UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

 
FORM 8-K
 
CURRENT REPORT
 
PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
 
Date of report (Date of earliest event reported): July 2, 2012
 
MANNATECH, INCORPORATED
 
(Exact Name of Registrant as Specified in its Charter)
 
Texas	000-24657	75-2508900	
(State or other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)	
 
600 S. Royal Lane, Suite 200
Coppell, Texas  75019
(Address of Principal Executive Offices, including Zip Code)

Registrant’s Telephone Number, including Area Code:  (972) 471-7400
_________________________________________________
(Former name or former address, if change since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨	Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425)	
 
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 
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Item 1.01.                      Entry into a Material Definitive Agreement.
 
Mannatech, Incorporated (“Mannatech”) has entered into an arrangement with Integrated Distribution and Logistics Direct, LLC (doing business as SPExpress) whereby Mannatech will outsource its warehousing and distribution functions to SPExpress. In connection with this arrangement, on July 2, 2012, Mannatech entered into a Services Agreement (the “ Services Agreement ”) whereby, effective July 7, 2012, SPExpress will provide the space, labor, materials, facilities, equipment and personnel necessary to fulfill Mannatech’s warehousing and distribution needs, including in facilities on both the east and west coasts of the United States, as well as in Texas.  The initial term of the Services Agreement expires March 18, 2018, with automatic one-year period extensions.  Additionally, in connection with the foregoing, on June 29, 2012, Mannatech entered into an Asset Purchase Agreement, which closed on July 7, 2012, whereby it sold certain assets related to the distribution and warehousing functions previously performed by Mannatech to SPExpress for an aggregate purchase price of $331,000.  SPExpress will use such purchased assets to perform its obligations under the Services Agreement.  The foregoing summary of the terms of the Services Agreement does not purport to be complete and is qualified in its entirety by reference to the Services Agreement, a copy of which is attached as Exhibit 10.1 to this Form 8-K and is incorporated herein by reference.

On July 2, 2012, Mannatech and SPExpress also entered into a Sublease (the “Sublease”) whereby, effective July 7, 2012, Mannatech will sublease the majority of the space in the distribution center it leases in Coppell, Texas to SPExpress for the purpose of providing the warehousing and distribution services under the Services Agreement.  The term of the Sublease will expire on March 19, 2018, unless terminated sooner pursuant to the terms thereof.  The foregoing summary of the terms of the Sublease does not purport to be complete and is qualified in its entirety by reference to the Sublease, a copy of which is attached as Exhibit 10.2 to this Form 8-K and is incorporated herein by reference.

Item 9.01.                      Financial Statements and Exhibits.
 
(d)           Exhibits.

Exhibit Number	Exhibit	
10.1*	Services Agreement by and between Integrated Distribution and Logistics Direct, LLC and Mannatech, Incorporated, dated July 2, 2012. (Portions of this exhibit were omitted pursuant to a confidential treatment request submitted pursuant to Rule 24b-2 of the Exchange Act.)	
10.2*	Sublease by and between Integrated Distribution and Logistics Direct, LLC and Mannatech, Incorporated, dated July 2, 2012. (Portions of this exhibit were omitted pursuant to a confidential treatment request submitted pursuant to Rule 24b-2 of the Exchange Act.)	
*Filed herewith.

 
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SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
 	 	MANNATECH, INCORPORATED	
 
Dated: July 9, 2012	 	By: 	 
/s/ S. Mark Nicholls	
 	 	 	S. Mark Nicholls
Chief Financial Officer	

 
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EXHIBIT INDEX

Exhibit Number	Exhibit	
10.1*	Services Agreement by and between Integrated Distribution and Logistics Direct, LLC and Mannatech, Incorporated, dated July 2, 2012. (Portions of this exhibit were omitted pursuant to a confidential treatment request submitted pursuant to Rule 24b-2 of the Exchange Act.)	
10.2*	Sublease by and between Integrated Distribution and Logistics Direct, LLC and Mannatech, Incorporated, dated July 2, 2012. (Portions of this exhibit were omitted pursuant to a confidential treatment request submitted pursuant to Rule 24b-2 of the Exchange Act.)	
            *Filed herewith.

 
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Exhibit 10.1

 
[***Indicates omitted material that is the subject of a confidential treatment request filed separately with the Commission.]
 
SERVICES AGREEMENT
 
THIS SERVICES AGREEMENT (“Agreement”) is entered into between Integrated Distribution and Logistics Direct, LLC  (dba SPExpress, hereinafter referred to as “SPE”), an  Arizona limited liability company  located at 1610 N. Kolb Rd., Tucson, AZ 85715 , and  Mannatech, Incorporated  (hereinafter referred to as “Client”)   a Texas Corporation ,   located at  600 S. Royal Ln. Ste. 200, Coppell, TX 75019 , as of the Commencement Date as set forth below.
 
1.  	Services To Be Provided:	
SPE agrees to provide the space, labor, materials, facilities, equipment and personnel reasonably necessary to perform services including but not limited to:  packaging, receipt, carriage, warehousing, storage, distribution, fulfillment, shipping, transportation and delivery services at the rates set forth in Appendix B (“Services Price Schedule”), each of which is incorporated herein by reference, and more specifically referenced in the Manifests required under Section 3 of this Agreement.
 
2.  	Acceptance:	

a.  	 In the event that goods tendered for storage or other services do not conform to the description contained herein, or Client requests that SPE perform services other than those identified herein, SPE may refuse to accept such goods. If SPE accepts such goods, the parties shall agree on applicable rates and charges within 30 days of SPE’s acceptance.  Should the parties be unable to reach an agreement, the rates and charges shall be based on the All-in pricing per order for the most similar priced Goods contained in Appendix B.	

b.  	All goods accepted by SPE shall constitute “Goods” as referred to under this Agreement.	

c.  	This Agreement is automatically canceled if no storage or other services are performed under this Agreement for a period of one hundred eighty (180) consecutive days.	

3.  	Delivery and Tender of Goods:	

 	a.	No Goods shall be delivered or transferred to SPE unless accompanied by Client’s complete written instructions, in the form of a written manifest, bill of lading or other warehouse and/or carriage receipt (collectively, the “Manifest”). All Goods shall be delivered to the Facility properly marked and packaged for storage and handling. In order to allow SPE to better schedule staffing and other resources and to properly receive Goods, Client shall provide SPE with an Advance Ship Notification (“ASN”) and packing slip or similar document for such shipment for all inbound deliveries to SPE Facilities.  ASN’s and the supporting shipment documentation may be emailed, faxed or mailed to SPE.  Client may notify SPE by telephone of inbound deliveries but must provide shipment documentation prior to, or at the time of, delivery of the goods to SPE in accordance with its established policies and procedures as further described in paragraph 5.  In the event of inbound deliveries, SPE shall:	

i.  	Use its best efforts to receive such deliveries in a timely manner.	

ii.  	Not bear any responsibility for detention or other related charges from the Client’s cartage companies if caused by Client.	

b.	Force Majeure.  No party (the “Affected Party”) shall be in breach of any of its obligations under this Agreement where failure to perform or delay in performing any obligation is due, wholly or in material part, directly or indirectly, to the occurrence of: act of God, act of public enemy, act of terrorism, act of a governmental body or agency, foreign or domestic, sabotage, riot, fire, flood, typhoon, explosion or other catastrophe, epidemic or quarantine restriction, accident, freight embargo, equipment failure, shortage of materials, prohibition to export, governmental directive, legal restrictions, or because of any other similar event (a “Force Majeure Event”), for the period of time occasioned by any such occurrence, so long as the event is beyond the reasonable control of, does not result from the fault of, and cannot be overcome by the exercise of reasonable due diligence by the Affected Party, and provided that:	

(a)  	the Affected Party forthwith gives the other party hereto written notice of the Force Majeure Event, which notice shall include an estimate of the duration and the likely impact of the Force Majeure Event;	

(b)  	the suspension or delay of performance shall be of no greater scope and of no longer duration than is reasonably required by the Force Majeure Event; and	

(c)  	the Affected Party will use its best efforts to correct, cure or overcome the Force Majeure Event.	

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Should the Force Majeure Event continue for a period of more than sixty (60) days and the Affected Party be unable to fulfill its obligations at the conclusion of the sixty (60) day period, either party shall have the right to terminate this Agreement upon a seven (7) day prior written notice to the other party.
Goods remaining in storage will continue to be subject to regular storage charges.
 	c.	Client agrees that all Goods shipped to SPE shall identify Client on the Manifest as the named consignee, in care of SPE, and shall not identify SPE as the consignee. If, in violation of this term of the Agreement, Goods are shipped to SPE as named consignee on the bill of lading or other contract of carriage, Client agrees to immediately notify carrier in writing, with copy of such notice to SPE, that SPE’s listing as consignee is as the “in care of party” only and has no beneficial title or interest in the Goods. Furthermore, SPE shall have the right to refuse such Goods and shall not be liable for any loss, misconsignment, or damage of any nature to, or related to, such Goods. Whether SPE accepts or refuses Goods shipped in violation of this Section 3, Client agrees to indemnify and hold SPE harmless from any and all claims for transportation, storage by any party other than SPE, handling by any party other than SPE and any and all other third-party charges of any nature relating to such Goods, including without limitation undercharges, demurrage, truck/intermodal detention and other charges of any nature whatsoever.	

d.  	In addition, the Client shall include in its Manifest furnished at or prior to such delivery,  information clearly identifying or otherwise showing quantities/units, item descriptions, marks, brands, or sizes of the Goods to be kept and accounted for separately, a unique identification code for the Manifest, descriptions of the packages containing the Goods (where applicable), a clear statement of the reasonable value assigned to the Goods, and the class of storage and other services desired, as well as the following, to be completed prior to SPE performing any services hereunder related to the corresponding Goods:  i) a space to identify the location of the SPE Facility; ii) a space to insert the date the Goods are turned over to and received by SPE; and iii) a space for the signature of an authorized SPE representative at the Facilities confirming receipt of the Goods at the appropriate Facility.	

e.  	Upon receipt of each Manifest and at the time of delivery, SPE shall stamp the Manifest “subject to final count and inspection.”  Within a reasonable time receipt of each Manifest, SPE shall fill in the appropriate information, furnish its signature where provided, and return a signed copy of the Manifest to Client, whereupon such Manifest shall constitute a valid warehouse receipt and a valid Bill of Lading.  SPE will confirm to Client that the Goods were received in correct quantity and in good condition through a receipt which will be communicated to Client via email within 3 business days after receipt of signed Bill of Lading.	

f.  	Client shall provide SPE with written instructions concerning the release or other disposition of the Goods.  TWX, facsimile, EDI, or other similar written communication is satisfactory, as it is agreed herein that  SPE  may rely upon the information contained in the writing as received.	

g.  	Client shall use its best efforts to comply with, and shall be solely responsible for, all applicable laws, regulations and requirements of the Federal Trade Commission, the Food and Drug Administration, the Federal Communications Commission and any other state or federal agency that might have jurisdiction over Client’s merchandise or sales transactions.  Client shall monitor compliance under such laws, regulations and requirements, and shall promptly notify SPE of any special compliance issues raised by the offer or sale of Client’s merchandise or sales or promotional activities in a particular state.  Client shall indemnify, defend and hold harmless SPE, its members, managers, officers, employees, and agents from and against all claims, lawsuits, liabilities, damages and expenses, including without limitation, reasonable attorneys fees and expenses, arising from any breach by Client of its obligations under this Section.	

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4.  	Storage Period and Charges:	

a.  	Unless otherwise agreed in writing, all charges for storage are per package or pallet or other stated unit per month.	

b.  	Storage charges begin on the date that SPE accepts care, custody and control of the Goods, regardless of unloading date or date of issue of warehouse receipt. SPE shall be deemed to have accepted care, custody and control of the Goods on the date indicated on the corresponding warehouse receipt to be sent via email by SPE to Client.	

c.  	Storage charges shall be billed on a weekly basis and as set forth in Appendix B attached hereto.	

d.  	SPE will provide all utilities at the Facility, except Client will pay SPE for telephone, facsimile, overnight delivery and other communication expense incurred in dealing with Client’s Goods as part of the Monthly Administrative Support Fee described in Appendix B.  The payment schedule for such expenses is included in Appendix B.	

e. 	SPE will provide all required equipment at the Facility, unless specially agreed to otherwise.	
 
5.  	Term of Agreement:	
The services to be performed under this Agreement will commence on July 7, 2012 (“Commencement Date”) at the rates set forth in Appendix B and . Rates are subject for review and adjustment after the first year of the Agreement to account for increases or decreases in SPE’s costs.  The breakdown of SPE’s baseline costs are included in Appendix B.  The 2012 Baseline cost will serve as the baseline upon which the yearly adjustment will be made.  Beginning on July 7, 2013 and continuing on the same day each year that this Agreement is in effect, SPE shall provide Client with documentation for changes in its current baseline costs.  Should the Parties disagree with such price review or adjustment, either party may terminate this Agreement by providing one hundred-eighty (180) days written notice to this effect to other party.  In the event either Party terminates this Agreement under this provision, the pricing structure currently in effect at the time of termination will remain in effect for the 180 day transition period.  Unless otherwise specifically provided, all rates are in United States Dollars.  The initial contract term will begin on the Commencement Date stated above and continue until March 18, 2018, unless terminated earlier in accordance with the terms of this agreement, and will automatically renew for an additional one-year term each year thereafter, unless a party provides a notice to the other party of its intent not to renew the Agreement at least one-hundred twenty (120) days prior to the end of the then current term. SPE's Services Policies and Procedures are set out in Appendix A, which is incorporated herein by this reference.  SPE shall not be liable for loss or damage to any Goods resulting from complying with this Agreement, including without limitation the Policies and Procedures set out in said Appendix A.  All services provided under this Agreement, and all related transactions and undertakings, shall be subject to and governed by SPE’s Services Policies and Procedures set out in Appendix A.  In the event of a conflict between or among any term, condition or provision in SPE’s Services Policies and Procedures set out in Appendix A and any term, condition or provision in this Agreement or in a Manifest referenced in Section 3 of this Agreement, the order of priority, governance and precedence shall be first, the Manifest applicable to the Goods in question, second, SPE’s Services Policies and Procedures, and last this Agreement .

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6.  	Terms and Method of Payment:	
SPE will accept payment of invoices by Client by:
a.  	Check or similar instrument,	

b.  	Automated Clearing House (“ACH”),	

c.  	Credit Card acceptable to SPE.	
Payment terms on Client invoices are specified in Appendix B attached hereto.  If a credit card is used for payment, SPE will charge a five-percent (5%) surcharge added to the amount of the invoice in order to cover credit card processing and administration fees. Payment of invoices may also be made by ACH with no surcharge; payments made by ACH will be executed and negotiated by SPE no earlier than the 10th day following the date on which SPE's invoice is mailed to Client. Any amount of any invoice that is subject to reasonable dispute will not be subject to payment by Client until such dispute is resolved; subject to section “9. Disputes of Invoices” and section “10. Dispute Resolution” of this Agreement. Both parties will work diligently and in good faith to resolve any dispute.
 
7.  	Late Payments:	
Payments sent by mail and not post-marked by the due date will be assessed a monthly late payment penalty equal to 1.00% per month of the outstanding undisputed balance due from Client to SPE.
 
8.  	Compliance with Lender and other Legal Requests	
SPE shall comply with reasonable and customary requests of Client’s lender(s) with respect to the Goods, provided:
a.  	The requests are in writing and signed by Client, its Lender and SPE;	

b.  	Client agrees to pay SPE for any additional work of, or cost to, SPE caused in complying with the Lender’s requests;	

c.  	Lender or Client’s successor agrees to pay SPE for all outstanding charges at any time Lender or Client’s successor assumes control of Goods; and	

d.  	Upon assuming control of the Goods, Lender shall be bound by the terms of this Agreement.	
Furthermore, Client agrees to reimburse SPE for all reasonable legal or other costs related to responding to subpoenas or other legally binding requests or obligations related to Client’s business.

9.  	Disputes of Invoices:	
If the Client reasonably disputes any portion of an invoice, the Client must provide written notice of such dispute to SPE within thirty (30) days of the invoice date.  Under no circumstances shall SPE be liable for any disputed charges beyond such date in the absence of such written notice, and Client hereby expressly acknowledges and agrees that any claims related to such dispute shall be forfeited in the event Client fails to provide written notice of dispute within such thirty (30) day period.  If the dispute relates to a portion of the invoice, as opposed to the whole amount of the invoice, Client will make payment of the undisputed balance within the time period for payment set forth above.
 
10.  	Dispute Resolution:	
If a dispute, claim or other matter should arise between the parties in connection with this Agreement or the performance thereof, the aggrieved party shall notify the other party in writing.  If the parties fail to resolve the dispute within twenty (20) days after delivery of such notice, such dispute shall be resolved at the request of either party by a final and binding arbitration under the then current Commercial Arbitration Rules of the American Arbitration Association by a single arbitrator appointed in accordance with such rules, and pursuant to the following procedures, to which the parties agree:  (a) discovery (e.g., document production; examination of the other party’s witnesses and depositions) will be permitted in the written form only, except for cross-examination as further provided herein; (b)  the parties agree that the decision of the arbitrator shall be final and binding; (c)  the arbitration hearing shall be held no later than two (2) months from the date of the notice from one party to another party of its intent to proceed to arbitration;  (d) the arbitration shall take no more than two days, and each party shall have a total of up to four (4) hours to cross-examine the other party’s witnesses on the first day, and each party shall have a total of up to four (4) hours to present/rebut its case on the second day, with the arbitrator announcing the decision at the end of such presentations/rebuttals; (e) judgment on any decision made by the arbitrator may be entered and enforced in any court of competent jurisdiction; (f) all arbitration fees and charges shall be shared equally by the parties unless otherwise specified by the arbitrator; (g) each party shall be responsible for the payment of all fees and expenses connected with the presentation of its respective case, provided that the arbitrator may in his/her discretion award to the prevailing party the costs and expenses incurred by the prevailing party in connection with the arbitration proceeding; (h) the arbitration shall be confidential; (i) the arbitrator shall not include any confidential information of the parties in his/her arbitration decision or append any document which includes confidential information to his/her arbitration decision.

Notwithstanding the foregoing, neither party shall be precluded from applying to a court of competent jurisdiction for any relief in the nature of injunction, specific performance, or other equitable remedy.

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11.  	Transfer, Termination of Storage and Removal of Goods:	

a.  	 The Parties agree that the services will be rendered by SPE and Goods will be stored by SPE at its Facilities located at 445 South Royal Lane, Suite 800, Coppell, TX  75019 (Central) and Inland Empire Business Distribution Center #8, 1392 Sarah Place Unit B, Ontario, CA 91761 (West Coast) and a to be determined East Coast based distribution center location.  Should SPE wish to move any Goods in storage from SPE’s Facility in which they are stored to any other of SPE’s Facilities, SPE shall provide a written notice to Client of such intention and obtain Client’s prior written authorization, which shall not be unreasonably withheld or delayed; such move of Goods shall be made at SPE’s sole expense. SPE will store the Goods at, and may without notice move the Goods within and between, any one or more of the warehouse buildings which comprise any one of its Facilities which have been approved in writing by Client, provided that SPE shall at any reasonable time on demand of Client provide without unreasonable delay records setting forth the nature and quantity of Goods stored at each Facility.	

b.  	***	

c.  	***	

d.  	Client represents and warrants that Client is, and will continue to be, lawfully possessed of the Goods while they are in SPE’s dominion and has the right and authority to store them with  SPE .  Client further represents and warrants to SPE  that there are no known potential health, safety and/or environmental hazards associated with the storage and handling of such Goods, which render the Goods hazardous as defined by the United States Department of Transportation or any other applicable government agency.  If as a result of a quality or condition of the Goods, of which SPE had no actual notice at the time of deposit, the Goods are a hazard to other property or to SPE’s Facility or to persons, Client hereby acknowledges and agrees that SPE may return the Goods to Client at Client’s cost, and SPE shall incur no liability by reason of such return.  In any event, Client shall indemnify, defend and hold harmless SPE, its members, managers, officers, employees, and agents from and against all claims, lawsuits, liabilities, damages and expenses, including without limitation, reasonable attorneys fees and expenses, arising from any breach or failure by Client with respect any representation or warranty made by Client in this Agreement.	

e.  	Any termination of this Agreement is subject to the other terms and conditions of this Agreement.	
 
12.  	Records	
Client reserves the right upon request to enter the Warehouse Facility during normal working hours, upon reasonable advance notice and justification, to examine and count all or any of the Goods stored under the terms of this Agreement.  SPE agrees to maintain complete and accurate documents, accounts and records in connection with its Services for the period required for income tax reporting purposes.  SPE shall at all reasonable times, upon reasonable advance notice and justification, permit Client to examine the businesses records relating to the Product(s) for the purpose of reconciling quantities and determining with SPE whether certain amounts are payable within the meaning of the Agreement.  SPE shall maintain and preserve all records required by United States, State and local laws, regulations, and ordinances for a period of no less than seven (7) years.  The requirements of this Section shall survive the expiration or termination of this Agreement. Client shall be responsible for all costs and expenses generated in connection with SPE’s compliance with the provisions of this Section.
 
13.  	Criminal Acts:	
Client represents and warrants that the Services provided by SPE under this Agreement will not be used for any criminal purpose. If SPE becomes aware that the Services are being used for any criminal purpose, SPE will have the right to suspend or terminate all Services immediately.
 
14.  	Confidentiality:	

 	a.	Confidentiality.  During the Term of this Agreement and for five (5) years thereafter, each party (the “Receiving Party”) shall maintain in strict confidence the Confidential Information (as defined below) of the other party (the “Disclosing Party”).  Each party shall not use the Confidential Information of the other party for any purpose other than the purposes expressly permitted by this Agreement, shall not reproduce any Confidential Information in any form received from the other party except as required for the execution of activities agreed upon by the parties, and shall not disclose such Confidential Information to any third party (including, without limitation in connection with any publications, presentations or other disclosures) except to its employees, agents or advisors who have a need to know such Confidential Information to achieve the purposes of this Agreement or as otherwise contemplated herein for the purposes of this Agreement.  Each party shall ensure that any person to whom it discloses the other party’s Confidential Information is informed of the confidential nature of and duty not to disclose the information, and is obligated to maintain the confidentiality thereof, and each party shall remain responsible for any inappropriate disclosure made by its employees, agents or advisors.  Each party may also disclose such of the Confidential Information of the other party as may be required by law or by any governmental authority having jurisdiction, provided that prior to any such disclosure the party required to disclose shall, if possible, notify the other party prior to disclosing any Confidential Information and provide such other party with a reasonable opportunity to contest or limit the scope of the required disclosure and obtain any protective orders as may be appropriate; in all cases the party required to disclose shall limit the disclosure of Confidential Information as much as reasonably possible.   This section survives the termination of this Agreement.	

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b.           Definition.  “Confidential Information” means: the terms of this Agreement; all financial and business information of each party, including all information relating to the Goods and the Client’s clients to whom the Goods are shipped by SPE (the “Customers”), and all data, information, documentation and know-how relating to or in any way connected with the Goods and the Customers; and all other information of a party disclosed to the other party, whether orally or in writing, that is not generally available to the public or to its competitors.  Confidential Information shall not include any information which the Receiving Party can show:
 
(i)           was known to or in the possession of the Receiving Party prior to the date of its actual receipt from the Disclosing Party;
(ii)           is readily available to the public other than through any act or omission of the Receiving Party in contravention of this Agreement or any other agreement between the parties;
(iii)           was disclosed by a third party not under an obligation of confidentiality to the Disclosing Party; or
(iv)           is subsequently independently developed by the Receiving Party without use of the information of the Disclosing Party as demonstrated by competent written records.

15.  	Liability and Limitation of Damages:	

a.  	SPE will perform the services and exercise such care in regard to the Goods as a reasonable careful person would exercise under like circumstances.  SPE shall not be liable to Client, any customer of Client, or any other party for any loss or damage to Goods tendered, stored or handled, or for any other property damage or personal injuries, however caused, or for any other claims of any nature, unless such loss or damage or claim resulted from the failure by SPE to exercise such care in regard to them as a reasonable careful person would exercise under like circumstances, or resulted from any breach of this Agreement by SPE.  In no event shall SPE be liable for any damages caused by events beyond the reasonable control of SPE, including any Force Majeure Event.  SPE shall indemnify, defend and hold harmless Client and its members, managers, officers, employees and agents from and against all such claims, lawsuits, injuries, losses and damages, including without limitation, the reasonable fees and expenses of legal counsel, related to any loss or damage as a result of the breach of this Agreement by SPE.	

b.  	Goods are not insured by SPE against loss or damage however caused.  Client shall indemnify, defend and hold harmless SPE and its members, managers, officers, employees and agents from and against all such claims, lawsuits, injuries, losses and damages, including without limitation, the reasonable fees and expenses of legal counsel, related to any loss or damage in relation with the Goods or this Agreement and for which SPE is not expressly responsible under Subsection 15(a), above.  Goods and related mailing material, product and product components, delivered to, shipped from or stored at SPE’s Facilities remain property of Client and must be insured by Client as such. 	

c.  	Client declares that damages are limited to landed cost per item, provided, however, that such liability may be increased upon Client’s written request in a Manifest provided under Section 3 of this Agreement on part or all of the corresponding Goods in which event an additional monthly charge will be made based upon such increased valuation.  In no case shall SPE’s liability to Client exceed the cost or replacement value of Goods, whichever is lower.	

d.  	Where loss or damage occurs to tendered, stored or handled Goods, for which SPE is not liable, Client shall be responsible for the cost of removing and disposing of such Goods and the cost of any environmental cleanup and site remediation resulting from the loss or damage to the Goods.	

e.  	SPE is providing all services hereunder pursuant to the limited express warranties extended by SPE under this Agreement, and specifically under Subsection 15(a), above.  These limited express warranties constitute the only warranties, express or implied, from SPE to Client in relation to this Agreement and any services performed hereunder.  SPE expressly disclaims, and Client releases and discharged SPE from, all other warranties express or implies, including without limitation the implied warranties of merchantability and fitness for a particular purpose stated in the Uniform Commercial Code.  Client hereby agrees and acknowledges that SPE would not provide any services hereunder to Client but for the disclaimer, release and discharge of such other express warranties and implied warranties, and the other consideration given by SPE in relation thereto constitutes a bargain that is fair and reasonable to the parties.	

f.  	Except as clearly and expressly otherwise provided directly in Section 15 of this Agreement, and notwithstanding anything to the contrary in any document incorporated by reference into this Agreement, neither party shall under any circumstances be liable to the other party for any punitive, special, incidental or consequential damages, including without limitation loss of profits, loss of revenues or business.	

g.  	SPE shall not be responsible for any delayed or withheld refunds or credits due and owing to Client’s customers for any returned merchandise processed by SPE except as resulting from SPE’s failure to comply with the terms of this Agreement.	

h.  	SPE strives for accuracy at all times.  However, SPE may make an occasional error in picking, packing or shipping.  Upon Client’s request, or upon discovery by SPE of such error, SPE will refund or credit SPE’s service fee for any such order within 30 days of any such discovery or written request by Client.	

i.  	SPE shall not be liable for any concealed damage or concealed shortage of Client Goods or materials if such damage or shortage is caused or occurs prior to their actual receipt by SPE or after they are loaded away from SPE’s possession pursuant to Client’s instruction.	

 
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16.  	Shrinkage Allowance	
In further consideration of the rates herein, and in keeping with the definition of warehouseman’s legal liability contained herein and in Article 7-204 of the Uniform Commercial Code or other applicable state or local law, Client agrees to a shrinkage allowance in accordance with the Inventory Accuracy listed in the Service Levels contained in attached Appendix (C), for which, in case of loss or damage to Goods or mysterious disappearance, however caused, SPE will not be liable.
 
17.  	Default and Remedies:	
If either party shall fail to perform any of the covenants or obligations of performance and payment imposed upon it under and by virtue of this Agreement (except where such failure is excused under other provisions of this Agreement), the other party shall give the defaulting party written notice, stating specifically the cause for which the notice of default is given.  If, within a period of seven (7) days after such notice the defaulting party does not commence with diligence to remove and remedy the default then the party not in default may terminate this Agreement without any further obligation by furnishing the defaulting party a seven (7) day notice of cancellation.  Notwithstanding the foregoing, in the event the Client has defaulted in a payment obligation, SPE may terminate this Agreement should Client fail to effect the payment of any undisputed amount within thirty (30) days from its receipt of SPE’s written notice of such default.  In the event Client   has so defaulted in any of its payment obligations related to this Agreement, then in addition to the right to cancel this Agreement, SPE may exercise any right and remedy held at law, provided that SPE has not renounced in writing to such rights.

In connection with this Agreement, SPE and Client are also the parties to an Asset Purchase Agreement and a Sublease; both the Sublease and Asset Purchase Agreement were executed contemporaneously with this Agreement.  Therefore, in addition to the events of default described above, an event of default under the Asset Purchase Agreement and/or the Sublease will constitute an event of default under this Agreement.

18.  	Liability for Misshipment:	
If SPE negligently misships Goods, SPE shall pay the reasonable transportation charges incurred to return the misshipped Goods to SPE’s Facility. If the consignee fails to return the Goods, SPE’s maximum liability shall be for the lost or damaged Goods as specified in Section 15, above, and SPE shall have no liability for damages due to the consignee’s acceptance or use of the Goods whether such Goods be those of the Client or another.
 
19.  	Mysterious Disappearance:	
SPE shall be liable for loss of Goods due to inventory shortage or unexplained or mysterious disappearance of Goods only if Client establishes such loss occurred because of SPE’s failure to exercise the care required of SPE under Section 15(a) above. Any presumption of conversion imposed by law shall not apply to such loss and a claim by Client of conversion must be established by affirmative evidence that SPE converted the Goods to SPE’s own use.
 
20.  	Ownership and Property Rights:	
Title to the Goods shall remain in the name of Client.   SPE shall have statutory liens, as set forth in Article 7 of the Uniform Commercial Code, for all lawful charges for storage and preservation of the Goods; also for all lawful claims for money advanced, interest, insurance, transportation, labor, weighing coopering, and other charges and expenses in relation to such Goods, and for the balance on any other accounts that may be due. SPE further claims such statutory liens for all such charges, advances and expenses with respect to any other Goods stored by Client in any other facility owned or operated by SPE. In order to protect its liens, SPE reserves the right to require advance payment of all charges prior to shipment of Goods.
 
21.  	Non-Solicitation and Property Rights:	

a.  	During the term of this Agreement and for a period of twenty-four (24) months following the termination of this Agreement, each party agrees not to solicit, directly or indirectly, any employees of either party, or any of its related entities, or to otherwise compete with either party in the performance of services of the like performed by either party in relation to this Agreement.  The employees named in attached Appendix D are specifically excluded from this section.	

b.  	All technologies, software, hardware, operating applications, fulfillment procedures, telephone numbers, or other materials of any nature or type relating to the services provided pursuant to this Agreement which are not owned by Client or licensed to Client from a third party will be considered the sole and exclusive property of SPE and will be retained by SPE upon the termination of this Agreement. Notwithstanding anything in this or any other paragraph of this Agreement, Client will, at all times, be the sole and exclusive owner of its customer database and customer list, regardless of whether such is in the possession of SPE. Further, the information in the database will be provided by SPE to Client in electronic, machine-readable format within ten (10) days after Client's request therefore, at any time during the term of this Agreement, or within thirty (30) days following the expiration or earlier valid termination of the Agreement.	

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22.  	Assignment:	
This Agreement is binding on and will inure to the benefit of the parties hereto and their respective successors and assigns. Neither Client nor SPE may assign its rights, or delegate its duties, under this Agreement without the prior written consent of the other party, such consent not to be unreasonably withheld, conditioned or delayed.
 
23.  	Notices:	
Any notice, request, consent or communication given under this Agreement may be:
a.  	Hand-delivered, sent via facsimile transmission, or sent by electronic mail (with electronic receipt acknowledged by recipient), in which cases they will be deemed to have been given as of the date and time of the personal delivery or facsimile or email transmission, or	

b.  	Sent via nationally recognized express delivery service or sent via Certified Mail, return receipt requested, in which cases they will be deemed to have been given as of the date and time of receipt by the addressee.	
All notices may be sent to the street addresses, email addresses, or telephone/facsimile numbers as they appear in this Agreement or to such other addresses or numbers as the parties may designate in writing from time to time.

If to SPExpress
 
SPExpress
Attn: Mich Bayley
1610 N. Kolb Rd.
Tucson, AZ 85715
520-573-1100 Tel
520-573-1133 Fax
 	If to Client
 
Mannatech, Incorporated
Attn:   Chief Financial Officer
600 S. Royal Ln., Ste. 200
Coppell, TX 75019
Tel: 972-471-7205
Fax:

A notice hereunder shall be deemed to have been given as of the date it was received.  Any contact information provided above may be modified by providing notice of such modification as required hereunder.

24.  	Severability:	
Any term or provision of this Agreement that is invalid or unenforceable in any situation will not affect the validity or enforceability of the remaining terms and provisions of this Agreement, or the validity or enforceability of the offending term or provision in any other situation.
 
25.  	Independent Contractor:	
Nothing contained in this Agreement will be construed or interpreted by the parties hereto, or by any third party, as creating a relationship of principal and agent, partnership, joint venture, or any other association between SPE and the Client, other than that of independent contractors contracting for the provision and acceptance of fulfillment services. Each party will be responsible for hiring, supervising and compensating its own employees and for providing benefits to and withholding taxes for such employees.

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26.  	 Entire Agreement:	
This Agreement and its attachments represent the entire Agreement of the parties and supersedes all negotiations, representations, prior discussions or preliminary understandings between the parties. No statements, warranties, or representations of any kind that are not contained in this Agreement will in any way bind the parties. This Agreement can only be changed or modified by a writing signed by both of the parties.
 
27.  	Governing Law:	
 This Contract and the legal relationship between the parties hereto shall be governed by and construed in accordance with the substantive laws of the state where the Facility is located, including Article 7 of the Uniform Commercial Code as ratified in that state, notwithstanding its conflict of laws rules. Any lawsuit or other action involving any dispute, claim or controversy relating in any way to this Contract shall be brought only in the appropriate state or federal court in the state where the Facility is located.

 
Integrated Distribution and Logistics Direct, LLC (SPExpress)
 
By:               /s/        Michael K. Bayley 

Name:  Michael K. Bayley

Date:  July 2, 2012	Mannatech, Incorporated
(Client)
 
By:               /s/        Robert A. Sinnott 

Name:  Robert A. Sinnott

Date:  July 2, 2012	

 
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 Appendix A
 
Services Policies and Procedures
 
Quotations
:
Quotations are based on the cost of services, labor and materials on the date of the quote and are effective for the original term of this Agreement, as set forth in paragraph “5. Term of Agreement,” and for successive terms, unless modified or amended pursuant to the terms of this Agreement.
 
Alterations/Specifications:

Prices quoted are based upon the understanding by SPE of the specifications submitted and the samples provided by Client. If there is a material change in specifications, instructions, systems, packaging or volume resulting in additional costs, SPE will immediately notify Client of resulting price change with an updated Services Price Schedule (Appendix B). Client may terminate this Agreement should it disagree with such price change, by providing a written notice to this effect to SPE.  SPE may terminate this agreement should any price change be rejected by Client.  Client understands that SPE will use its reasonable efforts to accommodate any changes in specifications or any alternations and that any such changes in specifications or alternations may delay SPE's order processing for Client.
 
Postage Costs:
Quotations do not include postage, freight or other shipping charges.  Payment of postage in advance is required on all orders.  SPE will establish and Client will fund a deposit account for postage.  Upon the charges being incurred, whether or not an invoice or bill has been issued by SPE, SPE shall be deemed to have earned any deposits held by SPE up to the amount of costs and charges incurred for the Client.
 
Processing Charges/Retention:
Client is responsible for all bank charges, deposit, check clearing, check verification, merchant account, credit card processing and other fees to service Client's orders. It is a recommended practice for SPE to use the merchant account of the Client. In instances where SPE uses its own merchant account, SPE may retain or require deposit of funds in a reasonable amount, and for a reasonable period of time (up to 120 days) to honor credit card charge-backs, refund requests, and returns.
 
Acceptance of Order:
Client agrees SPE may refuse, at any time, to mail any copy, photographs, illustrations or products of any kind that, in SPE's sole judgment, is believed not to be in compliance with specific terms of the order, is fraudulent, is an invasion of privacy, is degrading, libelous, unlawful, profane, obscene, pornographic, tends to ridicule or embarrass, or is in bad taste, or which in is an infringement of a trademark, trade name, service mark, or copyright belonging to a third party or is in violation of the FTC's Mail or Telephone Order Merchandise Trade Regulation Rule.
 
Prior to exercising such right of refusal, SPE will immediately advise Client by phone, facsimile or email. SPE will explain to Client why SPE believes such action is necessary, and will exercise commercially reasonable efforts to resolve the problem with Client.

 
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Mailing Lists/Orders:
Client's mailing list(s) and/or orders in SPE's possession, for shipping, storage and/or otherwise, is the exclusive property of Client and will be used only in accordance with Client's instructions. SPE will use the same care with respect to Client's data, property and products in its possession as it uses with its own. This includes adequate backup procedures for all files and programs. SPE will not be liable for compiling such lists nor for an intangible or special value attached thereto. SPE is not responsible for the accuracy of lists supplied by the Client or a list broker.
 
Extra or Special Services:
a.  	Warehouse labor required for services other than ordinary handling and storage will be charged to Client at rates as set forth in Appendix B.	

b.  	Special services requested by Client including but not limited to repackaging of Goods, compiling of special stock statements; reporting marked weights, serial numbers or other data from packages; special physical counts of Goods; and handling transit billing will be subject to a charge at rates as set forth in Appendix B.	

c.  	Supplies other than those as set forth in Appendix B may be provided for Client at a charge in addition to SPE’s cost.	

d.  	By prior arrangement, Goods may be received or delivered during other than usual business hours, subject to a charge.	

e.  	Communication expense including postage, overnight delivery, or telephone may be charged to Client if such concern more than normal inventory reporting or if, at the request of Client, communications are made by other than regular United States Mail.	

f.  	All extra or special services will be approved by Client prior to the commencement of the work.  Documentation and approval may be made via workorder or similar document and may be approved via email acknowledgement, facsimile or other means.	

g.  	The placement of up to 3 stickers per bottle shipped is specifically excluded as an Extra or Special Service.	

h.  	The placement of any promotional material, either mechanically or manually, is specifically excluded as an Extra or Special Service.	

Materials:
SPE assumes in all quotations that all materials and products provided will permit efficient handling. Any materials or products that require special handling or packaging may be subject to additional costs as mentioned above. Client will be notified when this situation arises and approval will be obtained for handling for special rates before proceeding with work, and a new delivery schedule may result. Each incoming carton or skid must be clearly marked with identity, item code, and quantity. Multiple items should not be included within a single carton, skid or container unless clearly noted on the physical container, as well as on accompanying paperwork. All items must be clearly coded as reasonably agreed by SPE and Client. SPE will not be responsible for picking and packing errors, which result from Client's failure to code or from any mis-marking of items by Client or any third party. Client is expected to provide SPE with sufficient inventory or adequate sources of supply to meet anticipated demand. Cost for backorders, delay notices, canceled orders and increased client service resulting from out of stock conditions will be billed to Client.
 
Packaging and Inserting:
All efforts will be made to package material/products to protect the product itself, as well as the “perceived value” image.  Standard materials are generally used.  Custom or specified materials may involve additional costs and/or handling charges, as well as longer lead times.

 
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Reporting:
SPE agrees to provide Client, trading partners or other applicable parties with complete and accurate ship confirm files or other shipment notifications as required on a timely basis.
 
Accurate Information:
Client will provide SPE with information concerning the Goods, which is accurate, complete and sufficient to allow SPE to comply with all laws and regulations concerning the storage, handling and transporting of the Goods. Client will indemnify and hold SPE harmless from all loss, cost, penalty and expense (including reasonable attorneys’ fees) which SPE pays or incurs as a result of Client failing to fully discharge this obligation.
 
Client acknowledges that
 	SPE has no control over the delivery schedules of the U.S. Postal Service, UPS, FedEx or other carriers and cannot guarantee when mail and/or parcel or freight shipments released to a carrier will be delivered by that carrier.	

 	All orders are accepted by SPE subject to the condition that occurrences beyond SPE's reasonable control, for example: fire, accident, acts of God, and mechanical breakdown.	

 	 Client's late or back-ordered material or product may delay the completion date of an order's processing by more than the actual elapsed time the material or product is late.	
 
Insurance
:
During the term of the Agreement, SPE will maintain the following insurance coverage with respect to its operations, namely:
 	Statutory Workers' Compensation insurance with an Employers Liability limit of not less than $500,000 per occurrence, the expense for which will be the sole responsibility of SPE.	
Warehouse Legal Liability and Limitation of Damages
Goods are not insured by SPE against loss or injury however caused.
 	Commercial General Liability Insurance including contractual liability coverage with bodily injury and property damage combined single limit of not less than $1,000,000 per claim and $2,000,000 total policy limit. The premium expense for this insurance will be the responsibility of SPE.  SPE will add Client as an additional insured on policy.	
 
Payments at Termination:
Subject to the terms of the Agreement, SPE will be compensated in full for:
 
 	Any fees, expenses, or other amounts payable in accordance with the Agreement in relation to services duly performed through the date of termination,	

 	The cost of preparing a final inventory for Client, and	

 	The reasonable cost of any goods or services purchased for Client under the terms of the Agreement prior its termination.	
 
Verbal Orders:
Verbal orders are accepted only with the provision that the final specifications will be those understood by SPE at the time the order was taken and commemorated in writing by a corresponding Manifest complying with the requirements of Section 3 of the Agreement and issued by Client to SPE prior to the verbal order.
 
END OF APPENDIX A

 
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Appendix B
 
Services Price Schedule (Attached)
 
***

 

 
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Appendix C
 
Service Level Standards/Statement of Work

Receiving	Client provides electronic ASN or PO file of inbound shipment with some paperwork pertaining to shipment and in accordance with SPE Routing Guide.
Receive shipment(s) at warehouse.
Offload and inspect inbound shipment for external damage, etc.
Perform counts by scanning M/C barcode; log on Receiver document; note any discrepancies on Receiver document.
Palletize M/C freight and stage for put away pending Client approval.
Receiver document forwarded to Client for review and approval.
“Clean” receipts, where items/quantity matches ASN, get entered into inventory and put away immediately, no waiting for approval; receipts that are not clean (missing product, damages, etc) are held for Client review and approval before further action taken.
Where necessary approval received and inventory entered into system (i.e. released from hold to saleable inventory).
Warehouse completes put away of stock into bin/bulk locations or routes directly into production.
Service Level Standard:  All inventory received and entered into active inventory within 24 hours (1 business day) of receipt, subject to Client approval.	
 	 	
Returns	Receive inbound shipment of returns from carriers
Destroy all contents of all returned products.
License plates applied to products.
Return file generated and sent to Client to process against RMA and issue credit.
Approved product restocked back into saleable inventory.
Service Level Standard:  All returns processed within 48 hours of receipt (2 business days).	
 	 	
Order Processing, Pick, Pack, and Manifest	Client posts an electronic “order ready” file to FTP site at designated intervals during course of day.
For Retail Orders, can take data file feed from VAN or all can flow through Client; in which case Client passes order file.
Order files imported into SPExpress order processing system.
If Client provides item count trailer in order file, SPExpress will perform a QC audit to ensure accurate import (for example:  orders and items summed).
Order discrepancies presented and reviewed with Client.
If applicable, order discrepancies or errors corrected.
Orders released to warehouse floor in waves.
Orders picked and packed.
Orders (small parcel) sent to sent to manifest stations for weighing, further prep and application of carrier compliant label.
Orders (small parcel) loaded out in staged trailers for delivery to FedEx/UPS/USPS or other carrier if applicable.
Orders (LTL) sent to manifest stations for weighing (floor scales), labeling and final inspection.
Orders (LTL) BOL prepared by Transportation Department; carrier notified and pick-up scheduled.
Orders (LTL) loaded onto carrier trailer and BOL signed and receipt by carrier acknowledged.
End of day manifest file closed out and track # files uploaded to proper carriers.
Any exceptions investigated and acted upon.
Service Level Standard:
· Order Accuracy (Pick, Pack and Ship):  ***%.
 
· Inventory Accuracy (Shrinkage):   ***%.
 
· Outbound Shipments:  If order file received before *** EST, ***% of orders shipped within 24 hours (1 business day) and balance shipped within 48hours (2 business days).

IT and Corp	Ship confirm file produced and posted to FTP site at agreed upon times.
Data presented in suitable format for VAN if trading partner advance notification required.
Stored procedure can send same file to Client for billing and VAN for ASN.
If Client is doing ASN one ship confirm file to Client.
Account Manager handles all Customer Service issues.
Service Level Standard:  All ship confirm files and required data posted same evening or early next day via stored procedures.	
 	 	
Assumptions	Client handles all ASN transmissions to/from VAN or retailer direct (SPExpress can accommodate but costs not included).
Client to provide *** rolling forecast of projected order volume to SPExpress.
Packaging of outbound orders in accordance with customer specifications.
Product stored in bins/racks and bulk with assumption of at least four (4) high in bulk.
Estimated orders per month, approximately ***.
***% of orders shipped small parcel via FedEx or similar carrier.
***% of orders shipped LTL or other.	

 
Mannatech Initials:                                           ___________________                                Date:           ________________

 
SPExpress Initials:                                ___________________                                Date:           ________________

 
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Appendix D

 
List of Employees Exempt from Non-Solicitation

 
***

 
15

 

Exhibit 10.2

[***Indicates omitted material that is the subject of a confidential treatment request filed separately with the Commission.]

SUBLEASE

THIS SUBLEASE (the “Sublease”) is made and entered into as of the 7th day of July, 2012 (“Effective Date”) between Mannatech, Incorporated, a Texas corporation ("Sublessor"), with its principal place of business at 600 S. Royal Lane, Suite 200, Coppell, Texas 75019 and Integrated Distribution and Logistics Direct, LLC (d/b/a SPE Express), an Arizona limited liability company (“Subtenant”), with its principal place of business at 1610 N. Kolb Rd., Tucson, AZ 85715.

RECITALS

A.           Sublessor operates a distribution center in connection with its primary business located at 445 S. Royal Lane, Ste. 800 Coppell, Texas 75019.  Sublessor and Subtenant have entered into that certain Asset Purchase Agreement dated as of July 7, 2012 for certain assets pertaining to the distribution operations on this same date (the “Asset Purchase Agreement”).

B.           Subtenant is in the business of fulfillment, shipping, distribution and logistical services. Pursuant to the closing of the Asset Purchase Agreement, Sublessee is entering into a Services Agreement with Sublessor, this same date, to provide the same for Sublessor’s North American fulfillment, shipping, distribution and logistical needs (the “Services Agreement”).

C.           Subtenant desires to sublease and use the Leased Premises (as defined below) for its distribution operations, and to effectuate its obligations under the Services Agreement pursuant to the terms thereof.

AGREEMENT

1. PREMISES: In accordance with that certain Lease Agreement dated May 29, 1997 between Sublessor and MEPC Quorum Properties II, Incorporated predecessor in interest to Texas Dugan Limited Partnership (“Landlord”), as amended November 6, 1997, September 22, 2005 and March 18, 2011 to date ( the “Prime Lease”), Sublessor leases from Landlord certain premises containing approximately 74,476 square feet in the aggregate ("Leased Premises”) in the building located at 445 S. Royal Lane, Ste. 800 Coppell, TX 75019. The Leased Premises are further described in the Prime Lease, a copy of which is attached hereto as Exhibit A and is incorporated by reference herein.

2. DEMISE: In accordance with this Sublease, Sublessor hereby subleases to Subtenant, and Subtenant
hereby subleases from Sublessor, 73,036 square feet of the Leased Premises (“Subleased Premises”). The actual Subleased Premises is located within that portion of the Leased Premises identified by hatching on  Exhibit B  attached hereto.  Subtenant is subleasing all of the Leased Premises except for 1,440 square feet (the “Reserved Space”), as identified on Exhibit B.  Subject to the terms of the Prime Lease, at no additional charge to Subtenant (except such charges as may be included in Operating Costs in accordance with the terms of the Prime Lease), Subtenant shall have the right to use all associated common areas and shall have such other use and access rights as may be necessary for the exercise of its rights and the performance of its obligations hereunder, including, but not limited to, access to electrical, phone and data rooms, existing phone and data wiring infrastructure, and restrooms.

3. SUBLEASE: This Sublease is subject and subordinate to the Prime Lease and to the matters to which the Prime Lease is or shall be subject and subordinate.

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4. TERM: The term of this Sublease shall commence July 7, 2012, and shall expire on
March 19, 2018 (the "Term"), unless sooner terminated in accordance with this Sublease.

5. PRIME LEASE: The Prime Lease is incorporated herein by reference so that, except to the extent that
certain provisions of the Prime Lease are inapplicable or modified by this Sublease, or excluded below, each and every term, covenant and condition of the Prime Lease binding or inuring to the benefit of Landlord shall, in respect of the Sublease, bind or inure to the benefit of Sublessor, and each and every term, covenant and condition of the Prime Lease binding or inuring to the benefit of lessee thereunder shall, in respect to the Sublease, bind or inure to the benefit of Subtenant, with the same force and effect as if such terms, covenants and conditions were completely set forth in the Sublease, and as if the words “Lessor(s)” and “Lessee(s)”, or words of similar import, wherever the same appear in the Prime Lease, were construed to mean, respectively, “Sublessor” and “Subtenant” in the Sublease, and as if the words “Leased Premises”, “Premises”, “Leased Property”, or words of similar import, wherever the same appear in the Prime Lease, were construed to mean “Subleased Premises” in the Sublease, and as if the word
“Lease,” or words of similar import, wherever the same appear in the Prime Lease, were construed to mean the “Sublease.” If any of the express provisions of the Sublease shall conflict with any of the provisions of the Prime Lease incorporated by reference herein, such conflict shall be resolved in every instance in favor of the express provisions of the Sublease. Notwithstanding the foregoing or anything to the contrary contained herein, Subtenant shall not have the right to exercise any renewal options, expansion options, rights of first offer or similar rights set forth in the Prime Lease.

6. RENT: Subtenant shall pay a portion of the total rent paid by Sublessor, including base rent, additional
costs and other charges (collectively referred to herein as "Rent"), and excluding the Reserved Space, as set forth according to the following schedule:

i.  	First Year Post Effective Date	

a.  	*** of the base rent and utilities and miscellaneous costs required by the Prime Lease in the first month after the effective date;	

b.  	*** of the base rent and utilities and miscellaneous costs required by the Prime Lease in the second month following the effective date;	

c.  	*** of the base rent and utilities and miscellaneous costs  required by the Prime Lease in the third month following the effective date;	

d.  	*** of the base rent and utilities and miscellaneous costs required by the Prime Lease in the fourth month following the effective date;	

e.  	*** of the base rent and utilities and miscellaneous costs  required by the Prime Lease in the fifth month following the effective date;	

f.  	*** of the base rent and utilities and miscellaneous costs required by the Prime Lease in the sixth month following the effective date;	

g.  	*** of the base rent and utilities and miscellaneous costs required by the Prime Lease in the seventh month following the effective date;	

h.  	*** of the base rent and utilities and miscellaneous costs required by the Prime Lease in the eighth month following the effective date;	

i.  	*** of the base rent and utilities and miscellaneous costs required by the Prime Lease in the ninth month following the effective date;	

j.  	*** of the baser rent and utilities and miscellaneous costs required by the Prime Lease in the tenth month following the effective date;	

k.  	*** of the base rent and utilities and miscellaneous costs required by the Prime Lease in the eleventh month following the effective date; and then	

l.  	*** of the base rent and utilities and miscellaneous costs required by the Prime Lease in the twelfth month following the effective date.	

2

 
ii.  	Acceleration of Rent Due:  Notwithstanding the foregoing, in the event that Subtenant is able to secure additional clients for its distribution business for the unused portion of the demised premises more rapidly than the above schedule, the Subtenant shall pay additional base rent and utilities and miscellaneous costs in direct proportion to the amount of spaced utilized, rounded up to the nearest fifth percentile according to the above payment schedule.  Sublessor and Subtenant shall each designate a representative to determine the amount of space utilized.  If the representatives are unable to agree on the amount of space utilized, the Parties agree that rent will be paid based on the mid-point of the difference between each representative’s estimated usage rounded to the nearest fifth percentile in the above payment schedule.	

iii.  	Each Successive Year Thereafter Post Effective Date:  After the expiration of the twelfth month post Effective Date, Subtenant shall be responsible for one-hundred percent (100%), excluding the Reserved Space, of the base rent and utilities and miscellaneous costs for each successive month following the one year anniversary of the closing.	

iv.  	Procedure for Paying Rent:  Sublessor shall invoice Subtenant on the first day of each month for the previous month’s rent, utilities, and miscellaneous costs.  Subtenant shall remit rent to Sublessor in the form of a credit applied as an offset against the invoice for services rendered to Sublessor by Subtenant under the Services Agreement. If the credit does not completely offset the total amount owed by Sublessor, Sublessor shall remit the balance due in accordance with the terms of the Services Agreement. If the credit is in excess of what is owed under the invoice for services, Subtenant shall remit the balance owed to Sublessor under this Sublease within 10 days from the date of the invoice issued by Sublessor to Subtenant for rent.  In the event that the parties are no longer operating under the Services Agreement, payment of rent will be made in a manner agreed upon by the parties.	

7. PERFORMANCE BY SUBLESSOR: Any obligations of Sublessor which are contained in the Sublease by the incorporation by reference of the provisions of the Prime Lease shall be observed or performed by Sublessor using reasonable efforts to cause the Landlord to observe and/or perform the same (which obligations include, without limitation, services to be provided by Landlord and restoration of damaged property), and Sublessor shall diligently enforce its rights to cause such observance or performance. Subtenant shall not in any event have any rights in respect of the Subleased Premises greater than Sublessor’s right with respect thereto under the Prime Lease.

8. NO BREACH OF PRIME LEASE:  Subtenant shall not do any act which may constitute a breach or violation of any term, covenant or condition of the Prime Lease by the lessee thereunder, whether or not such act or thing is permitted under the provisions of the Sublease. Sublessor shall not do or permit to be done any act which may constitute a breach or violation of any term, covenant or condition of the Prime Lease, including without limitation untimely payment of any obligation due from Sublessor to Landlord.

9. NO PRIVITY OF ESTATE: Nothing contained in the Sublease shall be construed to create privity of
estate or of contract between Subtenant and the Landlord.

10. RELEASES: Subtenant hereby releases the Landlord or anyone claiming through or under the
Landlord by way of subrogation or otherwise to the extent that Sublessor, as tenant, released the Landlord pursuant to the terms of the Prime Lease, and/or the Landlord was relieved of liability or responsibility pursuant to the provisions of the Prime Lease, and Subtenant will cause its insurance carriers to include any clauses or endorsements in favor of the Landlord which Sublessor is required to provide pursuant to the provisions of the Prime Lease with respect to the Subleased Premises.

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11. USE: Subtenant shall use and occupy the Subleased Premises solely for distribution, shipping, and logistical purposes and all lawful uses incidental thereto. Any other activities not specifically mentioned above regarding the use and occupancy of the Subleased Premises are subject to the prior written approval of Sublessor and Landlord.

12. CONDITION OF SUBLEASED PREMISES: Subtenant is leasing the Subleased Premises in its "as
is," "where is" condition on the date hereof.  Notwithstanding the foregoing, Sublessor represents that the Leased Premises (including systems, apparatus and appliances) are in working order as of the Effective Date.

13. CONSENT AND APPROVALS: Sublessor shall reasonably cooperate to seek Landlord's consent to any matter under the Prime Lease as may be reasonably requested by Subtenant.

14. NOTICES: Any notice, report, statement, approval, consent, designation, demand or request to be given under this Sublease shall be effective when made in writing, deposited for mailing with the United States Postal Service or with a recognized overnight delivery service and addressed to Sublessor or Subtenant at the following addresses:

SUBTENANT:
Integrated Distribution and Logistics Direct, LLC
Attn:   Mich Bayley                                           
1610 N. Kolb Rd.
Tucson, AZ 85715

SUBLESSOR:
Mannatech, Incorporated
Attn: Chief Financial Officer                                                      
600 S. Royal Lane, Suite 200
Coppell, Texas 75019

With a copy to:
Attn: Chief Legal Officer (at same address)

Sublessor shall promptly give written notice to Subtenant of (i) all claims, demands or controversies by or with the Landlord under the Prime Lease, and (ii) any events which require that Sublessor give notice to Landlord under the Prime Lease, which would materially affect Subtenant's rights or obligations hereunder.

15. TERMINATION: If for any reason the Prime Lease shall terminate prior to the expiration of the Sublease Term, this Sublease shall thereupon be terminated and Sublessor shall have no liability whatsoever to Subtenant by reason thereof (unless the termination occurred as a result of Sublessor's default or breach under the Prime Lease).

16. ASSIGNMENT AND SUBLETTING: Subtenant shall not sublet the Subleased Premises or any part
thereof or assign the Sublease or otherwise encumber or dispose of its interest therein without Sublessor’s and Landlord’s prior written consent in each instance, which consent may be withheld in Sublessor’s and/or Landlord’s sole discretion, except that Subtenant shall have the right, without Sublessor’s or Landlord’s consent, to assign this Sublease to any entity that controls, is controlled by, or under common control with Subtenant.

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17. INSURANCE: Subtenant shall, throughout the Term of this Sublease, maintain for the Subleased
Premises comparable insurance coverage as required of Sublessor under the Prime Lease. Such insurance shall, in addition to complying with the requirements of the Prime Lease, name Sublessor as an additional insured.

18. DEFAULT: The default provisions set forth in the Prime Lease are incorporated herein by reference,
provided that Subtenant shall have a ten (10) day notice and cure period for monetary default and a thirty (30) day notice and cure period for non-monetary default (unless such non-monetary default is not capable of cure within thirty (30) days, in which case Subtenant shall have a reasonable period of time in which to effect a cure, so long as Subtenant diligently prosecutes the cure to completion).  Notwithstanding the provisions of the Prime Lease, should Subtenant become insolvent; admit in writing that its inability to pay its debts; make a general assignment for the benefit of creditors; 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 take any action to authorize or in contemplation of any of the actions set forth above, Sublessor shall have the immediate right to terminate this Sublease.

19.  CROSS DEFAULT WITH ASSET PURHCASE AGREEMENT AND SERVICES AGREEMENT:  An event of default under the Asset Purchase Agreement and/or the Services Agreement will constitute and event of default under this Sublease, unless such default is remedied by the defaulting party in accordance with the terms thereof or is waived by the non-breaching party.

20. BROKERAGE: Each party represents and warrants to the other that no broker or other person had any part, or was instrumental in any way, in bringing about the Sublease.  Each party agrees to indemnify, defend and hold harmless the other from and against any claims made by any broker or other person (other than Broker) for a brokerage commission, finder’s fee, or similar compensation, by reason of or in connection with the Sublease, and any loss, liability, damage, cost and expense (including, without limitation, reasonable attorney’s fees) which may be incurred in connection with such claims if such other broker or other person (other than Broker) claims to have had dealings with such party. Sublessor shall be responsible for all payments due to Broker in connection with this Sublease pursuant to separate written agreements.

21. WAIVER OF JURY TRIAL AND RIGHT TO COUNTERCLAIM: Each party hereby waives all right to trial by jury in any action, proceeding or counterclaim arising out of or in any way connected with the Sublease, the relationship of Sublessor and Subtenant, the Subleased Premises and the use and occupancy thereof, and any claim of injury or damages.

22. MODIFICATIONS: The Sublease cannot be changed orally or in any manner other than by a written
agreement executed by both parties. Sublessor shall not amend the Prime Lease with respect to any material provision that would materially affect Subtenant's rights or obligations hereunder without Subtenant's prior written consent.

23. SUCCESSORS AND ASSIGNS: The provisions of the Sublease, except as herein otherwise specifically provided, shall extend to, bind and inure to the benefit of the parties hereto and their respective personal representatives, heirs, successors and permitted assigns.

24. INTERPRETATION: This Sublease shall be governed by and construed in accordance with the laws of the state in which the Subleased Premises are located. If any provision of the Sublease or application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, the remainder of the Sublease and the application of that provision to other persons or circumstances shall not be affected but rather shall be enforced to the extent permitted by law. The captions and headings are solely for convenience of reference and shall be construed without regard to any presumption or other rule requiring construction against the party causing the Sublease to be drafted.

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25. AUTHORITY: Each party represents and warrants that the undersigned has the full right, power and authority to execute this Sublease on behalf of the party indicated.

26. QUIET ENJOYMENT: Sublessor warrants that, upon payment of the Rent, as defined herein, and performance of all obligations, covenants and agreements of Subtenant hereunder, Subtenant shall peaceably and quietly have, hold and enjoy the Subleased Premises during the Sublease Term, subject however to the provisions of this Sublease.

27. PARKING: Subject to the terms and conditions of the Prime Lease, Sublessor shall, at no cost to
Subtenant, allow Subtenant the use of such parking as is made available to Sublessor under the Prime Lease with respect to the Subleased Premises.

28. LANDLORD’S CONSENT: This Sublease is expressly contingent upon and shall not be effective until receipt of Landlord’s approval and execution of the Landlord’s Consent attached hereto as Exhibit C and incorporated herein by this reference.

29.  MISCELANEOUS

i.  	Transition Period for Storage:  Sublessor and Subtenant agree that Sublessor shall have a period of 120 days from the Effective Date to remove any remaining property or assets in the Subleased Premises that were not part of the “Asset Purchase Agreement.”	

ii.  	Subleased Premises to be used for Disaster Relief:  Sublessor and Subtenant agree that for a period of 12 months from the Effective Date, Sublessor has the right to utilize a portion of the Subleased Premises in the event that a Catastrophic Event renders Sublessor’s current corporate office (address noted above) inoperable for an extended period of time.  Subtenant agrees to provide Sublessor with enough space for up to 25 computers for all essential employees necessary for the day to day operations of Sublessor’s business for an interim period of time until Sublessor finds a permanent facility for those essential employees. For purposes of this Sublease, the term “Catastrophic Event” means a force majeure event defined under the Prime Lease and/or any event damaging or affecting the Sublessor’s internal computer systems.	

iii.  	Removal of Installed Equipment:  Sublessor and Subtenant agree that at the expiration of this Sublease, Subtenant shall remove any and all warehouse equipment Subtenant has installed.	

iv.  	Expiration of the Prime Lease: Upon the expiration of the Prime Lease, If Sublessor determines that it does not want to exercise its right to renew the Prime Lease, Subtenant will have the right to negotiate directly with the Landlord for the terms of a new lease for the Premises.	

v.  	Repair of HVAC Units:  Sublessor agrees to repair the HVAC units identified in the Engineer’s Report, attached as Exhibit D, at its sole cost within one hundred twenty (120) days of the Effective Date.	

30. COUNTERPARTS: This Sublease may be executed in multiple counterparts. Facsimile signatures shall be deemed originals.

31. PRIME LEASE: Sublessor has, and on the Effective Date will have, performed in all material respects the obligations required to be performed by it pursuant to Prime Lease, including timely payment of all amounts owed thereunder. Sublessor has not waived any material right under the Prime Lease.  The Prime Lease is fully enforceable by Sublessor in accordance with its stated terms.  No party to the Prime Lease has committed a breach, or act or permitted or causal omission that, with the passage of time or giving of notice, would constitute a breach thereunder.

 
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IN WITNESS WHEREOF, Sublessor and Subtenant have hereunto executed the Sublease as of the day and year first above written.

SUBLESSOR:
MANNATECH, INCORPORATED

By: /s/ Robert A. Sinnott
[Signature]
Name: Robert A. Sinnott
Title: CEO/CSO
Date: June 29, 2012

SUBTENANT:
INTEGRATED DISTRIBUTION AND LOGISTICS DIRECT, LLC

By: /s/ Michael K. Bayley
[Signature]
Name: Michael K. Bayley
Title: President and CEO
Date: July 2, 2012

Exhibit A – Prime Lease
Exhibit B – Subleased Premises
Exhibit C – Landlord Consent
Exhibit D – Engineer’s Report

 
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EXHIBIT A
PRIME LEASE

COMMERCIAL LEASE AGREEMENT
 
                           MEPC QUORUM PROPERTIES II INC.,
 
                                     as LANDLORD,
 
                                         and
 
                                   MANNATECH, INC.
 
                                      as TENANT
 
                           pertaining to 74,476 square feet
                    in Freeport North Industrial Park [Phase III]
                                    Coppell, Texas
 
________________________________________________________________________
 
                              COMMERCIAL LEASE AGREEMENT
 
     THIS COMMERCIAL LEASE AGREEMENT (this LEASE) is made and entered into by
and between MEPC QUORUM PROPERTIES II INC., a Delaware corporation (LANDLORD),
and MANNATECH, INC., a Texas corporation (TENANT).
 
     1.   PREMISES/LEASE TERM.  In consideration of the mutual obligations of
Landlord and Tenant set forth herein, Landlord leases to Tenant, and Tenant
hereby takes from Landlord, approximately 74,476 square feet (the PREMISES) in
the Building (hereinafter defined) to be constructed by Landlord on an
approximate 27.8 acre tract of land located in the Freeport North Industrial
Park, City of Coppell, Dallas County, Texas, as more particularly described on
EXHIBIT "A" attached hereto and incorporated herein by reference (the LAND)
and illustrated and illustrated on the Site Plan (herein so called) attached
hereto as EXHIBIT "C" and incorporated herein by reference, together with the
non-exclusive use of all rights, privileges, easements, appurtenances, and
amenities belonging to or in any way pertaining to the Project (hereinafter
defined) for a term (the LEASE TERM or the TERM OF THIS LEASE) beginning on
the Commencement Date (hereinafter defined) and ending at 11:59 p.m. on the
last day of the month that is one hundred twenty (120) complete calendar
months after the Rent Commencement Date (hereinafter defined). If the Rent
Commencement Date occurs on the first day of a calendar month, then the month
in which the Rent Commencement Date occurs shall be the first complete
calendar month after the occurrence of the Rent Commencement Date for purposes
of determining such one hundred twenty (120) complete calendar month period.
That portion of the Land upon which the Building (and its appurtenances) are
constructed, the Building (including the Premises comprising a part thereof)
and any other improvements constructed by or on behalf of Landlord on such
portion of the Land are collectively referred to herein as the PROJECT. The
Project is further described by illustration on the Site Plan.
 
     2.   IMPROVEMENTS TO BE CONSTRUCTED BY LANDLORD.

8

 
          A.   BUILDING. Landlord agrees to construct on the Land an
approximate 297,902 square foot warehouse building structure (the BUILDING)
containing the features generally described on EXHIBIT "B" attached hereto and
incorporated herein by reference and generally situated as shown on the Site
Plan (herein so called) attached hereto as EXHIBIT "C" and incorporated herein
by reference. Landlord agrees to construct the Building in a good and
workmanlike manner.
 
          B.   CONSTRUCTION COSTS. Subject to the terms of this paragraph,
Landlord will pay all costs of constructing the Building and any other
improvements described on EXHIBIT "B". Notwithstanding the preceding sentence,
Tenant shall be responsible for the following:
 
               (1) If Landlord performs, at Tenant's request, any work over
     and above the work generally described on EXHIBIT "B" (herein, the
     ADDITIONAL WORK), the Additional Work together with the cost of preparing
     plans and specifications for same will be at Tenant's expense. Landlord
     will not be obligated to perform any such Additional Work until Tenant
     pays Landlord ten percent (10%) of the estimated cost of the Additional
     Work, as estimated by Landlord, with the actual cost of the Additional
     Work, less the initial payment by Tenant, being due within ten (10) days
     after substantial completion of the Additional Work.
 
               (2) All costs or expenses incurred or suffered by Landlord that
     are caused by Tenant Delays. A TENANT DELAY(S) shall mean any delay in
     the completion of the Building or any delay in the occurrence of the
     Commencement Date caused by a Tenant Party, any delay resulting from the
     installation by Tenant or any Tenant Party of any property or equipment
     of Tenant in or on the Premises prior to the Commencement Date, any delay
     resulting from any request by Tenant for any change or modification to
     the plans and specifications for the Building, any delay caused by any
     Additional Work requested by Tenant, and any delay due to interference by
     Tenant or any Tenant Party with Landlord's engineers, consultants,
     contractors or otherwise. As used in this Lease, a TENANT PARTY shall
     mean one or more of Tenant, its agents, employees, officers, partners or
     contractors.

 
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     3.   COMMENCEMENT DATE/ACCEPTANCE OF PREMISES.
 
          A.   COMMENCEMENT DATE. The COMMENCEMENT DATE shall be the date upon
which Landlord's architect reasonably determines that construction of the
Building shell has progressed to a point sufficient to allow Tenant to enter
the Premises and perform any finish work Tenant requires in the Premises (such
to be subject to Paragraph 6 below), provided that this date shall be adjusted
backward (I.E., to an earlier date) by one (1) day for each day that a Tenant
Delay exists. Subject to Tenant Delays and Force Majeure, Landlord agrees to
use reasonable efforts to cause the Commencement Date to occur by October 13,
1997. Tenant's entry into the Premises for purposes of commencing such finish
work shall constitute Tenant's acknowledgement that (i) it has inspected and
accepts the Building and the Project, (ii) the Premises is suitable for the
purpose for which it is leased, subject to completion by Tenant of any finish
work Tenant requires, (iii) the Building and the Project are in good and
satisfactory condition, and (iv) no representations as to the repair of the
Premises or the Project, nor promises to alter, remodel or improve the
Premises or the Project which have been made by Landlord remain unsatisfied.
Upon determination of the actual Commencement Date and Tenant's entry into the
Premises, Tenant agrees to execute an Acceptance of Premises Memorandum in the
form attached hereto and made a part hereof as EXHIBIT "E"; provided, however,
that Tenant's failure to execute the Acceptance of Premises Memorandum will
not delay the occurrence of the Commencement Date.
 
     4.   RENT.
 
          A.   BASE MONTHLY RENT. Tenant agrees to pay to Landlord rent for
the Premises, in advance, as follows (BASE MONTHLY RENT):
 
     -    Beginning on the Rent Commencement Date and continuing through the
          last day of the sixtieth (60th) complete calendar month after the
          month in which the Rent Commencement Date occurs, $20,170.58 per month
          ($242,046.96 on an annualized basis); and
 
     -    Beginning on the first day of the sixty-first (61st) calendar month
          after the month in which the Rent Commencement Date occurs, and
          continuing through the remainder of the Lease Term, $23,273.75 per
          month ($279,285 on an annualized basis).
 
          B.   ADDITIONAL RENT. Tenant agrees to reimburse Landlord for
Tenant's Proportionate Share (hereinafter defined) of (i) Real Property Taxes
(hereinafter defined), (ii) Landlord's actual cost of obtaining and
maintaining Landlord's Insurance (hereinafter defined), and (iii) the actual
cost of any maintenance performed by Landlord under Paragraph 12A(2) below or
which, in Landlord's reasonable discretion, is for the benefit of the Project
as a whole and not reasonably allocable to any specific tenant or tenants
(collectively, the ADJUSTMENTS). During each month of the term of this Lease,
on the same day that Base Monthly Rent is due hereunder, Tenant shall pay to
Landlord as additional Rent an amount equal to 1/12 of Tenant's Proportionate
Share of the estimated total annual cost of the Adjustments, as determined by
Landlord. Tenant authorizes Landlord to use such funds to pay such costs. The
initial monthly payments of Adjustments are based upon Landlord's good faith
estimates for the current Lease Year (hereinafter defined) and shall be
increased or decreased each Lease Year to reflect the projected actual cost of
all Adjustments. If Tenant's total payments are less than Tenant's
Proportionate Share of the actual costs of all such items, Tenant shall pay
the difference to Landlord within ten (10) days after demand. If the total
payments of Tenant are more than Tenant's Proportionate Share of the actual
costs of all such items, Landlord shall notify Tenant of such and retain such
excess and credit it against Tenant's next. monthly estimated payments of
Adjustments. The amount of the Base Monthly Rent and the estimated monthly
payments (based upon a complete calendar month) of Tenant's Proportionate
Share of the Adjustments for the Lease Year in which the date of this Lease
occurs are as follows:

 
   (1)  Base Monthly Rent                  $20,170.58
   (2)  Real Property Taxes                  $3,723.80
   (3)  Insurance                                   $310.32
   (4)  Maintenance                             $620.63
                                          ----------
   Initial Monthly Payment Total      $24,825.33
                                          ----------
                                          ----------

 
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     TENANT'S PROPORTIONATE SHARE, as used in this Lease, shall mean a
fraction, the numerator of which is the number of square feet of rentable area
contained in the Premises and the denominator of which is the entire number of
square feet of rentable area contained in the Building (as to costs which do
not materially vary based on the occupancy of the Building) or is the entire
rented area contained in the Building (as to costs which do materially vary
based on the occupancy of the Building). If the Project is part of a larger
development constructed by Landlord on the Land (the DEVELOPMENT) and the
Building and one or more other buildings on parts of the Development other
than the Project share the benefit of or may properly be allocated a portion
of any expense, Landlord shall reasonably allocate any such expense among the
Building and such other building(s) prior to applying Tenant's Proportionate
Share to such expense.
 
          C.   PAYMENT OF RENT. Base Monthly Rent and Adjustments shall be due
and payable, in advance, beginning on that date which is ninety (90) days
after the Commencement Date (the RENT COMMENCEMENT DATE); provided that one
(1) full installment of Base Monthly Rent and Adjustments totalling $24,825.33
is due and payable on the date of this Lease, such to be applied to the first
installment of Base Monthly Rent and Adjustments due on the Rent Commencement
Date and thereafter applied to Base Monthly Rent and Adjustments until fully
applied. Any installment of Base Monthly Rent or Adjustments due for any
fractional calendar month shall be prorated based upon the actual number of
days in that month. If the Rent Commencement Date occurs on the first day of a
calendar month, then the month in which the Rent Commencement Date occurs
shall be the first complete calendar month after the occurrence of the Rent
Commencement Date for purposes of determining the date upon which Base Monthly
Rent adjusts. As used in this Lease, RENT shall mean the Base Monthly Rent and
all other amounts provided for in this Lease to be paid by Tenant to Landlord,
all of which shall constitute rental in consideration for this Lease and the
leasing of the Premises. All Rent (hereinafter defined) shall be paid at the
times and in the amounts provided for herein in legal tender of the United
States of America to Landlord at the address specified in Paragraph 32 hereof
or to such other person or at such other address as Landlord may from time to
time designate in writing. Rent shall be paid without notice, demand,
abatement, deduction or offset (unless expressly provided for elsewhere in
this Lease) and shall be a covenant of Tenant independent of any obligation of
Landlord under this Lease. Tenant's obligation to pay any installment of Rent
shall not be deemed satisfied until such installment of Rent has actually been
received by Landlord.
 
          D.   AUDIT OF ADJUSTMENTS. Within ninety (90) days after the end of
each Lease Year, Landlord will provide to Tenant a statement of Adjustments
paid by Landlord for the just ended Lease Year. Tenant may at any time within
thirty (30) days after its receipt of Landlord's statement, but in any event
upon ten (10) days advance written notice to Landlord, audit, inspect and copy
the books and records of Landlord with respect to the Adjustments and make any
written objections Tenant may have to Landlord's determination of same.
Landlord shall cooperate with Tenant in providing Tenant reasonable access to
its books and records during normal business hours for this purpose. If the
results of any inspection or audit show an overcharge to Tenant of more than
five percent (5%) of the actual amount of Adjustments owed by Tenant, then
Landlord shall pay the reasonable costs of such audit (assuming the audit is
performed by a third party unaffiliated with Tenant and not including the
travel, meal or incidental expenses of the auditor), and Landlord shall credit
or refund to Tenant any overcharge of such items as discovered by the
inspection or audit within thirty (30) days of completion of such inspection
or audit. In the event such audit discloses an overcharge to Tenant of up to
but no more than five percent, there will be no credit or refund to Tenant,
and Tenant will pay the cost of the audit. In the event such audit discloses
an undercharge of Adjustments billed to Tenant, Tenant shall pay Landlord the
amount of such undercharge within thirty (30) days of the completion of such
audit and the cost of the audit. In the event Landlord disputes the amount of
Adjustments or Tenant's Proportionate Share thereof, as determined by Tenant's
audit, Landlord shall have a period of thirty (30) days from its receipt of
Tenant's audit results to have its own independent auditor inspect Tenant's
audit and the books and records pertaining to the Adjustments and deliver the
results thereof to Tenant. Landlord's failure to conduct such an audit and
deliver the results thereof to Tenant within such thirty (30) day period shall
constitute acceptance by Landlord of the results of Tenant's audit.  If
Landlord delivers Tenant Landlord's audit within such thirty (30) day period,
Tenant shall have thirty (30) days to review and object to the results
thereof. The results of Landlord's audit shall be conclusive and binding upon
Tenant unless Tenant objects in writing, such objections to be specific, to
such results within such thirty (30) day period.
 
          E.   LEASE YEAR. A LEASE YEAR shall mean a twelve (12) month period
commencing each January 1st and ending on the following December 31st;
provided, however, Landlord may from time to time (but no more often than once
every eighteen (18) months) change the twelve (12) month period designated as
a Lease Year by notice thereof to Tenant, in which event the obligations of
Tenant measured by Lease Years shall be prorated as appropriate during any

 
11

 
Lease Year of less than twelve (12) months based on the number of days in any
such Lease Year divided by 365; and provided, further, the first and last
Lease Years and all obligations of Tenant measured by such Lease Years, shall
be prorated as appropriate based upon the number of days in the applicable
Lease Year during the term of this Lease divided by 365.
 
          F.   INTEREST ON DELINQUENT RENT. Any Rent due from Tenant to
Landlord which is not paid when due shall bear interest from and after the
expiration of any applicable cure or grace period until paid at the lower of
(i) eighteen percent (18%) per annum or (ii) the highest rate from time to
time allowed by applicable law, from the date such payment is due until paid,
but the payment of such interest shall not excuse or cure the default. This
provision for default interest shall be in addition to all of Landlord's other
rights and remedies hereunder or at law or equity and shall not be construed
as liquidated damages or as limiting Landlord's remedies in any manner. Any
assessed default interest will be additional Rent owed hereunder.
 
     5.   COMPLIANCE WITH LAWS.  Tenant shall comply with all Applicable Laws
in connection with Tenant's use and occupancy of the Premises and Tenant's
performance of its obligations under this Lease, all at Tenant's expense.  As
used herein the term APPLICABLE LAWS means and includes any and all federal,
state and local laws, ordinances, orders, deed restrictions (specifically
including the Declaration of Protective Covenants dated May 18, 1995 and
recorded in Volume 95098, Page 924, ET SEQ. of the Official Public Records of
Real Property in Dallas County, Texas (as amended, modified, supplemented,
restated and assigned from time to time, the DECLARATION)), easements of
record, rules, and regulations of all governmental bodies (state, federal, and
municipal) applicable to or having jurisdiction over the use, occupancy,
operation and maintenance of the Project, including without limitation, the
Americans With Disabilities Act of 1990, as amended from time to time (ADA),
and Environmental Laws (hereinafter defined), as such may be amended or
modified from time to time. Notwithstanding the above, if any improvement,
modification or alteration of the Premises or the Project, or any portion
thereof, is required to bring same into compliance with the ADA, or any other
Applicable Laws, and (i) Tenant is not otherwise expressly responsible for
such improvement, modification or alteration under this Lease, (ii) the
necessity for such improvement, modification or alteration was not caused, in
whole or in part, by Tenant or any Tenant Party, and (iii) the necessity for
such improvement, modification or alteration was not due to the specific use
of the Premises by Tenant, then Landlord will undertake such improvement,
modification or alteration and the cost thereof will be charged back to (A)
Tenant to the extent that the improvement, modification or alteration affects
only or is totally within the Premises, and (B) all tenants of the Project,
including Tenant, to the extent that the improvement, modification or
alteration affects the Project as a whole and not any one tenant's particular
leased premises, with each tenant paying its Proportionate Share thereof. Such
costs will be charged over the useful life of the subject improvement,
modification or alteration, as determined under generally accepted accounting
principles, with the assumption that the only portion of such expense
chargeable for any one Lease Year will be a fraction of such expense, the
numerator of which is one and the denominator of which is the estimated useful
life of the improvement, modification or alteration.
 
     6.   ALTERATIONS AND IMPROVEMENTS BY TENANT.
 
          A.   CONDITIONS PRECEDENT TO ALL ALTERATIONS AND IMPROVEMENTS.
Except as expressly permitted by this Paragraph 6, or unless otherwise agreed
to in writing between Landlord and Tenant, Tenant may not make or permit any
alterations, improvements, or additions in or to the Premises or the Project
without Landlord's prior written consent. All alterations and improvements
desired by Tenant are subject to the following conditions/requirements:
 
               (1)  Subject to subparagraph 6B below, all alterations,
     improvements and additions will be at the sole cost and expense of Tenant;
 
               (2)  All alterations, improvements and additions in and to the
     Premises requested by Tenant must be made in accordance with plans and
     specifications first approved in writing by Landlord;
 
               (3)  Tenant's contractors and subcontractors are subject to
     Landlord's prior approval. In addition, each of Tenant's contractor(s) and
     subcontractor(s) must deliver evidence satisfactory to Landlord that the
     insurance specified on EXHIBIT "F" (attached hereto and incorporated herein
     by reference) is in force prior to commencing work;

 
12

 
 
               (4)  All alterations, improvements and additions made by Tenant
     must comply with all Applicable Laws including, specifically, the ADA,
     and applicable building permits and certificates of occupancy. Landlord's
     approval of Tenant's plans and specifications for the alterations or
     improvements will not act as a confirmation or agreement by Landlord that
     the improvements and alterations comply with Applicable Laws;
 
               (5)  Tenant must deliver to Landlord evidence that Tenant has
     obtained all necessary governmental permits and approvals for the
     improvements, alterations and additions prior to starting any work;
 
               (6)  All alterations, improvements and additions must be done
     in a good and workmanlike manner so as not to damage or alter the primary
     structure or structural qualities or the utility or other systems of the
     Premises or the Building and is subject to approval by Landlord during
     and after construction, in its sole discretion. Tenant agrees to meet
     with Landlord's project manager, who for purposes of this Lease shall be
     Rob Ahmuty until further notice, as deemed reasonably necessary by such
     project manager during any construction by Tenant pursuant to this
     Paragraph 6 so that Landlord can evaluate the progress of such work and
     its impact on the remainder of the Project;
 
               (7)  Lien releases from each of Tenant's contractor(s) and
     subcontractor(s) satisfactory to Landlord must be submitted to Landlord
     within thirty (30) days after completion of the work performed by the
     contractor(s) or subcontractor(s); and
 
               (8)  Tenant shall be solely responsible for the safety and
     security of all equipment and property installed or placed in, on or
     about the Premises by Tenant or any Tenant Party.
 
          B.   FINISH ALLOWANCE. Notwithstanding subparagraph 6A(1) above,
Landlord grants Tenant an allowance in the amount of $223,425 (the FINISH
ALLOWANCE) to be utilized by Tenant in performing alterations and improvements
to the Premises to "finish-out" the Premises. Any improvements or alterations
performed by Tenant and paid for out of the Finish Allowance, including
without limitation, any work related thereto such as design, engineering, and
construction management services, is referred to herein as the TENANT FINISH
WORK. Landlord will pay such invoices up to, but not in excess of, the Finish
Allowance conditioned upon:
 
               (1)  Tenant shall submit all invoices received in connection
     with the Tenant Finish Work to Landlord for payment not less than fifteen
     (15) days prior to the due date of such invoice. Landlord, at its option,
     will not be obligated to pay any invoice not received by such date; and
 
               (2)  Landlord having reasonably satisfied itself that all
     conditions/requirements set forth in subparagraph 6A above have been
     satisfied; and
 
               (3)  Landlord having inspected and approved of the work for
     which payment is sought, such approval not to be unreasonably withheld,
     conditioned or delayed; and
 
               (4)  The Finish Allowance may not be used or allocated for any
     materials or property, or for the labor incurred in constructing or
     installing same, that would be characterized as Tenant's Property under
     subparagraph 6C below, it being the intention of both parties hereto
     that, without limiting subparagraph 6D below, all improvements and
     alterations paid for with the Finish Allowance will in all events and
     circumstances be Landlord's property.
 
     Any decision to pay or not pay any invoice will be made within ten (10)
business days after receiving the subject invoice, provided, however, that
Landlord may further condition such approval upon the satisfaction of any of
the conditions/requirements of Paragraph 6A or this Paragraph 6B that may not
have been satisfied within such ten (10) day period (I.E., lien waivers).
Failure to disapprove of an invoice within such ten (10) day period shall
constitute approval thereof. All invoices will be paid within fifteen (15)
days after Landlord has approved the invoice and is satisfied that all
conditions and requirements set forth in Paragraph 6A and this Paragraph 6B
have been satisfied. All cost and expenses incurred by Tenant in making any
alterations or improvements to the Premises or the Project in excess of the
Finish Allowance will be Tenant's sole cost and expense. If the Finish
Allowance has not been fully utilized within one (1) year

 
13

 
 
after the Commencement Date, and provided that Tenant is not then in default
under this Lease, the remaining balance will be applied to Base Monthly Rent
and Adjustments until the Finish Allowance is exhausted. At the end of such
year, Landlord will provide Tenant with a written accounting of the balance,
if any, of the Finish Allowance.
 
          C.   TENANT'S PROPERTY. Tenant, at its own cost and expense, may
erect such shelves, racks, bins and trade fixtures (collectively, TENANT'S
PROPERTY) within the Premises as it desires and without Landlord's prior
consent provided that (a) such items do not alter the basic character of the
Premises or the Building; (b) such items do not overload or damage the
Premises or the Building or the utility or other systems serving same; (c)
such items may be removed without material injury to the Premises and the
Building; and (d) the construction, erection or installation thereof complies
with all Applicable Laws, applicable building permits and certificates of
occupancy; and (e) provided that Tenant's installation of Tenant's Property
prior to the Commencement Date will be subject to Paragraph 5B above. All of
Tenant's Property shall remain the property of Tenant and shall be removed on
or before the earlier to occur of the date of termination of this Lease or
Tenant's vacating of the Premises. Tenant shall promptly repair any damage to
the Project or the Premises caused by the removal of any of Tenant's Property.
Any of Tenant's Property not so removed and any other property of Tenant not
removed prior to the termination of this Lease or Tenant's vacating of the
Premises shall thereupon be conclusively presumed to have been abandoned by
Tenant, and Landlord may, at its option, take over possession of any and all
of the foregoing and either (i) declare the same to be the property of
Landlord by written notice to Tenant at the address provided herein or (ii) at
the sole cost and expense of Tenant, remove, store, and/or dispose of the same
or any part thereof, all at Tenant's cost, in any manner that Landlord shall
choose without incurring liability to Tenant or any other person.
 
          D.   LANDLORD'S PROPERTY/RESTORATION OF PREMISES BY TENANT. Except
as provided in Paragraph 6C above, all alterations, additions, and
improvements made to, or fixtures or other improvements placed in or on, the
Premises, whether temporary or permanent in character are a part of the
Premises and are the property of Landlord when they are made to or placed in
or on the Premises, without compensation to Tenant; provided that, at
Landlord's option, upon the termination of this Lease, Landlord may require
Tenant, at Tenant's cost, to remove any improvements, other than the Tenant
Finish Work, made to the Premises or Project by Tenant and restore the
Premises to substantially the condition it was in upon the completion of the
Tenant Finish Work, reasonable wear and tear excepted; and further provided
that, if Tenant first properly requested and Landlord gave its consent to such
improvements, Landlord must make such election at the time of giving such
consent.
 
          E.   INDEMNITY. Tenant hereby indemnifies and holds Landlord
harmless from any claims, demands, actions, losses, and damages arising from
activities of Tenant or any Tenant Party, or any of their invitees, in
connection with any alterations, improvements or additions made or contracted
for by Tenant.
 
     7.   USE. Subject to Applicable Laws, the Premises shall be used only for
the purpose of general office, manufacturing, receiving, storing, shipping and
selling (other than retail) products, materials and merchandise made and/or
distributed by Tenant, and for such other lawful purposes as may be incidental
thereto. Provided that such use is permitted by Applicable Laws, any
manufacturing performed by Tenant at the Premises shall be limited to the
manufacture and/or assembly of pharmaceutical, diet supplement and/or other
human health related products. Outside storage, including without limitation,
storage of trucks and other vehicles, is prohibited without Landlord's prior
written consent. Tenant shall not permit any objectionable or unpleasant
odors, smoke, dust, gas, noise or vibrations to emanate from the Premises, nor
take any other action that would constitute a health or environmental hazard
or nuisance or that would disturb, interfere with, or endanger Landlord or the
occupant of any other land or buildings in the vicinity of the Project or any
other tenant of the Project. Tenant's use of the Premises must in any event
comply with all Applicable Laws including, without limitation, the Declaration
and Applicable Laws.  TENANT SHALL MAKE ITS OWN DETERMINATIONS AS TO THE
SUITABILITY OF THE PREMISES FOR ITS INTENDED USE. BY ENTERING INTO THIS LEASE,
TENANT REPRESENTS AND WARRANTS THAT IT HAS INVESTIGATED AND SATISFIED ITSELF
AS TO WHETHER OR NOT APPLICABLE LAWS PERMIT ITS INTENDED USE OF THE PREMISES
AND THAT TENANT IS RELYING SOLELY UPON SUCH INVESTIGATIONS, AND NOT UPON AND
REPRESENTATIONS OF LANDLORD, IN ENTERING INTO THIS LEASE. If Tenant's
particular use of the Premises requires that additional improvements or
modifications be made to the Premises or the Project by Landlord so that the
Premises and the Project complies in all respects with Applicable Laws, Tenant
shall be solely responsible for such costs.

 
14

 
 
     8.   HAZARDOUS MATERIALS.
 
          A.   HAZARDOUS MATERIALS DEFINED. As used in this Lease, the term
HAZARDOUS MATERIALS means and includes (i) any hazardous, toxic or dangerous
waste, substance or material, as defined for purposes of the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, the
Resource Conservation and Recovery Act of 1976, as amended, or any other
Applicable Laws applicable to the Premises and establishing liability,
standards, or regulating or requiring action as to the industrial hygiene,
use, generation, treatment, discharge, spillage, storage, uncontrolled loss,
seepage, filtration, disposal, removal, or existence of a hazardous, toxic or
dangerous waste, substance or material (collectively, ENVIRONMENTAL LAWS) and
(ii) any waste, substance or material which, even if not so regulated, is
known to pose a hazard to the health and safety of persons or property,
specifically including, without limitation, oil and petroleum products and
by-products and asbestos.
 
          B.   PROHIBITION OF HAZARDOUS MATERIALS/TENANT'S LIABILITY. Except
for Hazardous Materials that are used only as an incidental part of Tenant's
day-to-day business operations and not as an integral part thereof (E.G., fuel
for forklifts and similar equipment, office supplies, cleaning solvents),
Tenant may not use, treat, handle, store, generate, dispose of or release or
cause or permit any Tenant Party, or any of their invitees, to use, handle,
store, generate, treat, dispose of or release, in, on, under or from the
Premises or the Project any Hazardous Materials. Without limiting any of the
above:
 
                    (1)  Tenant covenants and agrees that it shall at its own
     expense procure, maintain in effect and comply with all conditions of any
     and all permits, licenses and other governmental and regulatory approvals
     required for Tenant's use of the Premises and any operations or conduct
     of Tenant involving the use, handling, generation, treatment, storage,
     disposal, management or release of any Hazardous Materials. Tenant shall
     cause any and all Hazardous Materials that are to be removed from the
     Premises to be transported solely by duly licensed haulers and to duly
     licensed facilities for final disposal of such Hazardous Materials.
     Tenant shall in all respects, handle, treat, deal with and manage any
     and all Hazardous Materials in, on, under or about the Premises as a
     result of the actions, conduct or any part of the business operations of
     Tenant or any Tenant Party, or any of their invitees, in complete
     conformity with all Applicable Laws and prudent industry practices
     regarding the management of such Hazardous Materials. All reporting
     obligations relating to Hazardous Materials in, on, under or about the
     Premises as a result of the actions, conduct or any part of the business
     operations of Tenant or any Tenant Party, or any of their invitees, are
     solely the responsibility of Tenant. Upon expiration or earlier
     termination of this Lease, Tenant covenants and agrees to cause all
     Hazardous Materials existing in, on, or under the Premises to be removed
     from the Premises and transported for use, storage or disposal in
     accordance and in compliance with all Applicable Laws. In addition, and
     unless Landlord instructs Tenant otherwise, at the expiration of the term
     of this Lease, Tenant shall remove all tanks or fixtures which were
     placed on the Premises by or on behalf of Tenant or any Tenant Party
     during the term of this Lease and which contain, have contained or are
     contaminated with, Hazardous Materials;
 
                    (2)  Tenant shall immediately notify Landlord in writing
     of (i) any Tenant Release (hereinafter defined), (ii) any enforcement,
     clean-up, removal or other governmental or regulatory action instituted,
     completed or threatened against Tenant, the Premises, the Project, or any
     part thereof pursuant to any Applicable Laws; (iii) any claim made or
     threatened by any person against Tenant, Landlord, the Premises, or the
     Project relating to damage, contribution, cost recovery, compensation,
     loss or injury resulting from or claimed to result from any Hazardous
     Materials, and (iv) any reports made to any environmental agency arising
     out of or in connection with any Hazardous Materials in, on or about or
     under the Premises or with respect to any Hazardous Materials removed
     from the Premises, including, any complaints, notices, warnings, reports
     or asserted violations in connection therewith. Tenant shall also provide
     to Landlord, as promptly, as possible, and in any event within five (5)
     business days after Tenant first received or sent the same, with copies
     of all claims, reports, complaints, notices, warnings or asserted
     violations relating in any way to the Premises or Tenant's use thereof.
     Tenant shall not take any remedial action in response to the presence of
     any Hazardous Materials in/on, about or under the Premises, nor enter
     into any settlement agreement, consent, decree or other compromise in
     respect to any claims relating to or in any way connected with the
     Premises without first notifying Landlord of Tenant's intention to do so
     and affording Landlord ample opportunity to appear, intervene or
     otherwise appropriately assert and protect Landlord's interest with
     respect thereto;

 
15

 
 
                    (3)  Tenant shall indemnify, at Landlord's option, defend
     (with counsel reasonably acceptable to Landlord), protect and hold
     Landlord and each of Landlord's officers, directors, partners, employees,
     agents, attorneys, successors and assigns free and harmless from and
     against any and all claims, liabilities, damages, costs, penalties,
     forfeitures, losses or expenses (including attorneys' fees) for death or
     injury to any person or damage to any property whatsoever (including
     water tables and atmosphere) arising or resulting in whole or in part,
     directly or indirectly, from the presence, release or discharge of
     Hazardous Materials in, on, under, upon or from the Premises to the
     extent that such presence, release or discharge was caused or permitted
     by Tenant or any Tenant Party, or any of their invitees, or from the
     transportation or disposal of Hazardous Materials to or from the Premises
     or the Project by Tenant or any Tenant Party, or any of their invitees
     (herein, a TENANT RELEASE).  Tenant's obligations hereunder shall
     include, without limitation, and whether foreseeable or unforeseeable,
     all costs of any required or necessary repairs, clean-up or
     detoxification or decontamination of the Premises or the Project and any
     other land contaminated or adversely effected by the Tenant Release and
     the presence and implementation of any closure, remedial action or other
     required plans in connection therewith, and shall survive the expiration
     of or early termination of this Lease;
 
                    (4)  Landlord may at any time commission an environmental
     audit of the Premises or the Project. If it is determined that a Tenant
     Release has in fact occurred, then, without limitation of any other remedy
     Landlord may have hereunder, Tenant shall reimburse the actual costs of the
     testing to Landlord on demand as additional Rent.
 
                    (5)  Tenant shall execute affidavits, representations, and
     the like from time to time at Landlord's request concerning Tenant's
     actual knowledge and belief regarding the presence of Hazardous Materials
     in, on or under the Premises.
 
          C.   ENVIRONMENTAL STUDIES. Landlord represents that, except as set
forth in any written studies or reports provided to Tenant, Landlord has no
actual knowledge of any adverse environmental conditions affecting the Land;
provided. however, that Landlord makes no representations or warranties
regarding the truth or accuracy of the environmental reports so provided and
Tenant shall rely upon such reports, if at all, at Tenant's sole risk.
 
          D.   SURVIVAL.  The respective covenants, rights and obligations of
Landlord and Tenant under this Paragraph 8 shall survive the expiration or
earlier termination of this Lease.
 
     9.   SIGNAGE. Any signage Tenant desires for the Premises shall be
subject to Landlord's written approval and shall be submitted to Landlord for
approval prior to the Commencement Date of this Lease. Tenant shall repair,
paint and/or replace the building facia surface to which its signs are
attached upon vacation of the Premises, or the removal or alteration of its
signage. Tenant shall not (i) make any changes to the exterior of the
Building, (ii) install any exterior lights, decorations, balloons, flags,
pennants, banners or painting, or (iii) erect or install any signs, windows or
door lettering, placards, decorations or advertising media of any type which
can be viewed from the exterior of the Building, without Landlord's prior
written consent. All signs, decorations, advertising media, blinds, draperies
and other window treatment or bars or other security installations visible
from outside the Building shall conform in all respects to the criteria
established by Landlord and Applicable Laws.
 
     10.  TAXES.
 
          A.   REAL PROPERTY TAXES. Subject to reimbursement by Tenant as
provided in Paragraph 4B above, Landlord shall pay all taxes, assessments and
governmental charges of any kind and nature and all assessments due to deed
restrictions and/or owner or community associations (collectively referred to
herein as REAL PROPERTY TAXES), that accrue against the Project, or any part
thereof. If at any time during the term of this Lease, there shall be levied,
assessed or unposed on Landlord a capital levy or other tax directly on the
Rent received under this Lease and/or a franchise tax, gross receipts tax (but
not a typical or customary state or federal income tax), assessment, levy or
charge measured by or based, in whole or in part, upon Rent paid under this
Lease, then all such taxes, assessments, levies or charges, or the part
thereof so measured or based, shall be deemed to be included within the term
REAL PROPERTY TAXES for the purposes hereof. Landlord shall have the right to
employ a tax consulting firm to attempt to assure a fair tax burden on the
Project and the Premises within the applicable taxing jurisdiction. Tenant
agrees to pay its Proportionate

 
16

 
 
Share of the cost of such consultant as additional Rent.
 
          B.   PERSONAL PROPERTY TAXES. Tenant shall be liable for all taxes
levied or assessed against Tenant's Property and any other personal property
or fixtures placed or installed in the Premises or the Project by or on behalf
of Tenant. If any such taxes are levied or assessed against Landlord or
Landlord's property and (i) Landlord pays the same, or (ii) the assessed value
of Landlord's property is increased by inclusion of such personal property and
fixtures and Landlord pays the increased taxes, then, Tenant shall pay to
Landlord such taxes within ten (10) days after demand. If Tenant later
contests such taxes and is successful in abating or reducing all or a portion
of same, and provided that Tenant has, in fact, reimbursed Landlord for the
taxes paid by Landlord, Landlord will return to Tenant the amount by which
such taxes were reduced or abated, up to the amount Tenant reimbursed Landlord.
 
     11.  UTILITIES. Landlord agrees to provide water, sewer and gas utility
lines to the outside of the exterior walls of the Building and electricity
service to be provided to a transformer located at the Project. Tenant shall
pay for all utilities servicing the Premises, including, without limitation
water, gas, heat, light, power, telephone, sewer, sprinkler charges and other
utilities and services used on or at the Premises, together with any taxes,
penalties, surcharges or the like pertaining to the Tenant's use of the
Premises, and any maintenance charges for utilities. Tenant shall pay its
Proportionate Share of all charges for jointly metered and common area
utilities as additional Rent. Landlord shall not be liable for any
interruption or failure of utility service at the Premises and all Rent owed
pursuant to the terms of this Lease shall continue to be due notwithstanding
such interruption.
 
     12.  REPAIRS AND MAINTENANCE.
 
          A.   LANDLORD'S OBLIGATION TO REPAIR AND MAINTAIN.
 
                    (1) Landlord, at its own cost and expense, shall maintain
     the structural soundness of the Building's roof, foundation and exterior
     walls in good repair, except for reasonable wear and tear and except for
     damage caused by any act or omission of Tenant or any Tenant Party or
     their invitees. Landlord may elect to repair any damage caused by Tenant
     or any Tenant Party or their invitees, and if Landlord so elects, Tenant
     shall pay Landlord the cost or anticipated cost of such repair on demand,
     subject to Paragraph 13C hereof. The term WALLS as used herein shall not
     include windows, glass or plate glass, doors, special store fronts or
     office entries. Tenant shall promptly give Landlord written notice of any
     defect or need for repairs, after which Landlord shall have reasonable
     opportunity to repair same or cure such defect.
 
                    (2)  Landlord shall maintain or cause to be maintained all
     exterior painting, parking areas (inclusive of striping) and landscaped
     areas of the Project and utility lines outside the exterior walls of the
     Building in good condition and repair, other than those areas that are
     expressly Tenant's obligations under Paragraph 12B below. Tenant shall
     reimburse Landlord for Tenant's Proportionate Share of any costs incurred
     by Landlord under this paragraph, net of the Adjustments being escrowed
     monthly for maintenance under Paragraph 4B above.  Notwithstanding any of
     the above, if it is determined that any specific repair or maintenance
     otherwise required to be performed by Landlord under this subparagraph is
     caused solely by Tenant, any Tenant Party or any of their invitees,
     Tenant shall be solely responsible for the cost of such repair or
     maintenance and such shall be paid to Landlord outside of and in addition
     to the Adjustments. All such amounts payable under this subparagraph
     shall be owed to Landlord as additional Rent.
 
                    (3) In the event the Building or the Premises is damaged
     or becomes out of repair and such is the obligation of Landlord to repair
     or maintain hereunder, Tenant shall provided prompt written notice to
     Landlord thereof stating the nature of the needed repairs. Landlord will
     then have thirty (30) days to make any necessary repairs or such longer
     time as is reasonably necessary with the exercise of due diligence if
     such repairs cannot reasonably be completed in thirty (30) days.
     Additionally, in the event of an emergency, defined for purposes of this
     subparagraph as a condition that if allowed to continue to exist without
     repair would result in damage, injury or death to property or person, and
     assuming that it is not reasonably feasible for Tenant to give the
     required notice to Landlord, then Tenant may make such repairs as are
     reasonably necessary to prevent further immediate damage or injury to
     person or property; provided that Tenant gives Landlord prompt written
     notice of the nature of the emergency and the action taken by Tenant. In
     such event, Landlord shall reimburse

 
17

 
 
Tenant within thirty (30) days of invoice for the actual costs of such
repairs made by Tenant.
 
          B.   TENANT'S OBLIGATION TO REPAIR AND MAINTAIN. Except only for
maintenance, repair and replacement performed by Landlord pursuant to
Paragraph 12A hereof, Tenant, at its own cost and expense, shall maintain in
good condition and promptly make all necessary repairs and replacements to
(i) all parts of the Premises, (ii) all utility lines and appurtenances from
the exterior walls of the Building to and within the Premises, and (iii) any
and all overhead doors, loading docks, loading dock levelers and loading
dock equipment.  Additionally, Tenant shall maintain the walkways, parking
areas and facilities, driveways and alleys located within the Adjacent Area,
as illustrated on EXHIBIT "C" attached hereto, in a reasonably clean and
sanitary condition. Tenant, at its own cost and expense, shall enter into a
regularly scheduled preventive maintenance/service contract with a
maintenance contractor approved by Landlord for servicing all hot water,
heating and air conditioning systems and equipment within the Premises; which
service contract must include all services suggested by the equipment
manufacturer in its operations/maintenance manual and must become effective
within thirty (30) days of the date Tenant takes possession of the Premises.
 
     Landlord reserves the right to perform any of Tenant's obligations set
forth under this paragraph including utility line maintenance and any other
items that are otherwise Tenant's obligations under this paragraph to the
extent that Tenant fails to perform its obligations thereunder within the
time frames set forth in Paragraph 18F. In such event, Landlord shall be
entitled to an administrative fee of ten percent (10%) of the costs and
expense of all of the foregoing, and Tenant shall be liable for the cost and
expense of such repair, replacement, maintenance and other such items, as
well as the administrative fee.
 
     13.  INSURANCE.
 
          A.   LANDLORD'S INSURANCE. Landlord shall maintain insurance
covering the Building (except that Landlord shall not be required to insure
any part of the partitions, fixtures, additions and other improvements that
may have been constructed, erected or installed in or about the Premises or
for the benefit of, or by or for Tenant, including, without limitation, the
Tenant Finish Work) in an amount not less than one hundred percent (100%) of
the replacement cost thereof insuring against the perils of Fire, Lightning,
Extended Coverage, Vandalism and Malicious Mischief (collectively, LANDLORD'S
INSURANCE).
 
          B.   TENANT'S INSURANCE. Tenant, at its own expense, shall maintain
during the term of this Lease a policy or policies of worker's compensation
(or its equivalent provided such is approved by Landlord, such not to be
unreasonably withheld) and commercial general liability insurance, including
personal injury and property damage, with contractual liability endorsement,
in the amount of Five Hundred Thousand Dollars ($500,000.00) for property
damages and One Million Dollars ($1,000,000.00) per occurrence for personal
injuries or deaths of persons occurring in or about the Premises and the
Project; provided, such limits may be adjusted upward in Landlord's
reasonable discretion based upon inflation or upon the type of business
conducted by Tenant in the Premises. Said policies shall (i) name Landlord as
an additional insured and insure Landlord's contingent liability under this
Lease (except for the worker's compensation policy, which instead shall
include waiver of subrogation endorsement in favor of Landlord), (ii) be
issued on an occurrence (not claims made) basis, (iii) be issued by an
insurance company which is acceptable to Landlord, and (iv) provide that said
insurance shall not be cancelled unless thirty (30) days prior written notice
shall have been given to Landlord. In addition to the above, Tenant shall
maintain insurance insuring the interest of Tenant and covering all of
Tenant's property and all partitions, fixtures, additions and other
improvements that may have been constructed, erected or installed in or about
the Premises or for the benefit of, or by or for Tenant, inclusive of the
Tenant Finish Work, and covering all contents of the Premises, in an amount
not less than one hundred percent (100%) of the replacement cost thereof
insuring against the perils of Fire, Lightning, Extended Coverage, Vandalism
and Malicious Mischief. Said policy or policies or certificates thereof shall
be delivered to Landlord by Tenant upon commencement of the term of the Lease
and at least thirty (30) days prior to the effective date of each renewal of
said insurance.
 
     Tenant will not permit the Premises to be used for any purpose or in any
manner that would (i) void the insurance thereon, (ii) increase the insurance
risk, or (iii) cause the disallowance of any sprinkler credits, including
without limitation, use of the Premises for the receipt, storage or handling
of any product, material or merchandise that is explosive or highly
inflammable. If any increase in the cost of any insurance on the Premises or
the Building is caused by Tenant's use of the Premises, or because Tenant
vacates the Premises, then Tenant shall pay the amount of such increase to Landlord upon demand.

18

 
 
          C.   WAIVER OF SUBROGATION. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS LEASE, LANDLORD AND TENANT HEREBY WAIVE ANY RIGHTS EACH MAY HAVE AGAINST
THE OTHER ON ACCOUNT OF ANY LOSS OR DAMAGE OCCASIONED TO LANDLORD OR TENANT,
AS THE CASE MAY BE (WHETHER OR NOT SUCH LOSS OR DAMAGE IS CAUSED BY THE FAULT
OR SOLE OR CONCURRENT NEGLIGENCE OF, WITH RESPECT TO LOSS OR DAMAGE TO THE
PROPERTY OF TENANT, LANDLORD OR ANY LANDLORD PARTY, OR, WITH RESPECT TO ANY
LOSS OF DAMAGE TO ANY PROPERTY OF LANDLORD, OF TENANT, ANY TENANT PARTY OR
ANY OF THEIR INVITEES), TO THEIR RESPECTIVE PROPERTY, THE PREMISES, ITS
CONTENTS OR TO ANY OTHER PORTION OF THE BUILDING OR THE PROJECT ARISING FROM
ANY RISK THAT WOULD BE COVERED BY ANY INSURANCE REQUIRED TO BE CARRIED UNDER
THIS LEASE (WHETHER OR SUCH INSURANCE IS ACTUALLY CARRIED OR MAINTAINED), OR
OTHERWISE CARRIED BY THE WAIVING PARTY (BUT, AS TO ANY SUCH INSURANCE
OTHERWISE CARRIED, ONLY TO THE EXTENT OF SUCH INSURANCE PROCEEDS ACTUALLY
RECOVERED).  THE PARTIES HERETO EACH, ON BEHALF OF THEIR RESPECTIVE INSURANCE
COMPANIES INSURING THE PROPERTY OF EITHER LANDLORD OR TENANT AGAINST ANY SUCH
LOSS, WAIVE ANY RIGHT OF SUBROGATION THAT IT MAY HAVE AGAINST LANDLORD OR
TENANT, AS THE CASE MAY BE. EACH PARTY TO THIS LEASE AGREES IMMEDIATELY TO
GIVE TO EACH SUCH INSURANCE COMPANY WRITTEN NOTIFICATION OF THE TERMS OF THE
MUTUAL WAIVERS CONTAINED IN THIS PARAGRAPH, AND TO HAVE SAID INSURANCE
POLICIES PROPERLY ENDORSED, IF NECESSARY, TO PREVENT THE INVALIDATION OF SAID
INSURANCE COVERAGES BY REASON OF SAID WAIVERS.
 
     14.  LIABILITY/INDEMNIFICATION.
 
          A.   LANDLORD'S LIABILITY AND INDEMNITY.
 
                    (1)  RELEASE FROM LIABILITY. Except as otherwise
     expressly provided in this Lease, neither Landlord nor any Landlord
     Party (hereinafter defined) will be liable to Tenant or any Tenant Party
     or any of their invitees for any death or injury to person or damage to
     property on or about the Premises or the Project caused by or arising
     out of, in whole or in part, (i) the negligence of, or act or omission
     of, Tenant or any Tenant Party or any of their invitees, (ii) the
     Premises or the Project becoming out of repair, (iii) the leakage of
     gas, oil, water or steam or by electricity emanating from any part of
     the Premises or the Project, or (iv) any other cause, unless and then
     only to the extent such death or injury to person or damage to property
     is due to the negligence or willful misconduct of Landlord or any
     Landlord Party. As used in this Paragraph 14, a LANDLORD PARTY shall
     mean one or more of Landlord's officers, partners, shareholders,
     employees, agents or contractors.
 
                    (2)  LANDLORD'S INDEMNITY OF TENANT. Except for any
     claims, rights of recovery and causes of action that Tenant has
     expressly herein waived or released or for which Landlord is not
     responsible hereunder, Landlord shall indemnify and hold Tenant and each
     Tenant Party harmless from and against any and all fines, suits, losses,
     costs, liabilities, claims, demands, actions and judgments of every kind
     and character, including reasonable court costs and attorneys fees,
     suffered by, recovered from, or asserted against Tenant or any Tenant
     Party for any injury or death to any person or damage to any property
     in, on, or about the Premises or the Project to the extent, and only to
     the extent, that such death or injury to person or damage to property is
     caused by the negligence or willful misconduct of Landlord or any
     Landlord Party. Upon the occurrence of an event which Landlord is
     required to indemnify Tenant against, and upon demand by Tenant,
     Landlord shall employ counsel reasonably acceptable to Tenant and defend
     Tenant against any liability for such event, all at Landlord's cost.
 
          B.   TENANT'S INDEMNITY. Except for any claims, rights of recovery
and causes of action that Landlord has expressly herein waived or released or
for which Tenant is not responsible hereunder, Tenant shall indemnify and
hold Landlord and each Landlord Party harmless from and against any and all
fines, suits, losses, costs, liabilities, claims, demands, actions and
judgments of every kind and character, including reasonable court costs and
attorneys fees, suffered by, recovered from, or asserted against Landlord or
any Landlord Party (i) arising by reason of any breach, violation or

 
19

 
 
non-performance by Tenant of any term, provision, covenant, condition or
agreement to be performed or abided by Tenant hereunder, (ii) arising on
account of death, injury or damage to person or property in, on, or about the
Premises or the Project when such death, injury or damage is caused or arises
out of the negligence or willful misconduct of Tenant, any Tenant Party or
any of their invitees, and (iii) with respect to any action brought by a
Tenant Party or any invitee of Tenant or any Tenant Party, arising out of any
matter for which neither Landlord nor any Landlord Party is liable or
responsible hereunder. Upon the occurrence of an event which Tenant is
required to indemnify Landlord or a Landlord Party against, and upon demand
by Landlord, Tenant shall employ counsel reasonably acceptable to Landlord
and defend Landlord or such Landlord Party against any liability for such
event, all at Tenant's cost.
 
          C.   LIABILITY FOR ACTS OF TENANT AND LANDLORD PARTIES. The
individual(s) executing this Lease on behalf of Landlord or Tenant, as
applicable, are doing so in their representative capacity only, solely as a
representative of Landlord or Tenant, as applicable, and any liability to
Landlord or any Landlord Party or Tenant or any Tenant Party arising or
resulting hereunder based upon the actions of such individual(s) or any other
Landlord Party or Tenant Party, as applicable, shall merely be that of
Landlord (as to any Landlord Party) or Tenant (as to any Tenant Party) and
not such individual(s) or Landlord Party or Tenant Party.
 
          D.   SURVIVAL. The releases, indemnities and covenants of Landlord
and Tenant in this Paragraph 14 are in addition to, and not in limitation of,
any other indemnities made by Landlord or Tenant elsewhere in this Lease. The
provisions of this Section 14 shall survive the expiration or termination of
this Lease with respect to any claims or liability arising out of events
occurring prior to such expiration or termination.
 
     15.  CASUALTY.
 
          A.   TERMINATION OF LEASE. If the Premises should be damaged or
destroyed by fire or other peril, Tenant immediately shall give written
notice to Landlord. If: (i) the Building should be totally destroyed by any
peril not covered by the insurance to be provided by Landlord under Paragraph
13A above; or if (ii) the Premises should be so damaged thereby that, in
Landlord's estimation, rebuilding or repairs cannot be completed within one
hundred eighty (180) days after the date of such damage; or if (iii) the
Premises should be so damaged thereby that, in Landlord's estimation,
rebuilding or repairs of the portion thereof required to be insured by
Landlord can be substantially completed within one hundred eighty (180) days
after the date of such damage, but the insurance proceeds available to
Landlord will not, in Landlord's estimation, be sufficient to complete such
rebuilding or repairs (due to such insurance proceeds being applied to
mortgage debt or otherwise) and Landlord is either unable or unwilling to
advance sufficient funds to complete such rebuilding or repairs; then in any
of such events this Lease shall cease and terminate as if and to the extent
the effective date of such termination had been the date originally scheduled
for the expiration of the term of this Lease, and the Rent shall be abated
during the previously unexpired term of this Lease, effective upon the date
of the occurrence of such damage. Landlord's determinations under this
paragraph must be made in writing to Tenant within forty-five (45) days after
the subject casualty.
 
          B.   RESTORATION OF PREMISES BY LANDLORD. Subject to the provisions
of Section 15.A above, if the Premises should be damaged by any peril covered
by the insurance to be provided by Landlord under Paragraph 13A above, and in
Landlord's estimation, rebuilding or repairs of the portion thereof required
to be insured by Landlord can be substantially completed within one hundred
eighty (180) days after the date of such damage, this Lease shall not
terminate, and Landlord shall restore the Premises to substantially its
previous condition, except that Landlord shall not be required to rebuild,
repair or replace any part of the partitions, fixtures, additions and other
improvements that may have been constructed, erected or installed in, or
about the Premises or for the benefit of, or by or for Tenant. During any
period of rebuilding, repair and restoration, Landlord shall allow Tenant a
reasonable reduction in Rent based upon, among other things, the adverse
effect such casualty and restoration have on Tenant's business operations.
Subject to Force Majeure, if such repairs and rebuilding of the Premises have
not been substantially completed within one hundred eighty (180) days after
the date of such damage, Tenant, as Tenant's exclusive remedy, may give
Landlord notice of Tenant's intention to terminate the Lease effective as of
the date specified in such notice, which date shall be not less that thirty
(30) days after the notice. If the repairs and rebuilding have not been
substantially completed by the date specified in such notice, Tenant, as
Tenant's exclusive remedy, may immediately terminate this Lease by delivering
written notice of termination to Landlord, in which event the rights and
obligations hereunder shall cease and terminate as if and to the extent the
effective date of such termination had been the date originally scheduled for
the expiration of the term

20

 
of this Lease, and Rent shall be abated during the previously unexpired term of this
Lease, effective upon the date of the termination.
 
     16.  CONDEMNATION.
 
          A.   MATERIAL TAKING. If any portion of the Premises or the
Project is taken for any public or quasi-public use under governmental law,
ordinance or regulation, or by right of eminent domain, or by private
purchase in lieu thereof and the taking materially interferes with the use of
the Premises for the purpose for which they were leased to Tenant or causes
the Premises or the exclusive parking area designated for Tenant to be in
noncompliance with Applicable Laws, then within thirty (30) days after such
taking Landlord shall notify Tenant as to whether or not Landlord will
reconstitute the Premises or the Project such that the Premises or the
Project once again complies with Applicable Laws or replicate the Premises or
the Project to substantially the condition it was in prior to such taking, as
applicable, within one hundred eighty (180) days after such taking.  If
Landlord notifies Tenant that it will not replicate or reconstitute the
Premises or the Project, as applicable, or otherwise fails to complete the
reconstitution or replication within one hundred eighty (180) days after such
taking, then this Lease shall terminate and the Rent shall be abated during
the unexpired portion of this Lease, effective as of the date of such taking.
If Landlord notifies Tenant that it will replicate or reconstitute the
Premises or the Project, as applicable, then this Lease shall not terminate
but Rent accruing after the date of such taking shall be reduced to such
extent as may be fair and reasonable under all of the circumstances (which
may include a abatement of all Rent), effective as of the date of such taking
until the Premises or the Project as applicable, is fully reconstituted or
replicated, at which time Rent will again adjust to the amounts set forth in
Paragraph 4.
 
          B.   OTHER TAKING. With respect to any taking not covered by
Paragraph 16A above, this Lease shall not terminate, but the Rent payable
hereunder during the unexpired portion of this Lease shall be reduced to such
extent as may be fair and reasonable under all of the circumstances,
effective as of the date of such taking.
 
          C.   CONDEMNATION PROCEEDS. All compensation awarded in connection
with or as a result of any eminent domain or condemnation proceedings shall
be the property of Landlord, and Tenant hereby assigns any interest in any
such award to Landlord; provided, however, Landlord shall have no interest in
any award made to Tenant for loss of business or goodwill or for the taking
of Tenant's fixtures and improvements, if a separate award for such items is
made to Tenant or reasonably allocable to Tenant for the taking of Tenant's
fixtures and improvements that Tenant would be permitted to remove upon
termination of this Lease.
 
     17.  ASSIGNMENT AND SUBLETTING.
 
          A.   PROHIBITION ON ASSIGNMENT AND SUBLETTING. Tenant shall not
have the right to assign, sublet, transfer or encumber this Lease, or any
interest therein, without the prior written consent of Landlord.  Any
attempted assignment, subletting, transfer or encumbrance by Tenant in
violation of the terms and covenants of this paragraph shall be void. If
Tenant requests Landlord's consent to an assignment of this Lease or
subletting of all or a part of the Premises, it shall submit to Landlord, in
writing, the name of the proposed assignee or subtenant, the commencement
date of such assignment or subletting, the nature and character of the
business of the proposed assignee or subtenant and the proposed rates, terms
and other pertinent conditions of such assignment or subletting. Upon receipt
of a request for consent to an assignment or subletting, and unless such
request pertains to an assignment or sublease governed by Paragraph 17B
below, Landlord shall have the option (to be exercised within thirty (30)
days from the submission of Tenant's written request) to (i) cancel this
Lease (or the applicable portion thereof as to a partial subletting) as of
the commencement date stated in the above-mentioned notice of subletting or
assignment, unless Tenant withdraws the proposal to sublet or assign within
ten (10) days after Landlord's notice of cancellation is given, (ii) permit
such assignment or subletting, or (iii) reasonably withhold its consent to
such assignment or subletting. If Landlord elects to cancel this Lease and
Tenant does not withdraw the proposal to sublet or assign, then the term of
this Lease (as to the applicable portion of the Premises), and the tenancy
and occupancy of the applicable portion of the Premises by Tenant hereunder,
shall cease, terminate, expire, and come to an end as if the cancellation
date was the original termination date of this Lease with respect to the
applicable portion of the Premises. In the event Landlord consents to a
proposed assignment or subletting and the rent due and payable by any such
assignee or sublessee under any such permitted assignment or sublease (or a
combination of the rent payable under such assignment or sublease plus any
bonus or any

 
21

 
 
other consideration therefor or any payment, incident thereto) exceeds the
Base Monthly Rent payable under Paragraph 3 of this Lease for the applicable
space, net of Tenant's actual reasonable costs incurred in connection with
such assignment or subletting (E.G., attorneys' fees, marketing costs (but
not Tenant's internal costs)) and net of any finish out allowance granted by
Tenant in connection with any assignment or sublease not in excess of market
(E.G., Tenant may not recover any finish out allowance in excess of that
which would granted to a similarly situated tenant for similar space in
similar properties in the Dallas/Fort Worth area), Tenant shall pay to
Landlord all such excess rent and other excess consideration within ten (10)
days following receipt thereof by Tenant, whether or not such assignment or
subletting pertains to an assignment or subletting permitted under Paragraph
17B below.
 
          B.   PERMITTED ASSIGNMENTS/SUBLEASES. Notwithstanding the
provisions of Paragraph 17A, Tenant may, without the consent of Landlord, at
any time assign or otherwise transfer this Lease or any portion thereof to
any Affiliate (hereinafter defined); or any Corporation resulting from the
consolidation or merger of Tenant into or with any other entity; or to any
person, firm, entity or corporation acquiring a majority of Tenant's issued
and outstanding capital stock or substantially all of Tenant's assets. As
used herein, the term AFFILIATE shall mean a person or entity, corporate or
otherwise, that directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with Tenant. The
term CONTROL means the right and power, direct or indirect, to direct or
cause the direction of the management and policies of a person or business
entity, corporation or otherwise, through ownership or voting securities, by
contract or otherwise; provided, however, that in the event of an assignment,
the assignee shall assume in writing the terms and conditions set forth
herein to be observed and performed by the Tenant in a form reasonably
approved by Landlord. A sublease or assignment pursuant to this Paragraph 17B
shall not be subject to Landlord's recapture rights set forth in Paragraph
17A above.
 
          C.   ASSIGNMENTS IN BANKRUPTCY.
 
                    (1)  If this Lease is assigned to any person or entity
     pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101
     et. seq. (the BANKRUPTCY CODE), any and all monies or other
     consideration payable or otherwise to be delivered in connection with
     such assignment shall be paid or delivered to Landlord, shall be and
     remain the exclusive property of Landlord and shall not constitute
     property of Tenant or of the estate of Tenant within the meaning of the
     Bankruptcy Code. Any and all monies or other considerations constituting
     Landlord's property under the preceding sentence not paid or delivered
     to Landlord shall be held in trust for the benefit of Landlord and be
     promptly paid or delivered to Landlord.
 
                    (2)  Any person or entity to which this Lease is assigned
     pursuant to the provisions of the Bankruptcy Code, shall be deemed,
     without further act or deed, to have assumed all of the obligations
     arising under this Lease on and after the date of such assignment. Any
     such assignee shall upon demand execute and deliver to Landlord an
     instrument confirming such assumption.
 
          D.   EFFECT OF ASSIGNMENT. Any assignee, sublessee or transferee of
Tenant's interest in this Lease (all such assignees, sublessees and
transferees being hereinafter referred to as TRANSFEREES), by assuming
Tenant's obligations hereunder, shall assume liability to Landlord for all
amounts paid to persons other than Landlord by such Transferees in
contravention of this Paragraph 17. No assignment, subletting or other
transfer, whether consented to by Landlord or not or permitted hereunder
shall relieve the Tenant named herein of any liability hereunder for the
obligations of the "Tenant". If an event of default occurs while the Premises
or any part thereof are assigned or sublet, then Landlord, in addition to any
other remedies herein provided, or provided by law, may collect directly from
such Transferee all rents payable to the Tenant and apply such rent against
any sum due Landlord hereunder. No such collection shall be construed to
constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder.
 
     18.  DEFAULT BY TENANT. The following events (herein individually
referred to as EVENT OF DEFAULT) each shall be deemed to be events of default
by Tenant under this Lease:
 
          A.   Tenant shall fail to pay any installment of the Rent herein
reserved when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of ten (10) days
after receipt of written notice from Landlord; provided, however, that an
event of default will occur without any

 
 
22

 
 
obligation of Landlord to deliver any notice if Landlord has given Tenant
written notice under this Paragraph 18A on two (2) or more occasions during
the twelve (12) month period preceding the current failure by Tenant to
timely pay Rent (though Tenant in such instances is granted a five (5) day
grace period from the date upon which the subject payment was due).
 
          B.   Tenant or any guarantor of the Tenant's obligations hereunder
shall (i) become insolvent; (ii) admit in writing its inability to pay its
debts; (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 a 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 paragraph.
 
          C.   Any case, proceeding or other action against the Tenant or any
guarantor of the Tenant's obligations hereunder shall be commenced seeking
(i) to have an order for relief entered against it as debtor or to adjudicate
it a bankrupt or insolvent; (ii) reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors;
(iii) appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its property, and such case,
proceeding or other action (a) results in the entry of an order for relief
against it which it is not fully stayed within seven (7) business days after
the entry thereof or (b) shall remain undismissed for a period of forty-five
(45) days.
 
          D.   OMITTED.
 
          E.   Tenant shall fail to discharge any lien placed upon the
Premises or the Project in violation of Paragraph 28 hereof within sixty (60)
days after any such lien or encumbrance is filed against the Premises or the
Project; provided, however, that if Tenant in good faith disputes such lien,
Tenant may contest the lien without being in default hereunder provided that
Tenant bonds the lien to Landlord's reasonable satisfaction and the lien is
in any event removed or extinguished no later than one hundred and twenty
(120) days after filing.
 
          F.   Tenant shall fail to comply with any other terms in this Lease
other than those for which an event of default has been described in this
Paragraph 18, and such failure is not cured within thirty (30) days after
written notice thereof to Tenant, such notice to specify the nature of the
default and the action required to cure same, or if such failure cannot
reasonably be cured in thirty (30) days, such time as is reasonable under the
circumstances, not to exceed ninety (90) days, and provided that Tenant must
diligently proceed to cure the default.
 
     19.  LANDLORD'S REMEDIES. Upon the occurrence of any event of default
specified in this Lease, Landlord, at its option, may exercise one (1) or
more of the following remedies, in addition to all other rights and remedies
provided at law or in equity.
 
          A.   Landlord may, without judicial process, terminate this Lease
(whereupon all obligations and liabilities of Landlord hereunder shall
terminate) and without further notice repossess the Premises without having
any liability therefor (including specifically any liability or duty under
Section 93.002 of the Texas Property Code which is specifically superseded by
this Paragraph 19A) and be entitled to recover all loss and damage Landlord
may suffer by reason of such termination, whether through inability to relet
the Premises on satisfactory terms or otherwise, including without
limitation, accrued Rent and interest thereon, accrued late charges and
interest thereon, the unamortized cost of the Tenant Finish Work made at
Landlord's expense pursuant to Paragraph 2 hereof or otherwise, broker's fees
and commissions, attorneys' fees, moving allowance and any other costs
incurred by Landlord in connection with making or executing this Lease, the
cost of recovering the Premises and the costs of reletting the Premises
(including without limitation advertising costs, brokerage fees, leasing
commissions, reasonable attorneys' fees and refurbishing costs). If such
termination is caused by the failure to pay Rent, Landlord may elect, by
sending written notice thereof to Tenant, to receive liquidated damages in an
amount equal to the product of (i) the sum of the all Rent and other charges
payable hereunder for the month during which this Lease is terminated
multiplied by (ii) the lesser of (x) the product of sixty percent (60%)
multiplied by the number of full calendar months which would have remained in
the term of this Lease but for such termination or (y) twenty-four (24). Such
liquidated damages shall be in lieu of the payment of loss and

 
23

 
 
damage accruing after the date of such termination, but shall not be in lieu
of or reduce in any way any amounts or damages payable by Tenant to Landlord
and accruing prior to the date of termination, which for all purpose shall
include, but not be limited to, accrued Rent and interest thereon, late
charges and interest thereon the unamortized cost of the Tenant Finish Work,
broker's fees and commissions, attorneys' fees, any moving allowances and any
other costs incurred by Landlord in connection with making or executing this
Lease. Nothing contained in this Lease shall limit or prejudice the right of
Landlord to prove for and obtain in proceedings for bankruptcy or insolvency
by reason of the termination of this Lease, an amount equal to the maximum
allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether the
amount be greater, equal to, or less than the amount of the loss or damages
referred to above.
 
          B.   Landlord may, without judicial process, immediately terminate
Tenant's right of possession of the Premises by delivering to Tenant written
notice of such termination (whereupon all obligations and liability of
Landlord hereunder shall terminate), but not terminate this Lease, and,
without notice or demand, enter upon the Premises or any part thereof and
take absolute possession of the same, expel or remove Tenant and any other
person or entity who may be occupying the Premises, by force if necessary,
change the locks, without having any liability therefor (including
specifically any liability or duty under Section 93.002 of the Texas Property
Code which is specifically superseded by this Paragraph 19B) and at
Landlord's option, Landlord may relet the Premises or any part thereof for
such terms and such rents as Landlord may in its sole discretion elect. In
the event of a termination of Tenant's possession of the Premises under this
Part B and notwithstanding anything in Section 93.002 of the Texas Property
Code to the contrary, Landlord shall have no obligation whatsoever to tender
to Tenant a key for new locks installed in the Premises and Tenant shall have
no further right to possession of the Premises. In the event Landlord shall
elect so to relet, then rent received by Landlord from such reletting shall
be applied first, to the payment of any indebtedness other than Rent due
hereunder from Tenant to Landlord (in such order as Landlord shall
designate), second, to the payment of any cost of such reletting, including,
without limitation, refurbishing costs, reasonable attorneys' fees,
advertising costs, brokerage fees and leasing commissions, and third, to the
payment of Rent due and unpaid hereunder (in such order as Landlord shall
designate), and Tenant shall satisfy and pay any deficiency upon demand
thereof from time to time. No re-entry or taking of possession of the
Premises by Landlord pursuant to this Paragraph 19B shall be construed as an
election on Landlord's part to terminate this Lease unless a written notice
of such termination is given to Tenant pursuant to Paragraph 19A above and,
notwithstanding any such reletting without termination, Landlord may at any
time thereafter elect to terminate this Lease for such previous breach. If
Landlord relets the Premises, either before or after the termination of this
Lease for a rental rate greater than the Rent provided in this Lease, then
for that portion of the Premises that is subject to such new lease, all such
excess rentals shall be and remain the exclusive property of Landlord, and
Tenant shall not be, at any time, entitled to recover said excess rental.
 
          C.   Landlord may, without judicial process enter upon the
Premises, by force if necessary, without having any civil or criminal
liability therefor (including specifically any liability or duty under
Section 93.002 of the Texas Property Code which is superseded by this
Paragraph 19C), and do whatever Tenant is obligated to do under the terms of
this Lease, and Tenant agrees to reimburse Landlord on demand for any
expenses which Landlord may incur in effecting compliance with Tenant's
obligations under this Lease plus an administrative fee equal to ten percent
(10%) of the amount of such reimbursement. Tenant further agrees that
Landlord shall not be liable for any damages resulting to Tenant from such
action, whether caused by the negligence of Landlord or otherwise.
 
          D.   Any repossession of or re-entering on the Premises by Landlord
under this Article shall be without liability or responsibility for damages
to Tenant. No repossession of or re-entering upon the Premises or any part
thereof pursuant to Paragraphs 19B or 19C or otherwise and no reletting of
the Premises or any part thereof pursuant to Paragraph 19B shall relieve
Tenant or any guarantor of its liabilities and obligations hereunder, all of
which shall survive such repossession or re-entering. In the event of any
such repossession of or re-entering upon the Premises or any part thereof by
reason of the occurrence of an event of default Tenant will continue to pay
to Landlord Rent required to be paid by Tenant.
 
          E.   No right or remedy herein conferred upon or reserved to
Landlord is intended to be exclusive of any other right or remedy, and each
and every right and remedy shall be cumulative and in addition to any other
right or remedy given hereunder or now or hereafter existing at law or in
equity or by statute. In addition to the other remedies provided in this

24

 
Lease, Landlord shall be entitled, to the extent permitted by applicable law,
to injunctive relief in case of the violation, or attempted or threatened
violation, of any of the covenants, agreements conditions or provisions
of this Lease, or to a decree compelling performance of any of the covenants,
agreements, conditions or provisions of this Lease, or to any other remedy
allowed to Landlord at law or in equity. Tenant shall indemnify and hold
Landlord harmless from any and all costs, expenses (including reasonable
attorneys' fees), claims and causes of action arising from or in connection
with any default by Tenant under this Lease.
 
     F.   If Landlord repossesses the Premises pursuant to the authority
herein granted or provided at law or in equity, then Landlord shall have the
right to (i) keep in place and use or (ii) remove and store all of the
furniture, fixtures and equipment at the Premises, including that which is
owned by or leased to Tenant at all times prior to any foreclosure thereon by
Landlord or repossession thereof by any lessor thereof or third party having
a superior lien thereon. Landlord also shall have the right to relinquish
possession of all or any portion of such furniture, fixtures, equipment and
other property to any person (CLAIMANT) who presents to Landlord a copy of
any instrument represented 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 or legality of said instrument. The rights of Landlord
herein stated shall be in addition to any and all other rights that 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.
 
          G.   To the extent required under Texas law, Landlord agrees to use
reasonable efforts to mitigate any of its damages arising from the occurrence
of an event of default by Tenant involving Tenant's abandonment of the
Premises. Tenant agrees that this requirement to use reasonable efforts will
have been satisfied by Landlord: (i) notifying its leasing agent of the
availability of the Premises for rent, and (ii) showing the Premises to
prospective tenants who request to see the Premises and to prospective
tenants referred to Landlord by Tenant. In no event shall Landlord be deemed
not to have mitigated its damages if Landlord chooses to lease some or all of
other space in the Building or the Project or, as applicable, the
Development, to a prospective tenant, rather than some or all of the Premises.
 
     20.  DEFAULT BY LANDLORD AND TENANT'S REMEDIES. If Landlord fails to
perform any of its obligations hereunder within thirty (30) days after
written notice from Tenant specifying such failure, or if such obligations
cannot reasonably be accomplished in thirty (30) days, Landlord has not
commenced performance within such thirty (30) day period and thereafter
diligently prosecutes performance through completion, Tenant's exclusive
remedy shall be an action for actual damages. In no event shall Landlord be
liable to Tenant for consequential, punitive or special damages (or any
similar types of damages) by reason of a failure to perform (or a default) by
Landlord hereunder or otherwise. Unless and until Landlord fails to so cure
any default after such 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 its ownership of the Premises
and not thereafter. The term "Landlord" shall mean only the owner, for the
time being, of the Premises, and in the event of the transfer by such owner
of its interest in the 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
of this Lease upon each new owner for the duration of such owner's ownership.
Notwithstanding any provisions of this Lease to the contrary, the liability of
Landlord to Tenant for any default by Landlord under the terms of this Lease
shall be limited to Landlord's interest in the Project, and Tenant agrees to
look solely to Landlord's interest in the Project and for recovery of any
judgment from Landlord, it being intended and agreed that Landlord shall not
be personally liable for any judgment or deficiency.
 
     21.  BANKRUPTCY.
 
          A.   Notwithstanding anything in this Lease to the contrary, all
amounts payable by Tenant to or on behalf of Landlord under this Lease,
whether or not expressly denominated as Rent, shall constitute rent for the
purposes of Section 502(b)(6) of the Bankruptcy Code.
 
          B.   This a contract under which applicable law excuses Landlord
from accepting performance from (or rendering performance to) any person or
entity other than Tenant within the meaning of Sections 365(c) and 365 (e)(2)
of the Bankruptcy Code.
 
     22.  SECURITY DEPOSIT. Tenant agrees to deposit with Landlord on the
date hereof an amount equal to

 
25

 
 
$24,825.33 which shall be held by Landlord, without obligation for interest,
as security for the performance of Tenant's obligations under this Lease, it
being expressly understood and agreed that this deposit is not an advance
rental deposit or a measure of Landlord's damages in case of Tenant's
default. Upon each occurrence of an event of default by Tenant, Landlord may
use all or part of the deposit to pay past due Rent or other payments due
Landlord under this Lease, and the cost of any other damage, injury, expense
or liability caused by such event of default without prejudice to any other
remedy provided herein or provided by law. On demand, Tenant shall pay
Landlord the amount that will restore the security deposit to its original
amount. The security deposit shall be deemed the property of Landlord, but
any remaining balance of such deposit shall be returned by Landlord to Tenant
when Tenant's obligations under this Lease have been fulfilled and this Lease
terminated, all in accordance with Applicable Laws.
 
     23.  WAIVER OF SECURITY INTEREST. Landlord hereby waives and negates any
and all contractual liens and security interests, statutory liens and
security interests or constitutional liens and security interests arising by
operation of law or otherwise to which Landlord might now or hereafter be
entitled on all property of Tenant now owned or hereafter placed in or upon
the Premises (except for judgment liens which may hereafter arise in favor of
Landlord).
 
     24.  SURRENDER UPON TERMINATION. At the termination of this Lease, by
its expiration or otherwise, Tenant immediately shall deliver possession of
the Premises to Landlord in good condition and repair and with all repairs
and maintenance required herein to be performed by Tenant completed,
including, without limitation, repairs and maintenance of all heating and air
conditioning systems and equipment therein, reasonable wear and tear and
damage due to fire or other casualty excepted. All obligations of Tenant
hereunder not fully performed as of the expiration or earlier termination of
the term of this Lease shall survive the expiration or earlier termination of
the term hereof.
 
     25.  HOLDING OVER. If, for any reason, Tenant retains possession of the
Premises after the expiration or termination of this Lease, unless the
parties hereto otherwise agree in writing, 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 shall be applicable during such period, except that
Tenant shall pay Landlord from time to time, upon demand, as rental for the
period of such possession, an amount equal to 150% of the Base Monthly Rent
in effect on the termination date, computed on a daily basis for each day of
such period. No holding over by Tenant, whether with or without consent of
Landlord, shall operate to extend this Lease except as otherwise expressly
provided. The preceding provisions of this Paragraph 25 shall not be
construed as consent for Tenant to retain possession of the Premises in the
absence of written consent thereto by Landlord. In addition to the above,
Tenant shall be liable to Landlord for Landlord's actual damages resulting as
a result of any holdover by Tenant.
 
     26.  QUIET ENJOYMENT. Landlord covenants that on or before the
Commencement Date it will have good title to the 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,
zoning ordinances and other building and fire ordinances and governmental
regulations relating to the use of such property, and easements, restrictions
and other conditions of record. Landlord agrees 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
Premises for the term of this Lease without hindrance or molestation from
Landlord, subject to the terms and provisions of this Lease.
 
     27.  ENTRY BY LANDLORD. Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any reasonable
time during business hours, to inspect the Premises and to make such repairs
as may be required or permitted pursuant to this Lease or to make such
repairs or installations as are necessary for other tenants in the Building.
During the period that is six (6) months prior to the end of the term of this
Lease, upon telephonic notice to Tenant, Landlord and Landlord's
representatives may enter the Premises during business hours for the purpose
of showing the Premises. In addition, Landlord shall have the right to erect
a suitable sign on the Premises stating the Premises are available. Landlord
shall also have the right (but not the obligation) to enter the Premises at
any time, and by force if necessary, in the case of an emergency. Tenant
shall notify Landlord in writing at least thirty (30) days prior to vacating
the Premises and shall arrange to meet with Landlord for a joint inspection
of the Premises prior to vacating. If Tenant fails to give such notice or to
arrange for such inspection, then Landlord's inspection of the Premises shall
be deemed correct for the purpose of determining Tenant's responsibility for
repairs and restoration of the Premises.

 
26

 
 
     28.  MECHANICS LIENS. Tenant has no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner to bind the interest of Landlord or Tenant in the
Premises or the Project or to charge the Rent payable hereunder for any claim
in favor of any person dealing with Tenant, including those who may furnish
materials or perform labor for any construction or repairs. Tenant covenants
and agrees that it will pay or cause to be paid all sums legally due and
payable by it on account of any labor performed or materials furnished in
connection with any work performed at the Premises or the Project and that it
will indemnify and hold Landlord harmless from and against any and all loss,
cost or expense based on or arising out of asserted claims or liens against
the leasehold estate or against the right, title and interest of Landlord in
the Premises or the Project or under the terms of this Lease. Tenant agrees
to give Landlord immediate written notice of the placing of any lien or
encumbrance against the Premises or the Project.
 
     29.  WAIVER. No waiver by either party hereto of any provision of this
Lease or of any default, event of default or breach by the other shall be
deemed to be a waiver of any other provision of this Lease, or of any
subsequent default, event of default or breach by such party of the same or
any other provision. A party's consent to or approval of any act by the other
that requires such approval or consent shall not be deemed to render
unnecessary the obtaining of such consent to or approval of any subsequent
act of such party. No act or thing done by Landlord or Landlord's agents
during the term of this Lease shall be deemed an acceptance of a surrender of
the Premises, unless done in writing signed by Landlord. The delivery of the
keys to any employee or agent of Landlord shall not operate as a termination
of this Lease or a surrender of the Premises. The acceptance of any Rent by
Landlord following a default, event of default or breach of this Lease by
Tenant shall not constitute a waiver by Landlord of such default, event of
default or breach or any other default, event of default or breach unless
such waiver is expressly stated in writing and signed by Landlord.
 
     30.  SUBORDINATION. Conditioned upon the beneficiary of any mortgages
and/or deeds of trust now existing or hereafter placed upon the Premises
entering into an agreement (herein an ATTORNMENT AGREEMENT) with Tenant in
which such beneficiary agrees not to disturb the possession and other rights
of Tenant under this Lease so long as Tenant is not in default in the
performance of its obligations hereunder, and, in the event of the
acquisition of title by such beneficiary through foreclosure proceedings or a
deed in lieu of foreclosure, to accept Tenant as tenant of the Premises under
the terms and conditions of this Lease, Tenant accepts this Lease subject and
subordinate to any mortgages and/or deeds of trust now or hereafter
constituting a lien or charge upon the Premises, provided, however, that if
the mortgagee, trustee, or holder of any such mortgage or deed of trust
elects to have Tenant's interest in this Lease superior to any such
instrument, then by notice to Tenant from such mortgagee, trustee or holder,
this Lease shall be deemed superior to such lien, whether this Lease was
executed before or after said mortgage or deed of trust.  Subject to the
foregoing, Tenant, at any time hereafter on demand, shall execute any
instruments, releases or other documents that may be required by any
mortgagee for the purpose of subjecting and subordinating this Lease to the
lien of any such mortgage.  For purposes of this section, Landlord will be
deemed to have satisfied the condition of obtaining an Attornment Agreement
if the form thereof required by the mortgagee is a type of form that is
customarily given by institutional lenders, provided that Tenant shall have
the right to attempt to negotiate more favorable terms.
 
     31.  TENANT ESTOPPELS.  Tenant agrees, from time to time, within ten
(10) days after request of Landlord to deliver to Landlord, or Landlord's
designee, a certificate of occupancy and an estoppel certificate stating that
this Lease is in full force and effect, the date to which Rent has been paid,
the unexpired term of this Lease and such other factual matters pertaining to
this Lease as may be requested by Landlord. It is understood and agreed that
Tenant's obligation to furnish such estoppel certificates in a timely fashion
is a material inducement for Landlord's execution of this Lease.
 
     32.  NOTICES. All notices, requests, approvals, and other communications
required or permitted to be delivered under this Lease must be in writing and
are effective (i) on the business day sent if sent by telecopier during
normal business hours and the sending telecopier generates a written
confirmation of sending, (ii) the next business day after delivery to a
nationally-recognized-overnight-courier service for prepaid overnight
delivery; (iii) if orderly delivery of the mail is not then disrupted or
threatened, in which event some method of delivery other than the mail must
be used, three (3) days after being deposited in the United States mail,
certified, return receipt requested, postage prepaid; or (iv) upon actual
receipt by the addressee if delivered personally or by any method other than
by telecopier (with written confirmation),
nationally-recognize-overnight-courier service, or mail, in each instance
addressed to Landlord or Tenant,

 
27

 
 
as the case may be, addressed:
 
     if to Landlord, as follows:
 
                                   MEPC Quorum Properties II Inc.
                                   15303 Dallas Parkway, Suite 100, LB 10
                                   Dallas, Texas 75248
                                   Attn: Property Manager
                                   Telecopy: (972) 851-7012
 
     and, if to Tenant, as follows:
 
                                   Mannatech, Inc.
                                   600 S. Royal Lane
                                   Suite 200
                                   Coppell, Texas 75019
                                   Attn: Ronald E. Kozak
                                   Telecopy: (972) 471-7389
 
or to such other address or to the attention of such other person as shall be
designated by the applicable party and on fifteen (15) days notice from time to
time in writing and sent in accordance herewith.
 
     33.  PARKING. Tenant and its employees, customers and licensees shall
have the exclusive right to use any parking areas that have been specifically
designated for such exclusive use by Landlord on the Site Plan, subject to
(i) all rules and regulations promulgated by Landlord in its reasonable
discretion, and (ii) rights of ingress and egress of other lessees of the
Project or the Development, as applicable. Tenant and its employees,
customers and licensees shall not have the right to use any parking area that
are from time to time specifically designated by Landlord for exclusive use
by another lessee, except to the extent necessary for ingress and egress.
Landlord shall not be responsible for enforcing Tenant's parking rights
against any third parties. Tenant agrees not to use more spaces than so
provided.
 
     34.  OPTION TO RENEW.
 
          A.   If Tenant is not in default under this Lease at the time of the
exercise of this option or at the commencement of the applicable Lease Term
extension, Tenant is granted the option (the OPTION) to extend the Lease Term
for one (1) extension term of five (5) years commencing on the next day after
the expiration of the initial Lease Term by giving Landlord all extension
notice at least nine (9) months, but not more than twelve (12) months, prior
to the expiration of the initial Lease Term. Tenant's lease of the Premises
during the extended Lease Term will be upon the same terms as in the Lease
for the initial Lease Term, except that (i) Base Monthly Rent will adjust on
the first day of the extended Lease Term to the Market Rate (defined below),
and (ii) during the extended Lease Term Tenant will have no further options
or rights to extend the Lease Term.
 
          B.   Within thirty (30) days after Landlord receives Tenant's written
notice of its exercise of the Option, Landlord shall deliver a notice to Tenant
(the MARKET RATE NOTICE) specifying the Market Rate for the extended Lease Term,
such to be based upon Landlord's reasonable and good-faith determination of
rents being charged for comparable space in similar properties in the
Freeport North Industrial Park, Coppell, Texas, for terms commensurate with
the extended Lease Term and for tenants similarly situated. Tenant shall have
fifteen (15) days (the EXAMINATION PERIOD) from its receipt of the Market
Rate Notice to accept or reject Landlord's designation of the Market Rate. If
Tenant accepts Landlord's designation of the Market Rate, the MARKET RATE
will be as set forth in the Market Rate Notice, and Tenant's election to
exercise the Option shall be irrevocable. If Tenant fails to accept in
writing Landlord's designation of the Market Rate set forth in the Market
Rate Notice during the Examination Period, Tenant shall be deemed to have
rejected Landlord's designation of the Market Rate.  If Tenant rejects or is
deemed to have rejected Landlord's designation of the Market Rate and
Landlord and Tenant cannot agree in writing on the Market Rate within the
earlier to occur of (i) fifteen (15) days after the date Landlord receives
Tenant's written rejection of Landlord's designation of

 
28

 
 
the Market Rate set forth in the Market Rate Notice, or (ii) fifteen (15)
days after the expiration of the Tenant is deemed to have rejected Landlord's
designation of the Market Rate as set forth in the Market Rate Notice (in
either of such instances, the NEGOTIATION PERIOD), then Tenant will be deemed
to have elected to revoke its exercise of the Option, and this Lease will
expire in accordance with Paragraph 1 above.
 
          C.   Tenant may not assign the Option to any assignee (except an
Affiliate) or sublessee of this Lease. No sublessee and no assignee (except an
Affiliate) may exercise the Option.
 
          D.   If the Lease Term is extended under this Paragraph 34, Landlord
shall prepare, and Landlord and Tenant will execute and deliver an amendment
to the Lease extending the Lease Term within fifteen (15) days after the
Market Rate is determined but in no event later than the date that the
applicable extension term commences; provided, however, that the failure of
the parties to enter into such an amendment will not affect the validity of
Tenant's exercise of the Option or the obligations of the parties during the
extended Lease Term.
 
     35.  RIGHT OF FIRST REFUSAL ON ADJACENT SPACE.
 
          A.   If at any time during the first three (3) years of the Lease
Term Landlord receives a bona fide offer from a third party (the THIRD PARTY
OFFER) for the lease of that space shown on the Site Plan as the Refusal
Space, such consisting of approximately 24,600 square feet, or any portion
thereof, that Landlord wants to accept, and conditioned upon Tenant not then
being in default hereunder, Landlord will first provide Tenant with written
notice (the REFUSAL NOTICE) thereof. Tenant will have seven (7) business days
(the REFUSAL PERIOD) from the date it receives the Refusal Notice to elect to
lease all, but not less than all, of the Refusal Space. If Tenant has not
notified Landlord in writing of such election prior to the expiration of the
Refusal Period, then Tenant shall be deemed to have elected not to lease the
Refusal Space. If Tenant timely and properly elects to lease the Refusal
Space, such lease, shall be on the same terms and conditions for the
Premises, as defined in Paragraph 1 above, provided that Base Monthly Rent
and Adjustments shall be increased proportionately and further provided that
the Work Allowance for the Refusal Space shall be an amount equal to the
product of $3.00 per square foot of the actual Refusal Space multiplied by a
fraction, the numerator of which is the number of months then remaining in
the Lease Term (without giving effect to any option to extend the Lease Term)
and the denominator of which is 122. Tenant's election to lease the Refusal
Space shall be irrevocable once given and from and after the date thereof,
the term PREMISES shall mean and include not only the Premises as defined in
Paragraph 1 above, but also the Refusal Space.
 
          B.   In the event Tenant does not elect (or is deemed to have not
elected) to lease the Refusal Space, Landlord shall have a period of two
hundred seventy (270) days from the date the Refusal Period expires (the
MARKETING PERIOD) to market the Refusal Space, or any portion thereof, for
lease on terms wholly within Landlord's discretion and during which period
Landlord will not have any obligations to Tenant under this Paragraph 35. If
Landlord has not entered into a binding lease with a third party during the
Marketing Period, the right of first refusal set forth in this Paragraph 35
shall again become effective and Landlord may not lease the Refusal Space, or
any portion thereof, without compliance with this Paragraph 35; provided,
however, that all rights of Tenant in and under this Paragraph 35 shall in
any event expire on that date which is the third anniversary of the date of
this Lease if not exercised by Tenant prior to such time.
 
          C.   Tenant may not assign its rights under this Paragraph 35 to
any assignee or sublessee of this Lease, nor may any sublessee or assignee
have any rights under this Paragraph 35.
 
          D.   If Tenant leases the Refusal Space, Landlord shall prepare,
and Landlord and Tenant will execute and deliver an amendment to the Lease
confirming the lease of the Refusal Space and the new Base Monthly Rent and
Adjustments; provided, however, that the failure of the parties to enter into
such an amendment will not affect the validity of Tenant's lease of the
Refusal Space or the obligations of the parties with respect thereto.
 
     36.  MISCELLANEOUS.
 
          A.   REQUIRED CONSENT. To the extent the approval or consent is
required of any party hereto, such party agrees that such consent or approval
may not be unreasonably withheld, delayed or conditioned unless the provision

 
29

 
 
where the requirement for such consent or approval is imposed includes an
express statement that such approval or consent may be withheld in such
party's sole discretion.
 
          B.   FINANCIAL STATEMENTS. During each Lease Year, and upon written
request by Landlord, Tenant shall provide to Landlord true, correct and complete
copies of Tenant's year end financial statements and quarterly, non-audited,
balance sheets certified by the chief financial officer (or its equivalent) of
Tenant.
 
          C.   CONFIDENTIALITY. Tenant shall keep the terms and provisions of
this Lease confidential at all times and not disclose the terms and provisions
hereof to any party without Landlord's prior written consent, which may be
withheld by Landlord in its sole discretion. Landlord hereby consents to the
disclosure of the terms and provisions of this Lease to employees of Tenant,
Tenant's attorneys and to any financial institution Tenant is seeking financing
from in connection with this Lease and/or Tenant's operations at the Premises.
The terms of this paragraph and Tenant's agreement thereto are a material
inducement to Landlord entering into this Lease, and Tenant agrees that Landlord
may be severely damaged by a breach of this paragraph and the confidentiality
obligations herein contained. Tenant agrees that in the event of a breach of
this paragraph, Landlord may, in addition to any other remedies it may have
under this Lease or at law or equity, seek injunctive relief against Tenant
and/or recover damages from Tenant.
 
          D.   HEADINGS/GENDER. Words of any gender used in this Lease shall
be held and construed to include any other gender, and words in the singular
number shall be held to include the plural, unless the context otherwise
requires. The captions inserted in this Lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this Lease,
or any provision hereof, or in any way affect the interpretation of this
Lease.
 
          E.   RUN WITH THE LAND. The terms, provisions and covenants and
conditions contained in this Lease shall run with the land and shall apply to,
inure to the benefit of, and be binding upon, the parties hereto and upon their
respective heirs, executors, personal representatives, legal representatives,
successor and assigns, except as otherwise herein expressly provided.  Landlord
shall have the right to transfer and assign, in whole or in part, its rights and
obligations in the Premises, Building and/or Project that are the subject of
this Lease. Each party agrees to furnish to the other, promptly upon demand,
a corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this Lease.
 
          F.   ORGANIZATION AND AUTHORITY.
 
               (i) Tenant represents and warrants to Landlord that (i) Tenant is
     a duly organized and existing Texas corporation and has the full right and
     authority to enter into this Lease and to perform all of its obligations
     hereunder, (ii) all requisite authorizing actions have been taken by Tenant
     in connection with the entering into of this Lease, and (iii) each of the
     persons signing this Lease on behalf of Tenant is authorized to do so. Upon
     request by Landlord, Tenant will provide a certified copy of the
     resolutions of the board of directors of Tenant authorizing the entering
     into of this Lease by Tenant and the execution hereof by the persons who
     sign this Lease on behalf of Tenant;
 
               (ii) Landlord represents and warrants to Tenant that (i) Landlord
     is a duly organized and existing Delaware corporation and has the full
     right and authority to enter into this Lease and to perform all of its
     obligations hereunder, (ii) all requisite authorizing actions have been
     taken by Landlord in connection with the entering into of this Lease, and
     (iii) each of the persons signing this Lease on behalf of Landlord is
     authorized to do so. Upon request by Tenant, Landlord will provide a
     certified copy of the resolutions of the board of directors of Landlord
     authorizing the entering into of this Lease by Landlord and the execution
     hereof by the persons who sign this Lease on behalf of Landlord.
 
          G.   RECORDING. Tenant may not record this Lease or any memorandum
thereof.
 
          H.   ENTIRE AGREEMENT. This Lease constitutes the entire
understanding and agreement of the Landlord and Tenant with respect to the
subject matter of this Lease, and contains all of the covenants and
agreements of Landlord and Tenant with respect thereto. Landlord and Tenant
each acknowledge that no representations, inducements, promises or
agreements, oral or written, have been made by Landlord or Tenant, or anyone
acting on behalf of Landlord or Tenant, which are not contained herein, and
any prior agreements, promises, negotiations, or representations not
expressly

 
30

 
 
set forth in this Lease are of no force or effect. This Lease may not be
altered, changed or amended except by all instrument in writing signed by
both parties hereto.
 
          I.   FORCE MAJEURE. As used in this Lease, FORCE MAJEURE shall mean
a delay caused by reason of fire, acts of God, unreasonable delays in
transportation, embargo, weather (I.E., rain and rain related conditions,
humidity, temperature, wind, etc.), strike, other labor disputes,
governmental preemption of priorities or other controls in connection with a
national or other public emergency, governmental delays in permitting, delays
caused by any governmental disapproval of, or required revisions to, the
Finish Plans, or shortages of fuel, supplies or labor or any similar cause
not within Landlord's reasonable control.  Landlord shall not be held
responsible for delays in the performance of its obligations hereunder caused
by Force Majeure, and such delays shall be excluded from the computation of
the time allowed for the performance of such obligations. It is expressly
agreed that the number of delay days may include not only the day or days
upon which the event of Force Majeure occurred but the number of days
thereafter that work could not resume due to the occurrence of such event of
Force Majeure. By way of example only, rain on a Sunday, which is not
scheduled as a normal work day, may prevent work for several days thereafter
due to mud conditions.
 
          J.   SEVERABILITY. If any clause or provision of this Lease is
illegal, invalid, or unenforceable under present or future laws effective
during the term of this Lease, then and in that event, it is the intention of
the parties hereto that the remainder of this Lease shall not be affected
thereby, and it is also the intention of the parties to this Lease that in
lieu of each clause or provision of this Lease that is illegal, invalid or
unenforceable, there be added, as a part of this Lease, 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.
 
          K.   DATE OF LEASE. All references in this Lease to "the date
hereof" or similar references shall be deemed to refer to the last date, in
point of time, on which all parties hereto have executed this Lease.
 
          L.   BROKERS.
 
                    (1) Tenant represents and warrants that, except for The
     Amend Group (BROKER), Tenant has not dealt with any broker, agent or other
     person in connection with this transaction and that, except for Broker, no
     broker, agent or other person brought about this transaction through the
     acts of or employment by Tenant, and, except with respect to any commission
     or fee owed to Broker, Tenant agrees to indemnify and hold Landlord
     harmless from and against any claims by any broker, agent or other person
     claiming a commission or other form of compensation by virtue of having
     dealt with Tenant with regard to this leasing transaction.
 
                    (2)  Landlord represents and warrants that, except for
     Broker, Landlord has not dealt with any broker, agent or other person in
     connection with this transaction and that, except for Broker, no broker,
     agent or other person brought about this transaction through the acts of
     or employment by Landlord. Landlord has agreed to pay Broker a commission
     pursuant to a separate written agreement between Landlord and Broker, and
     Landlord agrees to indemnify and hold Tenant harmless from and against any
     claims by Broker or any broker, agent or other person claiming a commission
     or other form of compensation by virtue of having dealt with Landlord with
     regard to this leasing transaction.
 
          M.   COUNTERPARTS. This Lease may be executed in counterparts, each
being deemed an original, but together constituting only one instrument.
 
          N.   TIME FOR PERFORMANCE. TIME IS OF THE ESSENCE WITH RESPECT TO ALL
PERFORMANCE OBLIGATIONS CONTAINED IN THIS LEASE.
 
          O.   ATTORNEYS FEES. In the event it becomes necessary for either
party hereto to file a suit to enforce this Lease or any provisions contained
herein, the party prevailing in such action shall be entitled to recover, in
addition to all other remedies or damages, reasonable attorneys fees incurred
in such suit.
 
          P.   LAW GOVERNING. This Lease shall be construed and interpreted in
accordance with the laws of the

 
31

 
 
State of Texas and the obligations of the parties hereto are and shall be
performable in, and venue for any claim or cause of action shall reside in,
Dallas County, Texas.
 
          Q.   AMENDMENTS. This Lease may not be modified or amended, except
by an agreement in writing signed by Landlord and Tenant. The parties may
waive any of the conditions contained herein or any of the obligations of the
other party hereunder, but any such waiver shall be effective only if in
writing and signed by the party waiving such conditions or obligations,
except as specifically set forth herein.
 
     EXECUTED BY Landlord, this 29TH day of MAY, 1997.
 
                                       MEPC QUORUM PROPERTIES II INC., a
                                       Delaware corporation

                                       By: /s/ PETER JOHNSON
                                          ----------------------------------
                                       Name:   PETER JOHNSON
                                            --------------------------------
                                       Title:  Executive Vice President
                                             -------------------------------

                                       By: /s/ DAVID L. CARLSON
                                          ----------------------------------
                                       Name:   DAVID L. CARLSON
                                            --------------------------------
                                       Title:  Vice President
                                             -------------------------------

     EXECUTED BY Tenant, this 29TH day of MAY, 1997.
 
                                       MANNATECH, INC., a Texas corporation

                                       By: /s/ CHARLES E. FIORETTI
                                          ----------------------------------
                                       Name:   CHARLES E. FIORETTI
                                            --------------------------------
                                       Title:  Chairman of the Board
                                             -------------------------------

 
EXHIBITS:
 
Exhibit A: Legal Description of 28 Acre Tract
Exhibit B: Shell Building Construction Features
Exhibit C: Site Plan
Exhibit D: Omitted
Exhibit E: Acceptance of Premises Memorandum
Exhibit F: Contractor Insurance Requirements

 
 
32

 
 
                                 EXHIBIT "A"
 
                    LEGAL DESCRIPTION OF 28 ACRE TRACT
 
Being a tract or parcel of land situated in the William S. Payne Survey,
Abstract No. 1140 and the C. S. Dunnagan Survey, Abstract No. 1655, City of
Coppell, Dallas County, Dallas, Texas, same being a portion of "Freeport
North", a Preliminary-Final Plat recorded in Volume 84203, Page 1835, Dallas
County Plat Records, same also being all of that certain 27.8527 acre Tract 5
conveyed to T/E Freeport North Land, Ltd. by instrument of record in Volume
94222, Page 1168, Dallas County Deed Records, said tract being more
particularly described by metes and bounds as follows:
 
BEGINING at a 1/2 inch iron rod set in the Easterly line of that certain
157.929 acre tract of land conveyed to San Antonio Savings Association, F.A.
by instrument of record in Volume 92104, Page 4313, Dallas County Deed
Records, same being in the Northwesterly corner of said 27.8527 acre tract,
same being in the Southerly line of Northpoint Drive, 80 feet wide, from
which a 1/2 inch iron rod found bears North 00 degrees 13 minutes 53 seconds
West, 80.21 feet;
 
THENCE, along said Southerly line, South 89 degrees 45 minutes 41 seconds
East, 1268.29 feet to a 1/2 inch iron rod set for corner;
 
THENCE, continuing along said Southerly line, South 28 degrees 41 minutes 54
seconds East, 14.50 feet to a 1/2 inch iron rod set for corner in the
Westerly line of Royal Lane, 100 feet wide;
 
THENCE, along said Westerly line the following five (5) courses:
 
     1)  81.48 feet along the arc of a non-tangent curve to the right having
         a radius of 950.00 feet, a central angle of 04 degrees 54 minutes 51
         seconds and a chord bearing and distance of South 35 degrees 16 minutes
         31 seconds West, 81.45 feet to a 1/2 inch iron rod set for a point of
         tangency;
 
     2)  South 37 degrees 43 minutes 57 seconds West, 170.92 feet to a 1/2
         inch iron rod set for the beginning of a curve;
 
     3)  684.33 feet along the arc of a tangent curve to the left having a
         radius of 1050.00, a central angle of 37 degrees 20 minutes 31 seconds
         and a chord bearing and distance of South 19 degrees 03 minutes 41
         seconds West, 672.28 feet to a 1/2 inch iron rod set for a point of
         tangency;
 
     4)  South 00 degrees 23 minutes 26 seconds West, 279.79 feet to a 1/2
         inch iron rod set for corner;
 
     5)  South 45 degrees 23 minutes 26 seconds West, 21.21 feet to a 1/2
         inch iron rod set for corner in the Northerly line of Gateview
         Boulevard, 60 feet wide;
 
THENCE, departing said Westerly line and along said Northerly line the
following four (4) courses:
 
     1)  North 89 degrees 36 minutes 34 seconds West, 150.17 feet to a 1/2
         inch iron rod set for the beginning of a curve;
 
     2)  299.43 feet along the arc of a tangent curve to the left having a
         radius of 530.00 feet, a central angle of 32 degrees 22 minutes 11
         seconds and a chord bearing and distance of South 74 degrees 12
         minutes 20 seconds West, 295.46 feet to a 1/2 inch iron rod set for
         a point of reverse curvature;
 
     3)  262.43 feet along the arc of a tangent curve to the right having a
         radius of 470.00 feet, a central angle of 32 degrees 00 minutes 00
         seconds and a chord bearing and distance of South 74 degrees 01 minutes
         15 seconds West, 259.10 feet to a 1/2 inch iron rod set for a point
         of tangency;
 
     4)  North 89 degrees 58 minutes 45 seconds West, 199.72 feet to a 1/2
         inch iron rod set for corner in the common line of said 157.929 acre
         tract and said 27.8527 acre tract;
 
THENCE along said common line, North 00 degrees 02 minutes 58 seconds East,
305.12 feet to a 5/8 inch iron rod found for corner:
 
THENCE continuing along said common line, North 00 degrees 13 minutes 53
seconds West, 995.31 feet to the POINT OF BEGINNING and CONTAINING 27.8527
acres, 1,213,263 square feet, more or less, of land area within these metes
and bounds.

 
33

 
 
                                   MANNATECH
 
                                   EXHIBIT B
 
                     SHELL BUILDING CONSTRUCTION FEATURES

SHELL BUILDING CONSTRUCTION FEATURES
 
  -   Painted exterior concrete tilt wall construction
  -   30' Clear Height to the bottom of the roof joist
  -   40' x 41' column bay dimensions
  -   Four-ply built-up roof system
  -   6" thick reinforced concrete floor slab
  -   6" thick reinforced concrete truck paving
  -   5" thick reinforced concrete car parking
  -   ESFR fire sprinkler system
  -   (9) 9' x 10' Vertical lift overhead doors
  -   (5) 30,000 CFM Rooftop exhaust fans
  -   4' x 4' skylights
  -   The building Fire Pump Room (approx. 12' x 18') is located
       within this lease space

 
CLARIFICATIONS AND EXCLUSIONS
 
  -   Fire alarm, security, and/or phone systems excluded
  -   In-rack fire sprinklers or modifications to overhead system excluded
  -   Dumpster/compactor power and/or screening excluded
  -   Draft curtains or modifications/additions to smoke removal
       system are excluded

34

 
 
         EXHIBIT "C"
 
                                  [FLOORPLAN]

35

 
 
                                   EXHIBIT "D"
 
                                     OMITTED

 
36

 
 
                                   EXHIBIT "E"
 
                        ACCEPTANCE OF PREMISES MEMORANDUM
 
          This memorandum is being executed pursuant to the Commercial Lease
Agreement (the LEASE) executed on the ___ day of ______, 1997, between MEPC
QUORUM PROPERTIES II INC., a Delaware corporation (LANDLORD), and MANNATECH,
INC., a TEXAS (TENANT).
 
Landlord and Tenant hereby agree that:
 
1.   Tenant acknowledges that (i) it has inspected and accepts the Building and
     the Project, (ii) the Premises is suitable for the purpose for which it is
     leased, subject to completion by Tenant of any finish work Tenant requires,
     (iii) the Building and the Project are in good and satisfactory condition,
     and (iv) no representations as to the repair of the Premises or the
     Project, nor promises to alter, remodel or improve the Premises or the
     Project which have been made by Landlord remain unsatisfied.
 
2.   The Commencement Date of the Lease is the ____ day of _________, 199__.
 
3.   The Rent Commencement Date of the Lease is the ____ day of _______, 199__.
 
4.   The expiration date of the Lease is the ____ day of _________, 1997___.
 
5.   All capitalized terms not defined herein shall have the meaning assigned to
     them in the Lease.
 
Agreed and Executed this ___ day of _______, 1997.
 
LANDLORD                                   TENANT
 
MEPC QUORUM PROPERTIES II INC.,            MANNATECH, INC., a TEXAS corporation
     a Delaware corporation

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

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

 
37

 
 
                                   EXHIBIT "F"

                        CONTRACTOR INSURANCE REQUIREMENTS
 
All contractors, subcontractors, suppliers, service providers, moving companies,
and others performing work of any type for Tenant at the Premises shall:
 
     -    carry the insurance listed below with companies acceptable to
          Landlord; and
 
     -    furnish Certificates of Insurance to Landlord evidencing required
          coverages at least ten (10) days prior to entry in the Premises and
          Renewal Certificates at least thirty (30) days prior to the expiration
          dates of Certificates previously furnished.
 
Certificates of Insurance must provide for thirty (30) days' prior written
notice of cancellation or material change to Landlord.
 
(1)  WORKERS COMPENSATION: Statutory workers compensation insurance covering
     full liability under applicable Workers Compensation Laws at the required
     statutory limits.
 
(2)  EMPLOYERS' LIABILITY: Employers' liability insurance with the following
     minimum limits of liability:
 
          $100,000  Each Accident
          $500,000  Disease-Policy Limit
          $100,000  Disease-Each Employee

(3)  COMMERCIAL GENERAL LIABILITY: This insurance policy must:
 
     (a)  Be written on a standard liability policy form (sometimes known as
          commercial general liability insurance) BUT WITHOUT exclusionary
          endorsements that may delete coverage for products/completed
          operations, personal and advertising injury, blanket contractual,
          fire legal liability, or medical payments.
 
     (b)  Be endorsed to provide that:
 
          -    aggregate limits, if any, apply separately to each of the
               insured's jobs or projects away from premises owned by or rented
               to the insured;
 
          -    the insurance is primary and non-contributory to any insurance
               provided by Landlord; and
 
          -    include the following minimum limits:
 
               $1,000,000     General Aggregate
               $1,000,000     Products-Completed Operations Aggregate
               $1,000,000     Personal & Advertising Injury
               $1,000,000     Each Occurrence
               $   50,000     Fire Damage (Any one fire)
               $    5,000     Medical Expense (Any one person)

(4)  AUTOMOBILE LIABILITY: Automobile liability insurance for claims of
     ownership, maintenance, or use of owned, non-owned, and hired motor
     vehicles at, upon, or away from the Premises with the following minimum
     limits:
 
                 $500,000     Combined Single Limit Bodily Injury and Property
                              Damage per Occurrence

 
38

 
 
(5)  EXCESS LIABILITY: Following form excess liability insurance with coverages
     at least as broad as the required commercial general liability insurance
     with the following minimum limits:
 
               $1,000,000     Each Occurrence
               $2,000,000     Aggregate

(6)  GENERAL REQUIREMENTS: All policies must be:
 
     -    written on an occurrence basis and not on a claims-made basis;
 
     -    endorsed to name as additional insureds Landlord, and its respective
          officers, directors, employees, agents, partners, and assigns;
 
     -    endorsed to waive any rights of subrogation against Landlord and its
          respective officers, directors, employees, agents, partners, and
          assigns; and
 
     -    primary and non-contributing with, and not in excess of, any other
          insurance available to Tenant and Landlord (or any other entity
          named as an additional insured).

 
39

 
 
                 FIRST AMENDMENT TO COMMERCIAL LEASE AGREEMENT
 
     THIS FIRST AMENDMENT TO COMMERCIAL LEASE AGREEMENT (this "AMENDMENT") is
entered into by and between MEPC QUORUM PROPERTIES II INC., a Delaware
corporation (LANDLORD) and MANNATECH, INC., a Texas corporation (TENANT)
effective as of November 6, 1997.
 
     A.   Landlord and Tenant have heretofore entered into a Commercial Lease
Agreement (the LEASE) pursuant to which Landlord leased to Tenant
approximately 74,476 square feet in the Building (as defined in the Lease)
located on the Land described on EXHIBIT "A" attached to the Lease and
located in the Freeport North Industrial Park, Coppell, Texas;
 
     B.   Landlord and Tenant now wish to amend the Lease.
 
     NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which being hereby acknowledged, Landlord and Tenant hereby
agree as follows:
 
     1.   COMMENCEMENT DATE. Landlord and Tenant agree that the COMMENCEMENT
DATE, as that term is used in the Lease, as amended hereby, shall be October
27, 1997.
 
     2.   IMPROVEMENTS/TENANT FINISH. Paragraph 2 of the Lease shall be, and
hereby is, deleted and replaced with the following Paragraph 2:
 
          "2.  IMPROVEMENTS TO BE CONSTRUCTED BY LANDLORD
 
               A.   BUILDING. Landlord agrees to construct on the Land an
     approximate 297,902 square foot warehouse building structure (the BUILDING)
     containing the features generally described on EXHIBIT "B" attached hereto
     and incorporated herein by reference and generally situated as shown on the
     Site Plan (herein so called) attached hereto as EXHIBIT "C" and
     incorporated herein by reference.
 
               B.   TENANT FINISH.  Landlord agrees to construct within the
     Premises the improvements described in the plans and specifications
     prepared by Meinhardt & Quintana (ARCHITECT) and set forth on EXHIBIT "G"
     attached hereto and incorporated herein by reference (collectively, the
     FINISH PLANS). The improvements to be constructed pursuant to the Finish
     Plans are collectively referred to herein as the TENANT FINISH WORK). The
     Building, the Tenant Finish Work and any other improvements constructed by
     Landlord on the Land from time to time, whether pursuant to this Lease or
     otherwise, are collectively referred to herein as the IMPROVEMENTS.

40

 
               C.   CONSTRUCTION COSTS. Subject to the terms of this paragraph,
     Landlord will pay (i) the cost of all Tenant Finish Work up to, but not in
     excess of the $220,928.00 (the WORK ALLOWANCE), which includes any costs
     incurred by Landlord in connection with the preparation of the Finish
     Plans, and (ii) the cost of constructing the Building and any other
     improvements described on EXHIBIT "B". Notwithstanding the preceding
     sentence, Tenant shall be responsible for the following:
 
                         (1)  If prior to commencement of the Tenant Finish Work
          Landlord determines that the actual cost of the Tenant Finish Work
          will exceed the Work Allowance, or if during construction the actual
          cost of the Tenant Finish Work exceeds the Work Allowance, Landlord
          will not be obligated to commence the Tenant Finish Work or continue
          its construction until it receives from Tenant ten percent (10%) of
          the estimated cost by which such amount is in excess, in Landlord's
          estimation, of the Work Allowance, with the actual amount of such
          excess, less the initial payment by Tenant, being due on the Rent
          Commencement Date.
 
                         (2)  If Tenant requests any redrawing of the Finish
          Plans, Tenant will be responsible for the costs of any redrawing of
          such plans in connection with such change(s) and shall reimburse
          Landlord for such costs upon demand.
 
                         (3)  If Landlord performs, at Tenant's request, any
          work over and above the work generally described in the Finish Plans
          or described on EXHIBIT "B" (herein, the ADDITIONAL WORK), including
          any additional work which has been approved by written change order
          or work order, then, subject to the exhaustion of the Work Allowance,
          the Additional Work together with the cost of preparing plans and
          specifications for same will be at Tenant's expense. Landlord will not
          be obligated to perform any such Additional Work until Tenant pays
          Landlord ten percent (10%) of the estimated cost
          of the Additional Work, as estimated by Landlord, with the actual cost
          of the Additional Work, less the initial payment by Tenant, being due
          on the Rent Commencement Date.
 
                         (4)  All costs or expenses incurred or suffered by
          Landlord that are caused by Tenant Delays. A TENANT DELAY(S) shall
          mean any delay in the completion of the Improvements or any delay in
          the occurrence of the Commencement Date caused by a Tenant Party,
          including, without limitation, any delay resulting from the
          installation by Tenant or any Tenant Party of any property or
          equipment of Tenant in or on the Premises prior to the Rent
          Commencement Date, any delay resulting from any request by Tenant for
          any change or modification to the Finish Plans, any delay caused by
          any Additional Work requested by Tenant, and any delay due to
          interference by Tenant or any Tenant Party with Landlord's engineers,
          consultants, contractors or otherwise. As used in this Lease, a TENANT
          PARTY shall mean one or more of Tenant, its agents, employees,
          officers, partners or contractors.

41

 
     Additionally, Landlord shall receive an administration fee in the total
     amount of 2.50% of the total construction costs of the Tenant Finish Work,
     as determined by the general contract for the Tenant Finish Work, as same
     may be modified by work or change orders.  Such fee shall be charged
     against the Work Allowance upon the entering into of such general contract
     and at the time the cost of any Additional Work is determined. If there is
     no remaining balance of the Work Allowance at any time the administration
     fee is owed, such shall be paid by Tenant upon demand. Lastly, all
     oversight costs charged by Architect in connection with the Tenant Finish
     Work shall be charged against the Work Allowance until exhausted and
     thereafter paid by Tenant upon demand.
 
               D.  MANNER OF CONSTRUCTION. Landlord agrees to construct the
     Improvements in a good and workmanlike manner.
 
               E.  OWNERSHIP OF IMPROVEMENTS.  All Tenant Finish Work and the
     other Improvements constructed by or on behalf of Landlord shall at all
     times be the sole property of Landlord."
 
     3.   RENT COMMENCEMENT/ACCEPTANCE OF PREMISES. Paragraph 3 of the Lease
shall be, and hereby is, deleted and replaced with the following:
 
     "3.  RENT COMMENCEMENT DATE/ACCEPTANCE OF PREMISES.
 
               A.  RENT COMMENCEMENT DATE. The RENT COMMENCEMENT DATE shall be
     the earlier to occur of (i) ninety (90) days after the Commencement Date,
     or (ii) the date Tenant takes possession or commences use of the Premises
     for any purpose other than merely to perform any work that may be permitted
     under Paragraph 6 below.
 
               B.  ACCEPTANCE OF PREMISES. Not less than five (5) days prior to
     the date Landlord estimates the Tenant Finish Work will be substantially
     complete Landlord will notify Tenant of the estimated date that the Tenant
     Finish Work will be substantially completed.  The term SUBSTANTIALLY
     COMPLETED or SUBSTANTIALLY COMPLETE as used herein, means that, in the
     reasonable opinion of Landlord's architect, the Tenant Finish Work has been
     completed in substantial accordance with the Finish Plans and that the
     Premises is in good and satisfactory condition, subject only to completion
     of minor punch list items.  Upon receipt of Landlord's notification, Tenant
     shall verbally notify Landlord of the date Tenant intends to make its
     walk-through inspection of the Premises, such date to be on the date
     specified in Landlord's notice for the Tenant Finish Work to be
     substantially complete or within three (3) days prior to that date.
     Landlord and Landlord's architect shall accompany Tenant on the
     walk-through inspection so as to mutually determine the punch list of
     items to be completed or repaired by Landlord within a reasonable time
     after the date of the walk-through inspection (the PUNCH LIST). At the
     conclusion of the walk-through inspection, Tenant will be deemed to have
     acknowledged that, subject only to Landlord's completion of the Punch List,
     (i) it has inspected and accepts the Premises and the Project, (ii) the
     Premises is suitable for the purpose for which it is leased, (iii) the
     Premises and the Project are in good and satisfactory condition, and
     (iv) no representations as to the repair of the Premises or the Project,
     nor promises to alter, remodel or improve the Premises or the Project which
     have been made by Landlord remain unsatisfied. At the conclusion of the
     walk-through inspection Tenant further agrees to execute an Acceptance of
     Premises Memorandum in the form attached hereto and made a part hereof as
     EXHIBIT "E", whereupon possession of the Premises will be delivered to
     Tenant and Tenant will be deemed to have accepted the Premises, and Tenant

 
42

 
 
     may thereafter occupy the Premises.  Tenant's failure to conduct a
     walk-through inspection or execute the Acceptance of Premises Memorandum
     will not delay the occurrence of the Rent Commencement Date."
 
     4.   PAYMENT OF RENT. Paragraph 4C of the Lease shall be, and hereby is,
deleted and replaced with the following:
 
          "C. PAYMENT OF RENT. Base Monthly Rent and Adjustments shall be due
     and payable, in advance, beginning on the Rent Commencement Date; provided
     that one (1) full installment of Base Monthly Rent and Adjustments totaling
     $24,825.33 is due and payable on the date of this Lease, such to be applied
     to the first installment of Base Monthly Rent and Adjustments due on the
     Rent Commencement Date and thereafter applied to Base Monthly Rent and
     Adjustments until fully applied.  Any installment of Base Monthly Rent or
     Adjustments due for any fractional calendar month shall be prorated based
     upon the actual number of days in that month. If the Rent Commencement Date
     occurs on the first day of a calendar month, then the month in which the
     Rent Commencement Date occurs shall be the first complete calendar month
     after the occurrence of the Rent Commencement Date for purposes of
     determining the date upon which Base Monthly Rent adjusts. As used in this
     Lease, RENT shall mean the Base Monthly Rent and all other amounts provided
     for in this Lease to be paid by Tenant to Landlord, all of which shall
     constitute rental in consideration for this Lease and the leasing of the
     Premises. All Rent (hereinafter defined) shall be paid at the times and in
     the amounts provided for herein in legal tender of the United States of
     America to Landlord at the address specified in Paragraph 32 hereof or to
     such other person or at such other address as Landlord may from time to
     time designate in writing. Rent shall be paid without notice, demand,
     abatement, deduction or offset (unless expressly provided for elsewhere in
     this Lease) and shall be a covenant of Tenant independent of any obligation
     of Landlord under this Lease. Tenant's obligation to pay any installment
     of Rent shall not be deemed satisfied until such installment of Rent has
     actually been received by Landlord."
 
     5.   IMPROVEMENTS/ALTERATIONS BY TENANT. Paragraphs 6A, 6B, and 6C of
the Lease shall be, and hereby are, deleted and replaced with the following:
 
               "A.  AFTER COMMENCEMENT DATE. Except as expressly permitted by
     this Paragraph 6, Tenant may not make or permit any alterations,
     improvements, or additions in or to the Premises without Landlord's prior
     written consent. All alterations and improvements desired by Tenant are
     subject to the following conditions:
 
                         (1)  All alterations, improvements and additions will
          be at the sole cost and expense of Tenant;
 
                         (2)  All alterations, improvements and additions in and
          to the Premises requested by Tenant must be made in accordance with
          plans and specifications first approved in writing by Landlord;
 
                         (3)  Tenant's contractors and subcontractors are
          subject to Landlord's prior approval. In addition, each of Tenant's
          contractor(s) and subcontractor(s) must deliver evidence satisfactory
          to Landlord that the insurance specified on EXHIBIT "F" (attached
          hereto and incorporated herein by reference) is in force prior to
          commencing work;
 
                         (4)  All alterations, improvements and additions made
          by Tenant must comply with all Applicable Laws including,
          specifically, the ADA, and applicable building permits and
          certificates of occupancy. Landlord's approval of Tenant's plans and
          specifications for the alterations or improvements will not act as a
          confirmation or agreement by Landlord that the improvements and
          alterations comply with Applicable Laws;
 
                         (5)  Tenant must deliver to Landlord evidence that
          Tenant has obtained all necessary governmental permits and approvals
          for the improvements, alterations and additions prior to starting any
          work;
 
                         (6)  All alterations, improvements and additions must
          be done in a good and workmanlike manner so as not to damage or alter
          the primary structure or structural qualities or the utility or other
          systems of the Premises or the Building and is subject to approval by
          Landlord during and after construction, in its sole discretion;

 
43

 
 
                         (7)  Lien releases from each of Tenant's contractor(s)
          and subcontractor(s) must be submitted to Landlord within ten (10)
          days after completion of the work performed by the contractor(s) or
          subcontractor(s); and
 
                         (8) Tenant shall be solely responsible for the safety
          and security of all equipment and property installed or placed in, on
          or about the Premises by a Tenant Party.
 
               B. PRIOR TO THE RENT COMMENCEMENT DATE. Prior to the Rent
     Commencement Date, and upon written request by Tenant, Tenant and its
     contractors may enter the Premises so that Tenant may perform other work
     and decorations Tenant wants in the Premises. This license to enter prior
     to the Rent Commencement Date is subject to the conditions set forth in
     Paragraph 6A above and, in addition, the following conditions:
 
                         (9)  Tenant's contractor(s) must work in harmony and
          not interfere with Landlord's contractors and subcontractors; and
 
                         (10) Landlord may revoke this license if the entry
          causes interference with the construction of the Improvements and
          Tenant does not immediately cease such interference (or cause its
          contractors to immediately cease such interference, as the case may
          be) after receipt of notice from Landlord, which notice may be
          verbal. Any such interference may be deemed a Tenant Delay.
 
               C.   TENANT'S PROPERTY. Tenant, at its own cost and expense, may
     erect such shelves, racks, bins and trade fixtures (collectively, TENANT'S
     PROPERTY) within the Premises as it desires and without Landlord's prior
     consent provided that (a) such items do not alter the basic character of
     the Premises or the Building; (b) such items do not overload or damage the
     Premises or the Building or the utility or other systems serving same; (c)
     such items may be removed without material injury to the Premises and the
     Building; and (d) the construction, erection or installation thereof
     complies with all Applicable Laws, applicable building permits and
     certificates of occupancy; and (e) provided that Tenant's installation of
     Tenant's Property prior to the Rent Commencement Date will be subject to
     Paragraph 6B above. All of Tenant's Property shall remain the property of
     Tenant and shall be removed on or before the earlier to occur of the date
     of termination of this Lease or Tenant's vacating of the Premises. Tenant
     shall promptly repair any damage to the Project or the Premises caused by
     the removal of any of Tenant's Property. Any of Tenant's Property not so
     removed and any other property of Tenant not removed prior to the
     termination of this Lease or Tenant's vacating of the Premises shall
     thereupon be conclusively presumed to have been abandoned by Tenant, and
     Landlord may, at its option, take over possession of any and all of the
     foregoing and either (i) declare the same to be the property of Landlord
     by written notice to Tenant at the address provided herein or (ii) at the
     sole cost and expense of Tenant, remove, store, and/or dispose of the same
     or any part thereof all at Tenant's cost, in any manner that Landlord shall
     choose without incurring liability to Tenant or any other person."
 
     6.   EXHIBITS. EXHIBIT "E" to the Lease shall be, and hereby is, deleted
and replaced with EXHIBIT "E" as attached to this Amendment. The Lease shall
be, and hereby is, further amended to add as EXHIBIT "G" thereto the Finish
Plans attached to this Amendment as EXHIBIT "G". EXHIBITS "A"-"D" and "F" are
omitted from this Amendment.
 
     7.   COUNTERPARTS. This Amendment may be executed in counterparts.
Facsimile signatures will have the same effect as originals.
 
     8.   RATIFICATION. The Lease, as amended hereby, is ratified and
confirmed by the parties as being in full force and effect. To the extent of
any conflict between the terms of the Lease and this Amendment, this
Amendment shall govern. All capitalized terms herein shall have the same
meaning as set forth in the Lease unless otherwise noted herein. This
Amendment is binding on the parties and their successors and assigns.
 
     IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
effective as of the latter of the two dates set forth below.
 
               LANDLORD:      MEPC QUORUM PROPERTIES INC., a Delaware
                              corporation

                              By: /s/ Ab Atkins
                                 ---------------------------------

 
44

 
 
                              Name:     Ab ATKINS
                                   -------------------------------
                              Title:  SENIOR VICE PRESIDENT
                                    ------------------------------
 
                              By: /s/ Peter Johnson
                                 ---------------------------------
 
                              Name:     PETER JOHNSON
                                   -------------------------------
                              Title:  SENIOR VICE PRESIDENT
                                    ------------------------------
 
               TENANT:        MANNATECH, INC. a Texas corporation
                              By: /s/ (Illegible)
                                 ---------------------------------
                              Name:
                                   -------------------------------
                              Title: C.O.O.
                                    ------------------------------

 
45

 
 
                               EXHIBITS "A" - "D"
 
                                    OMITTED

 
46

 
 
                                  EXHIBIT "E"
 
                       ACCEPTANCE OF PREMISES MEMORANDUM
 
     This memorandum is being executed pursuant to the Commercial Lease
Agreement (the LEASE) executed on the _____ day of____________,1999, between
MEPC QUORUM PROPERTIES II INC., a Delaware corporation (LANDLORD), and
MANNATECH, INC., a Texas corporation (TENANT).
 
Landlord and Tenant hereby agree that:
 
1.   Except for the Punch List Items (as shown on the attached Punch List),
     Landlord has fully completed the construction work required under the
     terms of the Lease and the Finish Plans attached thereto. Landlord will use
     reasonable efforts to complete the Punch List Items within thirty (30) days
     after the date hereof.
 
2.   Tenant acknowledges that, subject to the Punch List Items, (i) it has
     inspected and accepts the Premises, (ii) the buildings and improvements
     comprising the same are suitable for the purpose for which the Premises are
     leased, (iii) the Premises are in good and satisfactory condition, and (iv)
     no representations as to the repair of the Premises, nor promises to alter,
     remodel or improve the Premises which have been made by Landlord remain
     unsatisfied.
 
3.   The Rent Commencement Date of the Lease is the ____ day of ___________,
     199___.
 
4.   The expiration date of the Lease is the ____ day of__________, _____.
 
5.   All capitalized terms not defined herein shall have the meaning assigned to
     them in the Lease.
 
Agreed and Executed this ______day of ______________, 1998.
 
               LANDLORD                           TENANT
 
     MEPC QUORUM PROPERTIES II INC.,    MANNATECH, INC., a Texas corporation
     a Delaware corporation             a Texas corporation

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

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

47

 
 
                                  EXHIBIT "F"
                                    OMITTED

48

 
 
                                  EXHIBIT "G"
 
         Attached hereto are the site plans for the leased property.

 
49

 

LEASE ABSTRACT

LEASE AMENDMENT:	 	Second Amendment	
ABSTRACT PREPARED BY:	 	Gallini and Lester	
LANDLORD:	 	TEXAS DUGAN LIMITED PARTNERSHIP	
PROPERTY NAME:	 	Freeport III	
TENANT NAME:	 	MANNATECH INCORPORATED	
TENANT CONTACT:	 	Rick Leonard	
TENANT PHONE:	 	972-471-1561	
ADDRESS:	 	445 South Royal Lane, Suite 800, Coppell, TX 75019	
TENANT SQ.FT.	 	74,476	
LEASE EXECUTION DATE:	 	 	
TYPE OF LEASE:	 	RENEWAL	
 	 	
LEASE TERM IN MONTHS:	 	122	
COMMENCEMENT:	 	20-Jan-07	
EXPIRATION:	 	19-Mar-17	
RENEWAL OPTIONS:	 	2 five year options at market rate	
 
 	RENT:	

Year
[Missing Graphic Reference]	  	Dates:
[Missing Graphic Reference]	  	Amount per month
[Missing Graphic Reference]	  	Amount per year
[Missing Graphic Reference]	  	Annual PSF
[Missing Graphic Reference]	
0	  	01/20/2007-03/19/2007	  	$0.00 per month	  	 	  	 	
1-3	  	03/20/2007-03/19/2010	  	$23,273.75 per month	  	$279,285.00	  	$3.75	
2-5	  	03/20/2010-03/19/2012	  	$23,894.38 per month	  	$286,732.56	  	$3.85	
6-10	  	03/20/2012-03/19/2017	  	$25,135.65 per month	  	$301,627.80	  	$4.05	

SECURITY DEPOSIT:	  	$24,825.33	  	 	
EXPENSES:	  	Tenant pays all expenses	  	 	
TENANT IMPROVEMENT ALLOWANCE	  	$37,238.00	  	 	
 
OPTIONS:
 
Expansion: To take adjacent space, if exercised in years 1-5 of term

Year
[Missing Graphic Reference]	  	Dates:
[Missing Graphic Reference]	  	Annual PSF for
less than 20%
office finish
[Missing Graphic Reference]	  	 	
1-3	  	01/20/2007-01/19/2010	  	$3.75	  	 	
2-5	  	01/20/2010-01/19/2012	  	$3.85	  	 	
6-10	  	03/20/2012 - 03/19/2017	  	$4.05	  	 	
 	 	 	 	
Year
[Missing Graphic Reference]	  	Dates:
[Missing Graphic Reference]	  	Annual PSF for
over 20%
office finish
[Missing Graphic Reference]	  	 	
1-3	  	01/20/2007-01/19/2010	  	$4.15	  	 	
2-5	  	01/20/2010-01/19/2012	  	$4.25	  	 	
6-10	  	03/20/2012 - 03/19/2017	  	$4.40	  	 	
 
Expansion: To take adjacent space, if exercised in years 6-10 of term rate will be at market

Cancellation if Tenant has not exercised Expansion Option:	
 	  	Tenant has right to cancel at 62nd month on 12 months notice.	
Cancellation fee:	  	$105,290.45 plus unamortized tenant finish allowance of $18,619.00	
 	
Cancellation if Tenant has exercised Expansion Option:	
 	  	Tenant has right to cancel at 62nd month on 12 months notice.	
Cancellation fee:	  	$86,761.45 plus unamortized tenant finish allowance of $18,619.00	

 
50

 
 
SECOND AMENDMENT TO LEASE
 
THIS SECOND AMENDMENT TO LEASE is made as of this day of g^WW’/- 2005, by and between TEXAS DUGAN LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter  referred  to as “Landlord”) and’ MANNATECH INCORPORATED (previously identified as Mannatech, Inc., as Tenant), a Texas corporation (hereinafter referred to as “Tenant”).
 
WITNESSETH:
 
WHEREAS, MEPC Quorum Properties II Inc. and Tenant entered into that certain Commercial Lease Agreement dated May 29, 1997; as amended by that certain First Amendment to Lease Agreement dated November 6, 1997 (hereinafter collectively referred to as the “Lease”) for the lease of approximately 74,476 square feet of space (hereinafter the “Leased Premises”) in a building commonly known as Freeport HI (the “Building”) located at 445 South Royal Lane, Suite 800, Coppell, Texas 75019, and within Freeport North Industrial Park (the “Park”), which space is more particularly described in the Lease; and
 
WHEREAS, Texas Dugan Limited Partnership succeeded to the interest of the landlord under the Lease and is the Landlord with respect to the Leased Premises; and
 
WHEREAS. Landlord and Tenant desire to enter into a second amendment to the Lease to extend the term of the Lease upon the terms and conditions set forth herein (the “Second Amendment to Lease”).
 
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration paid by Landlord and Tenant to one another, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows:
 
1. Incorporation of Recitals. The above recitals are hereby incorporated into this Amendment as if fully set forth herein.
 
2. Premises/Lease Term. Effective as of January 20, 2007 (the “Effective Date”) the term of the Lease is hereby extended through midnight on March 19, 2017 (the “Extension Term”) with an option of early termination as set forth in Article 9 hereof.
 
3. Improvements To Be Constructed by Landlord. Section 2 of the Lease is deleted in its entirety and is replaced with the following:
 
“A. Landlord’s Obligations. Tenant has personally inspected the Leased Premises and accepts the same “AS IS” without representation or warranty by Landlord of any kind and with the understanding that Landlord shall have no responsibility with respect thereto except to construct and install within the Leased Premises, in a good and workmanlike manner, hereinafter referred to as the “Tenant Improvements”.
 
B. Construction Drawings. Cost Statement and Allowance.
 
(1) Promptly following the date hereof, Tenant will work with Landlord’s space planner to develop a space plan for the Leased Premises that is reasonably acceptable to Landlord (the “Space Plan”). Tenant shall deliver the Space Plan to Landlord within ten (10) days after the date of this Lease. Within twenty (20) days after Landlord’s receipt of the Space Plan, Landlord shall prepare and submit to Tenant (i) a set of construction drawings (the “CD’s”) covering all work to be performed by Landlord in constructing the Tenant Improvements in accordance with the Space Plan, and (ii) a statement of the cost to construct and install the Tenant Improvements (the “Cost Statement”). Tenant acknowledges and agrees that (A) the Cost Statement shall include design fees and a fee payable to the project’s general contractor, and (B) such general contractor may be comprised of a subsidiary, affiliate or employees of Landlord. Tenant shall have five (5) days after receipt of the CD’s and the Cost Statement in which to review both the CD’s and the Cost Statement and to give Landlord written notice of Tenant’s approval of the CD’s or its requested changes thereto. Tenant shall have no right to request any changes to the CD’s that would materially alter the exterior appearance or basic nature of the Building or the Building systems. If Tenant fails to approve or request changes to the CD’s within ten (10) days after its receipt thereof, then Tenant shall be deemed to have approved the CD’s and the Cost Statement and the same shall thereupon be final. If Tenant requests any changes to the CD’s, Landlord shall make those changes which are reasonably requested by Tenant and shall within ten (10) days of its receipt of such request submit the revised portion of the CD’s (and, to the extent applicable, the revised Cost Statement) to Tenant. Tenant shall have an additional five (5) business days to review the revised CD’s (the “Revision Review Period”) and shall not unreasonably disapprove the revised portions of the CD’s unless Landlord has unreasonably failed to incorporate reasonable comments of Tenant and, subject to the foregoing, the CD’s and the Cost Statement, as modified by said revisions, shall be deemed to be final upon the submission of said revisions to Tenant unless Tenant objects, in writing prior to the end of the Revision Review Period, Tenant shall at all times in its review of the CD’s and the Cost Statement, and of any revisions thereto, act reasonably and in good faith. Without limiting the foregoing, Tenant agrees to confirm Tenant’s consent to the CD’s and acknowledge the Cost Statement in writing within three (3) days following Landlord’s written request therefore.

51

 
 
(2) Tenant shall be responsible for the cost to construct and install the Tenant Improvements only to the extent that the Cost Statement, taking into account any increases or decreases resulting from any Change Orders (as hereinafter defined), exceeds Thirty Seven Thousand Two Hundred Thirty Eight and 00/100 Dollars (537,238.00) (the “Allowance”). If, following Tenant’s approval (or deemed approval) of the CD’s, the Cost Statement shows that the cost to construct and install the Tenant Improvements will exceed the Allowance, Tenant shall deliver to Landlord, within ten (10) days following Landlord’s written request, an amount equal to one-half (1/2) of such excess. Following Substantial Completion (as hereinafter defined) of the Tenant Improvements and acceptance by Tenant, which shall not be unreasonably withheld. Tenant shall pay to Landlord the difference between the Cost Statement (taking into account any increases or decreases resulting from any Change Orders) and the Allowance within ten (10) days of Landlord’s request therefor. Tenant’s failure to deliver the payments required in this paragraph shall entitle Landlord to stop the construction and installation of the Tenant Improvements until such payment is received, and any resulting delay shall constitute a Tenant Delay (as hereinafter defined) hereunder. In addition, all delinquent payments shall accrue interest at 15% per annum. Upon Substantial Completion of the Tenant Improvements, a representative of Landlord and a representative of Tenant together shall inspect the Leased Premises and generate a punchlist of defective or uncompleted items relating to the completion of construction of the Tenant Improvements. Tenant may withhold one hundred fifty percent (150%) of the cost of the uncompleted items identified on the punchlist, without penalty or delinquency charge, pending satisfactory resolution of any outstanding items contained in the punchlist. If the Allowance exceeds the Cost Statement (taking into account any increases or decreases resulting from any Change Orders), such savings shall be the property of Landlord.
 
C. Completion. Landlord shall use commercially reasonable speed and diligence to complete the Tenant Improvements. On the Effective Date Tenant shall be deemed to have accepted the Leased Premises and that the condition of the Leased Premises and the Building was at the time satisfactory and in conformity with the provisions of this Lease in all respects, subject to any punchlist items. Tenant acknowledges that Landlord will be constructing the Tenant Improvements to the Leased Premises during normal business hours and agrees to cooperate with Landlord so as not to interfere with Landlord’s completion of the Tenant Improvements. For purposes of this Amendment “Substantial Completion” (or any grammatical variation thereof) shall mean completion of construction of the Tenant Improvements, subject only to punchlist items to be identified by Landlord and Tenant in a joint inspection of the Leased Premises.
 
D. Change Orders. Tenant shall have the right to request changes to the CD’s at any time following the date hereof by way of written change order (each, a “Change Order”, and collectively, “Change Orders”). Provided such Change Order is reasonably acceptable to Landlord, Landlord shall prepare and submit promptly to Tenant a memorandum setting forth the impact on cost and schedule resulting from said Change Order (the “Change Order Memorandum of Agreement”). Tenant shall, within three (3) days following Tenant’s receipt of the Change Order Memorandum of Agreement, either (a) execute and return the Change Order Memorandum of Agreement to Landlord, or (b) retract its request for the Change Order. At Landlord’s option, Tenant shall pay to Landlord (or Landlord’s designee), within ten (10) days following Landlord’s request, any reasonable increase in the cost to construct the Tenant Improvements resulting from the Change Order, as set forth in the Change Order Memorandum of Agreement. Landlord shall not be obligated to commence any work set forth in a Change Order until such time as Tenant has delivered to Landlord the Change Order Memorandum of Agreement executed by Tenant and, if applicable, Tenant has paid Landlord in full for said Change Order.”
 
4. Rent. Section 4 of the Lease is hereby amended as follows:
 
A. Base Monthly Rent. Section 4A of the Lease is hereby amended to provide that Tenant shall pay to Landlord the Base Monthly Rent, in advance, without deduction or offset, beginning on the Effective Date and on or before the first day of each and every calendar month thereafter during the Extension Term as set forth below:

01/20/2007-03/19/2007	  	$0.00 per year	  	$ 0.00 per month	*	
03/20/2007-03/19/2010	  	$279,285.00 per year	  	$23,273.75 per month	 	
03/20/2010-03/19/2012	  	$286,732.60 per year	  	$23,894.38 per month	 	
03/20/2012-03/19/2017	  	$301,627.80 per year	  	$25,135.65 per month	 	
 
“‘Monthly Rental Installments shall be abated during Months ] through 2 of the Lease Term but Tenant shall be responsible for Tenant’s Proportionate Share of Adjustments.
 
B. Additional Rent. The first sentence of Section 4(B) is deleted in its entirety and replaced with the following:
 
“Tenant agrees to reimburse Landlord for Tenant’s Proportionate Share of (i) Real Property Taxes, (ii) Landlord’s actual cost of obtaining and maintaining Landlord’s Insurance, (iii) the actual cost of any maintenance performed by Landlord under Paragraph 12A(2) of the Lease or which, in Landlord’s reasonable discretion, is for the benefit of the Project as a whole and not reasonably allocable to any specific tenant or tenants, and (iv) management fees (such management fees shall not exceed  3%  of the total gross revenue of the Building) (collectively, the “Adjustments”).

52

 
 
5. Indemnity. Section 6(F) of the Lease is hereby deleted and replaced with the following provision:
 
“Tenant hereby indemnifies and holds Landlord harmless from any claims, demands, actions, losses, and damages arising from activities of Tenant or any Tenant Party, or any of their invitees, in connection with any alterations, improvements or additions made or contracted by Tenant.
 
Landlord hereby indemnifies and holds Tenant harmless from any claims, demands, actions, losses and damages arising from work performed by its contractors and/or subcontractors, as the case may be, in connection with Section 2 of this Second Amendment to Lease, except to the extent that any work is performed at the request of the Tenant outside the scope of the Allowances.”
 
6. Notices. Section 32 of the Lease is hereby amended to reflect Landlord’s current addresses for notices and payments as follows:

Landlord:	  	Texas Dugan Limited Partnership	
 	  	c/o Duke Realty Corporation
5495 Belt Line Road, Suite 360
Dallas, Texas 75254
Attn: Senior Property Manager	
 	 	
With a copy to:	  	Duke Realty Corporation
3950 Shackleford Road, Suite 300
Duluth, Georgia 30096-8268
Attn: Legal Department - TX Market	
 	 	
With Payments to:	  	Texas Dugan Limited Partnership
75 Remittance Drive, Suite 1493
Chicago, IL 60675-1493	
 	 	
Tenant (following occupancy):	  	Mannatech Incorporated
445 South Royal Lane Suite 800
Coppell, Texas 75019
Attn: Jeff Bourgoyne, Senior Vice President	
 	 	
With a copy to:	  	Mannatech Incorporated
600 South Royal Lane Suite 400
Coppell, Texas 75019
Attn: General Counsel	
 
7. Option to Renew. The Option to Renew as set forth in Section 34 of the Lease is hereby deleted in its entirety and is replaced with the following:
 
A. Grant and Exercise of Option. Provided that (i) no default has occurred and is then continuing; (ii) the credit worthiness of Tenant is then reasonably acceptable to Landlord using reasonably accepted business judgment and practices in determining such creditworthiness; and (iii) Tenant originally named herein remains in possession of and has been continuously operating in the entire Leased Premises throughout the term immediately preceding the Extension Term (as defined below); however, this requirement will be waived by Landlord if Landlord has approved a sublease of less than fifty percent (50%) of the Leased Premises as indicated in Paragraph 16 of the Lease, Tenant shall have the option to extend the Lease Term for two (2) additional periods of five (5) years each (the “Extension Term(s)”). Each Extension Term shall be upon the same terms and conditions contained in the Lease except (x) this provision giving two (2) extension options shall be amended to reflect the remaining options to extend, if any, and (y) any improvement allowances or other concessions applicable to the Leased Premises under the Lease shall not apply to the Extension Term, and (z) the Minimum Annual Rent shall be adjusted as set forth below (the “Rent Adjustment”). Tenant shall exercise each option by (i) delivering to Landlord, no later than six (6) months prior to the expiration of the preceding term, written notice of Tenant’s desire to extend the Lease Term, Tenant’s failure to timely exercise such option shall be deemed a waiver of such option and any succeeding option. Landlord shall notify Tenant of the amount of the Rent Adjustment no later than ninety (90) days prior to the commencement of the Extension Term. Tenant shall be deemed to have rejected the Rent Adjustment if it fails to deliver to Landlord a written objection thereto within ten (10) business days after receipt thereof. If Tenant properly exercises its option to extend. Landlord and Tenant shall execute an amendment to the Lease (or, at Landlord’s option, a new lease on the form then in use for the Building) reflecting the terms and conditions of the Extension Term within thirty (30) days after Tenant’s acceptance (or deemed acceptance) of the Rent Adjustment.

53

 
 
B. Rent Adjustment. The Minimum Annual Rent for the applicable Extension Term shall be an amount equal to the Minimum Annual Rent then being quoted by Landlord to prospective renewal tenants of the Building for space of comparable size and quality and with similar or equivalent improvements as are found in the Building, and if none, then in similar buildings in the vicinity; provided, however, that in no event shall the Minimum Annual Rent during any Extension Term be less than the highest Minimum Annual Rent payable during the immediately preceding term. The Monthly Rental Installments shall be an amount equal to one-twelfth (1/12) of the Minimum Annual Rent for the Extension Term and shall be paid at the same time and in the same manner as provided in the Lease.
 
8. Right of First Refusal on Adjacent Space. The Right of First Refusal as set forth in Section 35 of the Lease is deleted in its entirety and replaced with the following Right of First Offer:
 
“35. Right of First Offer.
 
A Provided that (i) no default has occurred and is then continuing, (ii) the creditworthiness of Tenant is then reasonably acceptable to Landlord, and (iii) Tenant originally named herein or its Permitted Transferee remains in possession of and has been continuously operating in the entire Leased Premises throughout the Lease Term, and subject to any rights of other tenants to the Offer Space (as defined herein) and Landlord’s right to renew or extend the lease term of any other tenant with respect to the portion of the Offer Space now or hereafter leased by such other tenant, Landlord shall, before entering into a lease with a third party for any space in the Building that becomes vacant (the “Offer Space”), notify Tenant in writing of the availability of the Offer Space for leasing and setting forth the terms and conditions upon which Landlord is willing to lease the Offer Space to Tenant (“Landlord’s Notice”). Tenant shall have five (5) business days from its receipt of Landlord’s Notice to deliver to Landlord a written notice agreeing to lease the Offer Space on the terms and conditions contained in Landlord’s Notice (“Tenant’s Acceptance”). In the event Tenant fails to deliver Tenant’s Acceptance to Landlord within said five (5)-business day period, such failure shall be conclusively deemed a rejection of the Offer Space and a waiver by Tenant of this right of first offer, whereupon, except as provided in (c) below, Tenant shall have no further rights with respect to the Offer Space and Landlord shall be free to lease the Offer Space to a third party.
 
B. The term for the Offer Space (the “Offer Space Term”) shall be coterminous with the term for the then existing Leased Premises (the “Existing Premises”); provided, however, that the minimum term for the Offer Space shall be five (5) years and the term for the Existing Premises shall be extended, if necessary, to be coterminous with the term for the Offer Space. If the Lease Term for the Existing Premises is extended as provided above, the Minimum Annual Rent for such extension term shall be an amount equal to the Minimum Annual Rent then being quoted by Landlord to prospective renewing tenants of the Building for space of comparable size and quality and with similar or equivalent improvements as are found in the Building, and if none, then in similar buildings in the vicinity; provided, however, that in no event shall the Minimum Annual Rent during such extension term be less than the highest Minimum Annual Rent payable during the immediately preceding term. The Minimum Annual Rent for the Offer Space shall be as set forth below:
 
(i) If Tenant exercises its right of first offer during years one (1) through five (5) of the Extended Term, the Minimum Annual Rent for the Offer Space shall be as follows:
 
(A) In the event the Offer Space contains less than twenty percent (20%) of office space, then during the Offer Space Term, the Minimum Annual Rent for the Offer Space shall be payable at the rates set forth below:

01/20/2007 - 01/19/2010	 	$3.75, per rentable square foot of the Offer Space	
01/20/2010-01/19/2012	 	$3.85 per rentable square foot of the Offer Space	
01/20/2012 - 01/19/2017	 	$4.05 per rentable square foot of the Offer Space; or	
 
(B) In the event the Offer Space contains twenty percent (20%) or more of office space, then the Minimum Annual Rent for the Offer Space shall be as follows:

01/20/2007 - 01/19/2010	 	$4.15 per rentable square foot of the Offer Space	
01/20/2010-01/19/2012	 	$4.25 per rentable square foot of the Offer Space	
01/20/2012 - 01/19/2017	 	$4.40 per rentable square foot of the Offer Space	
 
(ii) If Tenant exercises its right of first offer during years six (6) through ten (10) of the Extended Term, the Minimum Annual Rent for the Offer Space shall be an amount equal to the Minimum Annual Rent then being quoted by Landlord to prospective renewing tenants of the Building for space of comparable size and quality and with similar or equivalent improvements as are found in the Building, and if none, then in similar buildings in the Park; provided, however, that in no event shall the Minimum Annual Rent during this Extended Term be less than the highest Minimum Annual Rent payable during the immediately preceding term.

54

 
 
C. If Tenant properly exercises the right of first offer, Landlord and Tenant shall enter into an amendment to this Lease adding the Offer Space to the Premises upon the terms and conditions set forth herein and making such other modifications to this Lease as are appropriate under the circumstances. If Tenant shall fail to enter into such amendment within ten (10) days following Tenant’s Acceptance, then Landlord may terminate this right of first offer by notifying Tenant in writing, in which event Tenant shall have no further rights with respect to the Offer Space and Landlord shall be free to lease the Offer Space to a third party. This right of first offer shall be an ongoing right of first offer, which shall mean that if Tenant waives its right of first offer pursuant to subsection (a) above and all of the Offer Space is subsequently leased to a third party (“New Tenant”), Landlord shall not lease the Offer Space to a third party (other than the New Tenant) without notifying Tenant of the availability of the Offer Space, in which case Tenant shall again have a right of first offer to lease the Offer Space in accordance with this Section 35.”
 
9. Option to Terminate. Provided that (a) no default has occurred and is then continuing, and (b) Tenant originally named herein remains in possession of and has been continuously operating in the entire Premises throughout the Lease Term, however, this requirement will be waived by Landlord if Landlord has approved a sublease of less than fifty percent (50%) of the Leased Premises as indicated in Paragraph 16 of the Lease, then Tenant shall have the following termination rights:
 
(a) If Tenant has not exercised its Right of First Offer as set forth above. Tenant shall have a one time right to terminate the Lease effective as of the end of the sixty-second (62 nd ) month from the Effective Date. In order to exercise such termination right, Tenant shall notify Landlord of such exercise in writing at least twelve (12) months prior to the effective date of such termination, and together with such notice, Tenant shall deliver to Landlord, as an agreed upon termination fee, an amount equal to One Hundred Five Thousand Two Hundred Ninety and 45/100 Dollars ($105,290.45). Such payment is made in consideration for Landlord’s grant of this option to terminate to compensate Landlord for rental and other concessions given to Tenant and for other good and valuable consideration. The termination fee does not constitute payment of rent to Landlord. If Tenant fails to notify Landlord by the deadline set forth above, Tenant shall have waived Tenant’s termination right for the remainder of the term of the Lease and any extensions thereof. In the event Tenant exercises the Right of First Offer as set forth above, this option to terminate shall thereafter be void and of no further force or effect; or
 
(b) If Tenant has exercised its right of first offer as set forth above prior to the end of the 50th month of the Extension Term, Tenant shall have the right to terminate this Lease effective as of the end of the fifth (5 th ) anniversary of the commencement date of the Offer Space on the terms and conditions set forth below. In order to exercise such termination right, Tenant shall notify Landlord of such exercise in writing at least twelve (12) months prior to the effective date of such termination, and together with such notice, Tenant shall deliver to Landlord, as an agreed upon termination fee, an amount equal to Eighty-Six Thousand Seven Hundred Sixty-One and 45/100 Dollars ($86,761.45) plus the unamortized portion of any tenant finish improvements. Such payment is made in consideration for Landlord’s grant of this option to terminate to compensate Landlord for rental and other concessions given to Tenant and for other good and valuable consideration. The termination fee does not constitute payment of rent to Landlord. If Tenant fails to notify Landlord by the deadline set forth above, Tenant shall have waived Tenant’s termination right for the remainder of the term of the Lease and any extensions thereof.
 
10. Brokers. Section 36L of the Lease is deleted in its entirely and is replaced with the following:
 
Except for Gallini & Lester Corporate Realty Services, whose commission shall be paid by Landlord, Landlord and Tenant each represent and warrant to the other that neither party has engaged or had any conversations or negotiations with any broker, finder or other third party concerning the matters set forth in this Amendment who would be entitled to any commission or fee based on the execution of this Amendment. Landlord and Tenant each hereby indemnifies the other against and from any claims for any brokerage commissions and all costs, expenses and liabilities in connection therewith, including, without limitation, reasonable attorneys’ fees and expenses, for any breach of the foregoing. The foregoing indemnification shall survive the termination of the Lease for any reason.
 
11. Except as expressly modified by this Second Amendment to Lease, all provisions, terms and conditions of the Lease shall remain in full force and effect.
 
12. This Second Amendment to Lease is ratified and confirmed by the parties as being in full force and effect. To the extent of any conflict between the terms of the Lease and this Second Amendment to Lease, this Second Amendment shall govern. All terms herein shall have the same meaning as set forth in the Lease unless otherwise noted herein.
 
13. This Second Amendment to Lease shall not be of any legal effect or consequence unless signed by Landlord and Tenant, and once signed by Landlord and Tenant it shall be binding upon and inure to the benefit of Landlord, Tenant, and their respective legal representatives, successors and assigns. This Second Amendment to Lease may be executed in counterparts, including facsimile counterparts, with the same force and effectiveness as if it were executed in one complete document.
 
14. This Second Amendment to Lease has been executed and shall be construed under the laws of the State of Texas.
 
[Execution signatures contained on the following page]

55

 
 
IN WITNESS WHEREOF, the undersigned have caused this Second Amendment To Lease to be executed under seal and delivered as of the day and year first above written.

LANDLORD:	
 	
TEXAS DUGAN LIMITED PARTNERSHIP,
a Delaware limited partnership	
 	 	
By:	 	DUGAN GENERAL PARTNER LLC,
a Delaware limited liability company, its general partner	
 	 	 	
 	 	By:	 	DUGAN TEXAS LLC,
a Delaware limited liability company, its sole member	
 	 	 	
 	 	By:	 	DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership, its Manager	
 	 	 	
 	 	By:	 	DUKE REALTY CORPORATION,
an Indiana corporation, its General Partner	
 	 	
 	 	TENANT:	
 	 	
 	 	MANNATECH, INC.,
a Texas corporation	
 	 	 	
 	 	By:	 	/s/    TERRY L. PERSINGER        	
 	 	Name:	 	Terry L. Persinger	
 	 	Title:	 	President	
 	 	
 	 	ATTEST:	
 	 	 	
 	 	By:	 	/s/    BETTINA SIMON        	
 	 	Name:	 	Bettina Simon	
 	 	Title:	 	Sr. VP & General Counsel	
 	 	
 	 	[Corporate Seal]	
 
END OF EXECUTION SIGNATURES

 
56

 

PHG/AS/kc
 
03116/11

THIRD LEASE AMENDMENT

THIS THIRD  LEASE  AMENDMENT (the "Amendment") is executed  as of the _18th_ day of March,   2011,   by  and  between   TEXAS   DUGAN   LIMITED   PARTNERSHIP,  a  Delaware   limited partnership  ("Landlord"),  and  MANNATECH INCORPORATED (previously  identified  as  Mannatech, Inc.), a Texas corporation ("Tenant").
 
   WITNESSETH:

WHEREAS,  MEPC Quorum  Properties II Inc., as predecessor  in interest to Landlord, and Tenant entered  into a Commercial  Lease Agreement  dated May 29, 1997, as amended  by a First Amendment  to Commercial  Lease Agreement dated November 6, 1997 (the "First Lease Amendment"), and by a Second Amendment   to   Commercial    Lease   Agreement    dated   September    22,   2005   (the   "Second   Lease Amendment"),  (collectively,   the  "Lease"),   whereby   Tenant   leases   from  Landlord   certain   premises consisting of approximately  74,476 rentable square feet of space (the "Premises")  located in a building commonly  known as Freeport III (the "Building''), located at 445 South Royal Lane, Suite 800, Coppell, Texas 75019 within Freeport North Industrial Park (the "Park"); and
 
WHEREAS, Landlord and Tenant desire to extend the Lease Term; and
 
WHEREAS, Landlord and Tenant desire to amend certain  provisions of the Lease to reflect such extension and any other changes to the Lease;
 
NOW, THEREFORE, in consideration of the  foregoing  premises,  the mutual  covenants  herein contained and each act performed hereunder by the parties, Landlord and Tenant hereby enter into this Amendment.

1. Incorporation of Recitals.                                          The above recitals are hereby incorporated into this Amendment as if fully set forth herein.

2. Extension of Term.                                The Lease Term is hereby extended through March 31, 2018.
 
3. Amendment of Section 2.                                                    Improvements to be Constructed by Landlord .  Commencing April 1, 2011,  Section 2  of the Lease is hereby amended by incorporating the following:
 
"Tenant is currently in possession  of the Premises and accepts the same "AS IS" without representation  or warranty by Landlord of any kind."

4.           Amendment of Section 4.   Rent      Commencing  April  1, 2011, Section 4 of the Lease is hereby amended to provide that Tenant shall pay to Landlord the following Base Monthly Rent:

April 1, 2011 – April 30, 2011                                                                                   $6,889.03 per month
May 1, 2011 – December 31, 2011                                                                           $23,894.38 per month
January 1, 2012 – March 31, 2018                                                                           $19,674.08 per month

 
57

 

5.           Amendment of Section 19.   Landlord’s Remedies.   Section 19 of the Lease is hereby amended by incorporating the following additional subsection:

 
"G.  As consideration for Tenant's performance under this Lease, Tenant acknowledges that the Rent under this Amendment is reduced conditionally over the remainder of the initial Extension Term (as defined in the Second Lease Amendment).   In the event Tenant defaults under the terms of the Lease and/or this Amendment and fails to cure within any applicable cure period, then (i) the total sum of such Rent so conditionally excused shall become immediately due and payable; and (ii) Tenant's obligation to pay Rent shall automatically revert to the un amended amounts of the original Rent set forth in this Lease prior to this Amendment, which shall apply thereafter in lieu of the amounts set forth in this Amendment."

6.           Amendment of Section 32.   Section 32 of the Lease is hereby amended to reflect Landlord’s current address for notices and payments as follows:

 

 	"Landlord:	Texas Dugan Limited Partnership c/o Duke Realty Corporation	
Attn:           Texas Market                      Vice President,
                      Asset Management & Customer Service
                      14241 Dallas Parkway, Suite 1000
                      Dallas, Texas 75254
 
             With a
             Copy to:          Texas Dugan Limited Partnership
                Attn: Texas Market Attorney
                  14241 Dallas Parkway, Suite 1000
                  Dallas, Texas 75254
 
With
                  Payments to:     Texas Dugan Limited Partnership
                     75 Remittance Drive, Suite 1493
                     Chicago, Illinois 60675-1493"

7.           Amendment of Section 34.  Option to Renew.  Section 34 (b} of the Lease (as amended by the Second Lease Amendment) is hereby deleted in its entirety and the following is substituted in lieu thereof:
 
“(b)           Rent Adjustment.   The minimum annual Rent for the Extension Term shall be an amount equal to the minimum annual Rent then being quoted by Landlord to prospective renewing tenants of the Building for space of comparable size and quality and with similar or equivalent improvements as are found in the Building, and if none, then in similar buildings in the vicinity; provided, however, that in no event shall the minimum annual Rent during the first Extension Term be less than Four Dollars and Five Cents ($4.05) per square foot of the Premises and during the second Extension Term be less than the highest minimum annual Rent payable during the immediately preceding term.  The Base Monthly Rent shall be an amount equal to one-twelfth (1/12) of the minimum annual Rent for the Extension Term and shall be paid at the same time and in the same manner as provided in the Lease.”

 
58

 
 
8.           Amendment of Section 34.   Miscellaneous.   Section 34 of the Lease is hereby amended by adding the following additional subsections:
 
“R           Patriot Act.    Each of Landlord and Tenant, each as to itself, hereby represents its compliance and its agreement to continue to comply with all applicable anti-money laundering laws, including, without limitation, the USA Patriot Act, and the laws administered by the United States Treasury Department’s Office of Foreign Assets Control, including without limitation, Executive Order 13224 (“Executive Order”).  Each of Landlord and Tenant further represents (such representation to be true throughout the Lease Term) (i) that it is not, and it is not owned or controlled directly or indirectly by any person or entity, on the SDN List published by the United States Treasury Department’s Office of Foreign Assets Control and (ii) that it is not a person otherwise identified by government or legal authority as a person with whom a U.S. Person is prohibited from transacting business.  As of the date hereof, a list of such designations and the text for the Executive Order are published under the internet website address  www.ustreas.gov/offices/enforcement/ofac .

 
9.           Amendment of Section 35.   Right of First Offer.   Section 35 of the Lease is hereby deleted in its entirety and shall be of no further force or effect.

10.           Amendment of Section 9 of Second Lease Amendment.  Option to Terminate. Section 9 of the Second Lease Amendment is hereby deleted in its entirety and shall be of no further force or effect

11.           Broker.   Tenant represents and warrants that, except for Duke Realty Services, LLC representing Landlord and Jones Lang LaSalle Americas, Inc. representing Tenant, no other real estate broker or brokers were involved in the negotiation and execution of this Amendment.  Tenant shall indemnify  Landlord  and  hold  it  harmless  from  any  and  all  liability  for  the  breach  of  any  such representation and warranty on its part and shall pay any compensation to any other broker or person who may be deemed or held to be entitled thereto.

12.           Representations.

(a)  	Tenant hereby represents that (i) Tenant is duly organized, validly existing and in good	
standing (if applicable) in accordance with the laws of the State under which it was organized; (ii) Tenant is authorized to do business in the State where the Building is located; and (iii) the individual(s) executing and delivering this Amendment on behalf of Tenant has been properly authorized to do so, and such execution and delivery shall bind Tenant to its terms.

(b) Landlord hereby represents that (i) Landlord is duly organized, validly existing and in good standing (if applicable) in accordance with the laws of the State under which it was organized; (ii) Landlord is authorized to do business in the State where the Building is located; and (iii) the individual(s) executing and delivering this Amendment on behalf of Landlord has been properly authorized to do so, and such execution and delivery shall bind Landlord to its terms.

13.           Examination of Amendment.   Submission of this instrument for examination or signature to Tenant does not constitute  a  reservation or option, and  it is not effective until execution  by and delivery to both Landlord and Tenant.

 
59

 
 
     14.            Definitions.   Except as otherwise  provided herein, the capitalized  terms used in this Amendment shall have the definitions set forth in the Lease.

15.            Incorporation.   This .Amendment shall be incorporated into and made a part of the Lease, and all provisions of the Lease not expressly modified or amended hereby shall remain in full force and effect.

[SIGNATURES CONTAINED ON THE FOLLOWING PAGE]

 
60

 
 
IN WITNESS  WHEREOF,  the parties  have caused  this Amendment  to be executed  on the day and year first written above.

LANDLORD:

TEXAS  DUGAN LIMITED  PARTNERSHIP, a
 
Delaware  limited partnership

 	By: Dugan General Partner LLC, a Delaware limited liability company, its Sole General Partner	

 	By: Dugan Texas LLC, a Delaware limited liability company, its Sole Member	

By: Duke Realty Limited Partnership, an
 
Indiana limited partnership authorized  to do business in the State of Texas under the name Duke Indiana Realty Limited Partnership, its Manager
 
 	By: Duke Realty Corporation, an Indiana corporation  authorized  to do business in the State of Texas under the name Indiana Duke Realty Corporation, its General  Partner	

Dated:  March 18, 2011                                            

                                                        Senior Vice President

                            TENANT:

                   MANNATECH INCORPORATED, a Texas corporation

Dated: March 18, 2011                                    

 
                                           
                         Printed: Steve Fenstermacher
                                              Title: CEO & CFO

 
61

 

EXHIBIT B
SUBLEASED PREMISES

 

 
 
62

 

EXHIBIT C
LANDLORD’S CONSENT

05/04/12

CONSENT AND ACCEPTANCE

 
TEXAS DUGAN LIMITED PARTNERSHIP, a Delaware limited partnership, as Landlord under the Prime Lease, hereby consents to the Sublease of the Prime Lease as set forth above; provided, however, that such Sublease does not affect or release any liability of Sublessor under the terms and obligations of the Prime Lease.
 
This Consent and Acceptance of the foregoing Sublease shall not constitute a consent by Landlord to any further subletting or assignments of the entire or any portion of the Leased Premises.
 
This Consent and Acceptance does not constitute approval by Landlord of any of the provisions of the Sublease, or agreement thereto or therewith, but only approval of the sublet of the Subleased Premises to Subtenant.
 
Notwithstanding anything to the contrary in the Sublease, in no event shall Landlord be deemed to be in privity of contract with Subtenant or owe any obligation or duty to Subtenant under the Prime Lease or Sublease, any duties of Landlord under the Prime Lease are required by law being in favor of, for the benefit of, and enforceable soley by Sublessor.
 
 	"LANDLORD"	
 
                  TEXAS DUGAN LIMITED PARTNERSHIP,
                                                                           a Delaware limited partnership
 
 	By:	Dugan General Partner LLC, a Delaware limited liability company, its Sole General Partner	

 	By:	Dugan Texas LLC, a Delaware limited liability company, its Sole Member	
 
                                                            By: Duke Realty Limited Partnership, an Indiana limited partnership authorized to do business in the State of Texas under the name Duke                                             Indiana Realty Limited Partnership, its Manager
 
 	By: Duke Realty Corporation, an Indiana corporation authorized to do business in the State of Texas under the name	

                                                                                       
                                             Senior Vice President
Dated:            06/11/12

 
63

 
EXHIBIT D
ENGINEER’S REPORT

 
 
500 S. Kealy St.
Lewisville, TX. 75057
972-221-4373
TACLA001216C

Bill To:                                                      Work Address:
National Property Inspections
2201 Hazy Meadows                                             445 S. Royal Ln. Suite #800
Flower Mound, TX. 75028                                           Coppell, TX. 75019
 
Date of inspection 2/10/11 – Invoice #229370
 
Work to be performed: Inspect 12 HVAC systems
 
All systems appear to have had ongoing maintenance and over all conditions are good. They do have some age on them but repairs have been kept up. A typical lifetime of a roof top unit in our region is 15-20 years and is dependent upon proper maintenance.

System Number	1	 	 	 	
Make	 	York	 	 	
Model	 	D6CG036N04046C	 	 	
Serial	 	NME_42987	 	 	
Size	 	3	 	 	
Age	 	1996	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight / Clean	 	 	
Evaporator Coil	 	Straight / Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	N/A	 	 	
Blower Contactor	 	Good	1 pole	 	
Compressor 1 Contactor	 	Good	3 pole	 	
Compressor 2 Contactor	 	N/A	 	 	
Heat Exchanger	 	Good	 	 	
Belt	 	N/A	 	 	
Notes:	(2) 14x20x1, (1) 14x25x1 Filters/Clean	
 	 	
 	 System appears to have been maintained	
 	 Cooling ΔT 20˚	
 	 No recommended repairs needed	

 

 
64

 

 

 
System Number	2	 	 	 	
Make	 	York	 	 	
Model	 	D3CG120N16546JSD	 	 	
Serial	 	NHFM101456	 	 	
Size	 	10	 	 	
Age	 	1997	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight / Clean	 	 	
Evaporator Coil	 	Straight / Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
Blower Contactor	 	Pitted	2 pole	Needs Replaced	
Compressor 1 Contactor	 	Good	3 pole	 	
Compressor 2 Contactor	 	Good	3 pole	 	
Heat Exchanger	 	BAD	See Pictures	Needs Replaced	
Belt	 	1 – A56	Worn	Needs Replaced	
Notes:	 (4) 18x24x2 Filters/Dirty	
 	 Heat exchanger needs replaced * Holes	
 	 
 (1) A56 Belt needs replaced
 	
 	 Cooling ΔT 27˚	
 	 System appears to have been maintained

 

 

 

 

 
 
65

 

System Number	3	 	 	 	
Make	 	York	 	 	
Model	 	D3CG120N16546JSD	 	 	
Serial	 	NLFM126111	 	 	
Size	 	10	 	 	
Age	 	1997	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight / Clean	 	 	
Evaporator Coil	 	Straight / Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
Blower Contactor	 	Good	2 pole	 	
Compressor 1 Contactor	 	Good	3 pole	 	
Compressor 2 Contactor	 	Good	3 pole	 	
Heat Exchanger	 	Good	 	 	
Belt	 	1 – A56	Good	 	
Notes:	 (2) 16x24x2, (2)18x24x2 Filters/Dirty	

 	 Cooling ΔT 21˚	
 	 System appears to have been maintained	

 
 
66

 

System Number	4	 	 	 	
Make	 	York	 	 	
Model	 	D3CG120N16546JSD	 	 	
Serial	 	NHFM101472	 	 	
Size	 	10	 	 	
Age	 	1997	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight / Clean	 	 	
Evaporator Coil	 	Straight / Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
Blower Contactor	 	Good	2 pole	 	
Compressor 1 Contactor	 	Good	3 pole	 	
Compressor 2 Contactor	 	Good	3 pole	 	
Heat Exchanger	 	Good	 	 	
Belt	 	1 – A56	Good	 	
Notes:	 (2) 16x24x2, (2)18x24x2 Filters/Clean	
 	 Drain line is dislocated	
 	 	
 	 Cooling ΔT 23˚	
 	 System appears to have been maintained	

 
 
67

 

System Number	5	 	 	 	
Make	 	York	 	 	
Model	 	D1CG300N24046D	 	 	
Serial	 	NMFM132880	 	 	
Size	 	25	 	 	
Age	 	1997	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight / Clean	 	 	
Evaporator Coil	 	Straight / Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
CDFM 1 Contactor	 	Good	2 pole	 	
CDFM 2 Contactor	 	Good	2 pole	 	
Blower Contactor	 	Good	3 pole	 	
Compressor 1 Contactor	 	Good	3 pole	 	
Compressor 2 Contactor	 	Good	3 pole	 	
Compressor 3 Contactor	 	Good	3 pole	 	
Heat Exchanger	 	Good	 	 	
Belt	 	2-BX83	Good	 	
Notes:	 (6) 16x20x2, (3) 14x20x2 Filters/Dirty	
 	 
 (1) Fan Blade out of balance
 	
 	 Needs Ignition Module Replaced	
 	 Cooling ΔT 24˚	
 	 System appears to have been maintained	

 

68

 

System Number	6	 	 	 	
Make	 	York	 	 	
Model	 	D1CG300N240460	 	 	
Serial	 	NMFM132879	 	 	
Size	 	25	 	 	
Age	 	1997	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight / Clean	 	 	
Evaporator Coil	 	Straight / Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
CDFM 1 Contactor	 	Good	2 pole	 	
CDFM 2 Contactor	 	Good	2 pole	 	
Blower Contactor	 	Good	3 pole	 	
Compressor 1 Contactor	 	Good	3 pole	 	
Compressor 2 Contactor	 	Good	3 pole	 	
Compressor 3 Contactor	 	Good	3 pole	 	
Compressor 4 Contactor	 	Good	3 pole	 	
Heat Exchanger	 	Good	 	 	
Belt	 	2-BX83	Good	 	
Notes:	 (6) 16x20x2, (3) 14x20x2 Filters/Dirty	

 	 Cooling ΔT 22˚	
 	 System appears to have been maintained	

 

69

 

System Number	7	 	 	 	
Make	 	York	 	 	
Model	 	D1CG300N240460	 	 	
Serial	 	NMFM136203	 	 	
Size	 	25	 	 	
Age	 	1997	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight / Clean	 	 	
Evaporator Coil	 	Straight / Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
CDFM 1 Contactor	 	Good	2 pole	 	
CDFM 2 Contactor	 	Good	2 pole	 	
Blower Contactor	 	Good	2 pole	 	
Compressor 1 Contactor	 	BAD	3 pole	Needs Replaced	
Compressor 2 Contactor	 	BAD	3 pole	Needs Replaced	
Compressor 3 Contactor	 	BAD	3 pole	Needs Replaced	
Compressor 4 Contactor	 	Good	3 pole	 	
Heat Exchanger	 	Good	 	 	
Belt	 	2-BX83	Good	 	
Notes:	  (6) 16x20x2, (3) 14x20x2 Filters/Dirty	

 	 Cooling ΔT 22˚	
 	 System appears to have been maintained	

 

70

 
 
System Number	8	 	 	 	
Make	 	York	 	 	
Model	 	D1CG300N240460	 	 	
Serial	 	NMFM132878	 	 	
Size	 	25	 	 	
Age	 	1997	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight / Clean	 	 	
Evaporator Coil	 	Straight / Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
CDFM 1 Contactor	 	Good	2 pole	 	
CDFM 2 Contactor	 	Good	2 pole	 	
Blower Contactor	 	Good	3 pole	 	
Compressor 1 Contactor	 	Good	3 pole	 	
Compressor 2 Contactor	 	Good	3 pole	 	
Compressor 3 Contactor	 	Good	3 pole	 	
Compressor 4 Contactor	 	Good	3 pole	 	
Heat Exchanger	 	Good	 	 	
Belt	 	2-BX83	Good	 	
Notes:	  (6) 16x20x2, (3) 14x20x2 Filters/Dirty	

 	 Cooling ΔT 24˚	
 	 System appears to have been maintained	

 

71

 

System Number	9	 	 	 	
Make	 	York	 	 	
Model	 	D3CG120N16546JSD	 	 	
Serial	 	NHFM101454	 	 	
Size	 	10	 	 	
Age	 	1997	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight / Clean	 	 	
Evaporator Coil	 	Straight / Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
Blower Contactor	 	Good	2 pole	 	
Compressor 1 Contactor	 	Good	3 pole	 	
Compressor 2 Contactor	 	Good	3 pole	 	
Heat Exchanger	 	Good	 	 	
Belt	 	1-A56	Good	 	
Notes:	 (2) 16x24x2, (2)18x24x2 Filters/Dirty	

 	 Cooling ΔT 19˚	
 	 System appears to have been maintained	

 

72

 

System Number	10	 	 	 	
Make	 	Carrier	 	 	
Model	 	48TMD008-A-601	 	 	
Serial	 	1903G30553	 	 	
Size	 	8	 	 	
Age	 	2003	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight/Clean	 	 	
Evaporator Coil	 	Straight/Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
Blower Contactor	 	Good	2 pole	 	
Compressor 1 Contactor	 	Good	2 pole	 	
Compressor 2 Contactor	 	Good	2 pole	 	
Heat Exchanger	 	Good	 	 	
Belt	 	1-A48	Good	 	
Notes:	 (4) 16x20x2 Filters/Clean	

 	 Cooling ΔT 23˚	
 	 System appears to have been maintained	

 
 
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System Number	11	 	 	 	
Make	 	Lennox	 	 	
Model	 	HS29-036-2P	 	 	
Serial	 	5803D8167	 	 	
Size	 	3	 	 	
Age	 	2003	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight/Clean	 	 	
Evaporator Coil	 	Straight/Clean	 	 	
Blower Wheel Bearings	 	N/A	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	N/A	 	 	
Blower Contactor	 	AHU	 	 	
Compressor 1 Contactor	 	Good	1 pole	 	
Compressor 2 Contactor	 	N/A	 	 	
Heat Exchanger	 	N/A	 	 	
Belt	 	N/A	 	 	
Notes:	 
 (1) 20x20x1 Filter/Clean
 	
 	 AHU M#CB29M-41-1P, S#5803D01657	
 	Compressor is pulling locked rotor amps and needs replaced	

 	 Cooling ΔT SYSTEM DOWN˚	
 	 System appears to have been maintained	

 
 
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System Number	12	 	 	 	
Make	 	Carrier	 	 	
Model	 	48TMD028-611BA	 	 	
Serial	 	2707U19776	 	 	
Size	 	25	 	 	
Age	 	2007	 	 	
 	 	 	 	 	
Condenser Coil	 	Straight/Clean	 	 	
Evaporator Coil	 	Straight/Clean	 	 	
Blower Wheel Bearings	 	Good	 	 	
Blower Motor Bearings	 	Good	 	 	
CDFM 1 Bearings	 	Good	 	 	
CDFM 2 Bearings	 	Good	 	 	
CDFM 3 Bearings	 	Good	 	 	
CDFM 4 Bearings	 	Good	 	 	
CDFM 5 Bearings	 	Good	 	 	
CDFM 6 Bearings	 	Good	 	 	
CDFM 1 Contactor	 	Good	2 pole	 	
CDFM 2 Contactor	 	Good	2 pole	 	
CDFM 3 Contactor	 	Good	2 pole	 	
CDFM 4 Contactor	 	Good	2 pole	 	
CDFM 5 Contactor	 	Good	2 pole	 	
CDFM 6 Contactor	 	Good	2 pole	 	
Blower Contactor	 	Good	3 pole	 	
All Compressor Contactors	 	Good	3 pole	 	
Heat Exchanger	 	Good	 	 	
Belt	 	2-B47	Good	 	
 	 	 	 	 	
Notes:	 	 	 	 	
 	 (4) 16x20x2, (4) 20x20x2 Filters/Dirty	
 	 System was fully functional as of 2/23/2012 with no signs of problems at the time of the inspection. Uncertain of problem that kept the system from operating on previous inspections. Problem was apparently fixed by other contractor.	

 	 	

 
 
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Additional Work Recommended
System #	 	Recommended Work	 	Cost	 	
1	 	None	 	 	 	
2	 	Replace Air Filters	 	$40.55	 	
 	 	Replace Blower Contactor	 	$161.94	 	
 	 	Replace A56 Belt	 	$62.95	 	
 	 	Replace Heat Exchanger	 	$6,064.00	 	
 	 	***Alternate / Replace Unit***	 	 	$12,804.00	
 	 	 	 	$6,329.44	Subtotal #2	
3	 	Replace Air Filters	 	$40.55	 	
4	 	Replace Air Filters	 	$40.55	 	
 	 	Repair Drain Line	 	$126.30	 	
 	 	 	 	$166.85	Subtotal #4	
5	 	Replace Air Filters	 	$40.55	 	
 	 	Replace Fan Blade	 	$237.82	 	
 	 	Replace Ignition Module	 	$623.20	 	
 	 	 	 	$901.57	Subtotal #5	
6	 	Replace Air Filters	 	$40.55	 	
7	 	Replace Air Filters	 	$40.55	 	
 	 	Replace Contactor	 	$180.08	 	
 	 	Replace Contactor	 	$180.08	 	
 	 	Replace Contactor	 	$180.08	 	
 	 	 	 	$580.79	Subtotal #7	
8	 	Replace Air Filters	 	$40.55	 	
9	 	Replace Air Filters	 	$40.55	 	
10	 	None	 	 	 	
11	 	Replace Outdoor Unit 3Ton/3phase	$4,905.65	 	
12	 	Replace Air Filters	 	$64.59	 	

 

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