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EXHIBIT 10.22
[Net Lease]
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 16th day of June, 1997, between SCI
DEVELOPMENT SERVICES INCORPORATED ("Landlord"), and the Tenant named below.
TENANT: STUART ENTERTAINMENT, INC
TENANT'S REPRESENTATIVE ▇▇▇▇ ▇▇▇▇▇▇▇▇; ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
ADDRESS, AND PHONE NO.: ▇▇▇▇ ▇▇▇▇▇
PREMISES: That portion of the Building, containing approximately
100,000 rentable square feet during the first lease year, as
determined by Landlord, as shown on Exhibit A and 157,600
rentable square feet during the remaining Lease Term, as
determined by Landlord, as shown on Exhibit A-1.
PROJECT: McAllen ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇
TENANT'S PROPORTIONATE SHARE
OF PROJECT FOR THE FIRST LEASE YEAR: 48.43%
TENANT'S PROPORTIONATE SHARE
OF PROJECT FOR LEASE YEARS 2-7: 76.32%
TENANT'S PROPORTIONATE SHARE
OF BUILDING FOR THE FIRST LEASE YEAR: 48.43%
TENANT'S PROPORTIONATE SHARE
OF BUILDING FOR LEASE YEARS 2-7: 76.32%
LEASE TERM: Beginning on the Commencement Date and ending on the last
day of the 84th full calendar month thereafter.
COMMENCEMENT DATE: See Addendum Two
INITIAL MONTHLY BASE RENT: $27,500.00
(See Addendum One)
Initial Estimated Monthly 1. Utilities; $ 833.00
Operating Expense Payments:
(estimates only and subject 2. Common Area Charges: $ 1,500.00
to adjustment to actual costs
and expenses according to the 3. Taxes: $ 9,167.00
provisions of this Lease)
4. Insurance: $ 666.00
5. Management Fee: $ 1249.00
INITIAL ESTIMATED MONTHLY OPERATING
EXPENSE PAYMENTS: $13,415.00
INITIAL MONTHLY BASE RENT AND
OPERATING EXPENSE PAYMENTS: $49,915.00
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SECURITY DEPOSIT: $52,625.00
BROKER: None
ADDENDA: Addendum One - Base Rent Adjustments; Addendum Two-
Construction Addendum (Allowance); Addendum Three -
Tenant's Purchase Option; Addendum Four - Right of First
Offer; Addendum Five - One Renewal Option at Market;
Addendum Six - Acquisition of Premises Contingency;
Addendum Seven - Agreement to Subordinate Landlord's Lien
1. GRANTING CLAUSE. In consideration of the obligation of Tenant to
pay rent as herein provided and in consideration of the other terms, covenants,
and conditions hereof, Landlord leases to Tenant, and Tenant takes from
Landlord, the Premises, to have and to hold for the Lease Term, subject to the
terms, covenants and conditions of this Lease.
2. ACCEPTANCE OF PREMISES. Tenant shall accept the Premises in its
condition as of the Commencement Date, subject to all applicable laws,
ordinances, regulations, covenants and restrictions. Landlord has made no
representation or warranty as to the suitability of the Premises for the
conduct of Tenant's business, and Tenant waives any implied warranty that the
Premises are suitable for Tenant's intended purposes. Except as provided in
Paragraph 10, in no event shall Landlord have any obligation for any defects in
the Premises or any limitation on its use. The taking of possession of the
Premises shall be conclusive evidence that Tenant accepts the Premises and that
the Premises were in good condition at the time possession was taken except for
items that are Landlord's responsibility under Paragraph 10 and any punchlist
items agreed to in writing by Landlord and Tenant. Tenant shall have thirty
(30) days following the Commencement Date to prepare the punchlist items to be
repaired by Landlord; provided, however, such punchlist items shall not include
any items or repairs that were caused by, or are attributable to Tenant, its
agents, employees and invitees. The ability of Tenant to assert additional
punchlist items for thirty (30) days following the Commencement Date is not
intended to and shall not be construed to transfer to Landlord the Tenant's
obligations to maintain during the Lease Term the interior of the Premises
and/or the other portions of the Premises for which Tenant is responsible under
this Lease. As set forth on the first page of this Lease, (i) the Premises is
defined hereunder as the approximately 157,600 square feet of leased space as
outlined on Exhibit A of this Lease, (ii) the Building is the entire
approximately 206,500 square foot facility commonly known as the McAllen
Distribution Center No. 1, and (iii) the Project is the Building and any other
buildings built now or in the future by Landlord or its successor which are
contiguous to the Building and part of the McAllen Distribution Center.
3. USE. The Premises shall be used only for the purpose of receiving,
storing, shipping, and selling (but limited to wholesale sales) products,
materials, and general merchandise, including, but not limited to, bingo
printing and finishing, pull tabs, and ink markers, made and/or distributed by
Tenant, and for such other lawful purposes as may be incidental thereto. Tenant
may also use the Premises for light manufacturing of pull tab inserts, lottery
style tickets, assembly of electrical bingo blowers, flashboards, and
electronic bingo units. Tenant shall not conduct or give notice of any auction,
liquidation, or going out of business sale on the Premises. Tenant will use the
Premises in a careful, safe and proper manner and will not commit waste,
overload the floor or structure of the Premises or subject the Premises to use
that would damage the Premises. Tenant shall not permit any objectionable or
unpleasant odors, smoke, dust, gas, noise, or vibrations to emanate from the
Premises, or take any other action that would constitute a nuisance or would
disturb, unreasonably interfere with, or endanger Landlord or any tenants of
the Project. Outside storage, including without limitation, storage of trucks
and other vehicles, is prohibited without Landlord's prior written consent;
provided, however, that to the extent permitted by applicable Legal
Requirements (defined below), Tenant shall have the right to park automobiles,
trucks and/or trailers along the exterior walls of the Premises, between the
truck doors, and at the truck doors of the Premises, and in the truck court
area for the Premises, as shown on Exhibit A to this Lease, so long as such
automobiles, trucks and/or trailers are in operable condition and do not block
access to the
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premises of other tenants (if any) of the Building. Tenant, at its sole
expense, shall use and occupy the Premises in compliance with all laws,
including, without limitation, the Americans With Disabilities Act, orders,
judgments, ordinances, regulations, codes, directives, permits, licenses,
covenants and restrictions now or hereafter applicable to the Premises
(collectively, "Legal Requirements"). The Premises shall not be used as a place
of public accommodation under the Americans With Disabilities Act or similar
state statutes or local ordinances or any regulations promulgated thereunder,
all as may be amended from time to time. Tenant shall, at its expense, make any
alterations or modifications, within or without the Premises, that are required
by Legal Requirements related to Tenant's use or occupation of the Premises.
Tenant will not use or permit the Premises to be used for any purpose or in any
manner that would void Tenant's or Landlord's insurance, increase the insurance
risk, or cause the disallowance of any sprinkler credits. If any increase in
the cost of any insurance on the Premises or the Project is caused by Tenant's
use or occupation of the Premises, or because Tenant vacates the Premises, then
Tenant shall pay the amount of such increase to Landlord. Any occupation of the
Premises by Tenant prior to the Commencement Date shall be subject to all
obligations of Tenant under this Lease.
4. BASE RENT. Tenant shall pay Base Rent in the amount set forth
above. The Security Deposit shall be due and payable on the date hereof, and
the first monthly installment of Base Rent and estimated Operating Expenses
(defined below) shall be due and payable ten (10) days prior to the
Commencement Date. Tenant promises to pay to Landlord in advance, without
demand, deduction or set-off, monthly installments of Base Rent on or before
the first day of each calendar month succeeding the Commencement Date. Payments
of Base Rent for any fractional calendar month shall be prorated. All payments
required to be made by Tenant to Landlord hereunder shall be payable at such
address as Landlord may specify from time to time by written notice delivered
in accordance herewith. The obligation of Tenant to pay Base Rent and other
sums to Landlord and the obligations of Landlord under this Lease are
independent obligations. Tenant shall have no right at any time to ▇▇▇▇▇,
reduce, or set-off any rent due hereunder except as may be expressly provided
in this Lease. If Tenant is delinquent in any monthly installment of Base Rent
or of estimated Operating Expenses for more than 5 days, Tenant shall pay to
Landlord on demand a late charge equal to 5 percent of such delinquent sum.
Notwithstanding the foregoing, Tenant shall not be obligated to pay the late
charge until Landlord has given Tenant 5 days written notice of the delinquent
payment, provided, however, that such notice shall not be required more than
twice in any 12-month period or more than six (6) times over the initial Lease
Term. The provision for such late charge shall be in addition to all of
Landlords other rights and remedies hereunder or at law and shall not be
construed as a penalty.
5. SECURITY DEPOSIT. The Security Deposit shall be held by Landlord as
security for the performance of Tenant's obligations under this Lease. The
Security 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 (hereinafter defined), Landlord may use all or part of the Security
Deposit to pay delinquent payments due under this Lease, and the cost of any
damage, injury, expense or liability caused by such Event of Default, without
prejudice to any other remedy provided herein or provided by law. Tenant
shall pay Landlord on demand the amount that will restore the Security Deposit
to its original amount. Landlord's obligation respecting the Security Deposit
is that of a debtor, not a trustee; no interest shall accrue thereon. the
Security Deposit shall be the property of Landlord, but shall be paid to Tenant
when Tenant's obligations under this Lease have been completely fulfilled.
Landlord shall be released from any obligation with respect to the Security
Deposit upon transfer of this Lease and the Premises to a person or entity
assuming Landlord's obligations under this Paragraph S.
6. OPERATING EXPENSE PAYMENTS. During each month of the Lease Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal
to 1/12 of the annual cost, as estimated by Landlord from time to time, of
Tenant's Proportionate Share (hereinafter defined) of Operating Expenses for
the Project. Payments thereof for any fractional calendar month shall be
prorated. The term "Operating Expenses" means all costs and expenses incurred
by Landlord with respect to the ownership, maintenance, and operation of the
Project including, but not limited to costs of: Taxes (hereinafter defined) and
fees payable to tax consultants and attorneys for consultation and contesting
taxes; insurance; utilities; maintenance, repair and replacement of all
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portions of the Project, including without limitation, paving and parking
areas, roads, roofs, alleys, and driveways, mowing, landscaping, exterior
painting, utility lines, heating, ventilation and air conditioning systems,
lighting, electrical systems and other mechanical and building systems; amounts
paid to contractors and subcontractors for work or services performed in
connection with any of the foregoing; charges or assessments of any association
to which the Project is subject; property management fees payable to a property
manager in an amount not to exceed 1.5% of gross rents from the Project,
including any affiliate of Landlord, or if there is no property manager, an
amount not to exceed 1.5% of gross rents from the Project; security services,
if any; trash collection, sweeping and removal; and additions or alterations
made by Landlord to the Project or the Building in order to comply with Legal
Requirements (other than those expressly required herein to be made by Tenant)
or that are appropriate to the continued operation of the Project or the
Building as a bulk warehouse or light manufacturing facility in the market
area, provided that the cost of additions or alterations that are required to
be capitalized for federal income tax purposes shall be amortized on a straight
line basis over a period equal to the lesser of the useful life thereof for
federal income tax purposes or 10 years. Operating Expenses do not include
costs, expenses, depreciation or amortization for capital repairs and capital
replacements or structural repairs required to be made by Landlord under
Paragraph 10 of this Lease, debt service under mortgages or ground rent under
ground leases, costs of restoration to the extent of net insurance proceeds
received by Landlord with respect thereto, leasing commissions, or the costs of
renovating space for tenants.
If Tenant's total payments of Operating Expenses for any year
are less than Tenant's Proportionate Share of actual Operating Expenses for
such year, then Tenant shall pay the difference to Landlord within 30 days
after demand, and if more, then Landlord shall retain such excess and credit it
against Tenant's next payments. For purposes of calculating Tenant's
Proportionate Share of Operating Expenses, a year shall mean a calendar year
except the first year, which shall begin on the Commencement Date, and the last
year, which shall end on the expiration of this Lease. With respect to
Operating Expenses which Landlord allocates to the entire Project, Tenant's
"Proportionate Share" shall be the percentage set forth on the first page of
this Lease as Tenant's Proportionate Share of the Project as reasonably
adjusted by Landlord in the future for changes in the physical size of the
Premises or the Project; and, with respect to Operating Expenses which Landlord
allocates only to the Building, Tenant's "Proportionate Share" shall be the
percentage set forth on the first page of this Lease as Tenant's Proportionate
Share of the Building as reasonably adjusted by Landlord in the future for
changes in the physical size of the Premises or the Building. Landlord may
equitably increase Tenant's Proportionate Share for any item of expense or cost
reimbursable by Tenant that relates to a repair, replacement, or service that
benefits only the Premises or only a portion of the Project or Building that
includes the Premises or that varies with occupancy or use. The estimated
Operating Expenses for the Premises set forth on the first page of this Lease
are only estimates, and Landlord makes no guaranty or warranty that such
estimates will be accurate.
7. UTILITIES. Tenant shall pay for all water, gas, electricity, heat,
light, power, telephone, sewer, sprinkler services, refuse and trash
collection, and other utilities and services used on the Premises, all
maintenance charges for utilities, and any storm sewer charges or other similar
charges for utilities imposed by any governmental entity or utility provider,
together with any taxes, penalties, surcharges or the like pertaining to
Tenant's use of the Premises. Landlord may cause at Tenant's expense any
utilities to be separately metered or charged directly to Tenant by the
provider. Tenant shall pay its share of all charges for jointly metered
utilities based upon consumption, as reasonably determined by Landlord. No
interruption or failure of utilities shall result in the termination of this
Lease or the abatement of rent. Tenant agrees to limit use of water and sewer
for normal restroom use; provided, however, if such water and sewer is
separately metered, Tenant may also use water and sewer for Tenant's
manufacturing process.
8. TAXES. Landlord shall pay all taxes, assessments and governmental
charges (collectively referred to as "Taxes") that accrue against the Project
during the Lease Term, which shall be included as part of the Operating
Expenses charged to Tenant. Landlord may contest by appropriate legal
proceedings the amount, validity, or application of any Taxes or liens thereof.
All capital levies or other taxes assessed or imposed on Landlord upon the
rents payable to Landlord under this Lease and any franchise tax, any excise,
transaction, sales or privilege tax, assessment, levy or charge measured by or
based, in whole or in part, upon such rents from the Premises and/or
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the Project or any portion thereof shall be paid by Tenant to Landlord monthly
in estimated installments or upon demand, at the option of Landlord, as
additional rent; provided, however, in no event shall Tenant be liable for any
net income taxes imposed on Landlord unless such net income taxes are in
substitution for any Taxes payable hereunder. If any such tax or excise is
levied or assessed directly against Tenant, then Tenant shall be responsible
for and shall pay the same at such times and in such manner as the taxing
authority shall require. Tenant shall be liable for all taxes levied or
assessed against any personal property or fixtures placed in the Premises,
whether levied or assessed against Landlord or Tenant.
9. INSURANCE. Landlord shall maintain all risk property insurance
covering the full replacement cost of the Building. Landlord may, but is not
obligated to, maintain such other insurance and additional coverages as it may
deem necessary, including, but not limited to, commercial liability insurance
and rent loss insurance. All such insurance shall be included as part of the
Operating Expenses charged to Tenant. The Project or Building may be included in
a blanket policy (in which case the cost of such insurance allocable to the
Project or Building will be determined by Landlord based upon the insurer's
cost calculations). Tenant shall also reimburse Landlord for any increased
premiums or additional insurance which Landlord reasonably deems necessary as a
result of Tenant's use of the Premises.
Tenant, at its expense, shall maintain during the Lease Term:
all risk property insurance covering the full replacement cost of all property
and improvements installed or placed in the Premises by Tenant at Tenant's
expense; worker's compensation insurance with no less than the minimum limits
required by law; employer's liability insurance with such limits as required by
law; and commercial liability insurance, with a minimum limit of $1,000,000
per occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 (together with such
additional umbrella coverage as Landlord may reasonably require) for property
damage, personal injuries, or deaths of persons occurring in or about the
Premises. Landlord may from time to time require reasonable increases in any
such limits. The commercial liability policies shall name Landlord as an
additional insured, insure on an occurrence and not a claims-made basis, be
issued by insurance companies which are reasonably acceptable to Landlord, not
be cancelable unless 30 days prior written notice shall have been given to
Landlord, contain a hostile fire endorsement and a contractual liability
endorsement and provide primary coverage to Landlord (any policy issued to
Landlord providing duplicate or similar coverage shall be deemed excess over
Tenant's policies). Such policies or certificates thereof shall be delivered to
Landlord by Tenant upon commencement of the Lease Term and upon each renewal of
said insurance.
The all risk property insurance obtained by Landlord and Tenant
shall include a waiver of subrogation by the insurers and all rights based upon
an assignment from its insured, against Landlord or Tenant, their officers,
directors, employees, managers, agents, invitees and contractors, in connection
with any loss or damage thereby insured against. Neither party nor its
officers, directors, employees, managers, agents, invitees or contractors shall
be liable to the other for loss or damage caused by any risk coverable by all
risk property insurance, and each party waives any claims against the other
party, and its officers, directors, employees, managers, agents, invitees and
contractors for such loss or damage. The failure of a party to insure its
property shall not void this waiver. Landlord and its agents, employees and
contractors shall not be liable for, and Tenant hereby waives all claims
against such parties for, business interruption and losses occasioned thereby
sustained by Tenant or any person claiming through Tenant resulting from any
accident or occurrence in or upon the Premises or the Project from any cause
whatsoever, including without limitation, damage caused in whole or in part,
directly or indirectly, by the negligence of Landlord or its agents, employees
or contractors.
10. LANDLORD'S REPAIRS. Landlord shall maintain, at its expense, the
structural soundness of the roof, foundation, the structural soundness of the
floor, and exterior walls of the Building in good repair, reasonable wear and
tear and uninsured losses and damages caused by Tenant, its agents and
contractors excluded. The term "walls" as used in this Paragraph 10 shall not
include windows, glass or plate glass, doors or overhead doors, special store
fronts, dock bumpers, dock plates or levelers, or office entries. Tenant shall
promptly give Landlord written notice of any
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repair required by Landlord pursuant to this Paragraph 10, after which Landlord
shall have a reasonable opportunity to repair.
11. TENANT'S REPAIRS. Landlord, at Tenant's expense as provided in
Paragraph 6, shall maintain in good repair and condition the parking areas and
other common areas of the Building, including, but not limited to driveways,
alleys, landscape and grounds surrounding the Premises. Subject to Landlord s
obligation in Paragraph 10 and subject to Paragraphs 9 and 15, Tenant, at its
expense, shall repair, replace and maintain in good condition all portions of
the Premises and all areas, improvements and systems exclusively serving the
Premises including, without limitation, dock and loading areas, truck doors,
plumbing, water and sewer lines up to points of common connection, fire
sprinklers and fire protection systems, entries, doors, ceilings and roof
membrane, windows, interior walls, and the interior side of demising walls, and
heating, ventilation and air conditioning systems. Such repair and replacements
include capital expenditures and repairs whose benefit may extend beyond the
Term. Heating, ventilation and air conditioning systems and other mechanical
and building systems serving the Premises shall be maintained at Tenant s
expense pursuant to maintenance service contracts entered into by Tenant. The
scope of services and contractors under such maintenance contracts shall be
reasonably approved by Landlord. At Landlord s request, Tenant shall enter into
a joint maintenance agreement with any railroad that services the Premises. If
Tenant fails to perform any repair or replacement for which it is responsible,
Landlord may perform such work and be reimbursed by Tenant within 10 days after
demand therefor. Subject to Paragraphs 9 and 15, Tenant shall bear the full
cost of any repair or replacement to any part of the Building or Project that
results from damage caused by Tenant, its agents, contractors, or invitees and
any repair that benefits only the Premises. Landlord agrees that following the
Commencement Date, Landlord shall, to the extent assignable, assign to Tenant
any contractor or manufacturer warranties relating to the Tenant Improvements
and if such warranties are not assignable, Landlord shall use commercially
reasonable efforts to enforce such warranties on behalf and for the benefit of
Tenant.
12. TENANT-MADE ALTERATIONS AND TRADE FIXTURES. Any alterations,
additions, or improvements made by or on behalf of Tenant to the Premises
("Tenant-Made Alterations") shall be subject to Landlord s prior written
consent. Tenant shall cause, at its expense, all Tenant-Made Alterations to
comply with insurance requirements and with Legal Requirements and shall
construct at its expense any alteration or modification required by Legal
Requirements as a result of any Tenant-Made Alterations. All Tenant-Made
Alterations shall be constructed in a good and workmanlike manner by
contractors reasonably acceptable to Landlord and only good grades of materials
shall be used. All plans and specifications for any Tenant-Made Alterations
shall be submitted to Landlord for its approval. Landlord may monitor
construction of the Tenant-Made Alterations. Tenant shall reimburse Landlord
for its actual out-of-pocket costs in reviewing plans and specifications and in
monitoring construction for structural Tenant-Made Alterations. Landlord s
right to review plans and specifications and to monitor construction shall be
solely for its own benefit, and Landlord shall have no duty to see that such
plans and specifications or construction comply with applicable laws, codes,
rules and regulations. Tenant shall provide Landlord with the identities and
mailing addresses of all persons performing work or supplying materials, prior
to beginning such construction, and Landlord may post on and about the Premises
notices of non-responsibility pursuant to applicable law. Tenant shall furnish
security or make other arrangements satisfactory to Landlord to assure payment
for the completion of all work free and clear of liens and shall provide
certificates of insurance for worker's compensation and other coverage in
amounts and from an insurance company satisfactory to Landlord protecting
Landlord against liability for personal injury or property damage during
construction. Upon completion of any Tenant-Made Alterations, Tenant shall
deliver to Landlord sworn statements setting forth the names of all contractors
and subcontractors who did work on the Tenant-Made Alterations and final lien
waivers from all such contractors and subcontractors. Upon surrender of the
Premises, all Tenant-Made Alterations and any leasehold improvements
constructed by Landlord or Tenant shall remain on the Premises as Landlord's
property, except to the extent Landlord requires removal at Tenant's expense of
any such items or Landlord and Tenant have otherwise agreed in writing in
connection with Landlord's consent to any Tenant-Made Alterations. Tenant shall
repair any damage caused by such removal.
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Tenant, at its own cost and expense and without Landlord's prior
approval, may erect such shelves, bins, machinery and trade fixtures
(collectively "Trade Fixtures") in the ordinary course of its business provided
that such items do not alter the basic character of the Premises, do not
overload or damage the Premises, and may be removed without injury to the
Premises, and the construction, erection, and installation thereof complies
with all Legal Requirements and with Landlord's requirements set forth above.
Tenant shall remove its Trade Fixtures and shall repair any damage caused by
such removal.
13. SIGNS. Tenant shall not make any changes to the exterior of the
Premises, install any exterior lights, decorations, balloons, flags, pennants,
banners, or painting, or 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 Premises, without Landlord's prior written consent.
Upon surrender or vacation of the Premises, Tenant shall have removed all signs
and repair, paint, and/or replace the building facia surface to which its signs
are attached. Tenant shall obtain all applicable governmental permits and
approvals for sign and exterior treatments. All signs, decorations, advertising
media, blinds, draperies and other window treatment or bars or other security
installations visible from outside the Premises shall be subject to Landlord's
approval and conform in all respects to Landlord's requirements.
14. PARKING. Tenant shall have the exclusive use of that certain
parking area more particularly set forth on Exhibit A-1 to this Lease. Tenant
shall be entitled to park in common with other tenants of the Project in those
areas designated for nonreserved parking. Landlord may allocate parking spaces
among Tenant and other tenants in the Project if Landlord determines that such
parking facilities are becoming crowded. Landlord shall not be responsible for
enforcing Tenant's parking rights against any third parties.
15. RESTORATION. If at any time during the Lease Term the Premises are
damaged by a fire or other casualty, Landlord shall notify Tenant within 30
days after such damage as to the amount of time Landlord reasonably estimates
it will take to restore the Premises. If the restoration time is estimated to
exceed 4 months, either Landlord or Tenant may elect to terminate this Lease
upon notice to the other party given no later than 30 days after Landlord's
notice. If neither party elects to terminate this Lease or if Landlord
estimates that restoration will take 4 months or less, then, subject to receipt
of sufficient insurance proceeds, Landlord shall promptly restore the Premises
excluding the improvements installed by Tenant or by Landlord and paid by
Tenant, subject to delays arising from the collection of insurance proceeds or
from Force Majeure events. Tenant at Tenant's expense shall promptly perform,
subject to delays arising from the collection of insurance proceeds, or from
Force Majeure events, all repairs or restoration not required to be done by
Landlord and shall promptly re-enter the Premises and commence doing business
in accordance with this Lease. Notwithstanding the foregoing, either party may
terminate this Lease if the Premises are damaged during the last year of the
Lease Term and Landlord reasonably estimates that it will take more than one
month to repair such damage. Tenant shall pay to Landlord with respect to any
damage to the Premises the amount of the commercially reasonably deductible
under Landlord's insurance policy (currently $10,000) within 10 days after
presentment of Landlord's invoice. If the damage involves the premises of other
tenants, Tenant shall pay the portion of the deductible that the cost of the
restoration of the Premises bears to the total cost of restoration, as
determined by Landlord. Base Rent and Operating Expenses shall be abated for
the period of repair and restoration in the proportion which the area of the
Premises, if any, which is not usable by Tenant bears to the total area of the
Premises. Such abatement shall be the sole remedy of Tenant, and except as
provided herein, Tenant waives any right to terminate the Lease by reason of
damage or casualty loss.
16. CONDEMNATION. If any part of the Premises or the Project should be
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 (a "Taking" or "Taken"), and the Taking would prevent or materially
interfere with Tenant's use of the Premises in Tenant's reasonable judgement or
in Landlord's judgment would materially interfere with or impair its ownership
or operation of the Project, then upon written notice by Landlord this Lease
shall terminate and Base Rent shall be apportioned as of said date. If part of
the Premises shall be Taken, and this Lease is not terminated as provided
above, the Base Rent payable hereunder during the unexpired Lease Term shall be
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reduced to such extent as may be fair and reasonable under the circumstances.
In the event of any such Taking, Landlord shall be entitled to receive the
entire price or award from any such Taking without any payment to Tenant, and
Tenant hereby assigns to Landlord Tenant's interest, if any, in such award.
Tenant shall have the right, to the extent that same shall not diminish
Landlord's award, to make a separate claim against the condemning authority
(but not Landlord) for such compensation as may be separately awarded or
recoverable by Tenant for moving expenses and damage to Tenant's Trade
Fixtures, if a separate award for such items is made to Tenant.
17. ASSIGNMENT AND SUBLETTING. Without Landlord's prior written
consent, which Landlord will not unreasonably withhold or delay, Tenant shall
not assign this Lease or sublease the Premises or any part thereof or mortgage,
pledge, or hypothecate its leasehold interest or grant any concession or
license within the Premises and any attempt to do any of the foregoing shall be
void and of no effect. For purposes of this paragraph, a transfer of the
ownership interests controlling Tenant shall be deemed an assignment of this
Lease unless such ownership interests are publicly traded. Notwithstanding the
above, Tenant may assign or sublet the Premises, or any part thereof, to any
entity controlling Tenant, controlled by Tenant or under common control with
Tenant (a "Tenant Affiliate"), without the prior written consent of Landlord.
Tenant shall reimburse Landlord for all of Landlord's reasonable out-of-pocket
expenses in connection with any assignment or sublease. Upon Landlord's receipt
of Tenant's written notice of a desire to assign or sublet the Premises, or any
part thereof (other than to a Tenant Affiliate), Landlord may, by giving
written notice to Tenant within 30 days after receipt of Tenant's notice,
terminate this Lease with respect to the space described in Tenant's notice, as
of the date specified in Tenant's notice for the commencement of the proposed
assignment or sublease.
It shall be reasonable for the Landlord to withhold its consent
to any assignment or sublease in any of the following instances: (i) an Event
of Default has occurred and is continuing that would not be cured upon the
proposed sublease or assignment; (ii) the assignee or sublessee does not have a
tangible net worth calculated according to generally accepted accounting
principles at least equal to the greater of the tangible net worth of Tenant
immediately prior to such assignment or sublease or the net worth of the Tenant
at the time it executed the Lease; (iii) the intended use of the Premises by
the assignee or sublessee is not in accordance with Article 3 of this Lease;
(iv) the intended use of the Premises by the assignee or sublessee would
materially increase the pedestrian or vehicular traffic to the Premises or the
Project; (v) occupancy of the Premises by the assignee or sublessee would, in
Landlord's opinion, violate an agreement binding upon Landlord or the Project
with regard to the identity of tenants, usage in the Project, or similar
matters; (vi) the identity or business reputation of the assignee or sublessee
will, in the good faith judgment of Landlord, tend to damage the goodwill or
reputation of the Project; (vii) in the case of a sublease, the subtenant has
not acknowledged that the Lease controls over any inconsistent provision in the
sublease; or (viii) the proposed assignee or sublessee is a governmental
agency. Tenant and Landlord acknowledge that each of the foregoing criteria are
reasonable as of the date of execution of this Lease. The foregoing criteria
shall not exclude any other reasonable basis for Landlord to refuse its consent
to such assignment or sublease. Any approved assignment or sublease shall be
expressly subject to the terms and conditions of this Lease. Tenant shall
provide to Landlord all information concerning the assignee or sublessee as
Landlord may reasonably request.
Notwithstanding any assignment or subletting, Tenant and any
guarantor or surety of Tenant's obligations under this Lease shall at all times
remain fully responsible and liable for the payment of the rent and for
compliance with all of Tenant's other obligations under this Lease (regardless
of whether Landlord's approval has been obtained for any such assignments or
sublettings). In the event that the rent due and payable by a sublessee or
assignee (or a combination of the rental payable under such sublease or
assignment plus any bonus or other consideration therefor or incident thereto)
exceeds the rental payable under this Lease, then Tenant shall be bound and
obligated to pay Landlord as additional rent hereunder all such excess rental
and other excess consideration within 10 days following receipt thereof by
Tenant.
If this Lease be assigned or if the Premises be subleased
(whether in whole or in part) or in the event of the mortgage, pledge, or
hypothecation of Tenant's leasehold interest or grant of
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any concession or license within the Premises or if the Premises be occupied in
whole or in part by anyone other than Tenant, then upon a default by Tenant
hereunder Landlord may collect rent from the assignee, sublessee, mortgagee,
pledgee, party to whom the leasehold interest was hypothecated, concessionee or
licensee or other occupant and, except to the extent set forth in the preceding
paragraph, apply the amount collected to the next rent payable hereunder; and
all such rentals collected by Tenant shall be held in trust for Landlord and
immediately forwarded to Landlord. No such transaction or collection of rent or
application thereof by Landlord, however, shall be deemed a waiver of these
provisions or a release of Tenant from the further performance by Tenant of its
covenants, duties, or obligations hereunder.
18. INDEMNIFICATION. Except for the negligence of Landlord, its
agents, employees or contractors, and to the extent permitted by law, Tenant
agrees to indemnify, defend and hold harmless Landlord, and Landlord's agents,
employees and contractors, from and against any and all losses, liabilities,
damages, costs and expenses (including attorneys' fees) resulting from claims by
third parties for injuries to any person and damage to or theft or
misappropriation or loss of property occurring in or about the Project and
arising from the use and occupancy of the Premises or from any activity, work,
or thing done, permitted or suffered by Tenant in or about the Premises or due
to any other act or omission of Tenant, its subtenants, assignees, invitees,
employees, contractors and agents. The furnishing of insurance required
hereunder shall not be deemed to limit Tenant's obligations under this
Paragraph 18.
19. INSPECTION AND ACCESS. Upon 24 hours prior notice and during
regular business hours, except in the event of an emergency, Landlord and its
agents, representatives, and contractors may enter the Premises at any
reasonable time to inspect the Premises and to make such repairs as may be
required or permitted pursuant to this Lease and for any other business
purpose. Landlord and Landlord's representatives may enter the Premises during
business hours for the purpose of showing the Premises to prospective
purchasers and, during the last year of the Lease Term, to prospective tenants.
Landlord may erect a suitable sign on the Premises stating the Premises are
available to let or that the Project is available for sale. Landlord may grant
easements, make public dedications, designate common areas and create
restrictions on or about the Premises, provided that no such easement,
dedication, designation or restriction materially interferes with Tenant's use
or occupancy of the Premises. At Landlord's request, Tenant shall execute such
instruments as may be necessary for such easements, dedications or
restrictions.
20. QUIET ENJOYMENT. If Tenant shall perform all of the covenants and
agreements herein required to be performed by Tenant, Tenant shall, subject to
the terms of this Lease, at all times during the Lease Term, have peaceful and
quiet enjoyment of the Premises against any person claiming by, through or
under Landlord.
21. SURRENDER. Upon termination of the Lease Term or earlier
termination of Tenant's right of possession, Tenant shall surrender the
Premises to Landlord in the same condition as received, broom clean, ordinary
wear and tear and casualty loss and condemnation covered by Paragraphs 15 and
16 excepted. Any Trade Fixtures, Tenant-Made Alterations and property not so
removed by Tenant as permitted or required herein shall be deemed abandoned and
may be stored, removed, and disposed of by Landlord at Tenant's expense, and
Tenant waives all claims against Landlord for any damages resulting from
Landlord's retention and disposition of such property. All obligations of
Tenant hereunder not fully performed as of the termination of the Lease Term
shall survive the termination of the Lease Term, including without limitation,
indemnity obligations, payment obligations with respect to Operating Expenses
and obligations concerning the condition and repair of the Premises.
22. HOLDING OVER. If Tenant retains possession of the Premises after
the termination of the Lease Term, unless otherwise agreed in writing, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any
expansion or renewal option or other similar right or option) shall be
applicable during such holdover period, except that Tenant shall pay Landlord
from time to time, upon demand, as Base Rent for the holdover period, an amount
equal to double the Base Rent in effect on the termination date, computed on a
monthly basis for each month or part thereof during such holding
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over. All other payments shall continue under the terms of this Lease. In
addition, Tenant shall be liable for all damages incurred by Landlord as a
result of such holding over. No holding over by Tenant, whether with or without
consent of Landlord, shall operate to extend this Lease except as otherwise
expressly provided, and this Paragraph 22 shall not be construed as consent for
Tenant to retain possession of the Premises.
23. EVENTS OF DEFAULT. Each of the following events shall be an event
of default ("Event of Default") by Tenant under this Lease:
(i) Tenant shall fail to pay any installment of Base Rent or any
other payment required herein when due, and such failure shall continue
for a period of 5 days from the date of Tenant's receipt of written
notice from Landlord of such failure; provided, however, that Landlord
shall not be obligated to provide more than two (2) such written
notices in any twelve (12) month consecutive period, and Tenant's
failure to pay any third or subsequent installment of Base Rent payable
within such twelve (12) month period within five (5) days after the due
date thereof shall constitute an Event of Default by Tenant.
(ii) Tenant or any guarantor or surety of Tenant's obligations
hereunder shall (A) make a general assignment for the benefit of
creditors; (B) 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 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 (collectively a "proceeding for relief"); (C) become
the subject of any proceeding for relief which is not dismissed within
60 days of its filing or entry; or (D) die or suffer a legal disability
(if Tenant, guarantor, or surety is an individual) or be dissolved or
otherwise fail to maintain its legal existence (if Tenant, guarantor or
surety is a corporation, partnership or other entity).
(iii) Any insurance required to be maintained by Tenant pursuant
to this Lease shall be canceled or terminated or shall expire or shall
be reduced or materially changed, except, in each case, as permitted in
this Lease.
(iv) Tenant shall not occupy or shall vacate the Premises or
shall fail to continuously operate its business at the Premises for the
permitted use set forth herein, whether or not Tenant is in monetary or
other default under this Lease.
(v) Tenant shall attempt or there shall occur any assignment,
subleasing or other transfer of Tenant's interest in or with respect to
this Lease except as otherwise permitted in this Lease.
(vi) Tenant shall fail to discharge any lien placed upon the
Premises in violation of this Lease within 30 days after any such lien
or encumbrance is filed against the Premises.
(vii) Tenant shall fail to comply with any provision of this
Lease other than those specifically referred to in this Paragraph 23,
and except as otherwise expressly provided herein, such default shall
continue for more than 30 days after Landlord shall have given Tenant
written notice of such default.
24. LANDLORD'S REMEDIES. Upon each occurrence of an Event of Default
and so long as such Event of Default shall be continuing, Landlord may at any
time thereafter at its election: terminate this Lease or Tenant's right of
possession, (but Tenant shall remain liable as hereinafter provided) and/or
pursue any other remedies at law or in equity. Upon the termination of this
Lease or termination of Tenant's right of possession, it shall be lawful for
Landlord, without formal demand or notice of any kind, to re-enter the Premises
by summary dispossession proceedings or any other action or proceeding
authorized by law and to remove Tenant and all persons and property therefrom.
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If Landlord re-enters the Premises, Landlord shall have the right to keep in
place and use, or remove and store; all of the furniture, fixtures and
equipment at the Premises.
If Landlord terminates this Lease, Landlord may recover from Tenant
the sum of: all Base Rent and all other amounts accrued hereunder to the date
of such termination; the cost of reletting the whole or any part of the
Premises, including without limitation brokerage fees and/or leasing
commissions incurred by Landlord, and costs of removing and storing Tenant's or
any other occupant's property, repairing, altering, remodeling, or otherwise
putting the Premises into condition acceptable to a new tenant or tenants, and
all reasonable expenses incurred by Landlord in pursuing its remedies,
including reasonable attorneys' fees and court costs; and the excess of the then
present value of the Base Rent and other amounts payable by Tenant under this
Lease as would otherwise have been required to be paid by Tenant to Landlord
during the period following the termination of this Lease measured from the
date of such termination to the expiration date stated in this Lease, over the
present value of any net amounts which Tenant establishes Landlord can
reasonably expect to recover by reletting the Premises for such period, taking
into consideration the availability of acceptable tenants and other market
conditions affecting leasing. Such present values shall be calculated at a
discount rate equal to the 90-day U.S. Treasury ▇▇▇▇ rate at the date of such
termination.
If Landlord terminates Tenant's right of possession (but not this
Lease), Landlord may, but shall be under no obligation to, relet the Premises
for the account of Tenant for such rent and upon such terms as shall be
satisfactory to Landlord without thereby releasing Tenant from any liability
hereunder and without demand or notice of any kind to Tenant. For the purpose
of such reletting Landlord is authorized to make any repairs, changes,
alterations, or additions in or to the Premises as Landlord deems reasonably
necessary or desirable. If the Premises are not relet, then Tenant shall pay to
Landlord as damages a sum equal to the amount of the rental reserved in this
Lease for such period or periods, plus the cost of recovering possession of the
Premises (including attorneys' fees and costs of suit), the unpaid Base Rent and
other amounts accrued hereunder at the time of repossession, and the costs
incurred in any attempt by Landlord to relet the Premises. If the Premises are
relet and a sufficient sum shall not be realized from such reletting [after
first deducting therefrom, for retention by Landlord, the unpaid Base Rent and
other amounts accrued hereunder at the time of reletting, the cost of
recovering possession (including attorneys' fees and costs of suit), all of the
costs and expense of repairs, changes, alterations, and additions, the expense
of such reletting (including without limitation brokerage fees and leasing
commissions) and the cost of collection of the rent accruing therefrom] to
satisfy the rent provided for in this Lease to be paid, then Tenant shall
immediately satisfy and pay any such deficiency. Any such payments due Landlord
shall be made upon demand therefor from time to time and Tenant agrees that
Landlord may file suit to recover any sums falling due from time to time.
Notwithstanding any such reletting without termination, Landlord may at any
time thereafter elect in writing to terminate this Lease for such previous
breach.
Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises and/or a termination of this Lease by Landlord, whether by
agreement or by operation of law, it being understood that such surrender
and/or termination can be effected only by the written agreement of Landlord
and Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord
shall have the right at all times to enforce the provisions of this Lease in
strict accordance with the terms hereof; and the failure of Landlord at any
time to enforce its rights under this Lease strictly in accordance with same
shall not be construed as having created a custom in any way or manner contrary
to the specific terms, provisions, and covenants of this Lease or as having
modified the same. Tenant and Landlord further agree that forbearance or waiver
by Landlord to enforce its rights pursuant to this Lease or at law or in
equity, shall not be a waiver of Landlord's right to enforce one or more of its
rights in connection with any subsequent default. A receipt by Landlord of rent
or other payment with knowledge of the breach of any covenant hereof shall not
be deemed a waiver of such breach, and no waiver by Landlord of any provision
of this Lease shall be deemed to have been made unless expressed in writing and
signed by Landlord. To the greatest extent permitted by law, Tenant waives the
service of notice of Landlord s intention to re-enter as provided for in any
statute, or to institute legal proceedings to that end, and also waives all
right of redemption in case Tenant shall be
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dispossessed by a judgment or by warrant of any court or judge. The terms
"enter," "re-enter," "entry" or "re-entry," as used in this Lease, are not
restricted to their technical legal meanings. Any reletting of the Premises
shall be on such terms and conditions as Landlord in its sole discretion may
determine (including without limitation a term different than the remaining
Lease Term, rental concessions, alterations and repair of the Premises, lease
of less than the entire Premises to any tenant and leasing any or all other
portions of the Project before reletting the Premises). Landlord shall not be
liable, nor shall Tenant's obligations hereunder be diminished because of,
Landlord's failure to relet the Premises or collect rent due in respect of such
reletting.
25. TENANT'S REMEDIES/LIMITATION OF LIABILITY. Landlord shall not be
in default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of 30 days, then after such period of time
as is reasonably necessary). All obligations of Landlord hereunder shall be
construed as covenants, not conditions; and, except as may be otherwise
expressly provided in this Lease, Tenant may not terminate this Lease for
breach of Landlord's obligations hereunder. All obligations of Landlord under
this Lease will be binding upon Landlord only during the period of its
ownership of the Premises and not thereafter. The term "Landlord" in this Lease
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 obligations of Landlord
thereafter accruing, but such obligations shall be binding during the Lease
Term upon each new owner for the duration of such owner s ownership. Any
liability of Landlord under this Lease shall be limited solely to its interest
in the Project, and in no event shall any personal liability be asserted
against Landlord in connection with this Lease nor shall any recourse be had to
any other property or assets of Landlord.
26. WAIVER OF JURY TRIAL. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL
BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING
OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
27. SUBORDINATION. This Lease and Tenant's interest and rights
hereunder are and shall be subject and subordinate at all times to the lien of
any first mortgage, now existing or hereafter created on or against the Project
or the Premises, and all amendments, restatements, renewals, modifications,
consolidations, refinancing, assignments and extensions thereof, without the
necessity of any further instrument or act on the part of Tenant. Tenant
agrees, at the election of the holder of any such mortgage, to attorn to any
such holder. Tenant agrees upon demand to execute, acknowledge and deliver
such instruments, confirming such subordination and such instruments of
adornment as shall be requested by any such holder. Tenant hereby appoints
Landlord attorney in fact for Tenant irrevocably (such power of attorney being
coupled with an interest) to execute, acknowledge and deliver any such
instrument and instruments for and in the name of the Tenant and to cause any
such instrument to be recorded. Notwithstanding the foregoing, any such holder
may at any time subordinate its mortgage to this Lease, without Tenant's
consent, by notice in writing to Tenant, and thereupon this Lease shall be
deemed prior to such mortgage without regard to their respective dates of
execution, delivery or recording and in that event such holder shall have the
same rights with respect to this Lease as though this Lease had been executed
prior to the execution, delivery and recording of such mortgage and had been
assigned to such holder. The term "mortgage" whenever used in this Lease shall
be deemed to include deeds of trust, security assignments and any other
encumbrances, and any reference to the "holder" of a mortgage shall be deemed
to include the beneficiary under a deed of trust. Provided, Tenant is not in
default under the Lease, Landlord, at the request of Tenant, agrees to
subordinate Landlord's lien arising under this Lease against Tenant's property
located on the Premises. Such subordination shall be required only if the
lender shall be a bank or other financial institution or the vendor of Tenant's
equipment or a financing entity related to such vendor and shall be subject to
such conditions as Landlord may reasonably require. Tenant shall reimburse
Landlord for all reasonable out-of-pocket expenses incurred by Landlord in
negotiating and executing such agreement with Tenant's lender.
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28. MECHANIC'S LIENS. Tenant has no express or implied authority to
create or place any lien or encumbrance of any kind upon, or in any manner to
bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals 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 on the
Premises and that it will save and hold Landlord harmless from all loss, cost
or expense based on or arising out of asserted claims or liens against the
leasehold estate or against the interest of Landlord in the Premises or under
this Lease. Tenant shall give Landlord immediate written notice of the placing
of any lien or encumbrance against the Premises and cause such lien or
encumbrance to be discharged within 30 days of the filing or recording thereof;
provided, however, Tenant may contest such liens or encumbrances as long as
such contest prevents foreclosure of the lien or encumbrance and Tenant causes
such lien or encumbrance to be bonded or insured over in a manner satisfactory
to Landlord within such 30 day period.
29. ESTOPPEL CERTIFICATES. Tenant agrees, from time to time, within 10
days after request of Landlord, to execute and deliver to Landlord, or
Landlord's designee, any estoppel certificate requested by Landlord, stating
that this Lease is in full force and effect, the date to which rent has been
paid, that Landlord is not in default hereunder (or specifying in detail the
nature of Landlord's default), the termination date of this Lease and such
other matters pertaining to this Lease as may be requested by Landlord.
Tenant's obligation to furnish each estoppel certificate in a timely fashion is
a material inducement for Landlord's execution of this Lease. No cure or grace
period provided in this Lease shall apply to Tenant's obligations to timely
deliver an estoppel certificate. Tenant hereby irrevocably appoints Landlord as
its attorney in fact to execute on its behalf and in its name any such estoppel
certificate or fails to specify Landlord's default or if Tenant fails to
execute and deliver the estoppel certificate within 10 days after Landlord's
written request thereof.
30. ENVIRONMENTAL REQUIREMENTS. Except for Hazardous Material
contained in products used by Tenant in de minimis quantities for ordinary
cleaning and office purposes, Tenant shall not permit or cause any party to
bring any Hazardous Material upon the Premises or transport, store, use,
generate, manufacture or release any Hazardous Material in or about the
Premises without Landlord's prior written consent. Tenant, at its sole cost and
expense, shall operate its business in the Premises in strict compliance with
all Environmental Requirements and shall remediate in a manner satisfactory to
Landlord any Hazardous Materials released on or from the Project by Tenant, its
agents, employees, contractors, subtenants or invitees. Tenant shall complete
and certify to disclosure statements as requested by Landlord from time to time
relating to Tenant's transportation, storage, use, generation, manufacture or
release of Hazardous Materials on the Premises. The term "Environmental
Requirements" means all applicable present and future statutes, regulations,
ordinances, rules, codes, judgments, orders or other similar enactments of any
governmental authority or agency regulating or relating to health, safety, or
environmental conditions on, under, or about the Premises or the environment,
including without limitation, the following: the Comprehensive Environmental
Response, Compensation and Liability Act; the Resource Conservation and
Recovery Act; and all state and local counterparts thereto, and any regulations
or policies promulgated or issued thereunder. The Term "Hazardous Materials"
means and includes any substance, material, waste, pollutant, or contaminant
listed or defined as hazardous or toxic, under any Environmental Requirements,
asbestos and petroleum, including crude oil or any fraction thereof, natural
gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or
mixtures of natural gas and such synthetic gas). As defined in Environmental
Requirements, Tenant is and shall be deemed to be the "operator" of Tenant's
"facility" and the "owner" of all Hazardous Materials brought on the Premises
by Tenant, its agents, employees, contractors or invitees, and the wastes,
by-products, or residues generated, resulting, or produced therefrom.
Tenant shall indemnify, defend, and hold Landlord harmless from
and against any and all losses (including, without limitation, diminution in
value of the Premises or the Project and loss of rental income from the
Project), claims, demands, actions, suits, damages (including, without
limitation, punitive damages), expenses (including, without limitation,
remediation, removal, repair, corrective action, or cleanup expenses), and
costs (including, without limitation, actual attorneys' fees, consultant fees or
expert fees and including, without limitation, removal or management of any
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asbestos brought into the property or disturbed in breach of the requirements
of this Paragraph 30, regardless of whether such removal or management is
required by law) which are brought or recoverable against, or suffered or
incurred by Landlord as a result of any release of Hazardous Materials for
which Tenant is obligated to remediate as provided above or any other breach of
the requirements under this Paragraph 30 by Tenant, its agents, employees,
contractors, subtenants, assignees or invitees, regardless of whether Tenant
had knowledge of such noncompliance. The obligations of Tenant under this
Paragraph 30 shall survive any termination of this Lease.
Landlord shall have access to, and a right to perform inspections and
tests of, the Premises to determine Tenant's compliance with Environmental
Requirements, its obligations under this Paragraph 30, or the environmental
condition of the Premises. Access shall be granted to Landlord upon Landlord's
prior notice to Tenant and at such times so as to minimize, so far as may be
reasonable under the circumstances, any disturbance to Tenant's operations.
Such inspections and tests shall be conducted at Landlord's expense, unless
such inspections or tests reveal that Tenant has not complied with any
Environmental Requirement, in which case Tenant shall reimburse Landlord for
the reasonable cost of such inspection and tests. Landlord's receipt of or
satisfaction with any environmental assessment in no way waives any rights that
Landlord holds against Tenant.
31. RULES AND REGULATIONS. Tenant shall, at all times during the Lease
Term and any extension thereof, comply with all reasonable rules and
regulations at any time or from time to time established by Landlord covering
use of the Premises and the Project. The current rules and regulations are
attached hereto. In the event of any conflict between said rules and
regulations and other provisions of this Lease, the other terms and provisions
of this Lease shall control. Landlord shall not have any liability or
obligation for the breach of any rules or regulations by other tenants in the
Project.
32. SECURITY SERVICE. Tenant acknowledges and agrees that, while
Landlord may patrol the Project, Landlord is not providing any security
services with respect to the Premises and that Landlord shall not be liable to
Tenant for, and Tenant waives any claim against Landlord with respect to, any
loss by theft or any other damage suffered or incurred by Tenant in connection
with any unauthorized entry into the Premises or any other breach of security
with respect to the Premises.
33. FORCE MAJEURE. Landlord shall not be held responsible for delays
in the performance of its obligations hereunder when caused by strikes,
lockouts, labor disputes, acts of God, inability to obtain labor or materials
or reasonable substitutes therefor, governmental restrictions, governmental
regulations, governmental controls, delay in issuance of permits, enemy or
hostile governmental action, civil commotion, fire or other casualty, and
other causes beyond the reasonable control of Landlord ("Force Majeure").
34. ENTIRE AGREEMENT. This Lease constitutes the complete agreement of
Landlord and Tenant with respect to the subject matter hereof. 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 are superseded by this Lease. This Lease may
not be amended except by an instrument in writing signed by both parties
hereto.
35. SEVERABILITY. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease
shall not be affected thereby. 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.
36. BROKERS. Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction, other than the
broker, if any, set forth on the first page of this Lease, and Tenant agrees to
indemnify and hold Landlord harmless from and against any claims by any other
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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.
37. MISCELLANEOUS. (a) Any payments or charges due from Tenant to
Landlord hereunder shall be considered rent for all purposes of this Lease.
(b) If and when included within the term "Tenant," as used in this
instrument, there is more than one person, firm or corporation, each shall be
jointly and severally liable for the obligations of Tenant.
(c) All notices required or permitted to given under this Lease
shall be in writing and shall be sent by registered or certified mail, return
receipt requested, or by a reputable national overnight courier service,
postage prepaid, or by hand delivery addressed to the parties at their
addresses below, and with a copy sent to Landlord at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇). Either party may by notice given aforesaid change its
address for all subsequent notices. Except where otherwise expressly provided
to the contrary, notice shall be deemed given upon delivery.
(d) Except as otherwise expressly provided in this Lease or as
otherwise required by law, Landlord retains the absolute right to withhold any
consent or approval.
(e) At Landlord's request from time to time Tenant shall furnish
Landlord with true and complete copies of its most recent annual and quarterly
financial statements prepared by Tenant or Tenant's accountants and any
other financial information or summaries that Tenant typically provides to its
lenders or shareholders.
(f) Neither this Lease nor a memorandum of lease shall be filed by or
on behalf of Tenant in any public record. Landlord may prepare and file, and
upon request by Landlord Tenant will execute, a memorandum of lease.
(g) The normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto.
(h) The submission by Landlord to Tenant of this Lease shall have no
binding force or effect, shall not constitute an option for the leasing of the
Premises, nor confer any right or impose any obligations upon either party
until execution of this Lease by both parties.
(i) 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.
(j) Any amount not paid by Tenant within 5 days after its due date in
accordance with the terms of this Lease shall bear interest from such due date
until paid in full at the lesser of the highest rate permitted by applicable
law or 15 percent per year. It is expressly the intent of Landlord and Tenant
at all times to comply with applicable law governing the maximum rate or amount
of any interest payable on or in connection with this Lease. If applicable law
is ever judicially interpreted so as to render usurious any interest called for
under this Lease, or contracted for, charged, taken, reserved, or received with
respect to this Lease, then it is Landlord's and Tenant's express intent that
all excess amounts theretofore collected by Landlord be credited on the
applicable obligation (or, if the obligation has been or would thereby be paid
in full, refunded to Tenant), and the provisions of this Lease immediately
shall be deemed reformed and the amounts thereafter collectible hereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder.
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(k) Construction and interpretation of this Lease shall be governed by
the laws of the state in which the Project is located, excluding any principles
of conflicts of laws.
(l) Time is of the essence as to the performance of Tenant's
obligations under this Lease.
(m) All exhibits and addenda attached hereto are hereby incorporated
into this Lease and made a part hereof. In the event of any conflict between
such exhibits or addenda and the terms of this Lease, such exhibits or addenda
shall control.
38. LANDLORD'S LIEN/SECURITY INTEREST. Tenant hereby grants Landlord a
security interest, and this Lease constitutes a security agreement, within the
meaning of and pursuant to the Uniform Commercial Code of the state in which
the Premises are situated as to all of Tenant's property situate in, or upon,
or used in connection with the Premises (except merchandise sold in the
ordinary course of business) as security for all of Tenant's obligations
hereunder, including, without limitation, the obligation to pay rent. Such
personalty thus encumbered includes specifically all trade and other fixtures
for the purpose of this Paragraph and inventory, equipment, contract rights,
accounts receivable and the proceeds thereof. In order to perfect such security
interest, Tenant shall execute such financing statements and file the same at
Tenant's expense at the state and county Uniform Commercial Code filing offices
as often as Landlord in its discretion shall require; and Tenant hereby
irrevocably appoints Landlord its agent for the purpose of executing and filing
such financing statements on Tenant's behalf as Landlord shall deem necessary.
39. LIMITATION OF LIABILITY OF TRUSTEES, SHAREHOLDERS, AND OFFICERS OF
SECURITY CAPITAL INDUSTRIAL TRUST. Any obligation or liability whatsoever of
Security Capital Industrial Trust, a Maryland real estate investment trust,
which may arise at any time under this Lease or any obligation or liability
which may be incurred by it pursuant to any other instrument, transaction, or
undertaking contemplated hereby shall not be personally binding upon, nor shall
resort for the enforcement thereof be had to the property of, its trustees,
directors, shareholders, officers, employees or agents, regardless of whether
such obligation or liability is in the nature of contract, tort, or otherwise.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
TENANT: LANDLORD:
STUART ENTERTAINMENT, INC. SCI DEVELOPMENT SERVICES
INCORPORATED
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- -------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President Title: Managing Director
Address: Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Rules and Regulations
1. The sidewalk, entries, and driveways of the Project shall not be
obstructed by Tenant, or its agents, or used by them for any purpose
other than ingress and egress to and from the Premises.
2. Tenant shall not place any objects, including antennas, outdoor
furniture, etc., in the parking areas, landscaped areas or other areas
outside of its premises, or on the roof of the Project.
3. Except for seeing-eye dogs, no animals shall be allowed in the
offices, halls, or corridors in the Project.
4. Tenant shall not disturb the occupants of the Project or adjoining
buildings by the use of any radio or musical instrument or by the
making of loud or improper noises.
5. If Tenant desires telegraphic, telephonic or other electric connections
in the Premises, Landlord or its agent will direct the electrician as
to where and how the wires may be introduced; and, without such
direction, no boring or cutting of wires will be permitted. Any such
installation or connection shall be made at Tenant's expense.
6. Tenant shall not install or operate any steam or gas engine or boiler,
or other mechanical apparatus in the Premises, except as specifically
approved in the Lease. The use of oil, gas or inflammable liquids for
heating, lighting or any other purpose is expressly prohibited.
Explosives or other articles deemed extra hazardous shall not be
brought into the Project.
7. Parking any type of recreational vehicles is specifically prohibited
on or about the Project. Except for the overnight parking of
operative vehicles, no vehicle of any type shall be stored in the
parking areas at any time. In the event that a vehicle is disabled,
it shall be removed within 48 hours. There shall be no "For Sale" or
other advertising signs on or about any parked vehicle. All vehicles
shall be parked in the designated parking areas in conformity with
all signs and other markings. All parking will be open parking, and
no reserved parking, numbering or lettering of individual spaces will
be permitted except as specified by Landlord.
8. Tenant shall maintain the Premises free from rodents, insects and
other pests.
9. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs or who shall in any manner do any act in
violation of the Rules and Regulations of the Project.
10. Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and
cleanliness. Landlord shall not be responsible to Tenant for any loss
of property on the Premises, however occurring, or for any damage done
to the effects of Tenant by the janitors or any other employee or
person.
11. Tenant shall give Landlord prompt notice of any defects in the water,
lawn sprinkler, sewage, gas pipes, electrical lights and fixtures,
heating apparatus, or any other service equipment affecting the
Premises.
12. Except as otherwise expressly set forth in Paragraph 3 of the Lease,
Tenant shall not permit storage outside the Premises, including without
limitation, outside storage of trucks and other vehicles, or dumping of
waste or refuse or permit any harmful materials to be placed in any
drainage system or sanitary system in or about the Premises.
13. All moveable trash receptacles provided by the trash disposal firm for
the Premises must be kept in the trash enclosure areas, if any,
provided for that purpose.
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14. No auction, public or private, will be permitted on the Premises or the
Project.
15. No awnings shall be placed over the windows in the Premises except with
the prior written consent of Landlord.
16. The Premises shall not be used for lodging, sleeping or cooking or for
any immoral or illegal purposes or for any purpose other than that
specified in the Lease. No gaming devices shall be operated in the
Premises.
17. Tenant shall ascertain from Landlord the maximum amount of electrical
current which can safely be used in the Premises, taking into account
the capacity of the electrical wiring in the Project and the Premises
and the needs of other tenants, and shall not use more than such safe
capacity. Landlord's consent to the installation of electric equipment
shall not relieve Tenant from the obligation not to use more
electricity than such safe capacity.
18. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage.
19. Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's
ordinary use of the Premises and shall keep all such machinery free of
vibration, noise and air waves which may be transmitted beyond the
Premises.
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ADDENDUM ONE
BASE RENT ADJUSTMENTS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED JUNE 16, 1997, BETWEEN
SCI DEVELOPMENT SERVICES INCORPORATED
and
STUART ENTERTAINMENT, INC.
Base Rent shall equal the following amounts for the respective periods set
forth below:
Period Monthly Base Rent Occupied Sq. Ft.
------ ----------------- ----------------
Year 1 $27,500.00 100,000
Years 2-5 $43,340.00 157,600
Years 6-7 $49,841.00 157,600
Page 1 of 1
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ADDENDUM TWO
CONSTRUCTION
(ALLOWANCE)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED JUNE 16, 1997, BETWEEN
SCI DEVELOPMENT SERVICES INCORPORATED
and
STUART ENTERTAINMENT, INC.
(a) Landlord agrees to furnish or perform those items of
construction and those improvements (the "Tenant Improvements") specified
below:
See Exhibit A to this Addendum Two
Landlord shall pay up to a maximum amount of Five Hundred Fifty-one Thousand
Six Hundred Dollars ($551,600.00) for the Tenant Improvements (the "Tenant
Allowance"). If the cost of the Tenant Improvements is greater than Five
Hundred Fifty-one Thousand Six Hundred Dollars ($551,600.00), but less than One
Million One Hundred Sixty-three Thousand and Eighty-eight Dollars
($1,163,088.00), then the difference between the additional cost of the Tenant
Improvements over the Tenant Allowance shall be amortized over the Lease Term
at a rate of 10.5% and such difference shall be added to the Monthly Base Rent.
If the cost of the Tenant Improvements is estimated to exceed One Million One
Hundred Sixty-three Thousand Eighty-eight ($1,163,088.00), such estimated
overage shall be paid by Tenant to Landlord before Landlord begins construction
and a final adjusting payment based upon the actual costs of the Tenant
Improvements shall be made when the Tenant Improvements are complete.
(b) If Tenant shall desire any changes, Tenant shall so advise
Landlord in writing and Landlord shall determine whether such changes can be
made in a reasonable and feasible manner. Any and all costs of reviewing any
requested changes, and any and all costs of making any changes to the Tenant
Improvements which Tenant may request and which Landlord may agree to shall be
at Tenant's sole cost and expense and shall be paid to Landlord upon demand and
before execution of the change order.
(c) Landlord shall proceed with and complete the construction
of the Tenant Improvements. As soon as such improvements have been
substantially completed, Landlord shall notify Tenant in writing of the date
that the Tenant Improvements were Substantially Completed. Such date, unless an
earlier date is specified as the Commencement Date in this Lease or otherwise
agreed to in writing between Landlord and Tenant, shall be the "Commencement
Date," unless the completion of such improvements was delayed due to any act or
omission of, or delay caused by, Tenant including, without limitation, Tenant's
failure to approve plans, complete submittals or obtain permits within the time
periods agreed to by the parties or as reasonably required by Landlord, in
which case the Commencement Date shall be the date such improvements would have
been completed but for the delays caused by Tenant. The Tenant Improvements
shall be deemed substantially completed ("Substantially Completed") when, in
the opinion of the construction manager (whether an employee or agent of
Landlord or a third party construction manager), the Premises are substantially
completed except for punch list items which do not prevent in any material way
the use of the Premises for the purposes for which they were intended. After
the Commencement Date Tenant shall, upon demand, execute and deliver to
Landlord a letter of acceptance of delivery of the Premises.
(d) The failure of Tenant to take possession of or to occupy
the Premises shall not serve to relieve Tenant of obligations arising on the
Commencement Date or delay the payment of rent by Tenant. Subject to applicable
ordinances and building codes governing Tenant's right to occupy or perform in
the Premises, Tenant shall be allowed to install its tenant improvements,
machinery, equipment, fixtures, or other property on the Premises during the
final stages of
Page 1 of 2
24
completion of construction provided that Tenant does not thereby interfere with
the completion of construction or cause any labor dispute as a result of such
installations, and provided further that Tenant does hereby agree to indemnify,
defend, and hold Landlord harmless from any loss or damage to such property,
and all liability, loss, or damage arising from any injury to the Project or
the property of Landlord, its contractors, subcontractors, or materialmen, and
any death or personal injury to any person or persons arising out of such
installations, whether or not any such loss, damage, liability, death, or
personal injury was caused by Landlord's negligence. Any such occupancy or
performance in the Premises shall be in accordance with the provisions
governing Tenant-Made Alterations and Trade Fixtures in the Lease, and shall be
subject to Tenant providing to Landlord satisfactory evidence of insurance for
personal injury and property damage related to such Installations and
satisfactory evidence of payment arrangements with respect to installations
permitted hereunder. Delay in putting Tenant in possession of the Premises
shall not serve to extend the term of this Lease or to make Landlord liable for
any damages arising therefrom.
(e) Except for incomplete punch list items, Tenant upon the
Commencement Date shall have and hold the Premises as the same shall then be
without any liability or obligation on the part of Landlord for making any
further alterations or improvements of any kind in or about the Premises.
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ADDENDUM THREE
TENANT'S PURCHASE OPTION
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED JUNE 16, 1997, BETWEEN
STUART ENTERTAINMENT, INC.
and
SCI DEVELOPMENT SERVICES INCORPORATED
Subject to and in accordance with the terms of this Addendum Three,
Tenant shall have a one-time right and option to purchase the Premises
following the fifth (5th) lease year ("Purchase Option). Tenant shall exercise
the Purchase Option by delivering written notice to Landlord during the initial
Lease Term notifying Landlord that it intends exercise its Purchase Option
("Purchase Option Notice").
1. Purchase Price. The purchase price shall be (i) Seven Million Two
Hundred Sixty-Four Thousand Six Hundred and Seventy Dollars ($7,264,670.00) and
the amount of any unamortized Tenant Improvements relating to the Premises,
payable at closing. The intent of the parties is that the purchase price shall
be absolutely net to Landlord, with the sole exception being that Landlord
shall pay its attorneys' fees.
2. Closing. The closing shall be conducted through an escrow
established at a title company acceptable to both Landlord and Tenant. All
deliveries shall be deposited in escrow and all closing deliveries and
disbursements shall be made through the escrow. Except as otherwise set forth
in Section 14 below, the closing shall occur no later than 30 days following
the exercise of the Purchase Option.
3. Inspection. For a period of 15 days after the date of Tenant's
Purchase Option Notice to Landlord, Tenant shall be entitled to inspect the
Premises. Tenant shall indemnify and defend Landlord for any claim, damage or
liability arising out of Tenant's and its agent's and contractor's inspection.
Tenant may revoke its election to exercise the Purchase Option by notice to
Landlord within the 15-day period if Tenant is not satisfied with any aspect of
the Premises, in which case this Lease shall continue in full force and effect.
4. Title. Landlord shall convey to Tenant fee simple title to the
Premises by special warranty deed (warranting title by, through, or under
Landlord, but not otherwise) subject only to all matters of record and those
matters which a correct survey would show but free and clear of any liens or
any other exceptions created by, under, or through Landlord. Tenant shall have
the absolute right to approve title to the Property, and if title is not
satisfactory, Tenant may revoke its election to exercise the Purchase Option by
giving notice to Landlord (x) within the inspection period in Paragraph 3 above
and, (y) with respect to any title exceptions of which Tenant is notified after
such inspection period but before the Closing, at any time before the Closing.
Landlord shall assign to Tenant all its right, title and interest in and to all
contracts, warranties, permits, approvals, and other intangible property
related to the Premises except for any tradename or other similar rights
related to the Premises, which Landlord shall retain.
5. Prorations. There shall be no proration of taxes or other
expenses.
6. Lease Termination. The Lease shall be terminated as of the
closing. All rent and other payments due by Tenant to Landlord under the Lease
shall be prorated to the date of Closing and shall be deposited into the escrow
and disbursed to Landlord at closing.
7. No Warranty. Landlord makes no, and at closing Tenant shall waive
in writing satisfactory to Landlord any, warranty or representation with
respect to the Premises (other than title to the Premises as provided above)
and shall release Landlord from any right or claims, known or unknown, with
respect to the physical or environmental condition of the Premises or the
compliance of the Premises with applicable law. Tenant is relying on its own
inspection and review of the Premises. This sale shall be "AS IS, WHERE IS" and
the following language shall apply to such
Page 1 of 3
26
sale and shall be included in the Deed: "ADDITIONALLY, LANDLORD, AS SELLER, AND
TENANT, AS PURCHASER, HEREBY AGREE THAT (A) PURCHASER IS TAKING THE PROPERTY
"AS IS" WITH ALL LATENT AND PATENT DEFECTS AND THAT THERE IS NO WARRANTY BY
SELLER THAT THE PROPERTY IS FIT FOR A PARTICULAR PURPOSE, (B) PURCHASER IS NOT
RELYING UPON ANY REPRESENTATION, STATEMENT OR OTHER ASSERTION WITH RESPECT TO
THE PROPERTY CONDITION, BUT IS RELYING UPON ITS EXAMINATION OF THE PROPERTY,
AND (C) PURCHASER TAKES THE PROPERTY UNDER THIS AGREEMENT UNDER THE EXPRESS
UNDERSTANDING THAT THERE ARE NO EXPRESS OR IMPLIED WARRANTIES FROM SELLER
RELATING TO THE PROPERTY. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE THE
CLOSING.
8. Risk of Loss. Risk of loss shall remain with Landlord, subject to
Tenant's obligations under the Lease, until the closing. If any condemnation is
instituted or threatened against the Premises or the Premises are damaged,
either party may terminate the purchase transaction, and the Lease shall
remain in full force and effect.
9. Tax-Free Exchange. Landlord may conduct the sale as a tax-free
exchange pursuant to Section 1031 of the Internal Revenue Code. Such exchange
shall be conducted through a qualified intermediary, at no cost to Tenant, and
without affecting Landlord's obligations to Tenant. Tenant shall not be
required to take title to any other property in connection with a
Section 1031 exchange.
10. Exercise is Irrevocable. Tenant's exercise of the Purchase Option
is irrevocable except as provided herein. Time is of the essence.
11. Exercise by Tenant or Tenant Affiliate Only. Only the Tenant
originally named herein or a Tenant Affiliate may exercise this Purchase
Option. The Purchase Option is not assignable except to a Tenant Affiliate to
which the Lease is assigned and shall terminate automatically upon any
termination of the Lease other than as a result of default by Landlord.
Further, no such right is exercisable if as of the date of exercise of the
right or the closing, the Lease has terminated or an Event of Default or event
("potential default") which but for the passage of time or the giving of
notice, or both, would constitute an Event of Default has occurred and is
continuing.
12. Landlord Remedy. If, having given notice of the exercise of the
Purchase Option hereunder, Tenant should fail or refuse to close the conveyance
(Landlord having complied with all of its obligations hereunder and Landlord
having good and indefeasible tide to the Premises as herein defined), Landlord
shall have, as its sole and exclusive remedy, the right to terminate Tenant's
Purchase Option and this Lease shall continue in full force and effect.
13. Commissions. Tenant shall be responsible and liable for any
commission(s) due to any brokers regarding the Purchase Option. Tenant shall
indemnify and hold Landlord harmless for any damages, claims, costs or expenses
relating to Tenant's failure to pay any such commission. Landlord shall
indemnify and hold Tenant harmless for any damages, claims, costs or expenses
relating to Landlord's failure to pay any brokerage commission that Landlord is
contractually obligated to pay.
14. Right of First Offer to Purchase. Notwithstanding anything herein
to the contrary, if Tenant timely provides Landlord with the Sale Notice (as
defined in that certain Agreement of Purchase and Sale dated of even date
herewith between Landlord and Seller ["Purchase Agreement"]), and Landlord
determines, in its sole and absolute discretion, that Landlord would like to
sell the Building, then Landlord shall offer to Tenant the right to purchase
the Building on the same terms and conditions as set forth in this Addendum
("Purchase Offer"). Such Purchase Offer shall be made by Landlord to Tenant in
a written notice (hereinafter called the ("Purchase Offer Notice") which offer
shall designate that Landlord is selling the Building. Tenant may accept the
offer set forth in the Purchase Offer Notice by delivering to Landlord an
unconditional acceptance (hereinafter called Tenant's Purchase Notice") of such
offer within ninety (90) days after delivery by Landlord of the Purchase Offer
Notice to Tenant. Time shall be of the essence with respect to the giving of
Tenant's Purchase Notice. If Tenant does not accept (or fails to timely accept)
the Purchase Offer made by Landlord pursuant to the provisions of this Addendum
with respect to the Building designated in the Purchase Offer Notice, then the
Purchase Offer and the Purchase Option set forth in this Addendum shall
terminate and be null and void. If Tenant does timely accept such
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27
Purchase Offer, then Landlord and Tenant shall proceed in accordance with this
Addendum and shall close such Purchase Offer within ninety (90) days after the
date Tenant notifies Landlord that it accepts the Purchase Offer. If Tenant at
any time during the term of the Lease declines the Purchase Offer or the
Purchase Option offered by Landlord, Tenant shall be deemed to have irrevocably
waived all further rights under this Addendum, and Landlord shall be free to
sell the Building to third parties including on terms which may be less
favorable to Landlord than those offered to Tenant.
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ADDENDUM FOUR
RIGHT OF FIRST OFFER
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED JUNE 16, 1997, BETWEEN
STUART ENTERTAINMENT, INC.
and
SCI DEVELOPMENT SERVICES INCORPORATED
(a) "Offered Space" shall mean any second generation space in the
Building that is not, as of the date of the offer, subject to a right of first
refusal or right of first offer and is not subject to a Lease Agreement.
(b) Provided that as of the date of the giving of Landlord's Notice,
(x) Tenant is the Tenant originally named herein, (y) Tenant actually occupies
all of the Premises originally demised under this Lease and any premises added
to the Premises, and (z) no Event of Default or event which but for the passage
of time in the giving of notice, or both, would constitute an Event of Default
has occurred and is continuing, if at any time during the Lease Term any lease
for any portion of the Offered Space shall expire, then Landlord, before
offering such Offered Space to anyone, other than the tenant then occupying
such space (or its affiliates), shall offer to Tenant the right to include the
Offered Space within the Premises on the substantially the same terms and
conditions as set forth in this Lease in connection with the Premises,
including, without limitation, Monthly Base Rent.
(c) Such offer shall be made by Landlord to Tenant in a written notice
(hereinafter called the "First Offer Notice") which offer shall designate the
space being offered and shall specify the terms which Landlord intends to offer
with respect to any such Offered Space. Tenant may accept the offer set forth
in the First Offer Notice by delivering to Landlord an unconditional acceptance
(hereinafter called "Tenant's Notice") of such offer within 5 business days
after delivery by Landlord of the First Offer Notice to Tenant. Time shall be
of the essence with respect to the giving of Tenant's Notice. If Tenant does
not accept (or fails to timely accept) an offer made by Landlord pursuant to
the provisions of this Addendum with respect to the Offered Space designated in
the First Offer Notice, Landlord shall be under no further obligation with
respect to such space by reason of this Addendum. If Tenant does accept such
Offered Space, then Landlord and Tenant shall enter into an amendment to this
Lease to revise the following items to include the Offered Space: Tenant's
Proportionate Share of the Project, Tenant's Proportionate Share of the
Building, the monthly Base Rent and any other relevant terms and provisions of
the Lease. The term for the Offered Space shall be coterminous with the Lease
Term.
(d) Tenant must accept all Offered Space offered by Landlord at any
one time if it desires to accept any of such Offered Space and may not exercise
its right with respect to only part of such space. In addition, if Landlord
desires to lease more than just the Offered Space to one tenant, Landlord may
offer to Tenant pursuant to the terms hereof all such space which Landlord
desires to lease, and Tenant must exercise its rights hereunder with respect to
all such space and may not insist on receiving an offer for just the Offered
Space.
(e) If Tenant at any time declines any Offered Space offered by
Landlord, Tenant shall be deemed to have irrevocably waived all further rights
under this Addendum, and Landlord shall be free to lease the Offered Space to
third parties including on terms which may be less favorable to Landlord than
those offered to Tenant.
(f) if Tenant timely exercises its right under this Addendum with
respect to any Offered Space, then Landlord agrees to furnish and perform at
Landlord's sole cost and expense (to the extent of the prorated allowances
herein below provided) the below listed Initial Improvements and Allowance
Improvements (together, "Right of First Offer Improvements"). The costs of all
Right of First Offer Improvements shall be pro rated, on a monthly basis, based
on the term remaining on the Lease as of the effective date of Tenant's Notice,
and shall be computed on a per square foot
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29
basis, based on the size of the Offered Space. Costs of the Right of First
Offer Improvements shall be paid by Tenant.
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30
ADDENDUM FIVE
ONE RENEWAL OPTION AT MARKET
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED JUNE 16, 1997, BETWEEN
STUART ENTERTAINMENT, INC.
and
SCI DEVELOPMENT SERVICES INCORPORATED
(g) Provided that as of the time of the giving of the Extension Notice
and the Commencement Date of the Extension Term, (x) Tenant is the Tenant
originally named herein, (y) Tenant actually occupies all of the Premises
initially demised under this Lease and any space added to the Premises, and (z)
no Event of Default exists or would exist but for the passage of time or the
giving of notice, or both; then Tenant shall have the right to extend the Lease
Term for an additional term of five (5) years (such additional term is
hereinafter called the "Extension Term") commencing on the day following the
expiration of the Lease Term (hereinafter referred to as the "Commencement Date
of the Extension Term"). Tenant shall give Landlord notice (hereinafter called
the "Extension Notice") of its election to extend the term of the Lease Term at
least six (6) months, but not more than nine (9) months, prior to the scheduled
expiration date of the Lease Term.
(h) The Base Rent payable by Tenant to Landlord during the Extension
Term shall be the greater of (i) the Base Rent applicable to the last year of
the initial Lease term and (ii) the then prevailing fair market rate for
comparable space in comparable buildings in the McAllen are, including, but not
limited to, the Project, taking into account the size of the Lease, the length
of the renewal term, market escalations, the credit of Tenant and the age,
quality, clear height and improvements/features of the Premises ("Fair Market
Rent"). The Base Rent shall not be reduced by reason of any costs or expenses
saved by Landlord by reason of Landlord's not having to find a new tenant for
such premises (including, without limitation, brokerage commissions, costs of
improvements, rent concessions or lost rental income during any vacancy
period).
(i) Landlord shall notify Tenant of its determination of the Fair
Market Rent within twenty (20) days from the date Landlord receives the
Extension Notice (which shall be made in Landlord's sole discretion and shall
in any event be not less than the Base Rent in effect as of the expiration of
the Lease Term) for the Extension Term, and Tenant shall advise Landlord of any
objection within 10 days of receipt of Landlord's notice. Failure to respond
within the 10-day period shall constitute Tenant's acceptance of such Fair
Market Rent. If Tenant objects, Landlord and Tenant shall commence negotiations
to attempt to agree upon the Fair Market Rent within 30 days of Landlord's
receipt of Tenant's notice. If the parties cannot agree, each acting in good
faith but without any obligation to agree, then the Lease Term shall not be
extended and shall terminate on its scheduled termination date and Tenant shall
have no further right hereunder or any remedy by reason of the parties' failure
to agree.
(j) The determination of Base Rent does not reduce the Tenant's
obligation to pay or reimburse Landlord for operating expenses and other
reimbursable items as set forth in the Lease, and Tenant shall reimburse and
pay Landlord as set forth in the Lease with respect to such operating expenses
and other items with respect to the Premises during the Extension Term without
regard to any cap on such expenses set forth in the Lease.
(k) Except for the Base Rent as determined above, Tenant's occupancy
of the Premises during the Extension Term shall be on the same terms and
conditions as are in effect immediately prior to the expiration of the initial
Lease Term; provided, however, Tenant shall have no further right to any
allowances, credits or abatements or any options to expand, contract, renew or
extend the Lease.
Page 1 of 2
31
(l) If Tenant does not timely give the Extension Notice within the
period set forth in paragraph (a) above, Tenant's right to extend the Lease
Term for the Extension Term shall automatically terminate. Time is of the
essence as to the giving of the Extension Notice.
(m) Landlord shall have no obligation to refurbish or otherwise
improve the Premises for the Extension Term. The Premises shall be tendered on
the Commencement Date of the Extension Term in "as-is" condition.
(n) If the Lease is extended for the Extension Term, then Landlord
shall prepare and Tenant shall execute an amendment to the Lease confirming the
extension of the Lease Term and the other provisions applicable thereto (the
"Amendment").
(o) If Tenant exercises its right to extend the term of the Lease for
the Extension Term pursuant to this Addendum, the term "Lease Term" as used in
the Lease, shall be construed to include, when practicable, the Extension Term,
as applicable, except as provided above.
Page 2 of 2
32
ADDENDUM SIX
ACQUISITION OF PREMISES CONTINGENCY
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED JUNE 16, 1997, BETWEEN
STUART ENTERTAINMENT, INC.
and
SCI DEVELOPMENT SERVICES INCORPORATED
Tenant acknowledges that Landlord does not currently own the Premises.
Notwithstanding anything in the Lease to the contrary, Landlord's obligations
under the Lease are conditioned and contingent upon Landlord or its nominee or
assignee acquiring fee simple title to the Premises. If the conditions set
forth in the immediately preceding sentence have not been fulfilled or waived
by Landlord within forty-five (45) calendar days following the execution of the
Lease, Landlord shall so notify Tenant in writing and the Lease shall thereupon
cease and terminate and each of the parties hereto shall be released and
discharged from all liability and responsibility under the Lease. Failure of
Landlord to notify Tenant in writing as described in the preceding sentence
also shall effect a termination of the Lease on the forty-fifth (45th) calendar
day following the execution of the Lease, and each of the parties hereto shall
be released and discharged from all liability and responsibility under the
Lease. No expenditure of any sum or incurring of any liability of Tenant for
merchandise, fixtures, equipment labor, materials or otherwise shall affect the
rights of Landlord hereunder.
Page 1 of 1
33
ADDENDUM SEVEN
AGREEMENT TO SUBORDINATE LANDLORD'S LIEN
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED JUNE 16, 1997, BETWEEN
STUART ENTERTAINMENT, INC.
and
SCI DEVELOPMENT SERVICES INCORPORATED
Provided Tenant is not in default under the Lease, Landlord, at the
request of Tenant, agrees to subordinate Landlord's lien arising under the Lease
against Tenant's property located on the Premises. Such subordination shall be
required only if the leader shall be a bank or other financial institution or
the vendor of Tenant's equipment or a financing entity related to such vendor
and shall be subject to such conditions as Landlord may reasonably require.
Tenant shall reimburse Landlord for all reasonable out-of-pocket expenses
incurred by Landlord in negotiating and executing such agreement with Tenant's
lender.
Page 1 of 1
34
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made and entered
into by and between ____________________________ ,("Landlord"), and ____________
("Lender") as of the ________ day of ____________________________, 19 _____.
W I T N E S S E T H:
Whereas, Landlord and ("Tenant") have entered into that certain lease
dated 199__, (the "Lease") pursuant to which Tenant is leasing certain premises
(the "Premises") from Landlord;
Whereas, pursuant to the Landlord's Lien/Security Agreement provision
of the Lease, Tenant has granted to Landlord a lien on all of Tenant's personal
property ("Personal Property") located in the Premises (the "Landlord's Lien");
Whereas, in connection with the Tenant obtaining a line of credit or
receiving any financing or refinancing for the purchase of any personal
property for the Premises ("Personal Property Financing") with Lender, Tenant
has requested, and Landlord has agreed, subject to certain conditions, to
subordinate the Landlord's Lien to any personal property liens of Lender.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other consideration, the receipt and sufficiency of which is
hereby acknowledged, Landlord, Tenant and Lender hereby agree as follows:
1. Notwithstanding the Landlord's Lien/Security Agreement
provision of the Lease, Landlord's Lien shall be subordinate
and subject to the lien placed on the Personal Property by the
Lender in connection with the Personal Property Financing.
2. Lender hereby agrees that it shall not occupy and/or possess
the Premises for more than a fourteen (14) day period.
3. Lender hereby agrees that it shall indemnify and hold Landlord
harmless from any liability, loss, cost, damage caused while
in possession of the Premises and/or expenses (including,
without limitation, Landlord's attorneys' fees) incurred by or
asserted against Landlord arising out of any action by or on
behalf of the Lender in connection with Lender's enforcement
action involving Tenant's Personal Property.
4. Lender hereby agrees that it shall be required to repair any
damage to the Premises caused by Lender, or Lender's agents,
during the period in which it is in possession of the
Premises.
5. Lender, or Lender's agents, shall not hold any auction or sale
of the Personal Property on the Premises.
6. This Agreement shall in all respects be a continuing agreement
and shall remain in full force and effect so long as the
Personal Property Financing is in effect and so long as the
Tenant (or the Lender) occupies or is in possession of the
Premises.
Page 1 of 2
35
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the Lender and the Landlord as of the day and year first written above.
LENDER:
-------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
LANDLORD:
-------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Page 2 of 2
36
FIRST AMENDMENT TO LEASE AGREEMENT
BY AND BETWEEN
SCI DEVELOPMENT SERVICES INCORPORATED
and
STUART ENTERTAINMENT, INC.
This First Amendment To Lease Agreement (this "First Amendment") is
made and entered into effective as of January __, 1998, by and between SCI
DEVELOPMENT SERVICES INCORPORATED (hereinafter "Lessor"), and STUART
ENTERTAINMENT, INC. (hereinafter "Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee have previously entered into that certain
Lease Agreement dated June __, 1997, (hereinafter referred to as the "Lease"),
pursuant to which Lessor leases to Lessee that certain warehouse space
initially containing approximately 100,000 rentable square feet of space (the
"Premises") in Building 1 of the McAllen Distribution Center No. 1 located in
McAllen Texas; and
WHEREAS, Lessor and Lessee desire to amend the terms of the Lease to
increase the size of the Premises and to modify certain terms and provisions of
the Lease;
NOW, THEREFORE, pursuant to the foregoing, and in consideration of the
mutual covenants and agreements contained in the Lease and herein, the Lease,
effective as of the date of this First Amendment, is hereby modified and
amended as set out below:
1. All capitalized terms used herein shall have the same meaning as
defined in the Lease Agreement, unless otherwise defined this First
Amendment.
2. The definition of the term the "Premises" on Page 1 of the Lease is
hereby deleted in its entirety and replaced with the following:
"That portion of the Building, containing approximately
157,600 rentable square feet during the remaining Lease Term, as
determined by Landlord, as shown on Exhibit A."
3. The term "Tenant's Proportionate Share of Project for the first lease
year" on Page 1 of the Lease is hereby deleted in its entirety.
4. The term "Tenant's Proportionate Share of Project for the lease years
2-7" on Page 1 of the Lease is hereby deleted in its entirety and
replaced with the following:
"Tenant's Proportionate Share of the Project 72.64%"
5. The term "Tenant's Proportionate Share of Building for the first lease
year" on Page 1 of the Lease is hereby deleted in its entirety.
6. The term "Tenant's Proportionate Share of Building for the lease years
2-7" on Page 1 of the Lease is hereby deleted in its entirety and
replaced with the following:
"Tenant's Proportionate Share of the Project 72.64%"
7. The term "Lease Term" on Page 1 of the Lease is hereby deleted in its
entirety and replaced with the following:
"Beginning on the Commencement Date and ending on the last day of the
120th full calendar month thereafter."
8. The term "Initial Monthly Base Rent" on Page 1 of the Lease and
Addendum One of the Lease is hereby amended to be $43,340.00 for lease
years 1-5 and $49,841.00 for lease years 6-10.
9. The term "Initial Estimated Monthly Operating Expense Payments" on
Page 1 of the Lease is hereby amended to be as follows:
"1. Utilities: $1,313.33
37
2. Common Area Charges: $ 2,364.00
3. Taxes: $14,446.67
4. Insurance: $ 1,050.67
5. Management Fee: $ 1,970.00
10. The term "Initial Total Estimated Monthly Operating Expense Payments"
on Page 1 of the Lease is hereby amended to be as follows:
"Initial Total Estimated Monthly Operating Expense Payments: $21,144.67
11. The term "Initial Monthly Base Rent and Operating Expense Payments" on
Page 1 of the Lease is hereby amended to be as follows:
"Initial Monthly Base Rent and Operating Expense Payments: $64,484.67
12. Paragraph (a) of Addendum Two to the Lease is hereby deleted in its
entirety and is replaced with the following:
(a) Landlord agrees to furnish or perform those items of construction and
those improvements (the "Tenant Improvements") specified below:
See Exhibit A to this Addendum Two
Landlord shall pay up to Five Hundred Fifty-one Thousand Six Hundred Dollars
($551,600.00) for the Tenant Improvements (the "Tenant Allowance"). If the cost
of the Tenant Improvements is greater than Five Hundred Fifty One Thousand Six
Hundred Dollars ($551,600.00), but less than One Million One Hundred Sixty-three
Thousand and Eighty-eight Dollars ($1,163,088.00), then the difference between
the additional cost of the Tenant Improvements over the Tenant Allowance shall
be amortized over the Lease Term at a rate of 10.5% and such difference shall be
added to the Monthly Base Rent. If the cost of the Tenant Improvements is
greater than One Million One Hundred Sixty-Three Thousand and Eighty-eight
Dollars ($1,163,088.00), but less than One Million Five Hundred Seventy-Six
Thousand Nine Hundred Dollars ($ 1,576,900.00), then the difference between the
additional cost of the Tenant Improvements over One Million One Hundred
Sixty-Three Thousand and Eighty-Eight Dollars ($1,163,088.00) shall be amortized
over the Lease Term at a rate of 12% and such difference shall be added to the
Monthly Base Rent. If the cost of the Tenant Improvements is estimated to exceed
One Million Five Hundred Seventy-Six Thousand Nine Hundred Dollars
($1,576,900.00), such estimated overage shall be paid by Tenant to Landlord
before Landlord begins construction and a final adjusting payment based upon the
actual costs of the Tenant Improvements shall be made when the Tenant
Improvements are complete.
13. The first sentence of Paragraph (a) of Addendum Three to the Lease is
hereby deleted in its entirety and is replaced with the following: The purchase
price shall be Seven Million Three Hundred Eighty-Seven Thousand Eight Hundred
Dollars ($7,387,800.00), payable in immediately available funds at closing.
14. Exhibit A to the Lease is hereby deleted in its entirety and is
replaced with the Exhibit A attached to this First Amendment.
15. See below (*).
IT IS HEREBY AGREED BY THE PARTIES HERETO that, with the exception of
those terms and conditions specifically modified and amended herein, the herein
referenced Lease shall remain in full force and effect in accordance with all
its terms and conditions. In the event of any conflict between the terms and
provisions of this First Amendment and the terms and provisions of the Lease,
the terms and provisions of this First Amendment shall supersede and control.
This First Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, and all of such counterparts shall
constitute one agreement. To facilitate execution of this First Amendment, the
parties may execute and exchange facsimile counterparts of the signature pages
and facsimile counterparts shall serve as originals.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment To Lease Agreement to be effective as of the day and year as first
above written.
LESSOR: LESSEE:
SCI DEVELOPMENT SERVICES STUART ENTERTAINMENT, INC.
INCORPORATED
By: By:
------------------------------ ------------------------------
Name: Name:
---------------------------- ----------------------------
Title: Title:
---------------------------- ----------------------------
Date: , 1997 Date: , 1997
----------------------- -----------------------
* - Paragraph 2 of the Lease Agreement is further amended in the 19th line by
deleting "206,500 square foot facility" and inserting in its place "210,000
square foot facility".
2