SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT (this "Amendment") is executed
on and to be effective as of July 31, 2000, by and between ACQUIPORT
DFWIP, INC., a Delaware corporation, as landlord ("Lessor") and SPORT
SUPPLY GROUP, INC., a Delaware corporation, as tenant ("Lessee").
R E C I T A L S
WHEREAS, Merit Investment Partners, L.P. (predecessor in interest to
Lessor) ("Merit") and Lessee entered into that certain Lease Agreement
dated July 28, 1989, as amended by that certain First Amendment to Lease
dated as of July 13, 1998, by and between Lessor and Lessee (as amended,
the "Lease"), pursuant to which Lessee leases from Lessor certain real
property more particularly described on Exhibit A to the Lease, together
with the improvements thereon, consisting of a 137,670 square foot
building located at 1901 Diplomat, Farmers Branch, Texas (the
"Premises"); and
WHEREAS, Lessee desires to extend the term of the Lease, and Lessor and
Lessee desire to set forth the terms and conditions upon which the term
of the Lease will be extended.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Lessor and Lessee hereby
agree that the Lease should be, and hereby is, amended as follows:
1. Lease Term. The term of the Lease is hereby extended to December
31, 2004. The period of time from August 1, 2001 through December 31,
2004 is referred to herein as the "Extended Term".
2. Minimum Fixed Rent. The minimum fixed rent, as such term is used
in the Lease, for the Extended Term, shall be equal to $43,021.88 per
month. The minimum fixed rent from August 1, 2000 through July 31, 2001
shall be reduced to $43,021.88 per month. The minimum fixed rent for
the period prior to August 1, 2000 shall remain as currently set forth
in the Lease.
3. Improvements to Premises. Lessee shall take the Premises in its
"as-is" condition for the Extended Term except for certain Leasehold
Improvements (herein so called) to the Premises which shall be completed
in accordance with the specifications attached hereto as Exhibit A (the
<PAGE>
"Approved Plans"), which have been approved by both Lessor and Lessee.
Lessor shall cause the Leasehold Improvements to be installed or
constructed in accordance with the Approved Plans by Lessor's
contractor. So long as no Event of Default (or event which with notice
or lapse of time could become an Event of Default) has occurred under
the Lease, Lessor agrees to provide Lessee an allowance equal to One
Hundred Fifty-Three Thousand One Hundred Nineteen and No/100 Dollars
($153,119.00) (the "Improvement Allowance"), which allowance is to be
used solely for completion of the Leasehold Improvements in accordance
with the Approved Plans, and an additional allowance equal to Three
Thousand Two Hundred and No/100 Dollars ($3,200.00) (the "Architectural
Allowance"), which allowance is to be used solely for space planning and
design services for the Premises. In the event that any alterations or
modifications to the Premises are required in order to comply with
applicable law, including, without limitation, the Americans with
Disabilities Act of 1990, as amended, or the State of Texas equivalent
laws and regulations, the cost of any such alterations or modifications
shall be satisfied out of the Improvement Allowance. The cost of the
Leasehold Improvements and the space planning and design fees is to be
paid by Lessor out of the Improvement Allowance and the Architectural
Allowance, respectively.
Any completed work (labor or materials) outside the scope of the
Approved Plans or the cost of which is in excess of the Improvement
Allowance or the Architectural Allowance, as the case may be, shall be
at Lessee's sole cost and will be billed to Lessee by Lessor and will be
due and payable within ten (10) days after Lessee's receipt of an
invoice therefor. Notwithstanding the foregoing, Lessee will not be
liable for work outside the scope of the Approved Plans or excess costs
over the amount of the Improvement Allowance or the Architectural
Allowance unless Lessee has consented in writing to such work outside
the scope of the Approved Plans or excess costs prior to the
commencement of such work or the incurring of such excess costs. Any
portion of the Improvement Allowance or the Architectural Allowance
remaining upon the completion of the Leasehold Improvements shall be
deemed forfeited by Lessee.
Lessor further acknowledges and agrees that Section 4.07 of the Lease is
hereby amended to provide that Lessee shall not be required to surrender
<PAGE>
possession of the Premises to Lessor "in the same condition as when
received", but rather shall be entitled to surrender possession of the
Premises in the same condition as exists upon the completion of the
Leasehold Improvements described in Paragraph 3 above, subject to any
and all other requirements set forth in Section 4.07 of the Lease.
4. Lessor's Repairs. Section 4.03 is hereby modified by the addition
of the following language at the end of the first sentence:
"; provided, however, that Lessor shall repair and maintain the
structural soundness of the roof (including any necessary replacement as
determined by Lessor), exterior walls (excluding windows, window glass,
plate glass and doors), and foundation of the Premises, excluding any
repair or maintenance to such items (whether structural or
nonstructural) resulting from or caused in whole or in part by the
negligence or misconduct of Lessee, its agents, employees or
contractors."
5. Insurance. Section 5.04 of the Lease is hereby deleted in its
entirety and the following is hereby substituted therefor:
"Lessee shall keep in force throughout the term of this Lease: (a) a
Commercial General Liability insurance policy or policies to protect the
Lessor Entities (as hereinafter defined) against any liability to the
public or to any invitee of Lessee or a Lessor Entity incidental to the
use of or resulting from any accident occurring in or upon the Premises
with a limit of not less than $1,000,000.00 per occurrence and not less
than $2,000,000.00 in the annual aggregate, covering bodily injury and
property damage liability and $1,000,000.00 products/completed
operations aggregate; (b) Business Auto Liability covering owned, non-
owned and hired vehicles with a limit of not less than $1,000,000.00 per
accident; (c) insurance protecting against liability under Worker's
Compensation Laws with limits at least as required by statute; (d)
Employers Liability with limits of $500,000 each accident, $500,000
disease policy limit, $500,000 disease--each employee; and (e) Business
Interruption Insurance with limit of liability representing loss of at
least approximately six months of income. In addition, Lessee shall
maintain a policy or policies of insurance covering "all risks" perils
to the extent of the full replacement cost of the Premises and Lessee's
leasehold improvements and personal property situated therein as of the
date of the loss (provided that the replacement cost for the building
itself shall be provided by Lessor to Lessee from time to time and the
<PAGE>
replacement cost of Lessee's leasehold improvements, fixtures,
inventory, and other business personal property situated in or about the
Premises shall be determined by Lessee), with a deductible or self
insured retention of no more than $50,000.00. The term "Lessor
Entities", as used herein, shall mean Lessor, Lessor's investment
manager, and the trustees, boards of directors, officers, general partners,
beneficiaries, stockholders, employees and agents of each of
them.
Each of the aforesaid policies shall (a) be provided at Lessee's
expense; (b) name the Lessor and the building management company, if
any, as additional insureds; (c) be issued by an insurance company with
a minimum Best's rating of "A:VII" during the term of this Lease
(provided that if the rate of any insurance company in compliance at the
time of issuance of any policy thereafter has a reduction in its rating
bel rating
below a Best's rating of "A:VII", Lessee shall be provided ninety (90)
days to obtain a replacement policy with an insurance company with a
Best's rating of "A:VII"); and (d) provide that said insurance shall not
be cancelled unless thirty (30) days prior written notice (ten days for
non-payment of premium) shall have been given to Lessor; and said policy
or policies or certificates thereof shall be delivered to Lessor by
Lessee upon the commencement date and at least thirty (30) days prior to
each renewal of said insurance.
Whenever Lessee shall undertake any alterations, additions or
improvements in, to or about the Premises ("Work"), the aforesaid
insurance protection must extend to and include injuries to persons and
damage to property arising in connection with such Work, without
limitation including liability under any applicable structural work act,
and such other insurance as Lessor shall require; and the policies of or
certificates evidencing such insurance must be delivered to Lessor prior
to the commencement of any such Work."
6. Indemnification. Section 6.01 of the Lease is hereby deleted in
its entirety and the following is hereby substituted therefor:
"None of the Lessor Entities shall be liable and Lessee hereby waives
all claims against them for any damage to any property or any injury to
any person in or about the Premises by or from any cause whatsoever
(including without limiting the foregoing, rain or water leakage of any
character from the roof, windows, walls, basement, pipes, plumbing works
<PAGE>
or appliances, the Premises not being in good condition or repair, gas,
fire, oil, electricity or theft), except that Lessor will protect,
indemnify and hold the Lessee Entities (as hereinafter defined) harmless
from such claims to the extent caused by or arising from the gross
negligence or willful misconduct of Lessor or its agents, employees or
contractors or any breach or default on the part of Lessor in the
performance of any covenant or agreement on the part of Lessor to be
performed pursuant to this Lease. Lessee shall protect, indemnify and
hold the Lessor Entities harmless from and against any and all loss,
claims, liability or costs (including court costs and reasonable
attorney's fees) incurred by reason of (a) any damage to any property
(including but not limited to property of any Lessor Entity) or any
injury (including but not limited to death) to any person occurring in,
or about the Premises to the extent that such injury or damage shall be
caused by or arise from any actual or alleged act, neglect, fault, or
omission by or of Lessee, its agents, servants, employees, invitees, or
visitors to meet any standards imposed by any duty with respect to the
injury or damage; (b) the conduct or management of any work or thing
whatsoever done by the Lessee in or about the Premises or from
transactions of the Lessee concerning the Premises; (c) Lessee's failure
to comply with any and all governmental laws, ordinances and regulations
applicable to the condition or use of the Premises or its occupancy; or
(d) any breach or default on the part of Lessee in the performance of
any covenant or agreement on the part of Lessee to be performed pursuant
to this Lease. The provisions of this Section shall survive the
termination of this Lease with respect to any claims or liability
accruing prior to such termination. The term "Lessee Entities", as used
herein, shall mean Lessee and its directors, officers, general partners,
stockholders, employees and agents."
7. Notice. The address of Lessor set forth in Section 9.16 of the
Lease is hereby modified to be Acquiport DFWIP, Inc., 1406 Halsey Way,
Suite 110, Carrollton, Texas 75007. The address of Lessee set forth in
Section 9.16 of the Lease is hereby modified to be Sport Supply Group,
Inc., 1901 Diplomat Drive, Farmers Branch, Texas 75234, Attention:
President.
8. Hazardous Materials. The following is hereby added to the Lease as
Article 12:
"ARTICLE 12. HAZARDOUS MATERIALS.
Lessee shall not, and shall not direct, suffer or permit any of its
agents, contractors, employees, licensees or invitees to at any time
handle, use, manufacture, store or dispose of in or about the Premises
<PAGE>
any flammables, explosives, radioactive materials, hazardous wastes or
materials, toxic wastes or materials, or other similar substances,
petroleum products or derivatives or any substance subject to regulation
by or under any federal, state and local laws and ordinances relating to
the protection of the environment or the keeping, use or disposition of
environmentally hazardous materials, substances, or wastes, presently in
effect or hereafter adopted, all amendments to any of them, and all
rules and regulations issued pursuant to any of such laws or ordinances
(collectively "Environmental Laws") (all of such items being
collectively referred to as "Hazardous Materials"), nor shall Lessee
suffer or permit any Hazardous Materials to be used in any manner not
fully in compliance with all Environmental Laws, in the Premises or
appurtenant land or allow the environment to become contaminated with
any Hazardous Materials. Notwithstanding the foregoing, Lessee may (a)
store and use on the Premises those items described on Exhibit B
attached hereto in the quantities set forth next to such items, and (b)
handle, store, use or dispose of products containing small quantities of
Hazardous Materials (such as aerosol cans containing insecticides, toner
for copiers, paints, paint thinner, paint remover and the like) to the
extent customary and necessary for the use of the Premises for general
office purposes; provided that Lessee shall always handle, store, use,
and dispose of any such Hazardous Materials in a safe and lawful manner
and never allow such Hazardous Materials to contaminate the Premises,
appurtenant land, or the environment. Lessee shall protect, defend,
indemnify and hold each and all of the Lessor Entities harmless from and
against any and all loss, claims, liability or costs (including court
costs and reasonable attorney's fees) incurred by reason of any actual
or asserted failure of Lessee to fully comply with all applicable
Environmental Laws, or the presence, handling, use or disposition in or
from the Premises of any Hazardous Materials (even though permissible
under all applicable Environmental Laws or the provisions of this
Lease), or by reason of any actual or asserted failure of Lessee to
keep, observe, or perform any provision of this Article."
9. Renewal Options. Any and all renewal options contained in the
Lease are hereby deleted in their entirety, and in lieu thereof, Lessee
shall have, at its option (the "Renewal Option"), the right to renew and
extend this Lease for one term of five (5) years (the "Renewal Term").
The Renewal Term shall commence immediately upon the expiration of the
Extended Term by Lessee's giving written notice thereof to Lessor no
earlier than nine (9) months, and no later than six (6) months, prior to
the expiration of the Extended Term. Once Lessee shall exercise any
<PAGE>
Renewal Option, Lessee may not thereafter revoke such exercise, except
as expressly set forth below. Lessee shall not have the right to
exercise the Renewal Option at a time that an Event of Default (or an
event which with notice and/or lapse of time could become an Event of
Default) under this Lease has occurred and is continuing. Lessee's
failure to exercise timely the Renewal Option for any reason whatsoever
shall conclusively be deemed a waiver thereof. At Lessor's option,
Lessor may adjust the minimum fixed rent for the Renewal Term at an
annual rate equal to the Fair Market Value Rate (as hereinafter defined)
as of the commencement of the Renewal Term. As used in this Lease,
"Fair Market Value Rate" shall mean the fair market value rental rate
per square foot of rentable area per year in effect at the commencement
of the Renewal Term for comparable tenants taking comparable space in
comparable conditions under comparable terms in comparable buildings in
the same rental market (hereinafter called "Comparable Buildings");
provided, however, that in no event shall the minimum fixed rent for the
Renewal Term be less than ninety percent (90%) of the minimum fixed rent
for the last twelve (12) months of the Extended Term. It is also agreed
and understood that the Fair Market Value Rate shall include: (a) rent;
and (b) rental operating expenses, property tax, and utility and expense
adjustments that are being included as part of the terms and conditions
of industrial tenant leases for comparable tenants in Comparable
Buildings as of the time of determination of the Fair Market Value Rate.
Lessor shall advise Lessee within twenty (20) days after Lessee
exercises the Renewal Option of the Fair Market Value Rate which shall
be in effect as of the commencement date of the Renewal Term.
Lessee shall then have fifteen (15) days to notify Lessor of its
acceptance or rejection of the Fair Market Value Rate for the Renewal
Term and if rejecting the Fair Market Value Rate, of its election to
proceed using third-party appraisers, as hereinafter described. In the
event Lessee fails to so notify Lessor within such fifteen (15) day
period or if Lessee rejects the Fair Market Value Rate and does not
elect to proceed using third-party appraisers, Lessee shall be deemed to
have rejected the Fair Market Value Rate proposed by Lessor and to have
rejected its right to use third-party appraisers to determine the Fair
Market Value Rate. Notwithstanding the prohibition on Lessee's right to
revoke its exercise of the Renewal Option, in the event Lessee rejects
(or is deemed to have rejected) the Fair Market Value Rate proposed by
Lessor and rejects (or is deemed to have rejected) its right to use
third-party appraisers, Lessee shall be deemed to have revoked the
Renewal Option, and the Renewal Option shall be deemed null and void and
<PAGE>
of no further force or effect. If Lessee notifies Lessor of its
election to appoint third-party appraisers to determine the Fair Market
Value Rate within the time period set forth above, Lessee may no longer
revoke the respective Renewal Option. Lessor and Lessee shall each
appoint, by notice to the other within ten (10) business days after
Lessee's election to use third-party appraisers, a qualified
disinterested MAI appraiser doing business in the area. If the
appraisers so appointed are unable to agree upon the Fair Market Value
Rate within thirty (30) days after the appointment of the second
appraiser, they shall, within ten (10) business days thereafter appoint
a third disinterested MAI appraiser and the majority shall decide upon
the Fair Market Value Rate for the Renewal Term, such decision to be
rendered within forty-five (45) days after the appointment of the third
appraiser. If a majority are unable to agree within the allotted time,
the two determinations of Fair Market Value Rate nearest to one another
in amount shall be added together, divided by two (2), and the resulting
quotient shall be the Fair Market Value Rate. If either party fails to
appoint its appraiser within the time period provided, the determination
of the Fair Market Value Rate shall be made by the other appraiser alone
and if the two appraisers are unable to agree upon a third appraiser
within the time period and the parties are unable to mutually agree
within ten (l0) business days thereafter upon a third appraiser, either
party may request the President or equivalent officer of the Dallas
Texas Chapter of the American Institute of Real Estate Appraisers or if
none, an equivalent body, to appoint the same. Lessor and Lessee shall
each pay the cost of the appraiser appointed by each such party, and
Lessor and Lessee shall share equally the expense of the third
appraiser, if any. The determination of the appraisers shall be final
and binding and shall be enforceable by court order.
Lessee shall take the Premises "as is" for the Renewal Term and Lessor
shall have no obligation to make any improvements or alterations to the
Premises. Except as set forth in this paragraph, the leasing of the
Premises for the Renewal Term shall be upon the same terms and
conditions as the leasing of the Premises for the Extended Term and
shall be upon and subject to all of the provisions of this Lease. Any
Renewal Option granted to Lessee under this paragraph shall be personal
to Lessee and shall not be transferred, encumbered, or assigned by
Lessee or in any manner transferred to, or exercised by, any subtenant
of Lessee.
10. Brokerage Commissions. Each of the parties hereto represents and
<PAGE>
warrants to the other that it has not dealt with any broker or finder in
connection with this Lease except Cushman & Wakefield of Texas, Inc. and
RREEF Management Company. Lessor acknowledges that the commissions of
Cushman & Wakefield of Texas, Inc. and RREEF Management Company payable
in connection with this Amendment will be paid by Lessor, and Lessor
agrees to indemnify and hold Lessee harmless from and against any claims
by such brokers for such commissions.
11. Effectiveness. Except as modified herein, all other terms and
conditions of the Lease shall remain unchanged and shall continue in
full force and effect.
12. Governing Law. The laws of the State of Texas and of the United
States of America shall govern the rights, remedies, and duties of the
parties hereto and the validity, construction, enforcement, and
interpretation hereof.
13. Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns.
14. Illegality. If any provision of this Amendment is held to be
illegal, invalid, or unenforceable under present or future laws, such
provision shall be fully severable; this Amendment shall be construed
and enforced as if such illegal, invalid, or unenforceable provision had
never comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance
herefrom.
15. Limited Liability. Redress for any claims against Lessor under
this Amendment or the Lease shall only be made against Lessor to the
extent of Lessor's interest in the Premises, including, to the extent
received after a final judgment against Lessor has been obtained by
Lessee, the proceeds of any sale or refinancing of Lessor's interest in
the Premises (net of any actual costs incurred in connection therewith).
The obligations of Lessor under this Amendment and the Lease shall not
be personally binding on, nor shall any resort be had to the private
properties of, any of its trustees or board of directors and officers,
as the case may be, the general partners thereof, or any beneficiaries,
stockholders, employees or agents of Lessor, or the investment manager.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
LESSOR:
ACQUIPORT DFWIP, INC.,
a Delaware corporation
By: /s/ Craig M. Gotthadt
Name: Craig M. Gotthardt
Title: Vice President
LESSEE:
SPORT SUPPLY GROUP, INC.,
a Delaware corporation
By: /s/ Terrence M. Babilla
Name: Terrence M. Babilla
Title: Chief Operating Officer
