Exhibit 10.4
LEASE AGREEMENT
(Build-to-Suit Facility) - 2000
ARTICLE ONE. BASIC TERMS.
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.
Section 1.01. Date of Lease:
Section 1.02. Landlord : Panattoni/Hillwood Development Company, LLC, a
Texas limited liability company
Address of Landlord: 5310 Harvest Hill Road, Suite 180 Dallas,
Texas 75230
Section 1.03. Tenant (include legal entity): ICON Health and Fitness,
Inc., a Delaware corporation
Address of Tenant: - Attn: Jace Jergensen
ICON Health & Fitness. Inc.
4010 Distribution Drive, Suite 200
Garland, Texas 75041
and
Attn: Brad H. Bearnson
ICON Health & Fitness, Inc.
1500 South 1000 West
Logan, Utah 84321
Section 1.04. Property: The Property is Landlord's real property
development known as Skyline Building III (the "Building"), Skyline Business
Park, located on approximately 18.86 acres, Mesquite, Texas, and described or
depicted in Exhibit "A" (the "Project"). The Project includes the land, the
approximately 400,000 square foot Building and all other improvements to be
located on the land, and the common areas described in Paragraph 4.05(a). It is
understood and agreed that Tenant will have the right to require Landlord to
reduce the area of the Building to either 300,000 square feet or 350,000 square
feet, by giving written notice thereof within fifteen (15)days after the date
hereof. If Tenant so exercises such right, the Base Rent payable under Section
1.11(A) under this Lease will be recalculated on the following basis and other
amounts payable by Tenant under this Lease will be appropriately adjusted and
the parties will execute an amendment to this Lease reflecting such changes:
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Years 300,000 sf 350,000 sf
----- ---------- ----------
1-5 $4.18 $3.96
6-10 $4.81 $4.55
Section 1.05. Lease Term: One Hundred Twenty (120) months beginning on
November 15, 2000, or such other date as is specified in this Lease.
Section 1.06. Permitted Uses (See Article Five): receiving, storing,
shipping and selling products, materials and merchandise made and/or distributed
by Tenant, and for such other lawful purposes, including assembly and
manufacturing in conformance with the applicable zoning.
Section 1.07. Tenant's Guarantor: None
Section 1.08. Brokers (See Article fourteen) (if none, so state):
Landlord's Broker: None
Tenant's Broker: Leon Brothers (Al Leon)
Section 1.09. Parking. A minimum of one parking space will be provided
for every 1,000 square feet of Building area.
Section 1.10. Initial Security Deposit (See Section 3.02): $144,333.33
Section 1.11. Rent and Other Charges Payable by Tenant:
(a) BASE RENT: One Hundred Fifteen Thousand Dollars ($115,000.00) for the
first sixty (60) months of the Lease Term; One Hundred Thirty-Two Thousand Three
Hundred Thirty-Three and 33/100 Dollars ($132,333.33) for the remainder of the
initial Lease Term.
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02);
(ii) Utilities (See Section 4.03), (iii) Insurance Premiums (See Section 4.04);
(iv) Common Area Expenses (See Section 4.05).
Section 1.12. Landlord's Share of Profit on Assignment or Sublease: (See
Section 9.05): Fifty percent (50%) of the profit (the "Landlord's Share").
Section 1.13. Exhibits: The following exhibits are attached to and made a
part of this Lease: Exhibit "A" - Description of Land; Exhibit "B" - Building
Expansion; Exhibit "C" - Exclusions from Common Area Costs; Exhibit "D" - Tenant
Signage; Exhibit "E" - Site Plan and Building Specifications; Exhibit "F"
Landlord Waiver and Consent; Exhibit "G" - Expansion Land.
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Section 1.14. Interior Architectural: Tenant will use RGA Architects or
such other architect as may be mutually agreed upon by both parties (the
"Architect") to complete the architectural work for the tenant improvements,
including the design of all interior improvements ("Leasehold Improvements")
desired by Tenant over and above those included in the Building Improvements
being furnished by Landlord pursuant to Section 6.02(a), and preparation of
final interior construction drawings ("Leasehold Improvement Plans") for the
Leasehold Improvements.
Section 1.15. Leasehold Improvement Allowance: When the Leasehold Improvement
Plans have been approved by Landlord and Tenant pursuant to Section 6.02(c),
Landlord agrees to bid the portions of the Leasehold Improvements subject to the
hereinafter specified allowances to at least three (3) subcontractors (at least
one of which shall be designated by Tenant) and select the lowest qualified bid
while receiving Tenant's input on the decision. There will be no construction
management fee charged to Tenant by Landlord. The costs of the Leasehold
Improvements, and including without limitation all architectural and engineering
fees required to complete the Leasehold Improvement Plans, is referred to as the
"Work Costs". Landlord will be responsible for and will pay for the entire Work
Cost, except that with respect to the following items, Tenant will be solely
responsible for all costs, including associated architectural and engineering
fees, in excess of the indicated allowance:
(a) office area - $542,500
(b) showroom area - $90,000
(c) electrical distribution - $100,000
(d) compressed air - $10,000
(a) cranes/structural support - $10,000
(f) exterior signage per Section 5.04 - $5,000
With respect to each such item, Tenant will be solely responsible for all Work
Costs in excess of the indicated allowance, such excess cost being referred to
as "Tenant's Cost"; provided that Tenant has the option to allocate up to 50% of
the allowance for any particular allowance item to one or more of the other
allowance items. Tenant will pay to Landlord on a monthly basis , the amount of
Tenant's Cost actually invoiced to Tenant. Tenant's monthly payment to Landlord
will be due within 10 days of receiving a written invoice with backup
documentation from Landlord. The amount of Tenant's monthly payment will be
equal to Tenant's pro rata share of the cost of the total Work Costs invoiced
for that month. If the aggregate allowance applied against total Work Costs for
all such allowance items in accordance with the foregoing is less than
$757,500.00, Tenant will receive a Base Rent reduction for the initial Lease
Term calculated at the rate of $0.02 per square foot per annum for each
$100,000.00 of savings, or a proportionate part of $0.02 for fractional part of
$100,000.00 of savings (e.g., $50,000 savings produces reduction of $0.01 per
square foot per annum; $150,000.00 produces a reduction of $0.03 per square foot
per annum).
ARTICLE TWO. LEASE TERM.
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Section 2.01. Lease of Property for Lease Term. Landlord leases the
Property from Landlord to Tenant and Tenant leases the Property from Landlord
for the Lease Term. The Lease Term is for the period stated in Section 1.05
above and shall begin and end on the dates specified in Section 1.05 above,
unless the beginning or end of the Lease Term is changed under any provision of
this Lease. The "Commencement Date" shall be the date specified in Section 1.05
above for the beginning of the Lease Term, unless advanced or delayed under any
provision of this Lease.
Section 2.02. Delay in Commencement. Landlord shall not be liable to
Tenant if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. Notwithstanding the foregoing, if the Property is not delivered to Tenant
with the Project substantially completed by March 31, 2001 (as such date may be
extended due to Tenant Delay or Force Majeure), Tenant shall have the option to
terminate this Lease by giving Landlord written notice thereof at any time prior
to such substantial completion and delivery to Tenant. Upon any such
termination, Tenant will have no further obligation to Landlord under this
Lease.
Section 2.03. Early Occupancy. Subject to applicable governmental requirements,
Landlord will make the Property and the Improvements constructed thereon
available to Tenant for the purpose of installing warehouse racks and other
equipment thirty days prior to Landlord's receipt of a certificate of occupancy
for the Property, provided Tenant does not delay completion of the Improvements.
If Tenant occupies the Property prior to the Commencement Date, Tenant's
occupancy of the Property shall be subject to all of the provisions of this
Lease, except that Tenant will not be required to pay Base Rent or other charges
specified in this Lease for the early occupancy period. Early occupancy of the
Property shall not advance the expiration date of this Lease.
Section 2.04. Renewal Option. Provided that Tenant is not in material
default of any of the terms, covenants and conditions hereof beyond the
expiration of applicable notice and cure periods set forth herein, Tenant will
have the right and option to extend the original term of this Lease for two (2)
further terms of sixty (60) months each. Such extension(s) of the original term
shall be on the same terms, covenants and conditions as provided for in the
original term except for this Section 2.04 and except that the rental rate
specified in Section 1.11 of this Lease during each extended term shall be at
the fair market rental in effect at the beginning of the extended term on
equivalent properties, of equivalent size, in equivalent areas in Dallas County,
Texas ("Fair Market Rent"). Tenant will deliver written notice to Landlord of
Tenant's intent to exercise a renewal option granted herein not more than twelve
(12) months nor less than nine (9) months prior to the expiration of the
original term of this Lease or the first extended term, as the case may be. In
the event Tenant fails to deliver such written notice within the time period set
forth above, Tenant's right to extend the term hereunder shall expire and be of
no further force
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and effect. Failure to exercise the first renewal option shall render the second
renewal option null and void.
If Tenant exercises an option in accordance with the foregoing, the parties will
have until the date that is six (6) months prior to the date that the original
term or the first extension term, as the case may be, will expire in order to
agree on Base Rent during the extension term. If the parties agree on the Base
Rent for the extension term during that period, they shall immediately execute
an amendment to this Lease stating the Base Rent. If the parties are unable to
agree on Base Rent for the extended term during that period, then the Base Rent
for the extension period will be established by appraisal and will be 100% of
Fair Market Rental as determined by the appraisal.
Landlord and Tenant shall each appoint one appraiser at least five (5)
months prior to the expiration of the original term or first extension term, as
the case may be; provided, however, that if either party fails to designate an
appraiser within the time period specified, then the appraiser who is designated
shall conclusively determine the Fair Market Rental. If two (2) appraisers are
designated, then they shall submit within thirty (30) days after the second
thereof has been designated their appraisals of the Fair Market Rental. Each
appraiser shall prepare a written appraisal report that shall conform with the
standard of professional practice of the American Institute of Real Estate
Appraisers. Landlord and Tenant intend that the "Fair Market Rental" shall be
deemed to be the rent per square foot of rentable area of industrial/office
space that is then being charged for similar space located in buildings in the
area of the Building that are comparable in quality and offer similar amenities
to the Building and involving leases with similar terms and conditions
(including, but not limited to, free rent, brokerage commissions, and all other
monetary and nonmonetary concessions), and involving the use of the premises for
the permitted uses hereunder, but shall not include value added by alterations
and/or improvements made by Tenant, at Tenant's expense. The industrial office
spaces used for comparison shall be comparable in size, quality and design to
the Property, and such industrial office spaces used for comparison shall be
comparable to the Property with respect to their location within such buildings,
the quality and quantity of tenant improvements installed at each landlord's
expense, the services provided by each landlord to such tenant, and the
financial strength of Tenant.
Should the two appraisers be unable to agree within said thirty (30)
days, the two appraisers shall each submit an independent written appraisal and
together they shall designate one additional person as appraiser within five (5)
days following the expiration of said 30-day period; provided, however, that if
the difference between the two appraisals is five percent (5%) or less of the
lowest appraisal, then an additional appraiser shall not be designated and the
Fair Market Rental shall equal the average of the two appraisals that are
submitted. The third appraiser shall submit an independent written appraisal
within thirty (30) days following his or her appointment. If the two appraisers
cannot agree upon a third appraiser, then either party hereunder may request
that a judge of a Dallas State District Court appoint such third appraiser. The
Fair Market Rental shall be equal to the average of the two written appraisals
which are closest, and the third appraisal shall be disregarded. Each party
shall bear the cost of the appraiser appointed by it and the parties shall share
equally in the cost of the third appraiser. No person shall be appointed or
designated an appraiser unless he or she is an independent appraiser who is a
currently certified member of the American Institute of Real Estate Appraisers
(with
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MAI designation) and unless he or she has at least five (5) years experience as
an appraiser in Dallas County. The third appraiser shall not have ever been
employed (full-time or part-time or on a consulting basis) by Landlord or
Tenant. In the event that the Fair Market Rental is not established before the
commencement of the extended term, Tenant shall continue to pay the Base Rent in
effect at the end of the original term or first extension term, as the case may
be, and when the Fair Market Rental has been established, the new Base Rent
shall be retroactively effective as of the beginning of the extended term and
Tenant shall pay Landlord any deficiency within thirty (30) days after the
establishment of the new Base Rent.
Section 2.05. Building Expansion. Tenant will have the right to require
Landlord to expand the Building upon the terms and conditions set forth on
Exhibit "B" attached hereto and made a part hereof for all purposes.
Section 2.06. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord against all damages which Landlord incurs from
Tenant's delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a "month
to month" tenancy, subject to all of the terms of this Lease applicable to a
month-to-month tenancy, except that the Base Rent then in effect shall be
increased by fifty percent (50%).
ARTICLE THREE: BASE RENT.
Section 3.01. Time and Manner of Payment. On the first day of the second
month of the Lease Term and each month thereafter, Tenant shall pay Landlord the
Base Rent, in advance, without offset, deduction or prior demand. The Base Rent
shall be payable at Landlord's address or at such other place as Landlord may
designate in writing,
Section 3.02. Security Deposit. Upon the execution of this Lease, and as
the Security Deposit under this Lease, Tenant shall deliver to Landlord an
executed original irrevocable standby letter of credit ("L.C.") in the amount of
$144,333.33, in favor of Landlord, such L.C. to have a term commencing on the
execution of this Lease and ending no less than twelve (12) months from the date
of execution of this Lease (subject to the L.C. extension requirement
hereinafter specified). The L.C. may be drawn upon and used upon each occurrence
of any event of default which remains uncured after applicable notice and cure
periods; Landlord may use all or part of the L.C. to pay past due rent or other
payments due Landlord under this Lease, or to cure any other defaults of Tenant
under this Lease without prejudice to any other remedy provided herein or
provided by law. Such L.C. shall be issued in a form and by a National Banking
Association or other financial institution (located within the continental
United States of America, and if not located in Dallas, Texas, must either agree
in the L.C. to accept presentation of required material for drawing purposes by
Federal Express or other overnight courier, or have a correspondent bank in
Dallas, Texas at which the L.C. may be presented for payment(s)) (hereinafter
the "Issuer"), acceptable to Landlord. With respect to any default occurring
during the term of the Lease, which remains uncured following applicable notice
and cure periods,
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Landlord shall have the right to proceed against the total L.C. at the sole
discretion of Landlord regarding items and the amounts to be drawn upon relating
to any default by Tenant; provided, however, that any drawn amounts not properly
applied by Landlord in accordance with this Section 3.02 shall be deposited and
maintained by Landlord in a separate bank account on account of Tenant's
Security Deposit obligations hereunder. If Landlord uses any part of the L.C.,
Deposit, Tenant shall restore the L.C. to its full amount within ten (10) days
after Landlord's written request. Tenant's failure to do so shall be a material
default under this Lease. No interest shall be paid on any portion of the L.C.
converted to cash pursuant to the provisions hereof. In the event of the sale of
the Property, Landlord will have the obligation to transfer the Security
Deposit, both the L.C. and any cash proceeds thereof, to the vendee, provided
such vendee agrees in a writing delivered to Tenant to accept and hold the same
in compliance with the terms hereof, in accordance with Section 11. The L.C.
shall contain the following terms and conditions:
1. The L.C. shall be deemed to be automatically extended without amendment
from year to year, with renewal occurring annually, from the date of its
issuance or any future expiration date unless at least 30 days prior to any
future expiration date the bank notifies Landlord, in writing, by certified
mail, return receipt requested, that the issuer intends not to renew the L.C.
for an additional year.
2. In the event the L.C. is not extended at least 30 days prior to its then
stated expiration date and will therefore expire by its terms and the Lease,
including any or all extensions or renewals, has not expired, then (unless
Tenant has, prior to drafting by Landlord, deposited with Landlord cash or a
substitute L.C. in the amount of the Security Deposit) Landlord shall be allowed
to draft upon issuer for the full amount of the L.C., subject to the terms and
provisions hereinabove set forth.
3. The L.C. shall be subject to the "Uniform Customs and Practices for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500.
4. The amount of the L.C. shall be payable at sight to Landlord within three
(3) business days of presentation of the sight draft, in whole or partial
drawings; upon presentation to the issuer of the following documents:
a. Landlord's written demand for payment making reference to the date
and number of the L.C.;
b. Landlord's signed certificate that the amount drawn is required to
satisfy an event of default which has remained uncured beyond
applicable notice and grace periods, as set forth in the Lease, or
that Tenant has failed to deposit cash or a substitute L.C. as
required under subsection 2 above; and
c. The original L.C. for endorsement of the amount paid and if the
draft is for the full amount the L.C. is to be surrendered to the
issuer.
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5. The issuer shall not modify the L.C. without prior written consent of the
Landlord. An extension of the L.C. shall not be deemed a modification under the
above provisions.
6. Landlord shall have the right to assign and transfer its right and
interests in the L.C. only to a purchaser of the Project; provided such
purchaser issues a written receipt therefor delivered to Tenant.
Section 3.03. Termination; Advance Payments. Upon termination of this
Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, Landlord shall
refund or credit to Tenant (or Tenants successor) the unused portion of the
Security Deposit, any advance rent or other advance payments made by Tenant to
Landlord, and any amounts paid for real property taxes and other reserves which
apply to any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT.
Section 4.01. Additional Rent. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02. Property Taxes.
(a) Real Property Taxes. Tenant shall pay all real property taxes on
the Property (including without limitation any fees, taxes or assessments
against, or as a result of, any tenant improvements installed on the Property by
or for the benefit of Tenant) during the Lease Term. Such payment shall be made
at least ten (10) days prior to the delinquency date of the taxes. Within such
ten (10)-day period, Tenant shall furnish Landlord with satisfactory evidence
that the real property taxes have been paid. Landlord shall reimburse Tenant for
any real property taxes paid by Tenant covering any period of time prior to or
after the Lease Term. If Tenant fails to pay the real property taxes when due,
Landlord may pay the taxes and Tenant shall reimburse Landlord for the amount of
such tax payment as Additional Rent. It is understood that Tenant is applying
for tax abatement from the appropriate governmental authorities. Landlord agrees
to reasonably cooperate at no cost to Landlord.
(b) Definition of "Real Property Tax." "Real Property Tax" means: (i)
any fee, license fee, license tax, business license fee, commercial rental tax,
levy charge, assessment, penalty or tax imposed by any taxing authority against
the Property; (ii) any tax on the Landlord's right to receive, or the receipt
of, rent or income from the Property or against Landlord's business of leasing
the Property; (iii) any tax or charge for fire protection, streets, sidewalks,
road maintenance, refuse or other services provided to the Property by any
governmental agency; (iv) any tax imposed upon this transaction or based upon a
re-assessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; (v) any assessments levied with respect to the Property by a property
owner's association or otherwise under any applicable restrictive
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covenants of record, and (vi) and any charge or fee replacing any tax previously
included within the definition of real property tax. "Real property tax" does
not, however, include Landlord's federal or state income, franchise, inheritance
or estate taxes.
(c) Joint Assessment. If the Property is not separately assessed,
Landlord shall reasonably determine Tenant's share of the real property tax
payable by Tenant under Paragraph 4.02(a) from the assessor's worksheets or
other reasonably available information. Tenant shall pay such share to Landlord
within fifteen (15) days after receipt of Landlord's written statement.
(d) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the Property.
(ii) If any of Tenant's personal property is taxed with the
Property, Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord for
such personal property taxes.
Section 4.03. Utilities. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property.
Section 4.04. Insurance Policies.
(a) Liability Insurance. During the Lease Term, Tenant shall maintain
a policy of commercial general liability insurance (sometimes known as broad
form comprehensive general liability insurance) insuring Tenant against
liability for bodily injury, property damage (including loss of use of property)
and personal injury arising out of the operation, use or occupancy of the
Property. Tenant shall name Landlord as an additional insured under such policy.
The initial amount of such insurance shall be ONE MILLION DOLLARS
($1,000,000.00) per occurrence and shall be subject to reasonable periodic
increase based upon inflation, increased liability awards, recommendation of
Landlord's professional insurance advisers and other relevant factors. The
liability insurance obtained by Tenant under this Paragraph 4.04(a) shall (i) be
primary and non-contributing; (ii) contain cross-liability endorsements; and
(iii) insure Landlord against Tenant's performance under Section 5.05, if the
matters giving rise to the indemnity under Section 5.05 result from the
negligence of Tenant. The amount and coverage of such insurance shall not limit
Tenant's liability nor relieve Tenant of any other obligations under this Lease.
Landlord may also obtain comprehensive public liability insurance in an amount
and with coverage determined by Landlord insuring Landlord against liability
arising out of ownership, operation, use or occupancy of the Property. The
policy obtained by Landlord shall not be contributory and shall not provide
primary insurance.
(b) Property and Rental Income Insurance. During the Lease Term,
Landlord shall maintain policies of insurance covering loss of or damage to the
Property in the full amount
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of its replacement value. Such policy shall contain an Inflation Guard
Endorsement and shall provide protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
special extended perils (all risk), sprinkler leakage and any other perils which
Landlord deems reasonably necessary. Landlord shall have the right to obtain
flood and earthquake insurance if required by any lender holding a security
interest in the Property. Landlord shall not obtain insurance for Tenant's
fixtures or equipment or building improvements installed by Tenant on the
Property. During the Lease Term, Landlord shall also maintain a rental income
insurance policy, with loss payable to Landlord, in an amount equal to one (1)
year's Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall be liable for the payment of any deductible amount under Landlord's
or Tenant's insurance policies maintained pursuant to this Section 4.04, in an
amount not to exceed TWENTY THOUSAND DOLLARS ($20,000.00). Tenant shall not do
or permit anything to be done which invalidates any such insurance policies.
(c) Payment of Premiums. Subject to Section 4.08, Tenant shall pay all
premiums for the insurance policies described in Paragraphs 4.04(a) and (b)
(whether obtained by Landlord or Tenant) within fifteen (15) days after Tenant's
receipt of a copy of the premium statement or other evidence of the amount due.
If insurance policies maintained by Landlord cover improvements on real property
other than the Property, Landlord shall deliver to Tenant a statement of the
premium applicable to the Property showing in reasonable detail how Tenant's
share of the premium was computed. If the Lease Term expires before the
expiration of an insurance policy maintained by Landlord, Tenant shall be liable
for Tenant's prorated share of the insurance premiums. Before the Commencement
Date, Tenant shall deliver to Landlord a copy of any policy of insurance which
Tenant is required to maintain under this Section 4.04. At least thirty (30)
days prior to the expiration of any such policy, Tenant shall deliver to
Landlord a renewal of such policy. As an alternative to providing a policy of
insurance, Tenant shall have the right to provide Landlord a certificate of
insurance, executed by an authorized officer of the insurance company, showing
that the insurance which Tenant is required to maintain under this Section 4.04
is in full force and effect and containing such other information which Landlord
reasonably requires.
(d) General Insurance Provisions.
(i) Any insurance which Tenant is required to maintain under
this Lease shall include a provision which requires the insurance carrier to
give Landlord not less than thirty (30) days' written notice prior to any
cancellation or modification of such coverage.
(ii) If Tenant fails to deliver a policy, certificate or renewal
to Landlord required under this Lease within the prescribed time period or if
any such policy is canceled or modified during the Lease Term without Landlord's
consent, and if Tenant does not cure such failure within ten (10) days after
written notice thereof from Landlord, Landlord may obtain such insurance, in
which case Tenant shall reimburse Landlord for the cost of such insurance within
fifteen (15) days after receipt of a statement that indicates the cost of such
insurance.
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(iii) Tenant shall maintain all insurance required under this
Lease with companies holding a "General Policy Rating" of A-8 or better, as set
forth in the most current issue of "Best Key Rating Guide". Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in the
form and amounts described in this Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this Section 4.04 is
for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant's type of business,
as that coverage may change from time to time. Landlord makes no representation
as to the adequacy of such insurance to protect Landlord's or Tenant's
interests. Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance policies
maintained, Landlord and Tenant each hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents or representatives
of the other, for loss of or damage to its property or the property of others
under its control, if such loss or damage is covered by any insurance policy in
force (whether or not described in this Lease) at the time of such loss or
damage. Upon obtaining the required policies of insurance, Landlord and Tenant
shall give notice to the insurance carriers of this mutual waiver of
subrogation.
Section 4.05. Common Areas. Use, Maintenance and Costs.
(a) Common Areas. As used in this Lease, "Common Areas" shall mean all
parking areas, driveways, sidewalks, loading areas, access roads, alleys,
corridors, landscaping and planted areas, and grounds surrounding the Building,
as shown on the site plan referenced in Section 6.02(a) .
(b) Use of Common Areas. Tenant shall have the exclusive right to use
the Common Areas for the purposes intended, subject to such reasonable rules and
regulations as Landlord may establish from time to time and to Landlord's rights
to enter upon the Property in accordance with the terms and provisions of this
Lease and for the performance of Landlord's duties under this Lease. Tenant
shall abide by such rules and regulations and shall use its best effort to cause
others who use the Common Areas with Tenant's express or implied permission to
abide by Landlord's rules and regulations.
(c) Maintenance of Common Areas. Landlord shall maintain the Common
Areas in good order, condition and repair, in Landlord's reasonable discretion,
as a first-class industrial/commercial real property development. Tenant shall
pay all costs incurred by Landlord for the operation and maintenance of the
Common Areas in accordance with the provisions of Section 4.08. Common Area
costs include, but are not limited to, costs and expenses for the following:
gardening and landscaping; utilities, water and sewage charges; maintenance of
signs (other than tenants' signs); maintenance of the exterior of the Building
(including painting); premiums for liability, property damage, fire and other
types of casualty
Tenant JJ Landlord JH 11
insurance on the Common Areas and all Common Area improvements; all property
taxes and assessments levied on or attributable to the Common Areas and all
Common Area improvements; all personal Property taxes levied on or attributable
to personal property used in connection with the Common Areas; straight-line
depreciation on personal property owned by Landlord which is consumed in the
operation or maintenance of the Common Areas; rental or lease payments paid by
Landlord for rented or leased personal property used in the operation or
maintenance of the Common Areas; fees for required licenses and permits;
repairing, resurfacing, repaving, maintaining, painting, lighting, cleaning,
refuse removal, security and similar items and any other maintenance, repair or
replacement items normally associated with the foregoing.; and reserves for roof
replacement and exterior painting and other appropriate reserves. Landlord may
cause any or all of such services to be provided by third parties and the cost
of such services shall be included in Common Area Costs. Common Area costs shall
not include (i) depreciation of real property which forms part of the Common
Area, or (ii) those costs set forth on Exhibit "C" attached hereto.
Section 4.06. Late Charges. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay to Landlord a late charge equal
to five percent (5%) of the overdue amount. The parties agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of such late payment. Notwithstanding the foregoing, Landlord
will waive the late charge two times during each calendar year, on a
non-cumulative basis.
Section 4.07. Interest on Past Due Obligations. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this Lease
is higher than the rate permitted by law, the interest rate is hereby decreased
to the maximum legal interest rate permitted by law. Notwithstanding the
foregoing, Landlord will waive the interest charge two times during each
calendar year, on a non-cumulative basis.
Section 4.08. Impounds for Insurance Premiums, Real Property Taxes and
Common Area Costs. Notwithstanding anything in this Lease to the contrary,
Tenant agrees to pay as Additional Rent (1) all real property taxes as defined
in Section 4.02, (2) any utilities for the Common Areas not separately metered
to Tenant, (3) the cost of insurance policies under Section 4.04, and (4)
Landlord's costs incurred pursuant to Section 4.05(c) (such costs and expenses
being referred to herein as "common area expenses"). During each month of the
Term of this Lease, on the same day that Base Rent is due hereunder, Tenant will
escrow with Landlord an amount equal to one-twelfth (1/12th) of the annual cost
of such items, as reasonably estimated by Landlord. Tenant authorizes Landlord
to use the funds deposited with Landlord under this Section 4.08 to pay such
costs. The initial monthly escrows set forth below are based
Tenant JJ Landlord JH 12
upon the estimated amounts for the first year of the Lease Term, and will be
increased or decreased annually to reflect the projected actual costs of all
such items. If Tenant's total escrow payments are less than the actual cost of
all such items, Tenant will pay the difference to Landlord within thirty (30)
days after demand. If the total escrow payments of Tenant are more than the
actual amount of all such items, Landlord will retain such excess and credit it
against Tenant's next annual escrow payments, or at Tenant's option refund such
excess to Tenant. The amount of the initial estimated monthly escrow payments
are as follows:
(a) Real Estate Taxes as set forth in Section 4.02 .................... $ 23,000.00
(b) Insurance as set forth in Section 4.04 ............................ $ 1,000.00
(c) Common area expenses as set forth in Section 4.05(c) .............. $ 5,333.33
-----------
(Includes management fee under Section 4.09)
Total initial estimated monthly escrow ............................ $ 29,333.33
Section 4.09. Management Fees. Tenant shall reimburse Landlord monthly
for management fees incurred by Landlord in connection with the Property in the
amount of two percent (2%) of the monthly rent for each month of the Lease Term.
Section 4.10. Audit. Within nine (9) months of the end of any calendar
year, Tenant shall be entitled to inspect the invoices and statements relating
to Landlord's cost of operating and maintaining common areas or common
facilities, at Landlord's office or at the office of Landlord's managing agent,
upon prior reasonable notice and during Landlord's normal business hours. Tenant
may also request that Landlord furnish copies of invoices and statements related
to Landlord's costs of operating and maintaining common areas or common
facilities. Any information provided to Tenant by virtue of this Section 4.10
and the results of any audit performed by Tenant shall be kept by Tenant in
confidence and not revealed to any third party (other than to its attorneys and
accountants) except as may be required by law or by order of a court of
competent jurisdiction. If Tenant's audit reflects any discrepancy in the
amounts reported by Landlord, Landlord and Tenant shall promptly make any
necessary adjustments. If Tenant's audit reflects that Landlord has misstated
the actual amounts by more than ten percent (10%), Landlord shall reimburse
Tenant for the reasonable cost of the audit, up to $1,500.00.
ARTICLE FIVE: USE OF PROPERTY.
Section 5.01. Permitted Uses. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
Section 5.02. Manner of Use. Tenant shall not cause or permit the
Property to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, or which constitutes a nuisance
or waste. Landlord shall obtain and pay for all permits, including a Certificate
of Occupancy, required for Tenant's occupancy of the Property and shall promptly
take all actions necessary to comply with all applicable statutes, ordinances,
rules, regulations, orders and requirements regulating the use by Tenant of the
Property as of the Commencement Date, including the Occupational Safety and
Health Act and the Americans With Disabilities Act and Texas Accessibility
statutes.
Tenant JJ Landlord JH 13
Section 5.03. Hazardous Materials. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local laws or regulations, including, without limitation petroleum-based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products, asbestos, PCBs and
similar compounds, and including any different products and materials which are
subsequently found to have adverse effects on the environment or the health and
safety of persons. Tenant shall not cause or permit any Hazardous Material to be
generated, produced, brought upon, used, stored, treated or disposed of in or
about the Property by Tenant, its agents, employees, contractors, sublessees
without the prior written consent of Landlord. Landlord shall be entitled to
take into account such other factors or facts as Landlord may reasonably
determine to be relevant in determining whether to grant or withhold consent to
Tenant's proposed activity with respect to Hazardous Material. In no event,
however, shall Landlord be required to consent to the installation or use of any
storage tanks on the Property.
Section 5.04. Signs and Auctions. Subject to applicable governmental
requirements and restrictions and written approval of Landlord, not to be
unreasonably withheld, delayed or conditioned, Tenant will have the right, at
Tenant's sole cost and expense, subject to the allowance specified in Section
1.15, to place signage on the Building facia. Tenant may install signs as shown
on Exhibit "D" attached hereto.
Section 5.05. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's negligence or
willful misconduct. As used in this Section, the term "Tenant" shall include
Tenant's employees, agents, contractors and invitees, if applicable.
Section 5.06. Landlord's Access. Landlord or its agents may enter the
Property during regular business hours with an escort provided by Tenant, to
show the Property to potential buyers, investors or tenants or other parties
(provided, that Landlord may not directly or indirectly bring any of Tenant's
business competitors into the Property); to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for
Tenant JJ Landlord JH 14
any other purpose Landlord deems necessary. Landlord shall give Tenant prior
notice of such entry, except in the case of an emergency. During the last twelve
months of the Lease Term, as the Lease Term may be extended, Landlord may place
customary "For Sale" or "For Lease" signs on the Property.
Section 5.07. Quiet Possession. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND
ALTERATIONS
Section 6.01. Existing. Subject to Landlord's obligations with respect to
construction of the Building and the Leasehold Improvements (hereinafter
defined) pursuant to Section 6.02, Tenant accepts the Property in its condition
as of the execution of the Lease, subject to all recorded matters, laws,
ordinances, and governmental regulations and orders. Except as expressly
provided herein, Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation as to the condition of the Property or the
suitability of the Property for Tenant's intended use. Tenant represents and
warrants that Tenant has made its own inspection of and inquiry regarding the
condition of the Property and is not relying on any representations of Landlord
or any Broker with respect thereto. If Landlord or Landlord's Broker has
provided a Property Information Sheet or other Disclosure Statement regarding
the Property, a copy is attached as an exhibit to the Lease.
Section 6.02. Construction of Improvements.
(a) Landlord agrees at Landlord's sole cost and expense, to construct
the approximately 400,000 square foot Building and associated improvements
(collectively, the "Building Improvements") on the Land in accordance with the
site plan and building specifications attached hereto as Exhibit "E"
(collectively the "Building Plans"). Landlord covenants that on the Commencement
Date the Building Improvements will comply with (i) City of Mesquite Fire and
Building Codes, (ii) State of Texas Accessibility Standards, (iii) Americans
with Disability Act legislation, and (iv) be of quality similar to other Class A
office/warehouse buildings in the Mesquite, Texas, area.
(b) Promptly after mutual approval of the Leasehold Improvement Plans,
Landlord will apply for a building permit for the Building Improvements, enter
into a construction agreement with its general contractor and commence
construction of the Building Improvements upon issuance of the building permit.
(c) Tenant will cause the Architect to prepare and submit to Landlord
within sixty (60) days after the date hereof, a set of plans and specifications
and/or construction drawings (collectively, the "Leasehold Improvement Plans")
for Landlord's use in constructing the Leasehold Improvements. Landlord shall
have ten (10) days after receipt to approve the Leasehold Improvement Plans or
to give reasonable comments to Tenant. If Landlord makes such comments, Tenant
shall have five (5) days to revise the Leasehold Improvement Plans and
Tenant JJ Landlord JH 15
resubmit them to Landlord. Landlord shall have five (5) days after receipt of
the resubmitted Leasehold Improvement Plans to approve the Leasehold Improvement
Plans. After Landlord and Tenant have approved the Leasehold Improvement Plans,
any subsequent changes to the Leasehold Improvement Plans requested by Tenant
shall be at Tenant's sole cost and expense and subject to Landlord's written
approval, such approval not to be unreasonably withheld, delayed or conditioned.
The parties will cooperate with all due diligence to cause the Leasehold
Improvement Plans to be completed and mutually approved on or before August 15,
2000. Such plans must comply with (i) City of Mesquite Fire and Building Codes,
(ii) State of Texas Accessibility Standards, (iii) Americans with Disability Act
legislation, and (iv) be of quality similar to other Class A office/warehouse
buildings in the Mesquite, Texas, area.
(d) Promptly after mutual approval of the Leasehold Improvement Plans,
Landlord will apply for a building permit for the Leasehold Improvements, enter
into a construction agreement with a subcontractor (the "Interior Contractor")
in accordance with Section 1.15, and commence construction of the Leasehold
Improvements upon issuance of the building permit therefor.
(e) The Leasehold Improvements and the Building Improvements are
herein jointly referred to as the "Improvements". Landlord will use reasonable
diligence to substantially complete the Improvements by November 15, 2000
(exclusive of landscaping, which may be completed thereafter as weather allows).
Any increased costs resulting from any "fast-tracking" will be paid by Landlord.
Notwithstanding anything in this Lease to the contrary, the Commencement Date
will be the date upon which Landlord has notified Tenant in writing that the
Improvements have been substantially completed by Landlord in accordance with
the provisions of this Lease and a temporary certificate of occupancy has been
issued. As used herein, the term "substantial completion" of the Improvements
will mean that, in the reasonable opinion of Landlord's architect, such
improvements have been completed in accordance with the Building Plans and the
Leasehold Improvement Plans, subject only to completion of minor punch list
items, and a temporary certificate of occupancy is issued for the Property by
the appropriate governmental authority. Landlord agrees to deliver a final
certificate of occupancy to Tenant promptly after substantial completion of the
Improvements. As soon as the Improvements have been substantially completed,
Landlord will notify Tenant in writing. Within ten (10) days thereafter, Tenant
will submit to Landlord in writing a punch list of items needing completion or
correction. Landlord will use its best efforts to complete such items within
thirty (30) days after the receipt of such notice. If Tenant, its employees,
agents or contractors cause construction to be delayed, the Commencement Date
will be the date that, in the opinion of Landlord's architect, substantial
completion would have occurred if such delays ("Tenant Delays") had not taken
place. Tenant Delays include, but are not limited to, delays resulting from any
of the following:
(i) Failure of Tenant or its architects, engineers, space
planners or others employed by Tenant to timely comply with the schedule for
preparation of the Leasehold Improvement Plans;
Tenant JJ Landlord JH 16
(ii) If Tenant makes changes either before or during
construction of the Improvements if the changes result in the Improvements being
substantially completed later than they would have been substantially completed
absent such changes; and
(iii) Landlord's inability to obtain a building permit,
certificate of occupancy or other required governmental approval, inspection,
license or certificate or any necessary approval of any architectural control
committee or other association required under covenants, conditions or
restrictions applicable to the Building, and such Inability is due to Tenant's
failure to cooperate in the approval process (including Tenant's failure to
agree in a timely manner to make changes to the Building Plans and/or the
Leasehold Improvement Plans, if and as required by such authorities).
(f) Subject to Section 6.02(g) below, if the Improvements have not
been substantially completed by December 15, 2000, Landlord will not be in
default. However, for the period of any delay between December 15, 2000, and the
date upon which the improvements are substantially completed (the "Delay
Period"), Landlord will provide Tenant with two (2) days of Base Rent abatement
for each day of the Delay Period.
(g) Landlord's agreement to provide Base Rent abatement pursuant to
Section 6.02(f) is subject to the following conditions:
(i) This Lease is fully executed by Tenant and delivered to
Landlord by May 31, 2000 (it being understood and agreed
that the aforesaid December 15, 2000 date will be extended
by the amount of any delay between May 31, 2000 and the
date of such execution and delivery by Tenant);
(ii) Tenant approves the Leasehold Improvement Plans in form
ready for submittal to the City of Mesquite by August 15,
2000 (it being understood and agreed that the aforesaid
December 15, 2000 date will be extended by the amount of
any delay between August 15, 2000 and the date of such
approval by Tenant); and
(iii) Landlord will manage the construction of the Leasehold
Improvement, which will include entering into an AIA
contract with the Interior Contractor for construction of
the Leasehold Improvements.
(h) Notwithstanding anything in this Lease to the contrary, all dates
and time periods for Landlord's performance under this Section 6.02 will be
subject to extension for the period of any Tenant Delays and delays of the type
specified in Section 13.12.
(i) All Improvements will be owned by Landlord and will remain on the
Land at the expiration or early termination of this Lease.
Section 6.03. Exemption of Landlord from Liability. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares.
Tenant JJ Landlord JH 17
merchandise or other property of Tenant. Tenant's employees, invitees, customers
or any other person in or about the Property, whether such damage or injury is
caused by or results from: (a) fire, steam, electricity, water, gas or rain; (b)
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures or any other cause;
(c) conditions arising in or about the Property or upon other portions of the
Project, or from other sources or places; or (d) any act or omission of any
other tenant of the Project. Landlord shall not be liable for any such damage or
injury even though the cause of or the means of repairing such damage or injury
are not accessible to Tenant. The provisions of this Section 6.02 shall not,
however, exempt Landlord from liability for Landlord's gross negligence or
willful misconduct.
Section 6.04. Landlord's Obligations. Except as provided in Article Seven
(Damage or Destruction) and Article Eight (Condemnation), Landlord shall be
responsible for the structural soundness of the Building including replacement
of the roof as well as repair to the foundation and exterior walls. However,
Landlord shall not be obligated to maintain or repair windows, doors, plate
glass or the interior surfaces of exterior walls. Tenant will immediately give
Landlord written notice of defect or need for repairs required per the terms of
this Lease, after which Landlord will repair same or cure such defect within
thirty (30) days after receiving written notice from Tenant unless such cure
cannot reasonably be accomplished within such thirty (30) days, in which case
Landlord will have such additional time as is reasonably necessary to accomplish
such cure provided Landlord promptly commences and diligently prosecutes such
cure to completion. Landlord's liability with respect to any defects, repairs,
replacements and maintenance for which Landlord is responsible hereunder will be
limited to the cost of such repairs or maintenance or the curing of such
defects. Tenant waives the benefit of any statute in effect now or in the future
which might give Tenant the right to make repairs at Landlord's expense or to
terminate this Lease due to Landlord's failure to keep the Property in good
order, condition and repair.
Section 6.05. Tenant's Obligations.
(a) Except as provided in Section 6.04, Article Seven (Damage
Destruction) and Article Eight (Condemnation), and except for Landlord's express
obligations under the Lease and for normal wear and tear, Tenant shall keep all
portions of the Property (including, nonstructural, interior, systems and
equipment) in good order, condition and repair (including interior repainting
and refinishing, as needed). If any portion of the Property or any system or
equipment in the Property which Tenant is obligated to repair cannot be fully
repaired or restored, Tenant shall promptly replace such portion of the Property
or system or equipment or equipment in the Property. Tenant shall maintain a
preventive maintenance contract providing for the regular inspection and
maintenance of the heating and air conditioning system by a licensed heating and
air conditioning contractor. If any part of the Property is damaged by any act
or omission of Tenant, Tenant shall pay Landlord the cost (net of any insurance
recovery by Landlord) of repairing or replacing such damaged property, whether
or not Landlord would otherwise be obligated to pay the cost of maintaining or
repairing such property. It is the intention of Landlord and Tenant that at all
times Tenant shall maintain the portions of the Property which Tenant is
obligated to maintain in an attractive, first class and fully operative
Tenant JJ Landlord JH 18
condition, normal wear and tear, obligations which are the express
responsibility of Landlord, fire, casualty and condemnation excepted.
From time to time upon written request of Tenant, Landlord will furnish
Tenant a written list of maintenance and repair contractors approved by Landlord
for the performance of HVAC, plumbing, electrical, and mechanical (including
overhead doors) work in the Property. If Tenant has difficulty in obtaining
response/service from any such contractors, Tenant may so advise Landlord, and
Landlord will promptly assist Tenant in attempting to cause such contractors to
diligently respond and perform by direct telephone contact and other reasonable
means typically employed by Landlord to obtain appropriate service from its
contractors. Further, within 30 days following the Commencement Date, Landlord
will advise Tenant of the cost and specifications of any available extended or
"full-service" HVAC warranties for Tenant's consideration.
(b) Tenant shall fulfill all of Tenant's obligations under this
Section 6.05, at Tenant's sole expense. If Tenant fails to maintain, repair or
replace the Property as required by this Section 6.05, Landlord may, upon ten
(10) days' prior notice to Tenant (except that no notice shall be required in
the case of an emergency), enter the Property and perform such maintenance or
repair (including replacement, as needed) on behalf of the Tenant. In such case,
Tenant shall reimburse Landlord for all costs incurred in performing such
maintenance or repair immediately upon demand.
(c) Landlord agrees that if a defect in materials or workmanship in
the initial construction of the Building or the Leasehold improvements
("Defect") is discovered by Tenant on or prior to the first anniversary of the
date of substantial completion of the Leasehold Improvements ("First
Anniversary"), Tenant shall give Landlord written notice thereof ("Defect
Notice") on or prior to the First Anniversary (time being of the essence with
respect thereto). If Landlord receives a Defect Notice prior to the First
Anniversary, Landlord shall, at its sole expense, cause such Defect to be
repaired or remedied. Notwithstanding the foregoing, nothing contained in this
Section 6.05(c) shall (i) require Landlord to repair or remedy any Defect to the
extent such repair or remediation is necessitated due to the negligence, or
intentional acts or omissions of, or misuse of the item requiring such repair or
remediation by, Tenant or its employees, agents, contractors or invitees; (ii)
require Landlord to repair or remedy any Defect if the coverage afforded by any
warranty or maintenance/service contract relating to the item in question has
been impaired or invalidated by Tenant or its employees, agents, contractors or
invitees; (iii) require Landlord to repair or remedy any Defect with respect to
which a Defect Notice is not received by Landlord on or prior to the First
Anniversary; (iv) give Tenant any defense to the payment when due of, or the
right to offset any amounts against, Base Rent, Additional Rent or other amounts
due from Tenant to Landlord hereunder; or (v) be enforceable against any
mortgagee of Landlord who succeeds to the interest of Landlord in the Property
as a result of foreclosure of any mortgage or deed of trust affecting the
Property (or as a result of a conveyance in lieu of foreclosure). Landlord may
satisfy its obligations under this Section 6.05(c) by electing to proceed under
any manufacturers' and construction warranties provided to Landlord in
connection with the construction of the Leasehold Improvements and/or under the
maintenance/service contracts required to be carried by Tenant under Section
6.05(a) hereof and Tenant hereby agrees to cooperate with Landlord in securing
the performance by any
Tenant JJ Landlord JH 19
manufacturer, contractor or contractor of the work required to be performed by
it under any such maintenance/service contractor of the work required to be
performed by it under any such maintenance/service contract.
Section 6.06. Alterations, Additions, and Improvements.
(a) Tenant shall not make any alterations additions, additions or
improvements to the Property (other than the Leasehold Improvements to be
constructed in accordance with the terms and conditions set forth in Section
6.02(c)) without the prior written consent of Landlord (which consent shall not
be unreasonably withheld, delayed or conditioned as to interior,
non-structural alterations); provided, however, Tenant may, without Landlord's
consent, make alterations which are nonstructural in character and the cost of
which does not exceed $100,000 during any calendar year of the Term of the Lease
("Permitted Non-Structural Alterations"). Tenant, at its own cost and expense,
may erect such shelves, bins, machinery and trade fixtures as it desires.
Notwithstanding the foregoing, the installation of such shelves, bins,
machinery, trade fixtures and all alterations, additions and improvements,
including without limitation Permitted Non-Structural Alterations, shall be
subject to the conditions that: (i) such items do not alter the basic character
of the Property; (ii) such items do not overload or damage the Property; (iii)
such items may be removed without injury to the Property; and (iv) the
construction, erection or installation thereof complies with all applicable
governmental laws, ordinances, regulations and with Landlord's specifications
and requirements. All alterations, additions, improvements and partitions
erected by Tenant shall be and remain the property of Tenant during the Term of
this Lease. All shelves, bins, machinery and trade fixtures installed by Tenant
(other than the Leasehold Improvements to be constructed in accordance with the
terms and conditions set forth on Exhibit "C") shall be removed on or before the
earlier to occur of the date of termination of this Lease or vacating of the
Property by Tenant, at which time Tenant shall restore the Property to the
condition as existed upon completion of the initial Leasehold Improvements,
reasonable wear and tear excepted. All alterations, installations, removals and
restoration shall be performed in a good and workmanlike manner so as not to
damage or alter the primary structure or structural qualities of the Building
and other improvements situated on the Property. Notwithstanding anything to the
contrary contained herein, but subject to the provisions of Section 6.06(b), it
is agreed that the use of and access to the roof of the Building is expressly
reserved to Landlord and is expressly denied to Tenant (except in order to
permit Tenant to discharge its obligations to repair, maintain and service the
HVAC unit situated on the roof of the Building or to comply with Tenant's other
obligations under this Lease). Subject to Section 6.06(b), Tenant shall not
penetrate the roof of the Building in any manner, nor install or construct any
alterations, additions or improvements thereon, nor otherwise use or occupy the
roof at any time during the Term hereof (except such use and occupation of the
roof as is necessary in order to permit Tenant to comply with the provisions of
this Lease).
(b) Tenant shall have the right to install satellite and/or microwave
antenna on the roof of the Building and elsewhere in the Building for the
reception and transmission of electromagnetic signals. Tenant shall be
responsible at Tenant's sole cost and expense for the cost of installation and
maintenance of such equipment. Landlord shall have the right to approve the
location, method of installation, size and shielding requirements, such approval
not to be
Tenant JJ Landlord JH 20
unreasonably withheld, delayed or conditioned; provided that any roof
penetrations shall be performed by Landlord's roofing contractor, at Tenant's
expense, in such manner as not to adversely affect the roof guarantee. Such
installation and use shall be subject to all required government approvals and
shall not interfere with Building systems.
(c) Tenant shall pay when due all claims for labor and material
furnished to the Property. Tenant shall give Landlord at least twenty (20) days'
prior written notice of the commencement of any work on the Property, regardless
of whether Landlord's consent to such work is required. Landlord may elect to
record and post notices of non-responsibility on the Property.
Section 6.07. Condition upon Termination. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction). In addition, Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent), prior to the expiration of the Lease and to
restore the Property to its prior condition, all at Tenant's expense; provided
that Landlord must advise Tenant in writing at the time Landlord approves any
such alterations if Landlord's approval is conditioned upon Tenant's removal of
such alterations upon the expiration or earlier termination of this Lease;
otherwise, Tenant will not be required to remove such alterations. With respect
to alterations that do not require Landlord's approval, unless Tenant obtains
Landlord's waiver of the removal and restoration requirement prior to commencing
construction, Landlord will have the right to require Tenant to remove the
alterations and restore as aforesaid. All alterations, additions and
improvements which Landlord has not required Tenant to remove shall become
Landlord's property and shall be surrendered to Landlord upon the expiration or
earlier termination of the Lease, except that Tenant may remove any of Tenant's
machinery or equipment which can be removed without material damage to the
Property. Tenant shall repair, at Tenant's expense, any damage to the Property
caused by the removal of any such machinery or equipment. In no event, however,
shall Tenant remove any of the following materials or equipment (which shall be
deemed Landlord's property) without Landlord's prior written consent; any power
wiring or power panels; lighting or lighting fixtures; wall coverings; drapes,
blinds or other window coverings; carpets or other floor coverings; heaters, air
conditioners or any other heating or air conditioning equipment; fencing or
security gates; or other similar building operating equipment and decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. Partial Damage to Property.
(a) Tenant shall notify Landlord in writing immediately upon the
occurrence of any damage to the Property. If in the opinion of Landlord's
architect or engineer the damage can be repaired or restored within six (6)
months and if the proceeds received by Landlord from the insurance policies
described in Paragraph 4.04(b) are sufficient to pay for the necessary repairs,
Tenant JJ Landlord JH 21
this Lease shall remain in effect and Landlord shall repair the damage as soon
as reasonably possible. Landlord may elect (but is not required) to repair any
damage to Tenant's fixtures, equipment, or improvements.
(b) If the insurance proceeds received by Landlord are not sufficient
to pay the entire cost of repair, or if the cause of the damage is not covered
by the insurance policies which Landlord maintains under Paragraph 4.04(b), or
if in the opinion of Landlord's architect or engineer the damage cannot be
repaired or restored within six (6) months, Landlord may elect either to (i)
repair the damage as soon as reasonably possible, in which case this Lease shall
remain in full force and effect, or (ii) terminate this Lease as of the date the
damage occurred. Landlord shall notify Tenant within thirty (30) days after
receipt of notice of the occurrence of the damage whether Landlord elects to
repair the damage or terminate the Lease. If Landlord elects to repair the
damage, Tenant shall pay Landlord the "deductible amount" (if any), but not to
exceed $20,000,00, under Landlord's insurance policies. If Landlord elects to
terminate the Lease, Tenant may elect to continue this Lease in full force and
effect, in which case Tenant shall repair any damage to the Property and any
building in which the Property is located. Tenant shall pay the cost of such
repairs, except that upon satisfactory completion of such repairs, Landlord
shall deliver to Tenant any insurance proceeds received by Landlord for the
damage repaired by Tenant. Tenant shall give Landlord written notice of such
election within ten (10) days after receiving Landlord's termination notice.
Notwithstanding anything herein to the contrary, if Landlord elects to repair
the damage in accordance with the provisions hereof, and if the damage is not
repaired or restored within six (6) months after the date of the casualty, then
Tenant may terminate this Lease by giving Landlord written notice thereof at any
time prior to completion of Landlord's repair and restoration obligations
hereunder.
(c) If the damage to the Property occurs during the last six (6)
months of the Lease Term and such damage will require more then thirty (30) days
to repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall give written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.
Section 7.02. Substantial or Total Destruction. If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease shall
terminate as of the date the destruction occurred. Notwithstanding the preceding
sentence, if the Property can be rebuilt within six (6) months after the date of
destruction, Landlord may elect to rebuild the Property at Landlord's own
expense, in which case this Lease shall remain in full force and effect.
Landlord shall notify Tenant of such election within thirty (30) days after
Tenant's notice of the occurrence of total or substantial destruction. If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord.
Tenant JJ Landlord JH 22
Section 7.03. Temporary Reduction of Rent. If the Property is destroyed
or damaged and Landlord or Tenant repairs or restores the Property pursuant to
the provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes. Except for such possible reduction in Base Rent,
insurance premiums and real property taxes, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair, or restoration of or to the Property,
Section 7.04. Waiver. Tenant waives the protection of any statute, code
or judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If (i) more than ten percent (10%) of the floor area of the Building is taken,
or (ii) parking is reduced below code requirements and is not replaced by
Landlord with reasonably suitable replacement parking within sixty (60) days
thereafter, or (iii) access to public roads is taken and not replaced by
Landlord with reasonably suitable replacement access within sixty (60) days
thereafter, and if in the case of (i), (ii) or (iii), whichever is applicable,
the Permitted Uses of the Building by Tenant is materially and adversely
interfered with, then either Landlord or Tenant may terminate this Lease as of
the date the condemning authority takes title or possession, by delivering
written notice to the other within ten (10) days after receipt of written notice
of such taking (or in the absence of such notice, within ten (10) days after the
condemning authority takes title or possession). If neither Landlord nor Tenant
terminates this Lease, this Lease shall remain in effect as to the portion of
the Property not taken, except that the Base Rent and Additional Rent shall be
reduced in proportion to the reduction in the floor area of the Building. Any
Condemnation award or payment shall be distributed in the following order: (a)
first, to any ground lessor, mortgagee or beneficiary under a deed of trust
encumbering the Property, the amount of its interest in the Property; (b)
second, to Tenant, only the amount of any award specifically designated for loss
of or damage to Tenant's trade fixtures or removable personal property; and (c)
third, to Landlord, the remainder of such award, whether as compensation for
reduction in the value of the leasehold, the taking of the fee, or otherwise. If
this Lease is not terminated, Landlord shall repair any damage to the Property
caused by the Condemnation, except that Landlord shall not be obligated to
repair any damage for which Tenant has been reimbursed by the condemning
authority. If the severance damages received by Landlord are not sufficient to
pay for such repair, Landlord shall have the right to either terminate this
Lease or make such repair (provided the repair can be completed within six
months) at Landlord's expense.
Tenant JJ Landlord JH 23
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. Landlord's Consent Required. No portion of the Property or
of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by sale, assignment, mortgage, sublease, transfer, operation of
law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord has the right to grantor withhold its
consent as provided in Section 9.05 below. Any attempted transfer without
consent shall be void and shall constitute a non-curable breach of this Lease.
If Tenant is a partnership, any cumulative transfer of more than twenty percent
(20%) of the partnership interests shall require Landlord's consent.
Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.
Section 9.03. No Release of Tenant. No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant's transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability under
this Lease.
Section 9.04. Offer to Terminate. If Tenant desires to assign the Lease
or sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.
Section 9.05. Landlord's Consent.
(a) Tenant's request for consent to any transfer described in Section
9.01 shall set forth in writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent and
security deposit payable under any proposed assignment or sublease), and any
other information Landlord deems relevant. Landlord shall have the right to
withhold consent, if reasonable, or to grant consent, based on the following
factors: (i) the business of the proposed assignee or subtenant and the proposed
use of the Property: (ii) the net worth and financial reputation of the proposed
assignee or subtenant: (iii) Tenant's compliance with all of its obligations
under the Lease: and (iv) such other factors as Landlord may reasonably deem
Tenant JJ Landlord JH 24
relevant. If Landlord objects to a proposed assignment solely because of the net
worth and/or financial reputation of the proposed assignee, Tenant may
nonetheless sublease (but not assign), all or a portion of the Property to the
proposed transferee, but only on the other terms of the proposed transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the
Lease the Landlord's Share (stated in Section 1.12) of the Profit (defined
below) on such transaction as and when received by Tenant, unless Landlord gives
written notice to Tenant and the assignee or subtenant that Landlord's Share
shall be paid by the assignee or subtenant to Landlord directly. The "Profit"
means (A) all amounts paid to Tenant for such assignment or sublease, including
"key" money, monthly rent in excess of the monthly rent payable under the Lease,
and all fees and other consideration paid for the assignment or sublease,
including fees under any collateral agreements, less (B) costs and expenses
directly incurred by Tenant in connection with the execution and performance of
such assignment or sublease for real estate broker's commissions and costs of
renovation or construction of tenant improvements required under such assignment
of sublease. Tenant is entitled to recover such cost and expenses before Tenant
is obligated to pay the Landlord's Share to Landlord. The Profit in the case of
a sublease of less than all the Property is the rent allocable to the subleased
space as a percentage on a square footage basis.
(ii) Tenant shall provide Landlord a written statement
certifying all amounts to be paid from any assignment or sublease of the
Property within thirty (30) days after the transaction documentation is signed,
and Landlord may inspect Tenant's books and records to verify the accuracy of
such statement. On written request, Tenant shall promptly furnish to Landlord
copies of all the transaction documentation, all of which shall be certified by
Tenant to be complete, true and correct. Landlord's receipt of Landlord's Share
shall not be consent to any further assignment or subletting. The breach of
Tenant's obligation under this Paragraph 9.05(b) shall be a material default of
the Lease.
Section 9.06. No Merger. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
Section 9.07. Security Interest. Tenant may grant a security interest
and/or lien in Tenant's trade fixtures, equipment, furnishings and personal
property installed by Tenant in the Property.
Tenant JJ Landlord JH 25
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. Covenants and Conditions. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenants right to continue in possession of the Property is conditioned upon such
performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.02. Defaults. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property for greater than 6 months without
giving Landlord at least fifteen (15) days advance written notice;
(b) If Tenant fails to pay rent or any other charge within ten (10)
days after written notice from Landlord that same is due;
(c) If Tenant fails to perform any of Tenants non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to complete
such performance, Tenant shall not be in default if Tenant commences such
performance within the thirty (30)-day period and thereafter diligently pursues
its completion. However, Landlord shall not be required to give such notice if
Tenant's failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.
(d) (i) If Tenant makes a general assignment or general arrangement
for the benefit of creditors; (ii) if a petition for adjudication of bankruptcy
or for reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.
(e) If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's obligations under the Lease. Unless otherwise expressly provided, no
guaranty of the Lease is revocable.
Section 10.03. Remedies. On the occurrence of any material default by
Tenant, Landlord may, at anytime thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
Tenant JJ Landlord JH 26
(a) Terminate Tenant's right to possession of the Property by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such event,
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including (i) the worth at the time of
the award of the unpaid Base Rent, Additional Rent and other charges which
Landlord had earned at the time of the termination: (ii) the worth at the time
of the award of the amount by which the unpaid Base Rent, Additional Rent and
other charges which Landlord would have earned after termination until the time
of the award exceeds the amount of such rental loss that Tenant proves Landlord
could have reasonably avoided; (iii) the worth at the time of the award of the
amount by which the unpaid Base Rent, and other charges which Tenant would have
paid for the balance of the Lease Term after the time of award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; and (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under the Lease or which in the ordinary course of things would be likely to
result therefrom, including, but not limited to, any costs or expenses Landlord
incurs in maintaining or preserving the Property after such default, the cost of
recovering possession of the Property, expenses of reletting, including
necessary renovation or alteration of the Property, Landlord's reasonable
attorneys' fee incurred in connection therewith, and any real estate commission
paid or payable. As used in subparts (i) and (ii) above, the "worth at the time
of the award" is computed by discounting to present value unpaid amounts at the
rate of fifteen percent (15%) per annum, or such lesser amount as may then be
the maximum lawful rate. As used in subpart (iii) above, the "worth at the time
of the award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%). If Tenant has abandoned the Property, Landlord shall have the option of
(i) retaking possession of the Property and recovering from Tenant the amount
specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(b);
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant has abandoned the Property. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Property is
located.
Section 10.04. Repayment of "Free" Rent. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and
Tenant JJ Landlord JH 27
this Lease shall be enforced as if there were no such rent abatement or other
rent concession. In such case, Abated Rent shall be calculated based on the full
initial rent payable under this Lease.
Section 10.05. Automatic Termination. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
Section 10.06. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN. PROTECTION OF LENDERS.
Section 11.01. Subordination. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. Tenant shall cooperate with Landlord and any lender
which is acquiring a security interest in the Property or the Lease. Tenant
shall execute such further documents and assurances as such lender may require,
provided that Tenant's obligations under this Lease shall not be increased in
any way (the performance of minor ministerial acts shall not be deemed to
increase Tenant's obligations), and Tenant shall not be deprived of its rights
under this Lease. Tenant's right to quiet possession of the Property during the
Lease Term shall not be disturbed if Tenant pays the rent and performs all of
Tenant's obligations under this Lease and is not otherwise in default. If any
ground lessor, beneficiary or mortgagee elects to have this Lease prior to the
lien of its ground lease, deed of trust or mortgage and gives written notice
thereof to Tenant, this Lease shall be deemed prior to such ground lease, deed
of trust or mortgage whether this Lease is dated prior or subsequent to the date
of said ground lease, deed of trust or mortgage or the date of recording
thereof.
Section 11.02. Attornment. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Tenant JJ Landlord JH 28
Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
Section 11.04. Estoppel Certificates.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver to Landlord a written statement certifying: (i) that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
cancelled or terminated; (iii) the last date of payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that Landlord is
not in default under this Lease (or, if Landlord is claimed to be in default,
stating why); and (v) such other representations or information with respect to
Tenant or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrance of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) business days after Landlord's request.
Landlord may give any such statement by Tenant to any prospective purchaser or
encumbrance of the Property. Such purchaser or encumbrancer may rely
conclusively upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such
ten (10) business day period, Landlord, and any prospective purchaser or
encumbrancer, may conclusively presume and rely upon the following facts: (i)
that the terms and provisions of this Lease have not been changed except as
otherwise represented by Landlord; (ii) that this Lease has not been canceled or
terminated except as otherwise represented by Landlord; (iii) that not more than
one month's Base Rent or other charges have been paid in advance; and (iv) that
Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.
Section 11.06. Tenant's Financial Condition. Within ten (10) days after
written request from Landlord, but not more often than once per calendar year,
Tenant shall deliver to Landlord such then existing financial statements as
Landlord reasonably requires to verify the net worth of Tenant or any assignee,
subtenant, or guarantor of Tenant. In addition, Tenant shall deliver to any
lender designated by Landlord any financial statements reasonably required by
such lender to facilitate the financing or refinancing of the Property. Tenant
represents and warrants to Landlord that each such financial statement is a true
and accurate statement as of the date of such statement. All financial
statements shall be confidential and shall be used only for the purposes set
forth in this Lease. Landlord shall execute, and cause any lender, prospective
purchaser or other person or entity to which Landlord discloses any such
financial statement in accordance with the provisions hereof to execute, a
non-disclosure statement in form reasonably acceptable to Tenant, Landlord and
any such parties if requested by Landlord.
ARTICLE TWELVE: LEGAL COSTS
Tenant JJ Landlord JH 29
Section 12.01. Legal Proceedings. If Tenant or Landlord shall be in
breach or default under this Lease, such party (the "Defaulting Party") shall
reimburse the other party (the "Nondefaulting Party") upon demand for any costs
or expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease Is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys'fees and costs.
The losing party in such action shall pay such attorneys' fees and costs. Tenant
shall also indemnify Landlord against and hold Landlord harmless from all costs,
expenses, demands and liability Landlord may incur if Landlord becomes or is
made a party to any claim or action (a) instituted by Tenant against any third
party, or by any third party against Tenant, or by or against any person holding
any interest under or using the Property by license of or agreement with Tenant;
(b) for foreclosure of any lien for labor or material furnished to or for Tenant
or such other person; (c) otherwise arising out of or resulting from any act or
transaction of Tenant or such other person; or (d) necessary to protect
Landlord's Interest under this Lease in a bankruptcy proceeding, or other
proceeding under Title 11 of the United States Code, as amended. Tenant shall
defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse landlord for any legal fees or costs Landlord incurs in any such
claim or action.
Section 12.02. Landlord's Consent. Tenant shall pay Landlord's reasonable
attorneys'fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or In connection with
any other act which Tenant proposes to do and which requires Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. Non-Discrimination. Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.
Section 13.02. Landlord's Liability; Certain Duties.
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or the leasehold estate under a
ground lease of the Property at the time in question. Each Landlord is obligated
to perform the obligations of Landlord under this Lease only during the time
such Landlord owns such interest or title. Any Landlord who transfers its title
or interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer.
However, each Landlord shall deliver to its transferee all funds that Tenant
previously paid if such funds have not yet been applied under the terms of this
Lease.
Tenant JJ Landlord JH 30
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any ground
lessor, mortgagee or beneficiary under any deed of trust encumbering the
Property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Tenant's notice, However, if such
nonperformance reasonably requires more than thirty (30) days to cure, Landlord
shall not be in default if such cure is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property, and neither the
Landlord nor its partners, shareholders, officers or other principals shall have
any personal liability under this Lease.
Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 13.04. Interpretation. The captions of the Articles or Sections
of this Lease are to assist the parties in reading this Lease and are not a part
of the terms or provisions of this Lease. Whenever required by the context of
this Lease, the singular shall include the plural and the plural shall include
the singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents. employees. contractors,
invitees, successors or others using the Property with Tenant's expressed or
implied permission.
Section 13.05. Incorporation of Prior Agreements; Modifications. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.06. Notices. All notices required or permitted under this
Lease shall be in writing and shall be personally delivered or sent by certified
mail, return receipt requested, postage prepaid. Notices to Tenant shall be
delivered to the address specified in Section 1.03 above. Notices to Landlord
shall be delivered to the address specified in Section 1.02 above. All notices
shall be effective upon delivery. Either party may change its notice address
upon written notice to the other party,
Section 13.07. Waivers. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant. negotiate such check without being bound to the conditions of such
statement.
Tenant JJ Landlord JH 31
Section 13.08. No Recordation. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.
Section 13.09. Binding Effect; Choice of Law. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
Section 13.10. Corporate Authority; Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within ten (10) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or it is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partners withdrawal or addition. Within ten (10) days
after this Lease is signed, Tenant shall deliver to Landlord a copy of Tenant's
recorded statement of partnership or certificate of limited partnership.
Section 13.11. Joint and Several Liability. All parties signing this
Lease as Tenant shall be jointly and severally liable for all obligations of
Tenant.
Section 13.12. Force Majeure. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, government regulation or restriction and weather
conditions.
Section 13.13. Execution of Lease. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.
Section 13.14. Survival. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.
Section 13.15. Landlord's Lien. Landlord agrees from time to time upon
reasonable advance written request of Tenant, to subordinate any and all
contractual or statutory landlord's liens in Tenant's property in favor of
lender(s) furnishing financing for Tenant's business by execution of Landlord's
Waiver and Consent in the form attached hereto as Exhibit "F" or other document
reasonably acceptable to Landlord and such lender(s).
Tenant JJ Landlord JH 32
Section 13.16. Tenant shall have right to choose utilities suppliers for
the Project.
ARTICLE FOURTEEN: BROKERS
Section 14.01. Broker's Fee. When this Lease is signed by and delivered
to both Landlord and Tenant, Landlord shall pay a real estate commission to
Tenant's Broker named in Section 1.08 above, as provided in the written
agreement between Landlord and Tenant's Broker. Nothing contained in this Lease
shall impose any obligation on Landlord to pay a commission or fee to any party
other than Tenant's Broker.
Section 14.02. Agency Disclosure; No Other Brokers. Landlord and Tenant
each warrant that they have dealt with no other real estate broker(s) in
connection with this transaction except: Leon Brothers, who represents Tenant.
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all exhibits
which are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on June 9, 2000 PANATTONI/HILLWOOD
at 5310 Harvest Hill Road, #180, DEVELOPMENT COMPANY, LLC,
Dallas, Texas a Texas limited liability company
By: /s/ Dewitt J. Hicks III
------------------------------------
Name: Dewitt J. Hicks III
----------------------------------
Title: Principal
---------------------------------
"TENANT"
Signed on June 6, 2000 ICON HEALTH AND FITNESS, INC.,
at 4010 Distribution Drive a Delaware corporation
Garland, TX
By: /s/ Jace Jergensen
------------------------------------
Name: Jace Jergensen
----------------------------------
Title: Vice President/General Manager
---------------------------------
Tenant JJ Landlord JH 33
Exhibit A
[Property Description]
PROPOSED BLOCK 2, LOT 4
BEING a tract of land situated in the Daniel Turner Survey, Abstract No. 1462,
in the City of Mesquite, Dallas County, Texas, and being a part of that tract of
land described in deed to Petrus Investment, L.P., as recorded in Volume 98251,
Page 9371, Deed Records, Dallas County, Texas, (DRDCT), and being more
particularly described as follows:
BEGINNING at a set 1/2-inch iron rod with a yellow plastic cap stamped "HALFF
ASSOC. INC." (hereafter referred to as "with cap"), at the intersection of the
westerly right-of-way line of Town East Boulevard (100 foot right-of-way) and
the northerly right-of-way line of a Dallas Power and Light Company
right-of-way, as recorded in Volume 5624, Page 250, DRDCT, (125 foot
right-of-way);
THENCE South 44 degrees 13minutes 32secondsWest, departing said westerly line
and along said northerly line, a distance of 930.01 feet to a set 1/2-inch iron
rod with cap for a corner;
THENCE North 45 degrees 31 minutes 28 seconds West, departing said northerly
line, a distance of 889.59 feet to a set 1/2-inch iron rod with cap for corner,
THENCE North 44 degrees 16 minutes 17 seconds East, a distance of 930.01 feet to
a set 1/2-inch iron rod with cap on the said westerly line of Town East
Boulevard;
THENCE South 45 degrees 31 minutes 28 seconds East, along said westerly line of
said Town East Boulevard, a distance of 888.85 feet to the POINT OF BEGINNING
AND CONTAINING 826,976 square feet or 18.98 acres of land, more or less.
Tenant JJ Landlord JH 34
EXHIBIT "B"
Building Expansion
a. Exercise of Expansion Option. Provided that (i) no Event of Default then
exists and (ii) there has been no material adverse change in Tenant's
financial condition, comparing the time the Lease is executed and the
time that Tenant exercises the expansion option, and Tenant is not in
default under its covenants with its then current lenders, if any (which
defaults have not been waived in writing by such lenders), Tenant shall
have the one-time right to elect to expand the Premises by up to 200,000
square feet (but not less than 100,000 square feet). The term of the
expansion option will be two (2) years commencing on the Commencement
Date ("Initial Expansion Option Term"); provided that Tenant shall have
the right to extend the Initial Expansion Option Term for an additional
two (2) years by giving Landlord written notice thereof at least sixty
(60) days prior to expiration of the Initial Expansion Option Term, time
being of the essence. If Tenant exercises its right to extend the Initial
Expansion Option Term, annual Base Rent shall automatically be increased
by $0.10 per square foot for the entire two (2) years of the extended
expansion option. This expansion right may be exercised by Tenant by
delivering to Landlord written notice thereof (the "Expansion Notice") at
any time during the Initial Expansion Option Tenn, as same may be
extended as aforesaid, specifying the size of the expansion area (the
"Expansion Space"). The Expansion Space will be constructed on the
approximately 10.04 acre tract adjacent to the Project and in the
configuration shown on Exhibit G attached to the Lease (the "Expansion
Land").
b. Expansion Space Lease. After Tenant has delivered the Expansion Notice as
provided above, Tenant and Landlord shall execute a new lease for the
Expansion Space (the "Expansion Space Lease") on substantially the same
terms and conditions as this Lease, but with a 10-year term (beginning on
substantial completion of the Expansion Space improvements) and an annual
base rent rate (1) for the first five years of the Expansion Space Lease
term, equal to (A) the Total Expansion Costs (defined below), multiplied
by (B) the sum of (i) a mortgage constant rate equal to the 20-Yeat
Mortgage Money Rate (defined below) at the time in question, plus (ii)
250 basis points (plus a $0.10 structural reserve); and (2) for the final
five years of the Expansion Space Lease term, equal to 115% of the base
rent for the first five years of the Expansion Space Lease term. For
example, if Tenant elects to do a 200,000 square foot expansion and the
20-Year Mortgage Money Rate is 9% and the Total Expansion Cost for the
Expansion Space is $2,000,000, then the annual Base Rent for the
Expansion Space during the first five years of the Expansion Space lease
term would be $250,000 [calculated as follows: $2,000,000 x (.09 +.025) =
$230,000; plus $20,000 structural reserve]; and $287,500 for the final
five years of the Expansion Space Lease term. At the time of execution of
the Expansion Space Lease, Landlord and Tenant shall execute an amendment
to this Lease extending the initial Term for a period such that it is
coterminous with the lease term of the
Tenant JJ Landlord JH 35
Expansion Space Lease, in which case, (A) the commencement date of the
first five-year extension under Section 2,04 of the Lease shall begin
upon the expiration of the initial Term of the Lease (as extended in
accordance with this sentence) and (B) the Base Rent payable for the
Premises during each Lease Year (defined below) of the extended portion
of the initial Term shall be equal to the product of the previous Lease
Year's Base Rent and 1.03, as determined at the beginning of each such
Lease Year. The term "20-year Mortgage Money Rate" shall mean the
mortgage constant (i.e., the amount of annual debt service, expressed as
a percentage of the loan amount, that is necessary to pay interest and
the entire principal over the amortization period) at the time such
determination is being made associated with mortgage loans made available
by the the following institutional lenders for permanent loans for
properties similar to the Premises, with an amortization schedule of 20
years: Metropolitan Life Insurance Company; Prudential Life Insurance
Company; and The Principal Financial Group. If, however, any of such
institutional lenders are not providing permanent financing for
properties similar to the Premises, then Landlord may substitute another
institutional lender in its/their place. Tenant may select the day on
which the mortgage constant shall be determined within 30 days after
Landlord notifies Tenant that the selection should be made (the
"Selection Period") . Within five days after the end of the Selection
Period, Tenant shall notify Landlord of Tenant's selected day. If Tenant
does not notify Landlord as provided in the preceding sentence, then the
mortgage constant shall be determined as of the day on which landlord
receives the Expansion Notice. "Lease Year" means each 12-month period
during the term of the Expansion Space Lease.
c. Expansion Space Improvements. Within 30 days after the Expansion Space
Lease is executed, Landlord will prepare and submit to Tenant for its
review preliminary plans and outline specifications (the "Expansion
Outline Specifications") for the construction of the shell of the
Expansion Space (the "Expansion Shell") and the interior improvements of
the Expansion Space (the "Expansion Interior") (which must be acceptable
to Landlord and Tenant and provide for improvements that can be
constructed for a Total Expansion Cost of not more than $32 per square
foot). Tenant shall notify Landlord whether it approves of the submitted
Expansion Outline Specifications within 14 days after Landlord's
submission thereof. If Tenant disapproves of the Expansion Outline
Specifications, then Tenant shall give Landlord notice thereof specifying
in detail the reasons for such disapproval, in which case Landlord shall
amend the submitted Expansion Outline Specifications and redeliver to
Tenant for its approval within 10 days after receiving Tenant's notice
disapproving the submitted Expansions Outline Specifications. This
process shall be repeated until the Expansion Outline Specifications have
been finally approved. Within 15 days after Landlord and Tenant have
approved the Expansion Outline Specifications, Landlord shall submit to
Tenant a written preliminary estimate of the Total Expansion Costs (which
shall be based in part upon the lowest qualified estimates among those
obtained by Landlord from at least four contractors for the cost of
constructing the Expansion Space in accordance with the Expansion Outline
Specifications). Tenant shall either approve or disapprove of such
preliminary estimate
Tenant JJ Landlord JH 36
within ten days after Tenant's receipt thereof. If Tenant disapproves the
estimate, then Tenant shall notify Landlord of the reasons for such
disapproval, in which case Landlord shall attempt to address Tenant's
reasons for disapproval and resubmit the preliminary estimate to Tenant
within 10 days after landlord's receipt of Tenant's disapproval. This
process shall be repeated until Tenant has approved the preliminary
estimate. Upon receipt of Tenant's approval of the preliminary estimate,
Landlord shall proceed to prepare detailed plans and specifications for
the Expansion Space (the "Expansion Plans and Specifications") including,
without limitation, working drawings, construction drawings, electrical,
plumbing and mechanical drawings necessary to construct the Expansion
Shell and the Expansion Interior. After Landlord and Tenant have approved
the Expansion Plans and Specifications, if Landlord believes that the
actual cost to complete the Expansion Space will exceed the preliminary
estimates by more than 10%, Landlord shall submit to Tenant Landlord's
written estimate of the cost of constructing such improvements in
accordance with the completed Expansion Plans and Specifications. Upon
receipt of Tenant's approval of any such revised estimate, Landlord shall
proceed to construct the improvements in accordance with the approved
Expansion Plans and Specifications. "Total Expansion Costs" shall mean
all soft and hard costs incurred in connection with the design and
construction of the improvements for the Expansion Space, including,
without limitation, all architecture, engineering, contractors, market
leasing (not to exceed 2.25% of the anticipated base rent due for the
Expansion Space for the fifth term of the lease thereof), brokerage and
legal fees and expenses (however, Total Expansion costs shall not
include-any-development fee or any brokerage commissions other than the
market leasing fee described above), any interest expense, tax and
insurance payments incurred during such construction process, any loan or
mortgage fees, value of the Expansion Land (currently agreed to be $1.50
per square foot, which shall increase at the rate of 5% per year), and
any other costs, fees or expenses incurred with the construction of the
Expansion Space. However, Total Expansion Costs relating to the design
and construction of the Expansion Space shall not exceed 110% of the hard
and soft costs for the design and construction of the Expansion Space
improvements that were approved by Tenant, unless such costs were caused
by changes in Law occurring after Tenant's approval of such costs or
Force Majeure Events. If Tenant elects to expand hereunder for less than
200,000 square feet, Landlord will have the right to construct up to the
full 200,000 square feet, in which case the Total Expansion Costs
attributable to the Expansion Shell and the Expansion Land will be
prorated between the Expansion Space and the balance of the actual square
footage of the constructed expansion building based upon their respective
square footages.
d. Rescission of Expansion Election. Landlord and Tenant shall negotiate in
good faith to reach mutual agreement on all matters for which this
Exhibit B requires the approval of Landlord and Tenant, including the
Expansion Outline Specifications, the Total Expansion Costs and the
Expansion Plans and Specifications. If the Total Expansion Costs and the
Expansion Plans and Specifications have not been finally approved by
Landlord and Tenant within 90 days after Tenant's delivery to Landlord of
an Expansion Notice, then, notwithstanding any other provision herein,
Tenant shall have the right to rescind such election upon written notice
to Landlord delivered at any time before the
Tenant JJ Landlord JH 37
earlier of the date Landlord and Tenant have finally approved the Total
Expansion Costs and the Plans and Specifications or 120 days after the
Expansion Notice was delivered to Landlord, in which case Tenant shall
reimburse landlord for all reasonable costs incurred by Landlord prior to
the date Tenant delivers such rescission notice (which costs shall
include an administration charge of $5,000 to cover Landlord's overhead
costs in connection therewith). Such reimbursement shall be due within 30
days after Landlord delivers to Tenant an invoice therefor. If Tenant
does not rescind its expansion option, Landlord will diligently commence
the construction of the Expansion Space and will thereafter diligently
and continuously pursue the completion of the Expansion Space.
e. Right of First Offer. If Tenant does not exercise its expansion option
during the Initial Expansion Option Term, as same may be extended as
aforesaid, Landlord or its successors and assigns with respect to the
Expansion Land shall have the right to construct a building (the "New
Building") on the Expansion Land at such time and of such size, up to
200,000 square feet, as Landlord or its successors or assigns may
determine in its or their sole discretion. Provided that if (i) no Event
of Default then exists, (ii) there has been no material adverse change in
Tenant's financial condition, comparing the time the Lease is executed
and the time that Tenant exercises the expansion option, (iii) Tenant is
not in default under its covenants with its then current lenders, if any
(which defaults have not been waived in writing by such lenders), and
(iv) the New Building is not constructed for occupancy solely by the then
owner of the Expansion Land, Landlord agrees prior to entering into the
first lease for space in any such New Building to give Tenant written
notice specifying the terms upon which Landlord will be offering to lease
space in the New Building to third parties. Such notice may be given
prior to commencement of construction of the New Building. Tenant will
have a period of five (5) business days after receipt of such notice
within within which to give Landlord written notice of Tenant's election
to lease all or any part of the New Building which is not to be occupied
by the then owner of the Expansion Land, upon the same terms and
provisions specified in Landlord's notice, provided that if Tenant does
not elect to take the entire portion of the New Building that is
available for lease to third parties, any remaining space available for
lease to third parties must be of a size and configuration acceptable to
Landlord from a marketing standpoint in Landlord's discretion. If Tenant
so elects to accept the offer, Tenant will have a period of ten (10)
additional calendar days following receipt from Landlord of a form of
Lease including the business points relating to such space, and otherwise
substantially incorporating the other provisions of this Lease generally
applicable separately from said business points. In the event of failure
of Tenant to se exercise the right to lease the subject space hereunder
or to so execute a new lease on such terms as aforesaid, Tenant will have
no further rights to lease the space pursuant to this paragraph e. At the
time that Tenant leases any space in the New Building, Landlord and
Tenant shall execute an amendment to this Lease extending the initial
Term for a period such that it is coterminous with the lease term of the
space in the New Building, in which case, (A) the commencement date of
the first five-year extension under Section 2.04 of the Lease shall begin
upon the expiration of the initial Term of the Lease (as extended in
accordance with this sentence) and (B) the Base Rent payable for the
Premises during each Lease Year (defined below)
Tenant JJ Landlord JH 38
of the extended portion of the initial Term shall be equal to the product
of the previous Lease Year's Base Rent and 1.03, as determined at the
beginning of each such Lease Year
f. It is understood and agreed that Landlord is the current owner of the
Expansion Land and that if Landlord transfers this Lease to a third
party, Landlord agrees that as a condition to being released from
Landlord's obligations under this Lease, that Landlord will grant to such
third party the right to purchase the Expansion Land at a net price to
Landlord equal to the land value specified in paragraph c. above (as
increased as therein provided) if Tenant exercises its expansion option
under paragraph a above. Such option may be exercised by giving Landlord
(or the then owner of the Expansion Land) written notice thereof (the
"Exercise Notice") within thirty (30) days after the first to occur of
(i) mutual agreement under paragraph d above, or (ii) expiration of the
120-day period specified in paragraph d., without Tenant having exercised
its recession right, and with closing to occur within fifteen (15) days
after receipt of the Exercise Notice. If Tenant does not exercise its
expansion option under paragraph a, the right of first offer set forth in
paragraph e. above will be applicable to the Expansion Land and binding
upon Landlord and Landlord's successors and assigns with respect to the
Expansion Land. Landlord agrees to cause any transferee of the Expansion
Land to assume the obligations of Landlord under such right of first
offer in writing for the benefit of Tenant.
Tenant JJ Landlord JH 39
EXHIBIT "C"
EXCLUSIONS FROM COMMON AREA COSTS
Notwithstanding any provision contained herein to the contrary "common area
expenses" for purposes hereof shall not include, and in no event shall Tenant be
required to pay or reimburse Landlord for: the any costs incurred by Landlord
prior to the date upon which Landlord delivers possession of the Property to
Tenant in the condition required by this Lease; any costs incurred by Landlord
in connection with the acquisition of the Property or the initial construction
of the Improvements, or the correction of any defects therein; depreciation
(except as provided in Section 4.05(c)); interest and/or principal payments on
debts of Landlord; repairs or other work occasioned by fire, windstorm or other
casualty, or the exercise of the right of eminent domain; lease commissions;
overhead and profit increment paid to subsidiaries or other affiliates of
Landlord for services to the extent that the costs of such services exceed the
competitive cost for such services rendered by persons or entities of similar
skill, competence and experience; cost of electricity and other utilities for
tenanted areas and areas intended for tenancy or capable of being tenanted in
the Property or the Project; salaries of employees whose rank is above the grade
of building manager (to the extent an employee's time is devoted to activities
at other locations or buildings, only an equitable proration of such salary,
based upon the actual time spent at the Property, shall be included within
common area expenses) all items(including repairs) and services paid for by
insurance proceeds; costs incurred in connection with the sale, financing,
refinancing, mortgaging or sale of the Property, including brokerage
commissions; attorney's and accountant's fees, closing costs; title insurance
premiums, transfer taxes and interest charges; costs, fines, interest,
penalties, legal fees or costs of litigation incurred due to the late payment of
taxes, utility bills and other costs incurred by Landlord's failure to make such
payments when due; costs associated with correcting any violation of law, or
making renovations or alterations to the Property required in order to cause
same to be in compliance with any applicable law; ground rent; rental or lease
charges on any equipment or property the acquisition of which would normally be
capitalized under generally accepted accounting principals; political or
charitable contributions; expenses for repairs, replacements or improvements
arising from the initial construction of the improvements to the extent such
expenses result from deficiencies in design or workmanship (except conditions
resulting from ordinary wear and tear); costs arising out of the gross
negligence of Landlord or its agents or of any tenant, vendor, contractor, or
providers of materials or services selected, hired or engaged by Landlord or its
agents; entertainment or travel expenses of Landlord, its employees, agents,
partners and affiliates; or reserves of any kind, Including without limitation,
replacement reserves and reserves for bad debts or lost rent or any similar
charge not involving the payment of money to third parties. No expenses will be
included in common area expenses that are otherwise payable by Tenant or other
specific tenants of the Project separate from common area expenses, so that
there will be no duplication of the same charges by billing the same charge to
Tenant or other specific tenants separate from common area expenses and also
including the same charges in common area expenses. Expenses
Tenant JJ Landlord JH 40
that are designated as capital expenditures by generally accepted accounting
procedures ("GAAP") shall be included in common area expenses, provided that if
any such expenditure is more than Five Thousand Dollars ($5,000.00), such amount
will be amortized over the useful life, as determined by GAAP, of such capital
expenditure, and such amortization will be included in common area expenses for
each year of such useful life failing within the Term of this Lease (to the
extent that the useful life of a capital expenditure exceeds the expiration of
the Term, Tenant will have no obligation to pay Landlord such amount following
such expiration)
Tenant JJ Landlord JH 41
EXHIBIT "D"
Proposed Signage
[GRAPHIC OMITTED]
Tenant JJ Landlord JH 42
EXHIBIT "E"
BUILDING SPECIFICATIONS
ICON HEALTH H AND FITNESS
GENERAL DESCRIPTION
Land Area: Approximately 18.98 acres
Building Type: Concrete tilt-up.
Building Size: 400,000 square feet
Building Dimensions: 500 X 800
Office Area: Landlord's proposal includes a $35 per square foot
allowance for design and construction of 15,500 square
feet of office area.
Showroom Area: Landlord's proposal includes a $30 per square foot
allowance for design and construction of 3,000 square
feet of showroom area. Showroom to include 2 floor
drains and a hose bib for use in spa displays.
Sewing Room: 60,000 square feet. Landlord will provide metal halide
fighting providing an average of 50 foot candies as
measured horizontally 3' above the floor, with a
minimum of 25 foot candles as measured vertically.
Landlord will provide 150 Tons of HVAC distributed
along with R-19 insulation at the roof deck. Also, this
area will be demised separately with 1-hr sheetrock
demising wall to deck which will be insulated, taped,
and painted white on the inside of the sewing room.
Also, landlord will provide a 12' by 12' automated,
overhead door leading into the sewing room from the
warehouse and a 40' by 80' chain fink storage area
within the sewing area. The height of the fence will be
10' and it will have a chain link roof which shall
fully enclose the area.
Clear Height: Operating clear height of 30', excluding: fight
fixtures and heaters.
Bay Sizes: Sixteen (16) bays at 50' each for the 800' length and
two staging bays (2) bays at approximately 52' each and
eight (9) bays at 44' each for the 500' depth.
Tenant JJ Landlord JH 43
Roof: 4 ply built-up
Skylights: None
Landscaping: A $100,000 allowance will be provided for all
installation and design of plant materials and
irrigation.
Parking: One space for every 1,000 square feet will be provided.
Outdoor Storage Area: Two areas of approximately 40,000 s.f. each, with 8'
tall chain link fencing with vinyl privacy slats. Each
area to be served by two gates each. Each area to have
a gravel surface.
SITE WORK
On-site Storm
Drain System: Engineered to assure rapid collection and disposal into
the municipal storm sewer.
Domestic Water
And Sewer: Extend Sanitary Sewer and Domestic Water Connections
for office into the first bay at the north end of the
building.
Paving: Car Operations: Concrete, per soils engineer
recommendations, but no less than 5".
Truck Operations: Concrete, per soils engineer
recommendations, but no less than 6".
Curbs and Striping: Fully striped parking lot per code.
CONCRETE
Walls: Reinforced concrete, 4,000 psi.
Interior: Smooth troweled finish with pick points covered.
Exterior: Smooth surface finish with accent paint stripes.
Floor Slab: 6" and 7 1/2" reinforced concrete, 4,000 psi when
cured, saw cut at perpendicular angles no greater than
16'-8" on center. Slab will be laser screened, with a
minimum floor flatness to meet or exceed a flatness of
Ff35 and a minimum floor levelness to meet or exceed a
levelness of F125. Construction joints will have 24"
smooth dowels, 24" on center.
Truck Docks: Concrete will extend 130' from the building and be
3,000 psi, reinforced, 6" thick. All concrete paving
shall have expansion
Tenant JJ Landlord JH 44
joints as drawn by architect, or engineer, and will
have saw cut control joints at maximum spacing of 15'
on center each way. All joints will be sealed with hot
rubberized asphalt joint sealer. All exterior paving
will be poured directly on prepared subgrade with bank
sand leveling cushion.
SMOKE EVACUATION
Smoke Evacuation: Smoke evacuation system per code.
DOORS & HARDWARE
Exterior:
Roll Up Doors: Twenty (20) 9' x 10', sectional metal doors, 48" high,
vertically lifted, manually operated.
Drive In Door: Two (2) 12' x 14' sectional metal, chain hoist
vertically lifted drive-in doors will be provided.
Man Doors: 3' x 6'8" metal doors with poured in place metal
frames, commercial grade hardware, including lever
handles inside, automatic closures and exterior lock
guard. The number of man doors will be per code.
Dock Equipment: Landlord will provide the following dock equipment: Ten
(10) Dock levelers by Rite Hite, or approved equal -
25,000 lbs. Capacity and ten (10) dock lights which can
be shared between two doors.
FINISHES
Paint: All metal surfaces with the exception of the roof and
interior steel will receive one factory coat of
oil-based primer and two coats of oil-based finish
paint. Exterior concrete walls and trim will receive
one coat of seal primer and one finished coat. All wall
striping shall receive two finish coats.
Demising Wall: None other than the walls constructed to separate the
sewing room area from the office area and warehouse
area.
Floor: Floor slab to be sealed with two coats of Sonneborne
Lapidolith
FIRE SPRINKLERS
Tenant JJ Landlord JH 45
Warehouse Area: An ESFR system, including pump room if required, will
be installed per code. The sprinkler control room will
be fully enclosed with CMU block.
Office: Fire protection for the office will be per code.
HVAC
Warehouse: Cambridge space heaters will be provided, complete with
unit mounted thermostats to protect the EFSR sprinkler
system by maintaining a minimum temperature of 45
degrees. In addition, exhaust fans will be provided per
code. Quantity of fans and air changes per applicable
mechanical and fire code, but in no event shall the air
changes be less than 3 per hour.
Office: The entire office space will be air conditioned per
code requirements.
Welding Area: Landlord will provide 15 tons of HVAC for the welding
area.
ELECTRICAL
Service: 4,500 amp, 480 volt, 3 phase service, main panel
housing, conduit, and pad only. Utility company to set
transformer and complete hookup.
Electrical Distribution: A $100,000 allowance will be provided for distribution
of power to equipment.
Warehouse Lighting: Warehouse Lighting shall be sufficient to average 25
foot candles in the warehouse 30" AFF based on an
unoccupied facility. Fixtures to be 400 watt metal
halide high bay fixtures.
Outside Lighting: Outside lighting shall consist of 400 watt
metal halide wall packs on all sides of the building at
a density of one per 150 linear feet. Landlord shall
add 2 pole lights at the entrance to the building.
Telephone: Main telephone terminal installed in the electrical
room. Extend 1 ea 4" conduit with pull string from the
property line into the electrical room. Mount one sheet
4'x8' plywood on electrical room wall above conduit
stub-up.
Emergency Power: Provided by Tenant
Wiring: All wiring and bus duct to be copper
Exterior Transformer: Provided by TU Electric
Tenant JJ Landlord JH 46
Power Source: TU Electric
ADA COMPLIANCE This facility will comply with all ADA regulations upon
the time of completion.
TESTING Landlord will engage a third party independent testing
laboratory to provide construction materials testing.
MISCELLANEOUS Roof drainage shall be provided by means of exterior
downspouts.
A $10,000 allowance will be provided for the
installation of compressed air lines.
An allowance of $10,000 will be provided for two (2)
2-ton overhead cranes.
EXCLUSIONS Joint sealant at the floor slab.
Tenant JJ Landlord JH 47
EXHIBIT "F"
LANDLORD'S WAIVER AND CONSENT
THIS LANDLORD'S WAIVER AND CONSENT ("Waiver and Consent") is made and
entered into as of this _____ day of ________________ by and between
_____________________, a ____________________ ("Landlord"), and GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, as agent ("Agent") for the lenders
(collectively, "Lenders") from time to time party to the Credit Agreement
described below.
A. Landlord is the owner of the real property commonly known as
________________________ (the "Premises").
B. Landlord has entered into that certain Lease Agreement (together
with all amendments and modifications thereto and waivers thereof, the "Lease")
with ICON Health & Fitness, Inc., a Delaware corporation ("Company"), with
respect to the Premises.
C. Agent and Lenders have entered into a Credit Agreement with
Company, and to secure the obligations arising under such Credit Agreement,
Company has granted to Agent, for its own benefit and the ratable benefit of
Lenders, a security interest in and lien upon certain assets of Company,
including all of Company's goods, inventory, machinery, equipment, and furniture
and trade fixtures (such as equipment bolted to floors), installed by Company,
together with all additions, substitutions, replacements and improvements to,
and proceeds of, the foregoing, but excluding building fixtures (such as
plumbing, lighting and HVAC systems) (collectively, the "Collateral").
NOW, THEREFORE, in consideration of any financial accommodations extended
by Lenders to Company at any time, and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Landlord acknowledges that (a) the Lease is in full force and
effect and (b) Landlord is not aware of any existing default under the Lease.
2. Landlord will use its best efforts to provide Agent with written
notice of any default by Company under the Lease (a "Default Notice"). Agent
shall have 15 days following receipt of such Default Notice to cure such
default, but neither Agent not any Lender shall be under any obligation to cure
any default by Company under the Lease. No action by Agent or any Lender
pursuant to this Waiver and Consent shall be deemed to be an assumption by Agent
or Lenders of any obligation under the Lease, and, except as provided in
paragraphs 6, 7 and 8 below, Agent shall not have any obligation to Landlord.
3. Landlord acknowledges the validity of Agent's lien on the
Collateral and, until such time as the obligations of Company to Lenders are
indefeasibly paid in full, Landlord agrees to subordinate any interest in the
Collateral Landlord may have and agrees not to distrain
Tenant JJ Landlord JH
or levy upon any Collateral or to assert any landlord lien, right of distraint
or other claim against the Collateral for any reason.
4. Landlord agrees that the Collateral consisting of trade fixtures
installed by Company, such as equipment bolted to the floor shall not be deemed
a fixture or part of the real estate but shall at all times be considered
personal property.
5. Prior to a termination of the Lease, Agent or its representatives
or invitees may enter upon the Premises at any time without any interference by
Landlord to inspect or remove any or all of the Collateral, including, without
limitation, by [public auction or] private sale pursuant to the provisions of
paragraph 7 below.
6. Upon written request made by Agent prior to expiration of the term
of the Lease or within fourteen (14) days after Agent's receipt of notice of
termination of the Lease (failing which, Agent's rights of permitted occupancy
during the Disposition Period shall be waiver), Landlord will permit Agent and
its representatives and invitees to occupy and remain on the Premises; provided
that (a) such period of occupation (the "Disposition Period") shall not exceed
up to 90 days following receipt by Agent of a notice of Lease termination from
Landlord or, if the Lease has expired by its own terms (absent a default
thereunder), up to 30 days following Agent's receipt of written notice of such
expiration, (b) for the actual period of occupancy by Agent, Agent will pay to
Landlord the basic rent due under the Lease pro-rated on a per diem basis
determined on a 30-day month, and shall provide and retain liability and
property insurance coverage, electricity and heat to the extent required by the
Lease, and (c) such amounts paid by Agent to Landlord shall exclude any rent
adjustments, indemnity payments or similar amounts for which the Company remains
liable under the Lease for default, holdover status or other similar charges. If
any injunction or stay is issued that prohibits Agent from removing the
Collateral, the commencement of the Disposition Period will be deferred until
such injunction or stay is lifted or removed. Agent's written request must state
the exact duration of Agent's desired Disposition Period, and Agent shall be
obligated to pay basic rent for such entire period, which rental amount shall
accompany Agent's written request.
7. During any Disposition Period, (a) Agent and its representatives
and invitees may inspect, repossess, remove and otherwise deal with the
Collateral, and Agent may advertise and conduct private sales of the Collateral
at the Premises, in each case without interference by Landlord or liability of
Agent or any Lender to Landlord, and (b) Agent shall make the Premises available
for inspection by Landlord and prospective tenants and shall cooperate in
Landlord's reasonable efforts to re-lease the Premises. If Agent conducts a
private sale of the Collateral at the Premises, Agent shall use reasonable
efforts to notify Landlord first and to hold such motion or sale in a manner
which would not unduly disrupt Landlord's or any other tenant's use of the
Premises.
8. Agent shall promptly repair, at Agent's expense, or reimburse
Landlord for any physical damage to the Premises actually caused by the conduct
of such [auction or] sale and any removal of Collateral by or through Agent
(ordinary wear and tear excluded). Neither Agent nor any Lender shall not be
liable for any diminution in value of the Premises caused by the
Tenant JJ Landlord JH
absence of Collateral removed, and neither Agent nor any Lender shall have any
duty or obligation to remove or dispose of any Collateral or any other property
left on the Premises by Company. Agent shall indemnify and hold harmless from
and against any claims, loss, cost, expense or damage asserted by Tenant or any
third party arising out of any act of omission of Agent in connection with the
exercise by Agent of its rights under this Waiver and Consent, including,
without limitation, reasonable attorneys' fees.
9. All notices hereunder shall be in writing, sent by
certified mail, return receipt requested or by telecopy, to the respective
parties and the addresses set forth on the signature page or at such other
address as the receiving party shall designate in writing.
10. This Waiver and Consent may be executed in any number of
several counterparts, shall be governed and controlled by, and interpreted
under, the laws of the State of Illinois, and shall inure to the benefit of
Agent and its successors and assigns and shall be binding upon Landlord and its
successors and assigns (including any transferees of the Premises) and upon
Agent, its successors and assigns.
IN WITNESS WHEREOF, this Landlord's Waiver and Consent is entered
into as of the date first set forth above.
"LANDLORD"
______________________________________ PANATTONI/HILLWOOD
______________________________________
______________________________________
______________________________________
Attention: ___________________________ By: _________________________________
Telephone: ___________________________ Title: ______________________________
Facsimile: ___________________________
"AGENT"
GENERAL ELECTRIC CAPITAL GENERAL ELECTRIC CAPITAL
CORPORATION CORPORATION
10 South LaSalle Street, Suite 2700
Chicago, Illinois 60603
Attention: ___________________________ By: _________________________________
Telephone: ___________________________ Title: ______________________________
Facsimile: ___________________________ Its: Duly Authorized Signatory
Tenant JJ Landlord JH
EXHIBIT "G"
EXPANSION LAND
PROPOSED BLOCK 2, LOT 3
BEING a tract of land situated in the Daniel Turner Survey, Abstract No. 1462,
in the City of Mesquite, Dallas County, Texas, and being a part of that tract of
land described in deed to Petrus Investment, L.P., as recorded in Volume 98251,
Page 9371, Deed Records, Dallas County, Texas, (DRDCT), and being more
particularly described as follows:
COMMENCING at a set 1/2-inch iron rod with a yellow plastic cap stamped "HALFF
ASSOC. INC." (hereafter referred to as "with cap"), at the intersection of the
westerly right-of-way line of Town East Boulevard (100 foot right-of-way) and
the northerly right-of-way line of a Dallas Power and Light Company
right-of-way, as recorded in Volume 5624, Page 250, DRDCT, (125 foot
right-of-way);
THENCE South 44 degrees 13 minutes 32 seconds West, departing said westerly line
and along said northerly line, a distance of 930.01 feet to the POINT OF
BEGINNING;
THENCE South 44 degrees 13 minutes 32 seconds West continuing along said
northerly line, a distance of 489.81 feet to a point at the intersection of said
northerly line with the easterly right-of-way line of Chase Road (50 foot
right-of-way);
THENCE North 45 degrees 45 minutes 33 seconds West, departing said northerly
line and along said easterly line, a distance of 889.98 feet to a point for
corner on the north line of said Petrus Investment tract;
THENCE North 44 degrees 16 minutes 17 seconds East, departing said easterly line
and along the north line of said Petrus Investment tract, a distance of 493.45
feet to a point for corner;
THENCE South 45 degrees 31 minutes 28 seconds East, departing said north line, a
distance of 889.59 feet to the POINT OF BEGINNING AND CONTAINING 437,446 SQUARE
FEET OR 10.04 ACRES OF LAND, MORE OR LESS.
Tenant JJ Landlord JH
[STRASBURGER & PRICE, L.L.P. LETTERHEAD]
June 1, 2000
VIA FAX
Charles Tuttle
5968 West Northwest Hwy.
Suite 1532
Dallas, TX 75225
RE: Lease by and between ICON Health & Fitness, Inc., as Tenant and
Panattoni/Hillwood Development Company, L.L.C., as Landlord
Dear Charles:
Under section 5.03 of the Lease, the Landlord has the right to approve.
any hazardous materials used on the property. The following is a list of
materials currently used by ICON in its manufacturing activities which may
require Landlord's approval.
3M Scotch grip plastic adhesive Deloaxed Hyddraparafine Distillate Oil
Enamel paint Acetylene Bottles
Autofroth Isocyanate Argon/CO2 bottles
Autofroth Resin Oxygen Bottles
Chemical Starter Kits For Spas Propane Tanks for Forklifts
Chlorine Light Machine Oil
Silk Screen Inks Miscellaneous Spray Paints
Toluene Hydraulic Fluid
Carbon Dioxide Storage Tanks - 12,000 LB. Fiberglassing (future potential material)
capacity
Argon Storage Tank - 118,000 Lb. capacity Paint for powdercoat process
#5 Spray Adhesive Plastics for processes like injection, blow,
vacuum, thermal, roto, etc. molding
As part of this there are a couple of storage tanks that will need to be
installed on the property and these are listed. The Landlord also has a right to
approve these storage tanks. As part of the Lease, we need Landlord's approval
of these materials and the two storage tanks pursuant to the terms of section
5.03. If you would have the Landlord sign below and send a copy of this back to
me and to Colin Rushalko, I would appreciate it.
Tenant JJ Landlord JH
Very truly yours,
/s/ ILLEGIBLE
APPROVED:
Partattoni/Hillwood Development Company, L.L.C.,
a Texas limited liability company
By:______________________________
Its:_____________________________
cc: Colin S. Rushalko
Director of ICON Health & Fitness, Weider Division
Tenant JJ Landlord JH
AMENDMENT NO. 1 TO LEASE AGREEMENT
(Build-to-Suit Facility) - 2000
This Amendment No. 1 to Lease Agreement by and between Panattoni/Hillwood
Development Company, LLC, as Landlord, and ICON Health and Fitness, Inc., as
Tenant is entered into as of June 9, 2000.
For and in consideration of Ten Dollars and other good and valuable
consideration, Landlord and Tenant hereby amend and modify the Lease Agreement
(Build-to-Suit Facility) - 2000 (the "Lease") by and between Landlord and Tenant
which Lease is dated as of June __, 2000. Landlord and Tenant add Article
Fifteen to the Lease, which Article Fifteen states as follows:
"ARTICLE FIFTEEN LEASE RESTRICTIONS
During the Term of this Lease, Landlord agrees not to lease any space or
grant other rights in the Expansion Land to the following entities: Cap Barbell,
Keys Fitness, Bollinger, Hedstrom, Jump Sport, Life Fitness, Sport Works,
Precor, Impex, and Schwinn, and such entities corporate successors."
Except as modified above, the Lease is in full force and effect without change
or amendment.
"LANDLORD"
PANATTONI/HILLWOOD
DEVELOPMENT COMPANY, LLC,
a Texas limited liability company
By: /s/ Dewitt J. Hicks III
-------------------------------
Name: DEWITT J. HICKS III
-----------------------------
Its: Principal
------------------------------
Date: 6/28/00
-----------------------------
"TENANT"
ICON HEALTH AND FITNESS, INC.,
a Delaware corporation
By: /s/ Jace Jergensen
------------------------------
Name: Jace Jergensen
----------------------------
Its: VP/GM
-----------------------------
Date: 6/26/00
----------------------------
Tenant JJ Landlord JH