until the Commencement Date, at which time it shall become the Address of the Leased Premises. With a copy to: Dona H. Cornell VC/VP for Legal Affairs and General Counsel 21 HOU:2798218. l2 University of Houston System 311 E. Cullen Building Houston, Texas 77204 Telephone: 713 -743 -5931 E-mail: dhcornell@uh.edu Such addresses may be changed from time to time by either party by serving written notice as above provided. Any such notice or demand shall be deemed to have been given on the date of receipted delivery, refusal to accept delivery or when delivery is first attempted but cannot be made due to a change of address for which no notice is given, five (5) business days after it shall have been mailed as provided in this Section 32 or if sent by facsimile, upon electronic or telephonic confirmation of receipt from the receiving facsimile machine, whichever is earlier. SEC. 34 COMMENCEMENT DATE: Tenant shall, if requested by Landlord, execute and deliver to Landlord within ten (10) days of Landlords' request an Acceptance of Leased Premises Memorandum of the Leased Premises, the form of which is attached as Exhibit F attached hereto and made a part hereof for all purposes. SEC. 35 INSPECTION: Landlord and Landlord's agents and representatives may enter the Leased Premises during normal business hours and upon 24 hours' notice (except in an emergency, in which case only reasonable notice considering the type of emergency shall be required) to inspect the Leased Premises; to make such repairs as may be required or permitted under this Lease Agreement; to perform, at its election and subject to the terms of this Lease Agreement, any unperformed obligations of Tenant hereunder; and to show the Leased Premises to prospective purchasers, mortgagees, ground lessors, and (during the last 12 months of the Term) tenants. During the last twelve (12) months of the Term, Landlord may erect a sign on the Leased Premises indicating that the Leased Premises are available. SEC. 36 BROKERS: Tenant warrants that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Lease Agreement and that it knows of no real estate broker(s) or agent(s) who is(are) or might be entitled to a commission in connection with this Lease Agreement. Tenant agrees to indemnify, defend (with counsel reasonably acceptable to Landlord) and hold harmless the Landlord Parties from and against any liability from all claims for commissions, finder's fee or other compensation arising from the negotiation of this Lease Agreement. SEC. 37 ESTOPPEL CERTIFICATES: A. From time to time after Tenant accepts the Leased Premises, within ten (10) days after request in writing therefor from Landlord, Tenant agrees to execute and deliver to Landlord, or to such other addressee or addresses as Landlord may designate (and Landlord and any such addressee may rely thereon), a statement in writing in the form of Exhibit G or in such other form and substance satisfactory to Landlord (herein called "Tenant's Estoppel Certificate"), certifying to all or any part of the information provided for in Exhibit G as is requested by Landlord and any other information reasonably requested by Landlord. B. Subject to the constitution and the laws of the State of Texas, Tenant does hereby irrevocably appoint Landlord as attorney-in-fact of Tenant, coupled with an interest, in Tenant's name, place and stead to sign and deliver Tenant's Estoppel Certificate as if the same had been signed and delivered by Tenant, in the event that Tenant fails to provide Tenant's Estoppel Certificate within ten (10) days after Landlord's written request therefor. SEC. 38 BANKRUPTCY: If a petition is filed by or against Tenant for relief under Title 11 of the United States Code, as amended (the "Bankruptcy Code"), and Tenant (including for purposes of this Section Tenant's successor in bankruptcy, whether a trustee or Tenant as debtor in possession) assumes and proposes to assign, or proposes to assume and assign, this Lease Agreement pursuant to the provisions of the Bankruptcy Code to any person or entity who has made or accepted a bona fide offer to accept an assignment of this Lease Agreement on terms acceptable to Tenant, then notice of the proposed assignment setting forth (a) the name and address of the proposed assignee, (b) all of the terms and conditions of the offer and proposed assignment, and (c) the adequate assurance to be furnished by the proposed assignee of its future performance under the Lease Agreement, shall be given to Landlord by Tenant no later than twenty (20) days after Tenant has made or received such offer, but in no event later than ten (10) days prior to the date on which Tenant applies to a court of competent jurisdiction for authority and approval to 22 HOU:2798218.12 enter into the proposed assignment. Landlord shall have the prior right and option, to be exercised by notice to Tenant given at any time prior to the date on which the court order authorizing such assignment becomes final and non-appealable, to receive an assignment of this Lease Agreement upon the same terms and conditions, and for the same consideration, if any, as the proposed assignee, less any brokerage commissions which may otherwise be payable out of the consideration to be paid by the proposed assignee for the assignment of this Lease Agreement. If this Lease Agreement is assigned pursuant to the provisions of the Bankruptcy Code, Landlord: (i) may require from the assignee a deposit or other security for the performance of its obligations under the Lease Agreement in an amount substantially the same as would have been required by Landlord upon the initial leasing to a tenant similar to the assignee; and (ii) shall receive, as Additional Rent, the sums and economic consideration described in Section 13A. Any person or entity to which this Lease Agreement is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed, without further act or documentation, to have assumed all of the Tenant's obligations arising under this Lease Agreement on and after the date of such assignment. Any such assignee shall, upon demand, execute and deliver to Landlord an instrument confirming such assumption. No provision of this Lease Agreement shall be deemed a waiver of Landlord's rights or remedies under the Bankruptcy Code to oppose any assumption and/or assignment of this Lease Agreement, to require a timely performance of Tenant's obligations under this Lease Agreement, or to regain possession of the Leased Premises if this Lease Agreement has neither been assumed nor rejected within sixty (60) days after the date of the order for relief or within such additional time as a court of competent jurisdiction may have fixed. Notwithstanding anything in this Lease Agreement to the contrary, all amounts payable by Tenant to or on behalf of Landlord under this Lease Agreement, whether or not expressly denominated as Rent, shall constitute rent for the purposes of Section 502(b)(6) of the Bankruptcy Code. SEC. 39 FINANCIAL STATEMENTS: [RESERVED.] SEC. 40 HAZARDOUS SUBSTANCES: A. Tenant shall not cause or permit any Hazardous Substance (as hereinafter defined) to be used, stored, generated, contained or disposed of on or in the Property or the Leased Premises by Tenant, Tenant's agents, employees, contractors or invitees in violation of Environmental Laws (as hereinafter defined). If Hazardous Substances are used, stored, generated, contained or disposed of on or in the Property or the Leased Premises, or if the Property or the Leased Premises becomes contaminated in any manner due to the actions or omissions of anyone other than Landlord or its agents, employees or contractors, Tenant shall, to the extent permitted by applicable law, indemnify, defend (with counsel reasonably acceptable to Landlord) and hold the Landlord Parties harmless from any and all claims, damages, fines, judgments, penalties, costs, liabilities and losses (including, without limitation, a decrease in value of the Property or the Leased Premises, damages caused by loss or restriction of rentable or usable space or any damages caused by adverse impact on marketing of the space and any and all sums paid for settlement of claims, attorneys' fees, consultant and expert fees) arising during or after the Term and as a result of such use, storage, generation, disposal or contamination in violation of Environmental Laws. This indemnification includes, without limitation, any and all costs incurred because of any investigation of the Property or the Leased Premises or any cleanup, removal or restoration mandated by a federal, state or local agency or political subdivision. Without limitation of the foregoing, if Tenant causes or permits the presence of any Hazardous Substance on the Property or the Leased Premises in violation of Environmental Laws that results in contamination, Tenant shall promptly, at its sole expense, take any and all necessary actions to return the Property or the Leased Premises to the condition existing prior to the presence of any such Hazardous Substance on or in the Property or the Leased Premises; provided, however, Tenant must obtain Landlord's prior written approval for any such remedial action. Tenant shall be responsible for the application for and maintenance of all required permits, the submittal of all notices and reports, proper labeling, training and record keeping, and timely and appropriate response to any release or other discharge by Tenant of a Hazardous Substance under Environmental Laws. The indemnity obligations of Tenant under this Section 40 shall survive the expiration or earlier termination of this Lease Agreement. B. As used herein, "Hazardous Substance" means any substance (i) that is toxic, ignitable, reactive or corrosive or that is regulated by any local, state or federal law, and includes any and all material or substances that are defined as "hazardous waste," "extremely hazardous waste," "hazardous substance" or a "hazardous material" pursuant to any such laws and includes, but is not limited to, asbestos, polychlorobiphenyls and petroleum and any fractions thereof, (ii) any substance which is now or hereafter considered a biological contaminant or which could adversely impact air quality, including mold, fungi and other bacterial agents and (iii) 23 HOU:2798218.12 all biohazardous, infectious and medical waste. Notwithstanding anything in this Section 40 to the contrary, "Hazardous Substances" shall not include materials commonly used in the ordinary operations of an institution of higher education, provided that (1) such materials are used and properly stored in the Leased Premises in quantities ordinarily used and stored in comparable office space, (2) such materials are not introduced into the Building's plumbing systems or are not otherwise released or discharged in the Leased Premises or the Building, and (3) such materials are in strict compliance with local, state or federal law. As used herein, "Environmental Laws" means all applicable federal, state or local laws, regulations, orders, judgments and decrees regarding health, safety or the environment. 24 HOU:2798218.12 SEC. 41 NO MONEY DAMAGES FOR FAILURE TO CONSENT; WAIVER OF CERTAIN DAMAGES: [RESERVED.] SEC. 42 ACKNOWLEDGMENT OF NON-APPLICABILITY OF DTPA: It is the understanding and intention of the parties that Tenant's rights and remedies with respect to the transactions provided for and contemplated in this Lease Agreement (collectively, this "Transaction") and with respect to all acts or practices of Landlord, past, present or future, in connection with this Transaction, are and shall be governed by legal principles other than the Texas Deceptive Trade Practices -Consumer Protection Act (the "DTPA"). Accordingly, Tenant hereby (a) agrees that under Section 17.49(f) of the DTPA this Transaction is not governed by the DTPA and (b) certifies, represents and warrants to Landlord that (i) Tenant has been represented by legal counsel in connection with this Transaction who has not been directly or indirectly identified, suggested or selected by the Landlord and Tenant has conferred with Tenant's counsel concerning all elements of this Lease Agreement (including, without limitation, this Section 42) and this Transaction and (ii) the Leased Premises will not be occupied by Tenant as Tenant's family residence. Tenant expressly recognizes that the total consideration as agreed to by Landlord has been predicated upon the inapplicability of the DTPA to this Transaction and that Landlord, in determining to proceed with the entering into of this Lease Agreement, has expressly relied on the inapplicability of the DTPA to this Transaction. SEC. 43 ATTORNEYS' FEES: To the extent permitted by law, in the event either party defaults in the perforrnance of any of the terms, agreements or conditions contained in this Lease Agreement and the other party places the enforcement of this Lease Agreement, or any part thereof, or the collection of any Rent due or to become due hereunder, or recovery of the possession of the Leased Premises, in the hands of an attorney who files suit upon the same, and should such non-defaulting party prevail in such suit, the defaulting party agrees to pay the other party's reasonable attorneys' fees. SEC. 44 AUTHORITY OF TENANT: Tenant warrants and represents unto Landlord that (a) Tenant is a duly organized and existing agency and institution of higher education of the State of Texas, as defined in Section 61.003, Texas Education Code, as amended, (b) Tenant has full right and authority to execute, deliver and perform this Lease Agreement, (c) the person executing this Lease Agreement was authorized to do so and (d) upon request of Landlord, such person will deliver to Landlord satisfactory evidence of his or her authority to execute this Lease Agreement on behalf of Tenant. SEC. 45 INABILITY TO PERFORM: Whenever a period of time is prescribed for the taking of an action by Landlord or Tenant, the period of time for the performance of such action shall be extended by the number of days that the performance is actually delayed due to strikes, acts of God, shortages of labor or materials, war, terrorist attacks (including bio-chemical attacks), civil disturbances and other causes beyond the reasonable control of the Landlord or Tenant ("Force Majeure" ); provided, however, that the foregoing shall not act to extend the date that any payment obligation is due under this Lease Agreement. SEC. 46 JOINT AND SEVERAL TENANCY: [RESERVED.] SEC. 47 EXECUTION OF THIS LEASE AGREEMENT: The submission of an unsigned copy of this Lease Agreement to Tenant for Tenant's consideration does not constitute an offer to lease the Leased Premises or an option to or for the Leased Premises. This Lease Agreement shall become effective and binding only upon the execution and delivery of this Lease Agreement by both Landlord and Tenant. SEC. 48 COUNTERCLAIM: [RESERVED.] SEC. 49 CALCULATION OF TIME PERIODS: Should the calculation of any of the various time periods provided for herein result in an obligation becoming due on a Saturday, Sunday or legal holiday, then the due date of such obligation or scheduled time of occurrence of such event shall be delayed until the next business day. SEC. 50 RENEWAL OPTIONS: [RESERVED.] SEC. 51 PREVAILING MARKET RENTAL RATE DETERMINATION: [RESERVED.] 25 HOU:2798218. l2 SEC. 52 PURCHASE OPTION: A. Tenant shall have the right (the "Purchase Option") to purchase, subject to the terms and conditions contained herein, all, but not less than all, of the Building and the Property, together with all of Landlord's right, title and interest appurtenant thereto (the Property and rights described above in this Section 52 being herein referred to as the "Purchase Option Property"). The Purchase Option shall be in effect from the Commencement Date until the sixty-first (61S`) day preceding the twentieth (20th) anniversary of the Commencement Date (the "Purchase Option Period"). Provided Tenant is not in default hereunder (after the expiration of any applicable notice and cure periods), Tenant may exercise the Purchase Option by execution and delivery to Landlord of a Purchase and Sale Agreement (the "Purchase Agreement") substantially in the form attached hereto as EXHIBIT H, and made a part hereof for all purposes, not later than the last day of the Purchase Option Period. The Purchase Agreement shall be completed by Tenant prior to delivery to Landlord with the appropriate information filled in and exhibits attached as provided in such Purchase Agreement or this Agreement, mutatis mutandis. If Tenant fails to exercise the Purchase Option in accordance with the terms of this Agreement within the Purchase Option Period, then the Purchase Option and the rights thereunder of Tenant shall automatically and immediately terminate without notice. B. The conveyance of the Purchase Option Property shall occur on the first business day that is sixty (60) calendar days after receipt by Landlord of the Purchase Agreement executed by Tenant as required by Section 52A hereof at 1:00 p.m. local time at the office of Andrews Kurth LLP, 600 Travis Street, Suite 4200, Houston, Texas 77002. At the closing, Tenant shall pay to Landlord the Purchase Price (defined below), and the Purchase Option Property shall be conveyed by Landlord by special warranty deed in the form attached as Exhibit B to the Purchase Agreement on an "AS-IS," "WHERE-IS," "WITH ALL FAULTS" basis. Landlord shall have the obligation to deliver a title insurance policy to Tenant, the cost of which shall be borne by Tenant. C. The "Purchase Price" shall equal the sum of (i) all amounts owed to Landlord under this Lease Agreement as of the date of conveyance, plus (ii) Tenant's Proportionate Share of all Annual Debt Service remaining from the date of conveyance to maturity of the Bonds. Landlord and Tenant hereby agree that such conveyance of the Purchase Option Property will be pursuant to the authority of Section 272.001(j), Texas Local Government Code, as amended, to promote a public purpose related to higher education and that the Purchase Price may or may not represent the fair market value of the Purchase Option Property at the time of such conveyance. D. If Tenant elects to exercise the Purchase Option and, for any reason other than a default by Landlord, as seller, under the Purchase and Sale Agreement, Tenant shall fail to purchase the Property as provided for herein and in the Purchase and Sale Agreement, then such Purchase Option shall no longer be available to Tenant and the terms of this Lease Agreement shall otherwise remain in full force and effect as if such Purchase Option were never exercised. SEC. 53 CONVEYANCE AT EXPIRATION OF TERM: A. So long as no Event of Default remains uncured on the Expiration Date, Landlord shall convey by Special Warranty Deed in the form attached as Exhibit B to the Purchase Agreement on an "AS-IS," "WHERE-IS," "WITH ALL FAULTS" basis all, but not less than all, of the Building and the Property, together with all of Landlord's right, title and interest appurtenant thereto, upon payment by Tenant of all amounts, if any, owed to Landlord under this Lease Agreement as of the Expiration Date. B. If an Event of Default remains uncured on the Expiration Date, Tenant shall have sixty (60) days from the Expiration Date to cure any such Event of Default. If any Event of Default is cured within such period, Landlord shall convey by Special Warranty Deed in the form attached as Exhibit B to the Purchase Agreement on an "AS-IS," "WHERE-IS," "WITH ALL FAULTS" basis all, but not less than all, of the Building and the Property, together with all of Landlord's right, title and interest appurtenant thereto, upon completion of such cure and payment by Tenant of all amounts, if any, owed to Landlord under this Lease Agreement as of the Expiration Date. 26 HOU:2798218.12 C. Landlord and Tenant hereby agree that any conveyance pursuant to this Section 53 will be a donation to Tenant pursuant to the authority of Section 272.001(j), Texas Local Government Code, as amended, to promote a public purpose related to higher education. SEC. 54 TAX EXEMPTION OF BONDS: It is the intention of Landlord and Tenant that the Bonds (defined in Schedule 1) be issued as, and remain until their final maturity date, bonds the interest on which is exempt from federal income taxation to the owners thereof. In that regard, Tenant agrees to provide representations and covenants regarding the use of the Leased Premises by Tenant, satisfactory to, and for the benefit of, Bond Counsel to Landlord, in order to ensure the tax-exempt status of the Bonds. SEC. 55 EXHIBITS AND SCHEDULES: Schedules 1 and 2 and Exhibits A through I are attached hereto and made a part of this Lease Agreement for all purposes. 27 HOU:27982 l8. l2 IN WITNESS WHEREOF, Landlord and Tenant, acting herein by duly authorized individuals, have caused these presents to be executed in multiple counterparts, each of which shall have the force and effect of an original on this day of , 2008 (the "Effective Date"). LANDLORD: CITY OF PEARLAND, TEXAS By: Z ~ ' Name: Bill Eisen Title: City Manager TENANT: UNIVERSITY OF HOUSTON SYSTEM ~~ Name: Renu Khator, Ph.D. Title: Chancellor/President 28 HOU:2798218.12 SCHEDULE 1 TO LEASE AGREEMENT BASE RENT Base Rent • Base Rent shall be payable on the First Interest Payment Date and on each Interest Payment Date thereafter. • Base Rent shall be calculated as follows: Date or Period Base Rent First Interest Payment Date Tenant's Proportionate Share of Annual Debt Service accrued through the last day of the month in which the First Interest Payment Date occurs Fifteenth day of each month thereafter in the Tenant's Proportionate Share of Annual Debt Service for the Bond Year in which the First Interest Payment remainder of the applicable Bond Year divided by the number Date occurs of months remaining in the Bond Year following the month in which the First Interest Payment Date occurs Fifteenth day of each month thereafter through Tenant's Proportionate Share of Annual Debt Service divided and including August 15, 2029 by 12 Definitions: "Annual Debt Service" shall mean, with respect to any particular Bond Year, an amount equal to the sum of (a) all interest accruing on the Bonds during such period, plus (b) the principal installments of the Bonds maturing in such Bond Year; provided, however, that if the True Interest Cost for the Bonds exceeds six percent (6%), then Landlord's financial advisor shall prepare an adjusted debt service schedule for the Bonds which adjusts the actual interest rates of each maturity of the Bonds proportionately in such a manner as to result in the True Interest Cost resulting from such adjusted debt service schedule equaling six percent (6%) (each such adjusted interest rate to be known as the "Adjusted Interest Rate) and Annual Debt Service for any particular Bond Year shall mean an amount equal to the sum of (a) all interest accruing on the Bonds during such period at the Adjusted Interest Rate, plus (b) the principal installments of the Bonds maturing in such Bond Year. "Bond Year" shall mean the twelve-month period ending on September 1 of each year; provided, however, that the first Bond Year shall begin on the date of delivery of the Bonds and shall end on September 1 of the year in which the first principal installment of the Bonds matures. "Bonds" shall mean the certificates of obligation intended to be issued by Landlord pursuant to Section 271.041 et seq., Texas Local Government Code, as amended, and Section 1201.042, Texas Government Code, as amended, for the purpose of paying (i) interest on the Bonds while the Building is being constructed and for a period not to exceed one year thereafter, (ii) the costs of designing, constructing and equipping the Building, and (iii) the costs of issuing the Bonds. "Building Rentable Square Feet" shall mean the number of square feet of `Rentable Area' (as that term is defined in the Standard Method for measuring Floor Area in an Office Building under BOMA guidelines) in the Building as measured by Landlord's architect. Schedule 1 - 1 HOU:2798218.12 "First Interest Payment Date" shall mean (a) if the Commencement Date falls on any day between the first day and the fifteenth of a month, the fifteenth (15~') day of the month in which the Commencement Date occurs, or (b) if the Commencement Date falls on any day between the sixteenth day and the last day of a month, the fifteenth (15`h) day of the month immediately following the month in which the Commencement Date occurs. "Interest Payment Date" shall mean the fifteenth date of each month following the month in which the First Interest Payment Date occurs through and including August 15 of the year of the final stated maturity of the Bonds. "Leased Premises Rentable Square Feet" shall mean the `Rentable Area' (as that term is defined in the Standard Method for measuring Floor Area in an Office building under BOMA guidelines) in the Leased Premises, as measured by Landlord's architect. "Tenant's Proportionate Share" shall mean the Leased Premises Rentable Square Feet divided by the Building Rentable Square Feet. "True Interest Cost" shall mean the rate, compounded semi-annually, necessary to discount the amounts payable on the respective principal and interest payment dates for the Bonds to the purchase price received for the Bonds. Schedule 1 - 2 HOU:2798218.12 N N b N O O 00 :O y d a m x _Q C1 0 C 0 Z O d n a C a a d m d 9 -i' a A ~' d m O D f 7 y, A ~ g n O O w O~ p D+ c ~ C o e e~_ a N fD m a ov m 0~ ~~ D ' • • " O d m m $$$ m 0 0 0 O ~'o ~ ~o D n ry w C ~ : a m ~ p _ m m m o ^ ° ~ R m m ~ ,- d~3 no a ;~.. 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'y 7 J ~4 !1 ^~ 0 0 7 m N O A ~ ~ 2~ N y 0 A O ' a D W ~ ~ fR ~ ~ N b (A ~ ~ V Ol (T Fy =. 01 ~ J N O. W 7o 7o N V A (]1 O W O (J1 O W b O O OD j pl O1 ~ O (T - a D W N O N O N O V O W 01 N A 0 0 p J G ~O AGG.1 O V O N C N 1 NO W W O (D b N 00000 N O O O d A f0 O Ul 0 0 b U 0 A 0o m 0 0 0 ~ ~ o m ~ ~ ~ ~ c r ~, S ~ $ o ~ O ~2 r. _ ~ ,k'. ~~ '~ j , , n a' EZi ~ , . N W V (}p (apl ~Ny... r~ LW ' ~N O W yN~'~ j(~~l11~ ~ -, N . CI?' N ~; y+b~ N a . N ~ ~(~QJT~ r -. ~ Ol .'.~' ; OT- V V1 yN 1 pO oQ ~ O~~ m f0 . ! Jl Q 1 fjO Q O Ul O V (O pO N J OJ ~ tl ~ i o 0 J ~ ~ fA !p M H. j 6A ~ N fA H ~ w N D V W A Wqq ~ W N 1 0 N 11J fq 0 ~ N O A N N 00 O Ol a N O ' W N ~ ~ S t J N W ~1 W ~ fA 00 O CT N O N O (Jt V O ~ - tD 00 W O> H f Jt O lr N 1D b A (]1 O V N V W O ::~. ~.' ', Y: ~. ~~ ~ 1 ' ( ~ ~~ > N N ''i4i s.rS{ J,'1 { . :,~+.7 ^P1v u~ ~ Ii~ ~ k u~i,~T~~N ~ + + A A A yO 0y0 W ( ~ p N 1 ID m W O1 A , Of ~ N V N N N 0 TO Oy~~ON((p~h O W 0 0 0 O 1 W f 71 b N N S (A b V1 O1 0 {,~ W N ~ N N (T f0 O ~ ~~.. V1W N (T W Q1 ~! N Q~ V1 -+ tD V fT W 00 t p Q OM (.n y~ ~ O {q O O (Jl W N CW11 O W~ A W DO A- +( N m °w C C r A r ~ O °0 91 ~ a ~+ ~ ~ 0 3 a 9 H A O~j ~ N n o ~ o o a A V W ~I EXHIBIT C LANDLORD IMPROVEMENTS SEC.1 PLANS. A. Building Plans. Landlord will cause its architect and mechanical, structural and electrical engineer (the "Design Professionals") to prepare a set of Building plans (the "Proposed Building Plans") for the construction of the shell of the Building and the parking areas, landscape and any detention areas on the Leased Premises as well as the interior improvements in the Building (collectively, the "Landlord Improvements"). Within twenty (20) business days after delivery of the Proposed Building Plans to Tenant, Tenant shall either approve (which approval shall not be unreasonably withheld, conditioned or delayed) that portion of the Proposed Building Plans that includes the Leased Premises (such portion, the "Leased Premises Proposed Building Plans") or notify Landlord of the item(s) of the Leased Premises Proposed Building Plans that Tenant disapproves and the reason(s) therefor. If Tenant disapproves the Leased Premises Proposed Building Plans, Landlord shall cause the Design Professionals to revise and resubmit same to Tenant for approval (the "Revised Leased Premises Building Plans"). Within ten (10) business days after delivery of the Revised Leased Premises Building Plans to Tenant, Tenant shall either approve the Revised Leased Premises Building Plans or notify Landlord of the item(s) of the Revised Leased Premises Building Plans which Tenant disapproves and the reason(s) therefor. If Tenant disapproves the Revised Leased Premises Building Plans, Landlord shall cause the Design Professionals to further revise and resubmit same to Tenant for approval, which process shall continue until the plans are approved. Tenant shall have ten (10) business days after delivery of the each set of Revised Leased Premises Building Plans to either approve the Revised Leased Premises Building Plans or notify Landlord of the item(s) of the Revised Leased Premises Building Plans which Tenant disapproves and the reason(s) therefor. Should Tenant fail to respond to Landlord's request for approval within the time periods allotted above, Tenant shall have been deemed to have approved such Revised Leased Premises Building Plans. The Leased Premises Proposed Building Plans or Revised Leased Premises Building Plans, as approved by Tenant, are hereinafter referred to as the "Building Plans." B. Construction Drawings. Landlord shall cause the Design Professionals to prepare construction drawings (in accordance with the Building Plans) and specifications including complete sets of detailed architectural, structural, mechanical, electrical and plumbing working drawings (the "Proposed Construction Drawings") for the Landlord Improvements and shall deliver the Proposed Construction Drawings to Tenant for approval of that portion of such Proposed Construction Drawings that includes the Leased Premises (such portion the "Leased Premises Proposed Construction Drawings") (which approval shall not be unreasonably withheld, conditioned or delayed). Within twenty (20) business days after delivery of the Leased Premises Proposed Construction Drawings to Tenant, Tenant shall either approve the Leased Premises Proposed Construction Drawings or notify Landlord of the item(s) of the Leased Premises Proposed Construction Drawings that Tenant disapproves and the reason(s) therefor. If Tenant disapproves the Leased Premises Proposed Construction Drawings, Landlord shall cause the Design Professionals to revise and resubmit same to Tenant for approval (the "Revised Leased Premises Construction Drawings"). Within ten (10) business days after delivery of the Revised Leased Premises Construction Drawings to Tenant, Tenant shall either approve the Revised Leased Premises Construction Drawings or notify Landlord of the item(s) of the Revised Leased Premises Construction Drawings which Tenant disapproves and the reason(s) therefor. If Tenant disapproves the Revised Leased Premises Construction Drawings, Landlord shall cause the Design Professionals to further revise and resubmit same to Tenant for approval, which process shall continue until the plans are approved. Tenant shall have ten (10) business days after delivery of each set of Revised Leased Premises Construction Drawings to either approve the Revised Leased Premises Construction Drawings or notify Landlord of the item(s) of the Revised Construction Drawings which Landlord disapproves and the reason(s) therefor. Should Tenant fail to respond to Landlord's request for approval within the time periods allotted above, Tenant shall have been deemed to have approved such Revised Leased Premises Construction Drawings. The Leased Premises Proposed Construction Drawings or Revised Leased Premises Construction Drawings, as approved by Tenant, are hereinafter referred to as the "Construction Drawings". C. Changes. Tenant may from time to time make requests for modifications to the Construction Drawings by delivering written notice to Landlord in accordance with Section SB of the Lease Agreement. No delays in designing and constructing the Landlord Improvements caused by such Tenant requests shall delay the C-1 HOU:2798218. l2 Commencement Date. Landlord may make requests for modifications to the Construction Drawings in accordance with Section SB of the Lease Agreement. D. Liabilitv. Landlord's approval of the Construction Drawings shall in no manner indicate that Landlord believes the Construction Drawings are in compliance with all applicable Laws. SEC 2. CONSTRUCTION OF IMPROVEMENTS. Landlord shall diligently construct or cause to be constructed the Landlord Improvements in accordance with the Construction Drawings in a good and workmanlike manner using materials specified in the Construction Drawings and in compliance with Law (including, but not limited to, the ADA) and so as to attain Substantial Completion by not later than the Target Date (as hereinafter defined). Landlord assumes no liability for special, consequential, or incidental damages of any kind whatsoever in connection with the design or construction of the Landlord Improvements, and makes no representations, warranties, or guaranties regarding the same, expressed or implied, including, without limitation, warranties of merchantability, fitness for a particular purpose, or of habitability, except as expressly set forth herein or in the Lease Agreement. SEC 3. SUBSTANTIAL COMPLETION. "Substantial Completion" shall occur when: (i) the project architect has issued a certificate in the form of AIA Document G-704 indicating that the Landlord Improvements are substantially complete in accordance with the Construction Drawings and such certificate has been confirmed by Tenant, and (ii) all systems and portions of the Landlord Improvements are operational as designed and the only remaining work is so minor in nature that Tenant could occupy the Landlord Improvements and the completion of the remainder of the work by Landlord would not materially interfere with Tenant's normal business operations. When Landlord believes that Substantial Completion has been achieved, Tenant and Landlord shall conduct an inspection of the Leased Premises within five (5) days after such date in order to develop apunch-list of incomplete, minor detail items (the "Punch-List Items") to be completed by Landlord. In the event any items other than Punch- List Items remain to be completed, Substantial Completion shall be deemed not to have occurred. Landlord shall use all reasonable efforts to complete all Punch-List Items within thirty (30) days after Substantial Completion. Landlord shall use reasonable efforts to minimize interference with the use of the Leased Premises by Tenant in the completion of such Punch-List Items. The "Target Date" for Substantial Completion of the Landlord Improvements is June 26, 2010. If Substantial Completion is delayed because of (a) any acts of Tenant or its agents, representatives, employees or contractors, (b) Tenant requested changes in the approved Construction Drawings, or (c) Force Majeure (collectively, "Tenant Delay"), then the Commencement Date shall not be extended, but rather shall start on the date on which it would have occurred but for such event. This Lease Agreement shall remain in full effect notwithstanding any delay in Substantial Completion and Landlord shall have no liability to Tenant if Substantial Completion has not occurred on or prior to the Target Date for any reason. SEC. 4 EARLY ENTRY BY TENANT. Tenant may enter the Leased Premises before Substantial Completion with Landlord's prior written consent (which shall not be unreasonably withheld) to perform work therein, provided that such entry shall be coordinated with Landlord and shall not materially interfere with Landlord's work. Prior to such entry, Tenant shall deliver to Landlord evidence that the insurance required under this Lease Agreement has been obtained, and Tenant shall pay all utility charges reasonably allocable to Tenant by Landlord in connection with such early entry. Any such entry shall be on the terms of this Lease Agreement, but no rent shall accrue in respect of Base Rent or Additional Rent during the period that Tenant so enters the Leased Premises. Tenant shall conduct its activities therein so as not to materially interfere with Landlord's construction activities, and shall do so at its risk and expense. If, in Landlord's judgment, Tenant's activities therein materially interfere with Landlord's construction activities, Landlord may terminate Tenant's right to enter the Leased Premises before the Commencement Date. SEC. 5 WARRANTY. For a period of one (1) year after Substantial Completion of the Landlord Improvements, or such greater correction period under Landlord's contract for the construction of the Landlord Improvements in accordance with the Construction Drawings, Landlord shall cause to be repaired, replaced and re-executed any defective materials, equipment and work which was initially prepared or supplied or performed in connection with this Exhibit C, including latent defects and work performed not in accordance with the approved Construction Drawings. Upon the expiration of this warranty, Landlord will assign to Tenant all manufacturers', suppliers', contractors' and subcontractors' warranties on materials, equipment and fixtures and labor incorporated into the Leased Premises or that it otherwise obtains to the extent necessary for Tenant to fulfill its maintenance and repair obligations as set out in this Lease Agreement. Further, Landlord shall furnish to Tenant all printed service and C-2 HOU:2798218.12 maintenance instructions and manuals issued by the manufacturer of each item of equipment famished in accordance with this Exhibit C. Tenant shall receive copies of all warranties received by Landlord on behalf of the Leased Premises. SEC. 6 ACCESSIBILITY INSPECTION. Landlord and Tenant acknowledge that the Leased Premises are subject to Chapter 469, Texas Government Code, as amended ("Chapter 469"), with respect to accessibility for the disabled, and agree to comply with the requirements thereof, including the following: (1) The Texas Department of Licensing and Regulation ("TDLR") is required to perform an on-site inspection of the Leased Premises prior to occupancy by Tenant to ensure compliance with Chapter 469 and the rules and regulations adopted by TDLR pursuant thereto. (2) If inspection by TDLR discloses any condition not in compliance with TDLR accessibility standards and specifications, Landlord shall correct such noncomplying conditions no later than the sixtieth (60`h) day after TDLR delivers the inspection results to Landlord, or by a later date set by TDLR, if circumstances justify a later compliance date. (3) Landlord and Tenant shall cooperate to provide to TDLR all necessary information concerning inspection of the Leased Premises and any required corrective action. Tenant shall pay any fees charged by TDLR for its inspection of the Premises under Chapter 469. C-3 HOU:2798218.12 EXHIBIT D FORM OF AMENDMENT TO LEASE AGREEMENT AMENDMENT TO LEASE AGREEMENT This Amendment No. _ to Lease Agreement (this "Amendment No. ") is entered into as of 200_ by the City of Pearland, Texas, ahome-rule municipality of the State of Texas ("Landlord"), and The University of Houston System, an agency and institution of higher education of the State of Texas ("Tenant"). All capitalized terms used herein but not defined herein shall have the meaning ascribed thereto in the Lease Agreement (defined below). RECITALS WHEREAS, Landlord and Tenant entered into that certain Lease Agreement, dated as of 2008 (as amended from time to time, the "Lease Agreement"), whereby Landlord agreed to Lease Agreement the Leased Premises to Tenant. WHEREAS, the Building being constructed by Landlord pursuant to the Lease Agreement is being completed based upon the Plans as described on Exhibit C attached to the Lease Agreement. AGREEMENTS NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. Definitions. All capitalized terms used herein but not defined herein shall have the meaning ascribed thereto in the Lease Agreement. Amendment to Exhibit .Exhibit to the Lease Agreement is hereby amended as follows: 3. Amendment to Schedule 2. Schedule 2 to the Lease Agreement is hereby amended by deleting such Schedule 2 in its entirety and replacing with the Schedule 2 attached hereto. 4. Tenant Delay. The number of days of Tenant Delay in connection with Tenant's Request that necessitated this Amendment No. _ is and the sum of all Tenant Delay days caused by Tenant's Request (inclusive of the number of days of Tenant Delay set forth immediately above) as of the date of this Amendment No. is 5. No Other Amendments. Except as specifically provided in this Amendment No. _, no other amendments, revisions or changes are made or permitted hereby to the Lease Agreement. All other terms and conditions of the Lease Agreement remain in full force and effect and apply fully to this Amendment No. 6. Conforming References. Upon the effectiveness of this Amendment No. _, each reference in the Lease Agreement to "this Lease Agreement," "thereunder," "hereto," "herein," or words of like import, shall mean and be a reference to the Lease Agreement as amended hereby. 7. Counterparts. This Amendment No. _ may be executed in one or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by Landlord and Tenant and delivered to each.of them. 8. Applicable Law. This Amendment No. _ and all rights and liabilities of the parties hereto with respect to the Lease Agreement shall be governed by the laws of the State of Texas. D-1 HOU:2798218.12 WITNESS THE EXECUTION hereof as of the date first above written. Landlord: By:_ Name: Title: Tenant: By: _ Name: Title: D-2 HOU:2798218.12 EXHIBIT E INSURANCE REQUIREMENTS A. Landlord acknowledges that, because the Tenant is an agency of the State of Texas, liability for the tortious conduct of the agents and employees of Tenant or for injuries caused by the conditions of tangible state property is provided solely by the provisions of the Texas Tort Claims Act (Texas Civil Practice and Remedies Code, Chapters 101 and 104), and that Workers' Compensation Insurance coverage for employees of the Tenant is provided by Tenant as mandated by the provisions of the Texas Labor Code, Chapter 503. Notwithstanding any provision in the Lease Agreement to the contrary, Tenant shall have the right, at its option, to self-insure, in lieu of purchasing policies of insurance. No insurance carrier of either party will have a right of subrogation against the other party to this Lease Agreement. B. Tenant shall be responsible for all its property on the Leased Premises. C. Tenant will not permit the Leased Premises to be used for any purpose or in any manner that would (i) void any insurance carried by Landlord thereon, (ii) increase the insurance risk or premium, or (iii) cause the disallowance of any sprinkler credits, including without limitation, use of the Leased Premises for the receipt, storage or handling of any product, material or merchandise that is explosive or highly flammable. If any increase in the cost of any insurance on the Leased Premises or the building of which the Leased Premises are a part is caused by Tenant's use of the Leased Premises, or because Tenant vacates the Leased Premises, then Tenant shall promptly pay the amount of such increase to Landlord upon demand. If any insurance policy lapses because Tenant's use is alleged to constitute an increased hazard under the policy, Tenant shall be liable to Landlord, as liquidated damages, in an amount equal to the coverage limit that would have existed but for the lapse, less any amount paid by the insurer on Landlord's behalf as a separate insured. Tenant will comply with all reasonable requirements of Landlord's insurance carrier. D. Anything in this Lease Agreement to the contrary notwithstanding, Tenant hereby waives and releases Landlord of and from any and all rights of recovery, claim, action or cause of action, against Landlord, its agents, officers and employees, for any loss or damage that may occur to the Leased Premises, improvements to the building of which the Leased Premises are a part, or personal property (building contents) within the building and/or Leased Premises unless directly caused by the actions of Landlord, including the negligence of Landlord for failure to act following notice from Tenant of a matter that is the responsibility of Landlord. E-1 HOU:2798218.12 EXHIBIT F ACCEPTANCE OF PREMISES MEMORANDUM This Memorandum is an amendment to the Lease Agreement (the "Lease Agreement") executed on the day of 200_ between the City of Pearland, Texas, as Landlord, and the University of Houston System, as Tenant, for that certain leased premises more particularly described in the Lease Agreement. Landlord and Tenant hereby agree that: 1. Except for those items shown on the attached "punch list," if any, which Landlord will remedy within days hereof, Landlord has fully completed the construction work required under the terms of the Lease Agreement. 2. The Leased Premises are tenantable, the Landlord has no further obligation for construction (except as specified above), and Tenant acknowledges that the Leased Premises are satisfactory in all respects. 3. The Commencement Date of the Lease Agreement is hereby agreed to be the day of , 200 4. The Expiration Date of the Lease Agreement is hereby agreed to be the day of , 200 All other terms and conditions of the Lease Agreement are hereby ratified and acknowledged to be unchanged. Agreed and Executed this day of , 200 Landlord: CITY OF PEARLAND, TEXAS By: Name: Tom Reid Title: Mayor Tenant: CITY OF PEARLAND, TEXAS By: Name: Renu Khator, PhD. Title: Chancellor/President F-1 HOU:2798218.12 EXHIBIT G TENANT'S ESTOPPEL CERTIFICATE (Addressee) ~ ~ Texas Gentlemen: The undersigned ("Tenant") has executed and entered into that certain lease agreement ("Lease Agreement") attached hereto as Exhibit "A" and made a part hereof for all purposes with respect to those certain premises ("Leased Premises") more fully described in the Lease Agreement. Tenant understands that the entity to whom this letter is addressed ("Addressee") has committed to loan or invest a substantial sum of money in reliance upon this certification by the undersigned, which certification is a condition precedent to making such loan or investment, or that Addressee intends to take some other action in reliance upon this certification. With respect to the Lease Agreement, Tenant certifies to you the following, with the intention that you may rely fully thereon: 1. A true and correct copy of the Lease Agreement, including any and all amendments and modifications thereto, is attached hereto as Exhibit "A"; 2. The original Lease Agreement is dated 200_, and has been assigned, modified, supplemented or amended only in the following respects: (Please write "None" above or, on a separate sheet of paper, state the effective date of and describe any oral or written modifications, supplements or amendments to the Lease Agreement and attach a copy of such modifications, supplements or amendments, with the Lease Agreement as Exhibit A); 3. Tenant is in actual occupancy of the Leased Premises under the Lease Agreement; 4. The initial term of the Lease Agreement commenced on , 200_, and ends at 11:59 p.m. on , 200_. The current monthly base rent is $ ,and no rentals or other payments in advance of the current calendar month have been paid by Tenant, except as follows: (Please write "None" above or describe such payments on a separate sheet of paper); 5. Base Rent with respect to the Lease Agreement has been paid by Tenant through _ 200_; all Additional Rent and other charges have been paid for the current periods; 6. There are no unpaid concessions, bonuses, free months' rent, rebates or other matters affecting the Rent for Tenant, except as follows: (Please write "None" above or describe such matters on a separate sheet of paper); 7. No security or other deposit has been paid by Tenant with respect to the Lease Agreement, except as follows: (Please write "None" above or describe such deposits on a separate sheet of paper); G-1 HOU2798218. l2 ;. The Lease Agreement is in full force and effect and there are no events or conditions existing which, with notice or the lapse of time or both, could constitute a monetary or other default of the Landlord under the Lease Agreement, or entitle Tenant to any offset or defense against the prompt current payment of Rent or constitute a default by Tenant under the Lease Agreement, except as follows: (Please write "None" above or describe such default on a separate sheet of paper); ~. All improvements required to be made by Landlord under the terms of the Lease Agreement have been satisfactorily completed and accepted by Tenant as being in conformity with the Lease Agreement, except as follows: (Please write "None" above or describe such improvements on a separate sheet of paper); 10. Tenant has no option to expand or rent additional space or any right of first refusal with regard to any additional space, under the Lease Agreement other than the Leased Premises, except as follows: (Please write "None" above or describe such right or option on a separate sheet of paper); 11. Tenant has no right or option to renew the Lease Agreement for any period of time after the expiration of the initial term of the Lease Agreement, except as follows: (Please write "None" above or describe such right on a separate sheet of paper); 12. To the best of Tenant's knowledge, any and all broker's leasing and other commissions relating to and/or resulting from Tenant's execution of the Lease Agreement and occupancy of the Leased Premises have been paid in full and no broker's leasing or other commissions will be or become due or payable in connection with or as a result of either Tenant's execution of a new Lease Agreement covering all or any portion of the Leased Premises or any other space within the Project or Tenant's renewal of the Lease Agreement, except as follows: (Please write "None" above or describe such right on a separate sheet of paper); 13. To the best of Tenant's knowledge, the use, maintenance or operation of the Leased Premises complies with, and will at all times comply with, all applicable federal, state, county or local statutes, laws, rules and regulations of any governmental authorities relating to environmental, health or safety matters (being hereinafter collectively referred to as the "Environmental Laws"); 14. The Leased Premises have not been used and Tenant does not plan to use the Leased Premises for any activities which, directly or indirectly, involve the use, generation, treatment, storage, transportation or disposal of any petroleum product or any toxic or hazardous chemical, material, substance, pollutant or waste; 15. Tenant has not received any notices, written or oral, of violation of any Environmental Law or of any allegation which, if true, would contradict anything contained herein and there are not writs, injunctions, decrees, orders or judgments outstanding, no lawsuits, claims, proceedings or investigations pending or threatened, relating to the use, maintenance or operation of the Leased Premises, nor is Tenant aware of a basis for any such proceeding; 16. There are no actions, whether voluntary or otherwise, pending against Tenant under the bankruptcy or insolvency laws of the United States or of any state. 17. Tenant has no right of refusal with respect to the Leased Premises or any portion thereof. 18. Tenant understands that the Lease Agreement may be assigned to Addressee and Tenant agrees to attorn to Addressee in all respects in accordance with the Lease Agreement. G-2 HOU:2798218.12 EXHIBIT H PURCHASE AND SALE AGREEMENT This Purchase and Sale Agreement (this "Agreement") is entered into as of the Effective Date (defined below) between the City of Pearland, Texas, ahome-rule municipality of the State of Texas ("Seller"), and the University of Houston System, an agency and institution of higher education of the State of Texas ("Purchaser"). Seller and Purchaser are parties to that certain Lease Agreement, dated as of , 2008 (as amended and supplemented to date, the "Lease Agreement") with respect to [a portion ofJ the Building (as defined in the Lease Agreement) located on the Real Estate (defined below). The Lease Agreement is attached hereto as Exhibit E. Certain capitalized terms used herein and not otherwise defined have the meanings assigned to such terms in the Lease Agreement. In consideration of the mutual covenants set forth herein, the parties agree as follows: Section 1. Sale and Purchase. Seller shall sell, convey, and assign to Purchaser, and Purchaser shall purchase and accept from Seller, for the Purchase Price (defined below) and on and subject to the terms and conditions herein set forth the tracts or parcels of real property situated in Harris County, Texas, described in Exhibit A, together with all improvements located thereon and all right, title and interest appurtenant thereto (collectively, the "Real Estate"), including all of Seller's right, title, and interest, if any, in and to (a) to the extent the same are assignable, all licenses, permits, warranties and approvals, and all rights thereunder with respect to or affecting the Real Estate; and (b) all personal property attached to or used in connection with the Real Estate (collectively "Personal Property"). The Real Estate, Personal Property and other property described above are referred to collectively herein as the "Pro er ." Section 2. Purchase Price. The price for which Seller shall sell, convey, and assign the Property to Purchaser, and which Purchaser shall pay to Seller, is the Purchase Price (as defined in the Lease Agreement), to be paid in cash or cash equivalents as set forth in Section 8(a)(1). Section 3. Delivery of Information by Seller. (a) Within seven (7) days after the Effective Date, Seller, at its expense, shall deliver or cause to be delivered to Purchaser the following: (1) commitment for Title Insurance (the "Title Commitment") from (the "Title Company") setting forth the status of the title of the Real Estate and showing all liens, claims, encumbrances, easements, rights-of- way, encroachments, reservations, restrictions, and all other matters of record affecting the Real Estate; HOU:2813486.2 (2) copies of all documents referred to in the Title Commitment (the "Title Commitment Documents"); (3) if in the City's possession or control, copies of all current [leases,] tests, reports and inspections pertaining to the existence of any Hazardous Substances (defined herein) in, on, under or about the Real Estate; and (4) a detailed list of all Personal Property. (b) Within seven (7) days after the Effective Date, Seller, at its expense, shall obtain a current "boundary line" survey of the Real Estate ("Survey"), which shall be certified to Purchaser and Title Company. Seller, at its expense, shall cause a true and correct copy of the Survey to be delivered to the Title Company, Purchaser and Purchaser's legal counsel promptly after receipt thereof by Seller. Section 4. Title Review. Purchaser shall have five (5) days from the later of (i) receipt of the Title Commitment and the Title Commitment Documents and (ii) seven (7) days after the Effective Date to review and make any objection to the exceptions to title shown on the Title Commitment or Survey (the "Title Review Period"). If Purchaser makes timely written objection to the Title Commitment or Survey, Seller may, but shall not be obligated to, attempt to cure any title objections made by Purchaser. Notwithstanding any other provision hereof, in no event shall Seller be obligated to incur any cost or expense in connection with any objection to title to the Real Estate made by Purchaser, provided Seller shall be obligated (i) to cause, at its sole cost and expense, all voluntary liens securing indebtedness affecting title to the Real Estate to be released of record and (ii) to remove, at its sole cost and expense, any title encumbrances affecting title to the Real Estate other than those approved by Purchaser (or made by, through or under, directly or indirectly the activities of Purchaser) and other than those that encumbered the Real Estate as of , 2008 (each of (i) and (ii) called, a "Seller Item"). Provided however, Purchaser shall not unreasonably withhold, delay or condition its approval to any encumbrances referred to in clause (ii) of the preceding sentence, excluding liens, that may be beneficial to the ownership or operation of the Real Estate. If Seller is unable or unwilling to cure Purchaser's objections prior to Closing, Purchaser may, at Purchaser's option, (i) accept title to the Real Estate subject to the objections raised by Purchaser, without an adjustment in the Purchase Price because of such objections, in which event said objections shall be deemed to be waived for all purposes, or (ii) rescind this Agreement, in which event this Agreement shall be of no further force or effect; provided, however, Seller's failure to remove and cure a Seller Item shall be a default by Seller hereunder which shall entitle Purchaser to exercise its remedies set out in Section 12 hereof. If Purchaser fails to make written objection to the Title Commitment or Survey, Purchaser shall be deemed to have approved the Title Commitment and Survey in their entirety. Thereafter, Purchaser will accept title to the Property subject to (i) the exceptions to title listed in the Title Commitment or shown on the Survey that relate to the Real Estate (subject to Seller's obligation to remove each Seller Item so as to no longer affect the Real Estate) and (ii) such other matters as shall be herein provided or which shall be otherwise approved in writing by Purchaser (collectively referred to as the "Permitted Exceptions"). The parties agree that a list of the Permitted Exceptions shall be attached to and incorporated in the Deed (defined herein). For greater certainty, the parties hereby agree that no Seller Item shall ever be deemed to be a part of the Permitted Exceptions unless expressly approved in writing by Purchaser. 2 HOU:2813486.2 Section 5. Representations, Warranties, and Covenants. (a) Seller. Seller represents and warrants to, and covenants with, Purchaser that, as of the Effective Date and as of the Closing Date: (1) Seller has full right, power, and authority to execute and deliver this Agreement and to consummate the purchase and sale transactions provided for herein without obtaining any further consents or approvals from, or the taking of any other actions with respect to, any third parties. This Agreement, when executed and delivered by Seller and Purchaser, will constitute the valid and binding agreement of Seller, enforceable against Seller in accordance with its terms. (2) To Seller's knowledge, there are no actions, suits, claims, assessments, or proceedings pending or threatened that could materially adversely affect Seller's ability to perform hereunder. (3) Seller shall pay, at or prior to the Closing Date, all bills or invoices arising out of or in connection with or resulting from the use, ownership or operation of the Property up to the Closing Date. Notwithstanding the foregoing, Seller will remain obligated, after Closing, for the payment of all bills and invoices arising out of or in connection with or resulting from the use, ownership, or operation of the Property prior to the Closing Date. (4) Seller shall cause to be terminated all contracts, sales agreements, construction agreements, maintenance agreements, employment agreements, service agreements and marketing agreements with respect to the Real Estate (collectively, the "Contracts") as of the Closing Date at no cost or expense to Purchaser. When used herein, the phrase "to Seller's knowledge" or derivations thereof shall mean the current actual knowledge of (who Seller represents to Purchaser is a person with knowledge with regard to the Property) without any obligation to make investigation or inquiry regarding the Property, and without obligation to make any investigation of the files, documents or studies in the possession of other persons, and shall not include any knowledge which may be imputed to Seller or of any other person. Purchaser acknowledges that the individual named above is named solely for the purpose of defining and narrowing the scope of Seller's knowledge and not for the purpose of imposing any liability on or creating any duties running from such individual to Purchaser. Purchaser covenants that it will bring no action of any kind against such individual related to or arising out of these representations and warranties. (b) Purchaser. Purchaser represents and warrants to, and covenants with, Seller that, as of the Effective Date and as of the Closing Date: (1) Purchaser has full right, power, and authority to execute and deliver this Agreement and to consummate the purchase and sale transactions provided for herein without obtaining any further consents or approvals from, or the taking of any other actions with respect to, any third parties. This Agreement, when executed and delivered by Seller and Purchaser, will constitute the valid and binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms. 3 HOU:2813486.2 (2) To Purchaser's knowledge there are no actions, suits, claims, assessments, or proceedings pending or threatened that could materially adversely affect Purchaser's ability to perform hereunder. (c) Survival. The representations and warranties set forth in Section 5(a) and Section 5(b) shall not be deemed to be merged into or waived by the instruments of Closing, but shall survive the Closing for a period of one (1) year (the "Survival Period"). No broker, agent, or party other than Seller is authorized to make any representation or warranty for or on behalf of Seller. (d) Condition of the Property. Purchaser acknowledges that Purchaser will have the opportunity to independently and personally inspect the Real Estate and that Purchaser has entered into this Agreement based upon its ability to make such examination and inspection. The Property is to be sold to and accepted by Purchaser at Closing in its then present condition, "AS IS, WITH ALL FAULTS, AND WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED," except for the express representations and warranties of Seller contained in Section 5(a). PURCHASER AGREES TO ACCEPT THE PROPERTY IN ITS PRESENT CONDITION AND ACKNOWLEDGES AND AGREES THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN SELLER'S COVENANT OF TITLE TO BE SET FORTH IN THE DEED), ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITION, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATIONS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE ITEMS OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER OR ANY OTHER MATTER OR THING REGARDING THE PROPERTY, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN SECTION 5(a). PURCHASER HAS NOT RELIED UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF SELLER WITH RESPECT TO THE PROPERTY, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN SECTION 5(a). PURCHASER HEREBY REPRESENTS THAT IT IS NOT RELYING UPON ANY WARRANTIES, PROMISES, GUARANTEES, OR REPRESENTATIONS MADE BY SELLER OR ANY ONE ACTING OR CLAIMING TO ACT ON BEHALF OF SELLER IN PURCHASING THE PROPERTY, OTHER THAN THE COVENANTS OF TITLE SET OUT IN THE DEED AND EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN SECTION 5(a). PURCHASER WILL CONDUCT SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER 4 HOU:2813486.2 SET OUT IN SECTION 5(a). UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER'S INVESTIGATIONS. "APPLICABLE ENVIRONMENTAL LAWS" MEANS ALL FEDERAL, STATE, OR LOCAL LAW, STATUTE, ORDINANCE, OR REGULATION, WHETHER NOW OR HEREAFTER IN EFFECT, PERTAINING TO HEALTH, INDUSTRIAL HYGIENE, OR THE ENVIRONMENTAL CONDITIONS ON, UNDER, OR ABOUT THE PROPERTY, INCLUDING WITHOUT LIMITATION, THE FOLLOWING, AS NOW OR HEREAFTER AMENDED: ' COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, 42 U.S.C. § 9601 ET SEQ.; RESOURCE, CONSERVATION AND RECOVERY ACT, 42 U.S.C. § 4901 ET SEQ. AS AMENDED BY THE SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT OF 1986, PUB. L. 99-499, 100 STAT. 1613; THE TOXIC SUBSTANCES CONTROL ACT, 15 U.S.C. § 2601 ET SEQ.; EMERGENCY PLANNING AND COMMUNITY RIGHT TO KNOW ACT OF 1986, 42 U.S.C. § 1101 ET SEQ.; CLEAN WATER ACT, 33 U.S.C. § 1251 ET SEQ.; CLEAN AIR ACT, 42 U.S.C. § 7401 ET SEQ.; FEDERAL WATER POLLUTION CONTROL ACT, 33 U.S.C. § 1251 ET SEQ.; AND ANY CORRESPONDING STATE LAWS OR ORDINANCES INCLUDING BUT NOT LIMITED TO THE TEXAS WATER CODE § 26.001 ET SEQ; TEXAS HEALTH & SAFETY CODE § 361.001 ET SEQ.; TEXAS SOLID WASTE DISPOSAL ACT, TEX. REV. CIV. STAT. ANN. ART. 4477-7; AND REGULATIONS, RULES, GUIDELINES, OR STANDARDS PROMULGATED PURSUANT TO SUCH LAWS, STATUTES AND REGULATIONS, AS SUCH STATUTES, REGULATIONS, RULES, GUIDELINES, AND STANDARDS ARE AMENDED FROM TIME TO TIME. "HAZARDOUS SUBSTANCES" MEANS MATERIALS OR SUBSTANCES THAT HAVE BEEN OR MAY IN THE FUTURE BE DETERMINED TO BE TOXIC, HAZARDOUS, UNDESIRABLE OR SUBJECT TO REGULATION AND THAT MAY NEED TO BE SPECIALLY TREATED, HANDLED AND/OR REMOVED FROM THE PROPERTY UNDER CURRENT OR FUTURE FEDERAL, STATE AND LOCAL LAWS, RULES, REGULATIONS OR GUIDELINES. THE TERMS OF THIS SECTION 5(d) SHALL EXPRESSLY SURVIVE THE CLOSING AND NOT MERGE THEREIN. Section 6. Purchaser Represented by Counsel. Purchaser hereby represents and warrants to Seller that: (a) Purchaser is represented by legal counsel in connection with the transaction contemplated by this Agreement; and (b) Purchaser is purchasing the Property for business, commercial, investment or other similar purpose and not for use as Purchaser's residence. Purchaser waives any and all rights or remedies it may have or be entitled to deriving from disparity in size or from any significant disparate bargaining position in relation to Seller. Section 7. Purchaser's Release of Seller and its Affiliates. PURCHASER HEREBY WAIVES, RELEASES AND AGREES NOT TO MAKE ANY CLAIM OR BRING ANY COST RECOVERY ACTION OR CLAIM OR OTHER ACTION AGAINST SELLER OR ITS AFFILIATES, DIRECTORS, OFFICERS, PARTNERS, MEMBERS, MANAGERS, EMPLOYEES, AGENTS, OR ASSIGNS (COLLECTIVELY, "SELLER AND ITS 5 HOU:2813486.2 AFFILIATES"), INCLUDING WITHOUT LIMITATION, NEGLIGENCE OF SELLER OR ITS AFFILIATES AND STRICT LIABILITY), BASED ON THE FOLLOWING, TO THE EXTENT RELATING TO SELLER'S PERIOD OF OWNERSHIP OF THE PROPERTY: (A) ANY APPLICABLE ENVIRONMENTAL LAW, (B) ANY DISCHARGE, DISPOSAL, RELEASE OR ESCAPE OF ANY HAZARDOUS SUBSTANCE, ON, AT, TO, OR FROM THE PROPERTY OR (C) ANY ENVIRONMENTAL CONDITIONS WHATSOEVER ON, UNDER, OR IN THE VICINITY OF THE PROPERTY; PROVIDED HOWEVER NOTHING IN THIS SECTION 7 SHALL PRECLUDE PURCHASER FROM MAKING A CLAIM FOR CONTRIBUTION AGAINST SELLER AND ITS AFFILIATES BASED ON THE ABOVE DESCRIBED EVENTS OR STATUTES IN CONNECTION WITH THIRD PARTY CLAIMS AGAINST PURCHASER WHICH RELATE TO SELLER'S PERIOD OF OWNERSHIP OF THE PROPERTY. "Affiliate" means a person who directly or indirectly, or through one or more intermediaries or other entities, owns an interest in, controls, is controlled by, or is under common control with Seller, or a person in which Seller directly or indirectly, or through one or more intermediaries or other entities, owns an interest. "Control" means the possession, directly or indirectly, or with one or more other persons, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. Seller and Purchaser agree that the provisions of this Section 7 shall expressly survive Closing, and shall not merge with the provisions of any closing documents. Purchaser acknowledges and agrees that the disclaimers and other agreements contained in this Section 7 and in Section 5(d) are integral parts of this Agreement and Seller would not have agreed to sell the Property to Purchaser for the Purchase Price without the disclaimers and other agreements contained in Section 7 and Section 5(d). Section 8. Closing. The closing (the "Closing") of the sale of the Property by Seller to Purchaser shall occur on the first business day that is sixty (60) calendar days after the Effective Date (the "Closing Date"), in the offices of Andrews Kurth LLP, 600 Travis Street, Suite 4200, Houston, Texas 77002, commencing at 10:00 a.m. Houston, Texas time. Time is of the essence with regard to the Closing Date. At the Closing the following, which are mutually concurrent conditions, shall occur: (a) Purchaser, at its expense, shall deliver or cause to be delivered to Seller the following: (1) Immediately available cash funds in the amount of the Purchase Price as specified in Section 2. (2) Evidence satisfactory to Seller and Title Company that the person executing the Closing documents on behalf of Purchaser has full right, power, and authority to do so. (b) Seller shall deliver or cause to be delivered to Purchaser the following: (1) A Special Warranty Deed (the "Deed") in the form of Exhibit B, attached hereto and made a part hereof for all purposes, fully executed and acknowledged by Seller, conveying to Purchaser the Property, subject only to the Permitted Exceptions. 6 HOU:2813486.2 (2) A Bill of Sale and Assignment in the form of Exhibit C, attached hereto and made a part hereof for all purposes, executed by Seller assigning all of Seller's right, title and interest in the Personal Property, "AS IS" and without warranty or representation of any kind whatsoever. (3) A Certificate in the form of Exhibit D, attached hereto and made a part hereof for all purposes, executed and sworn to by Seller. (4) At the sole expense of Purchaser, an Owner policy of title insurance in the amount of issued by Title Company, insuring that Purchaser is the owner of the Property subject only to the Permitted Exceptions and the standard printed exceptions included in a Texas standard form owner policy of title insurance; however, the standard exception for taxes shall be limited to the year in which the Closing occurs, and subsequent years and subsequent assessments for prior years due to change in land usage or ownership. At Purchaser's election, and at Purchaser's sole expense, if the Survey is acceptable to the Title Company for such purposes, the standard exception pertaining to "discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments, or any overlapping of improvements," may be deleted except for "shortages in area." (5) Evidence satisfactory to the Title Company that the persons executing and delivering the Closing documents on behalf of Seller have full right, power and authority to do so. (c) At the Closing, the following items of revenue and expense (collectively, the "Proration Items") shall be adjusted and apportioned in cash as of 11:59 p.m. on the Closing Date (the "Adjustment Date"), subject, however, to the terms of the Lease Agreement, under which Purchaser has been obligated to pay some or all of the following items: (1) Real estate and other ad valorem taxes, personal property or use taxes and sewer charges, on the basis of the fiscal year for which such taxes or charged are assessed. If the actual ad valorem taxes are not available on the Closing Date for the tax year in which the Adjustment Date occurs, the proration of such taxes at the Closing shall be estimated based upon reasonable information available to the parties, including information disclosed by the local tax office or other public information, and an adjustment shall be made when actual figures are published or otherwise become available. Subject to the preceding sentence, all taxes and assessments for the year of Closing and thereafter shall be assumed and paid solely by Purchaser. (2) No provision has been made for the proration of water charges, fuel charges or utility charges (including, without limitation, telephone, gas and electricity) as Seller shall terminate its account (but not the service itself) with the providers of all such services as of the Adjustment Date and Purchaser shall, prior to the Closing Date, make application to the providers of such services for the continuation of such services in the name of Purchaser or its designee. It is anticipated that in connection with all such services, the meters will be read on or about the Adjustment Date and Seller shall be responsible for paying the bills for such services accruing prior to the Adjustment 7 HOU:2813486.2 Date and Purchaser shall be responsible for the payment of all such accounts accruing on or after the Adjustment Date. The provisions of Section 8(c) will survive the Closing. (d) Except as expressly provided herein, and subject to the terms in the Lease Agreement, under which Purchaser has been obligated to pay some or all of the Proration Items, Seller will be charged and credited for the amount of all of the Proration Items relating to the period up to and including the Closing Date, and Purchaser will be charged and credited for all of the Proration Items relating to the period after the Closing Date. Such preliminary estimated Closing prorations shall be set forth on a preliminary closing statement to be prepared by Seller and submitted to Purchaser for Purchaser's approval prior to the Closing Date (the "Closing Statement"). The Closing Statement, once agreed upon, shall be signed by Purchaser and Seller and delivered to Title Company for purposes of making the preliminary proration adjustment at Closing subject to the final cash settlement provided for below. The preliminary proration shall be paid at Closing by Purchaser to Seller (if the preliminary prorations result in a net credit to Seller) or by Seller to Purchaser (if the preliminary prorations result in a net credit to Purchaser) by increasing or reducing the cash to be delivered by Purchaser in payment of the Purchase Price at the Closing. If the actual amounts of the Proration Items are not known as of the Closing Date, the prorations will be made at Closing on the basis of the best evidence then available; thereafter, when actual figures are received, re-prorations will be made on the basis of the actual figures, and a final cash settlement will be made between Seller and Purchaser. No prorations will be made in relation to insurance premiums, and Seller's insurance policies will not be assigned to Purchaser. The provisions of Section 8(d) will survive the Closing. (e) Seller shall pay (1) one-half of any escrow fees or similar charges of the Title Company, and (2) the cost of obtaining any other items required to be delivered by Seller to Purchaser at Closing as provided herein. (f) Purchaser shall pay (1) one-half of any escrow fees or similar charges of the Title Company, (2) the base premium for the owner's title policy and any charges for endorsements or deletions to the owner's title policy, (3) the cost of any survey other than the Survey, (4) any charges for any title policy in favor of Purchaser's lender, and (5) the cost of obtaining any other items required to be delivered by Purchaser to Seller at Closing as provided herein. (g) Upon completion of the Closing, Seller shall deliver to Purchaser possession of the Property, subject to the Permitted Exceptions and free and clear of the right of any parties under all Contracts. Section 9. Commissions. Neither Seller nor Purchaser has contacted any real estate broker, agent, finder or similar person in connection with the negotiation and execution of this Agreement, the transactions contemplated hereby or the sale and purchase of the Property. If any claims are made by any party for Acquisition Fees (defined herein) with respect to this transaction, such claims shall be handled by the party whose alleged commitments gave rise thereto. As used herein "Acquisition Fees" shall mean all fees paid to any person or entity in connection with the selection and purchase of the Property, including real estate commissions, 8 HOU:2813486.2 selection fees, nonrecurring management and start-up fees, development fees, and any other fees of a similar nature. It is agreed that if any claims for Acquisition Fees are ever made against Seller or Purchaser in connection with the transactions contemplated by this Agreement, all such claims shall be the responsibility of the party whose commitments form the basis of such claims. Seller and Purchaser each agree to indemnify and hold harmless the other from and against any and all liabilities, claims, demands or actions for or with respect to Acquisition Fees asserted by any person, firm or corporation in connection with this Agreement or the transactions contemplated hereby, and any court costs, attorneys' fees or other costs and expenses arising therefrom, insofar as any such liabilities, claims, demands or actions are based upon a contract or commitment of the indemnifying party. The indemnification provisions contained in this Section shall survive the Closing or the termination of this Agreement, as applicable. Section 10. Destruction, Damage, or Taking Before Closing. If, before Closing, all or any material part of the Property is destroyed or damaged, or becomes subject to condemnation or eminent domain proceedings, then Seller shall promptly notify Purchaser thereof (a "Seller's Notice"). Purchaser may elect to proceed with the Closing (subject to the other provisions of this Agreement) by delivering notice thereof to Seller within five business days after receipt of a Seller's Notice, but Purchaser shall be entitled to all insurance proceeds or condemnation awards payable as a result of such damage or taking and, to the extent the same may be necessary or appropriate, Seller shall assign to Purchaser at Closing Seller's rights to such proceeds or awards and, at Closing, Purchaser shall receive a credit for the amount of any deductible payable by Seller under any applicable property insurance policy affecting the Property. If, within five business days after Purchaser's receipt of a Seller's Notice, Seller receives written notice from Purchaser of Purchaser's termination of this Agreement, then Purchaser shall be deemed to have terminated this Agreement pursuant to Section 11(b), in which event the Lease Agreement shall remain in effect and the terms thereof relating to casualty or condemnation shall control. If, within five business days after Seller's delivery of a Seller's Notice, Seller does not receive written notice from Purchaser of Purchaser's termination of this Agreement, Purchaser shall have waived its right to terminate this Agreement under this Section 10. If, before Closing, less than a material part of the Property is destroyed or damaged, or becomes subject to condemnation or eminent domain proceedings, then Seller shall notify Purchaser thereof, Purchaser shall have no right to terminate this Agreement, and the parties shall proceed with the Closing, but Purchaser shall be entitled to all insurance proceeds or condemnation awards payable as a result of such damage or taking and, to the extent the same may be necessary or appropriate, Seller shall assign to Purchaser at Closing Seller's rights to such proceeds or awards and at Closing Purchaser shall receive a credit for the amount of any deductible payable under any applicable insurance policy. For the purposes of this Section 10, damage or a taking shall be considered to be "material" if the value of the portion of the Property damaged or taken exceeds , or, in the case of a taking, if the portion of the Property taken is such that it materially adversely affects the ability to use the remainder for the purposes for which it is presently used. Section 11. Termination and Remedies. (a) If Purchaser defaults on its obligations hereunder or otherwise fails to consummate the purchase of the Property pursuant to this Agreement for any reason other than termination hereof pursuant to a right expressly granted to Purchaser in this Agreement, then 9 HOU:2813486.2 Seller may, as its sole and exclusive remedy, terminate this Agreement by notifying Purchaser thereof, in writing, whereupon neither Purchaser nor Seller shall have any further rights or obligations hereunder, except those that by their terms survive the termination of this Agreement. In addition to the foregoing, Seller shall also be entitled to recover all expenses, including reasonable attorneys' fees and litigation costs, incurred in connection with enforcing any right or remedy under this Agreement. Any such default by Purchaser under this Agreement shall not constitute a default under the Lease Agreement; provided, however, that the purchase option under the Lease Agreement shall be deemed to be permanently extinguished. (b) If Purchaser elects to terminate this Agreement pursuant to an express right granted to Purchaser under this Agreement, then Purchaser shall give written notice to Seller of such termination, whereupon neither party hereto shall have any further rights or obligations hereunder, except those that by their terms survive the termination of this Agreement; provided, however, that the terms of the Lease Agreement shall remain in effect and provided further that the purchase option under the Lease Agreement shall be deemed to be permanently extinguished. (c) If Seller defaults on its obligations hereunder or fails to consummate the sale of the Property pursuant to this Agreement for any reason other than Purchaser's failure to perform its obligations hereunder or termination hereof by Purchaser in accordance with Section 11(b), then Purchaser, as its sole and exclusive remedy, may either (i) terminate this Agreement by notifying Seller thereof, in which case neither party hereto shall have any further rights or obligations hereunder, except those that by their terms survive the termination of this Agreement; provided, however, that the terms of the Lease Agreement shall remain in effect; or (ii) enforce specific performance of the obligations of Seller hereunder. In addition to the foregoing, Purchaser shall also be entitled to recover all expenses, including reasonable attorneys' fees and litigation costs, incurred in connection with enforcing any right or remedy under this Agreement. Section 12. Notices. All notices provided or permitted to be given under this Agreement must be in writing and may be served by depositing same in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested; by delivering the same in person to such party by anationally-recognized, overnight delivery service (e.g., Federal Express); or by facsimile copy transmission during normal business hours with a confirmation copy delivered by another method permitted under this Section 12. Notice given in accordance herewith shall be effective upon delivery to the address of the addressee (even if such addressee refuses delivery thereof). For purposes of notice, the addresses of the parties shall be as follows: If to Seller, to: City of Pearland 3519 Liberty Drive Pearland, Texas 77581 Attn: City Attorney Telephone: 281-652-1678 Telecopy: 281- 10 HOU:2813486.2 With a copy to: Andrews Kurth LLP 600 Travis St., Suite 4200 Houston, Texas 77002 Attn: Mark B. Arnold Telephone: 713 -220-3 93 8 Telecopy: 713 -23 8-7295 If to Purchaser, to: University of Houston System 212 E. Cullen Building Houston, Texas 77204 Attention: Chancellor Telephone: 713-743-8820 Telecopy: 713- With a copy to: University of Houston System 212 E. Cullen Building Houston, Texas 77204 Attention: Office of General Counsel Telephone: 713 -743 -0949 Telecopy: 713 -743 -0948 If to Title Company, to: Attention: Telephone: Telecopy: Either party or the Title Company hereto may change its address for notice by giving three days prior written notice thereof to the other party and the Title Company. Section 13. ASS1EnS; Beneficiaries. Purchaser shall not assign this Agreement or Purchaser's rights, duties and obligations hereunder without the prior written consent of Seller to any person other than an entity controlled by, under common control with or controlling Purchaser, and any attempt to do so shall constitute a default by Purchaser hereunder. Notwithstanding any such assignment, Purchaser shall remain liable for the performance of its obligations hereunder. This Agreement shall inure to the benefit of and be binding on the parties hereto and their respective heirs, legal representatives, successors, and permitted assigns. This Agreement is for the sole benefit of Seller and Purchaser, and no third party (including without limitation subsequent owners of the Property) is intended to be a beneficiary of or have the right to enforce this Agreement. Section 14. Governing Law; Jurisdiction. This Agreement shall be governed and construed in accordance with the laws of the State of Texas. Any suit, claim or other action which is brought to construe this Agreement, or which arises directly or indirectly under this Agreement, shall be brought only in a court of appropriate jurisdiction in Houston, Harris 11 HOU:2813486.2 County, Texas and such court shall be the exclusive tribunal for hearing the suit, claim or other action. Section 15. Entire Agreement. This Agreement is the entire agreement between Seller and Purchaser concerning the sale of the Property, and no modification hereof or subsequent agreement relative to the subject matter hereof shall be binding on either party unless reduced to writing and signed by the party to be bound. All Exhibits attached hereto are incorporated herein by this reference for all purposes. Section 16. Business Days; Holidays; Weekends. As used in this Agreement, the term "business day" means any day, other than a Saturday or Sunday, on which banks located in Houston, Texas are not required or authorized to close. If any notice or action required or permitted by this Agreement falls on a date which is not a business day, then such date shall be extended to the next business day. Section 17. Rule of Construction; No Waiver. Purchaser and Seller acknowledge that each party has reviewed this Agreement and that the rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments hereto. No provision of this Agreement shall be deemed to have been waived by either party unless the waiver is in writing and signed by that party. No custom or practice which may evolve between the Purchaser and Seller during the term of this Agreement shall be deemed or construed to waive or lessen the right of either of the parties hereto to insist upon strict compliance of the terms of this Agreement. Section 18. Multiple Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as maybe convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. Facsimile transmission signatures shall be deemed original signatures. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this instrument to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. A signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages. Section 19. Invalid Provisions. If any provision of this Agreement (except the provisions relating to Seller's obligation to convey the Property and Purchaser's obligation to pay the Purchase Price, the invalidity of either of which shall cause this Agreement to be null and void) is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Section 20. Attorneys' Fees. In the event of litigation between the parties in connection with this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and costs from the non-prevailing party. The obligation in the immediately 12 HOU:2813486.2 preceding sentence shall survive any termination of this Agreement or the Closing as a surviving obligation. Section 21. Time is of the Essence. Time is of the essence in this Agreement. Section 22. Effective Date. As used in this Agreement, the "Effective Date" shall be the date on which this Agreement is executed by the last of Purchaser or Seller. Section 23. Reporting Person. Purchaser and Seller hereby designate Title Company as the "reporting person" pursuant to the provisions of Section 6045(e) of the Internal Revenue Code of 1986, as amended. Section 24. Miscellaneous. Whenever herein the singular number is used, the same shall include the plural, and the plural shall include the singular where appropriate, and words of any gender shall include the other gender where appropriate. The headings of the Sections contained in this Agreement are for convenience only and shall not be taken into account in determining the meaning of any provision of this Agreement. The words "hereof' and "herein" refer to this entire Agreement and not merely the Section in which such words appear. Section 25. Limitation of Seller's Liability. Notwithstanding any other provision of this Agreement, any agreement contemplated by this Agreement, or any rights which Purchaser might otherwise have at law, equity, or by statute, whether based on contract or some other claim, any liability of Seller to Purchaser will be limited to its [equity interest] in the Property. Without limiting the generality of the foregoing, if Seller is or becomes a partnership, the general or limited partners, employees, agent or affiliate of Seller will not in any manner be personally or individually liable for the obligations of Seller hereunder or for any claims related to this Agreement, any agreement contemplated by this Agreement, or the Property. If Seller is or becomes a corporation or limited liability company, no member, manager, officer, employee, agent or affiliate of Seller will in any manner be personally or individually liable for the obligations of Seller hereunder or for any claim in any way related to this Agreement, any agreement contemplated by this Agreement, or the Property. The provisions of this Section 30 shall survive Closing. Section 26. Waiver of Jury Trial. THE PARTIES TO THIS AGREEMENT HEREBY KNOWINGLY AND VOLUNTARILY WAIVE THEIR RIGHT TO HAVE ANY SUIT, CLAIM OR DISPUTE, ARISING DIRECTLY OR INDIRECTLY UNDER THIS AGREEMENT, DECIDED BY A JURY, AND CONSENT TO HAVE ANY SUCH MATTER DECIDED SOLELY AND EXCLUSIVELY BY THE COURT. Section 27. No Electronic Transactions. The parties hereby acknowledge and agree this Agreement shall not be executed, entered into, altered, amended or modified by electronic means. Without limiting the generality of the foregoing, the parties hereby agree the transactions contemplated by this Agreement shall not be conducted by electronic means, except as specifically set forth in the Section 12 (Notices) or Section 18 (Multiple Counterparts). [Remainder of this page intentionally left blank; signature page follows.] 13 HOU:2813486.2 Executed as of the Effective Date. SELLER: PURCHASER: CITY OF PEARLAND, TEXAS By: Mayor Date of Execution: UNIVERSITY OF HOUSTON SYSTEM By: Name: Title: President, Board of Regents Date of Execution: S-1 HOU:2813486.2 TITLE COMPANY JOINDER Title Company joins herein in order to evidence its agreement to perform the duties and obligations of Title Company set forth herein and to acknowledge receipt of afully-executed copy of this Agreement. Dated: , 200 By:_ Name: Title: S-2 HOU:2813486.2 SCHEDULE OF EXHIBITS A - Description of Land B - Form of Special Warranty Deed C - Bill of Sale and Assignment D - Form of FIRPTA Certificate E - Lease Agreement Schedule-1 HOU:2813486.2 EXHIBIT B NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER SPECIAL WARRANTY DEED THE STATE OF TEXAS § § KNOW ALL MEN BY THESE PRESENTS: COUNTY OF HARRIS § The City of Pearland, Texas ("Grantor"), for and in consideration of the sum of $10.00 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, has GRANTED, BARGAINED, SOLD, and CONVEYED and by these presents does GRANT, BARGAIN, SELL, and CONVEY unto the University of Houston System ("Grantee"), the tract or parcel of land in Harris County, Texas, described in Exhibit A, together with all rights, titles, and interests appurtenant thereto including, without limitation, Grantor's interest, if any, in all improvements thereon (such land and interests are hereinafter collectively referred to as the "Pro er "); provided, however, that Grantee covenants and agrees to use the Property only for higher education purposes and that if Grantee, its successors or assigns, uses the Property or any portion thereof for any other purpose, or if Grantee, its successors or assigns, ceases using the Property or any portion thereof for said purposes, then the Property or any portion thereof will automatically revert to Grantor, its successors or assigns, without any further action being taken. This Special Warranty Deed and the conveyance hereinabove set forth is executed by Grantor and accepted by Grantee subject only to the matters described in Exhibit B attached hereto and incorporated herein by this reference, to the extent the same are validly existing and applicable to the Property (hereinafter referred to collectively as the "Permitted Exceptions"). Grantee acknowledges that Grantee has independently and personally inspected the Property and is acquiring the Property based upon such examination and inspection. The Property is conveyed and accepted by Grantee in its present condition, "AS IS, WITH ALL FAULTS, AND WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED", except for the express representations and warranties of Grantor herein. GRANTEE ACCEPTS THE PROPERTY IN ITS PRESENT CONDITION AND ACKNOWLEDGES AND AGREES THAT GRANTOR IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN GRANTOR'S COVENANT OF TITLE SET FORTH IN THIS DEED), ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITION, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATIONS, THE TRUTH, ACCURACY OR B-1 HOU:2813486.2 COMPLETENESS OF THE ITEMS OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF GRANTOR TO GRANTEE OR ANY OTHER MATTER OR THING REGARDING THE PROPERTY. GRANTEE HAS NOT RELIED UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF GRANTOR WITH RESPECT TO THE PROPERTY, OTHER THAN THE COVENANTS OF TITLE SET OUT IN THIS DEED. GRANTEE HEREBY REPRESENTS THAT IT IS NOT RELYING UPON ANY WARRANTIES, PROMISES, GUARANTEES, OR REPRESENTATIONS MADE BY GRANTOR OR ANY ONE ACTING OR CLAIMING TO ACT ON BEHALF OF GRANTOR IN PURCHASING THE PROPERTY, OTHER THAN THE COVENANTS OF TITLE SET OUT IN THIS DEED. GRANTEE HAS CONDUCTED SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS GRANTEE DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND IS RELYING SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF GRANTOR. GRANTEE ASSUMES THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY GRANTEE'S INVESTIGATIONS. "APPLICABLE ENVIRONMENTAL LAWS" MEANS ALL FEDERAL, STATE, OR LOCAL LAW, STATUTE, ORDINANCE, OR REGULATION, WHETHER NOW OR HEREAFTER IN EFFECT, PERTAINING TO HEALTH, INDUSTRIAL HYGIENE, OR THE ENVIRONMENTAL CONDITIONS ON, UNDER, OR ABOUT THE PROPERTY, INCLUDING WITHOUT LIMITATION, THE FOLLOWING, AS NOW OR HEREAFTER AMENDED: COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, 42 U.S.C. § 9601 ET SEQ.; RESOURCE, CONSERVATION AND RECOVERY ACT, 42 U.S.C. § 4901 ET SEQ. AS AMENDED BY THE SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT OF 1986, PUB. L. 99-499, 100 STAT. 1613; THE TOXIC SUBSTANCES CONTROL ACT, 15 U.S.C. § 2601 ET SEQ.; EMERGENCY PLANNING AND COMMUNITY RIGHT TO KNOW ACT OF 1986, 42 U.S.C. § 1101 ET SEQ.; CLEAN WATER ACT, 33 U.S.C. § 1251 ET SEQ.; CLEAN AIR ACT, 42 U.S.C. § 7401 ET SEQ.; FEDERAL WATER POLLUTION CONTROL ACT, 33 U.S.C. § 1251 ET SEQ.; AND ANY CORRESPONDING STATE LAWS OR ORDINANCES INCLUDING BUT NOT LIMITED TO THE TEXAS WATER CODE § 26.001 ET SEQ; TEXAS HEALTH & SAFETY CODE § 361.001 ET SEQ.; TEXAS SOLID WASTE DISPOSAL ACT, TEX. REV. CIV. STAT. ANN. ART. 4477-7; AND REGULATIONS, RULES, GUIDELINES, OR STANDARDS PROMULGATED PURSUANT TO SUCH LAWS, STATUTES AND REGULATIONS, AS SUCH STATUTES, REGULATIONS, RULES, GUIDELINES, AND STANDARDS ARE AMENDED FROM TIME TO TIME. "HAZARDOUS SUBSTANCES" MEANS MATERIALS OR SUBSTANCES THAT HAVE BEEN OR MAY IN THE FUTURE BE DETERMINED TO BE TOXIC, HAZARDOUS, UNDESIRABLE OR SUBJECT TO REGULATION AND THAT MAY NEED TO BE SPECIALLY TREATED, HANDLED AND/OR REMOVED FROM THE PROPERTY UNDER CURRENT OR FUTURE FEDERAL, STATE AND LOCAL LAWS, RULES, REGULATIONS OR GUIDELINES. TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereunto in anywise belonging, unto Grantee, its successors and assigns forever, and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER B-2 HOU:2813486.2 DEFEND all and singular the title to the Property unto the said Grantee, its successors and assigns against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through, or under Grantor but not otherwise, subject to the Permitted Exceptions. Grantee's address is: University of Houston System 211 E. Cullen building Houston, Texas 77204 Attention: Chancellor Ad valorem taxes for the current year have been prorated as of the date hereof, and the payment thereof is assumed by Grantee. EXECUTED as of , 200 UNIVERSITY OF HOUSTON SYSTEM By: Name: Title: President, Board of Regents B-3 HOU:2813486.2 THE STATE OF TEXAS § COUNTY OF DALLAS § This instrument was acknowledged before me on 200 by ,President of the Board of Regents of the University of Houston System, on behalf of said System. Notary Public, State of B-4 HOU:2813486.2 Exhibit A Legal Description of the Property ~~`~ ~ ~,: B-5 HOU:2813486.2 EXHIBIT C BILL OF SALE AND ASSIGNMENT THE STATE OF TEXAS § COUNTY OF DALLAS § Concurrently with the execution and delivery hereof, the City of Pearland, Texas ("Assignor") is conveying to the University of Houston System, whose address is 211 E. Cullen Building, Houston, Texas 77204 ("Assignee"), by Special Warranty Deed (the "Deed"), that certain real property, together with the improvements located thereon (the "Pro er "), lying and being situated in Harris County, Texas, being more particularly described on Exhibit "A", attached hereto and made a part hereof for all purposes. Assignor desires to assign, transfer and convey to Assignee all of the right, title and interest of Assignor in certain items of tangible and intangible personal property relating to the Property (all of such properties and assets to be assigned hereunder being collectively called the "Assigned Properties"). NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and other good and valuable consideration in hand paid by Assignee to Assignor, the receipt and sufficiency of which are hereby acknowledged and confessed by Assignor, Assignor does hereby ASSIGN, TRANSFER, SET OVER and DELIVER to Assignee, its successors and assigns, all of the Assignor's right, title and interest in the Assigned Properties, subject only to the exceptions and encumbrances affecting the Property, AS IS, and without any warranty, express or implied; provided, however, that Assignor hereby represents and warrants to assignee that Assignor has not previously assigned its right, title and interest in and to the Assigned Properties to any third party other than to Assignee pursuant to this Bill of Sale and Assignment. The Assigned Properties include Assignor's right, title, and interest in the following: 1. all personal property attached to or used in connection with the Real Estate. 2. To the extent assignable, all licenses, permits, warranties and approvals, and all rights thereunder, relating to the Property or the Assigned Properties. IN WITNESS WHEREOF, Assignor has caused this Assignment to be effective as of 20 [Remainder of this page intentionally left blank; signature page follows.] C-1 HOU:2813486.2 EXHIBIT D CERTIFICATION OF NON-FOREIGN STATUS Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform the University of Houston System ("Transferee") that withholding of tax is not required upon the disposition of a U.S. real property interest by the City of Pearland, Texas ("Transferor"), the undersigned, in his capacity as Mayor of Transferor, but not individually, hereby certifies to Transferee the following on behalf of Transferor: 1. Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations); 2. Transferor is not a disregarded entity as defined in Section 1.1445- 2(b)(2)(iii); 3. Transferor's U.S. employer identification number is ;and 4. Transferor's office address is 3519 Liberty Drive, Pearland, Texas 77581. Transferor understands that this certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of Transferor. City of Pearland, Texas By: Mayor Date: D-1 HOU:2813486.2 EXHIBIT I AIR CONDITIONING AND HEATING SERVICES Landlord will furnish Building standard air conditioning and heating between 7:00 a.m. and 11:00 p.m. from Monday through Sunday, all exclusive of Holidays (as defined below). Upon request of Tenant made in accordance with the rules and regulations for the Building, Landlord will furnish air conditioning and heating at other times (that is, at times other than the times specified above), in which event Tenant shall reimburse Landlord's per hour operating cost for each air handling unit activated, including all necessary control plant equipment to provide minimum loads for overtime HVAC. The following dates shall constitute "Holidays" as said term is used in this Lease Agreement: (1) New Year's Day (2) Memorial Day (3) Labor Day (4) Thanksgiving Day (5) Friday following Thanksgiving Day (6) Christmas If any holiday described in (1), (2), (3) or (6) above falls on a weekend, Tenant acknowledges and agrees that Landlord shall have the right to designate the preceding Friday or the following Monday as the holiday to be observed by the Building. In addition to any charges to be billed to Tenant pursuant to the Lease Agreement, Tenant shall reimburse Landlord at the rate of $50.00 per hour per air handler unit when air conditioning or heating is furnished at times other than those stated above. However, such rate is based upon the "Kilowatt Hour Rate" (as hereinafter defined) for electricity as of the date of this Lease Agreement (the "Base Rate") and if and when the Kilowatt Hour Rate increases over the Base Rate, the aforesaid rate of $50.00 per hour per air handler shall automatically increase proportionately. The "Kilowatt Hour Rate" shall mean the actual average cost per kilowatt hour charged by the public utilities providing electricity to the Building, or, if said public utilities shall cease charging for electricity on the basis of a kilowatt hour, then the Kilowatt Hour Rate shall mean the actual average cost per unit of measurement substituted therefore by said public utilities. I-1 HOU:2798218.12