SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JULY 25, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission File No. 1-13426
THE SPORTS AUTHORITY, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3511120
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3383 N. State Road 7, Ft. Lauderdale, Florida 33319
(Address of principal executive offices) (Zip Code)
(954) 735-1701
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Common Stock outstanding at September 8, 1999: 31,984,781
<PAGE>
THE SPORTS AUTHORITY, INC.
INDEX TO FORM 10-Q
PAGE NUMBER
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 4. Submission of Matters to a Vote of
Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
INDEX TO EXHIBITS 24
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
13 WEEKS ENDED 26 WEEKS ENDED
----------------------------- -----------------------------
JULY 25, JULY 26, JULY 25, JULY 26,
----------- ----------- ----------- -----------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Sales $ 385,550 $ 427,238 $ 742,067 $ 773,703
License fees and rental income 342 29 804 774
----------- ----------- ----------- -----------
385,892 427,267 742,871 774,477
----------- ----------- ----------- -----------
Cost of merchandise sold, includes
buying and occupancy costs 284,394 313,601 549,352 570,790
Selling, general and administrative expenses 92,988 102,015 188,205 193,993
Pre-opening expense 232 2,464 1,206 4,280
Goodwill amortization 491 491 981 981
----------- ----------- ----------- -----------
378,105 418,571 739,744 770,044
----------- ----------- ----------- -----------
Corporate restructuring - - (700) -
----------- ----------- ----------- -----------
Operating income 7,787 8,696 3,827 4,433
Other (income) expense:
Interest, net 4,029 2,623 7,562 5,298
Gain on deconsolidation - - (5,001) -
----------- ----------- ----------- -----------
4,029 2,623 2,561 5,298
----------- ----------- ----------- -----------
Income (loss) before income taxes 3,758 6,073 1,266 (865)
Income tax expense 1,493 2,651 471 29
Minority interest - (405) - (975)
----------- ----------- ----------- -----------
Net income $ 2,265 $ 3,827 $ 795 $ 81
=========== =========== =========== ===========
Earnings per common share-basic and diluted $ 0.07 $ 0.12 $ 0.02 $ -
=========== =========== =========== ===========
Weighted average common shares outstanding:
Basic 31,949 31,781 31,925 31,711
=========== =========== =========== ===========
Diluted 32,047 32,036 32,071 31,957
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
JULY 25, JANUARY 24,
1999 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,590 $ 22,946
Merchandise inventories 392,760 367,951
Accounts receivable and other current assets 48,522 48,438
----------- ------------
Total current assets 459,872 439,335
Net property and equipment 309,576 341,371
Other assets and deferred charges 55,260 72,073
Goodwill - net of accumulated amortization of
$18,566 and $17,585, respectively 47,839 48,820
----------- ------------
Total Assets $ 872,547 $ 901,599
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 162,865 $ 180,117
Accrued payroll and other liabilities 96,331 139,468
Short-term debt 121,265 75,623
Taxes other than income taxes 15,908 13,582
----------- ------------
Total current liabilities 396,369 408,790
Long-term debt 149,906 173,248
Other long-term liabilities 50,774 50,804
----------- ------------
Total liabilities 597,049 632,842
Minority interest - (4,155)
Stockholders' equity:
Common stock, $.01 par value, 100,000 shares
authorized, 32,040 and 31,951 issued, respectively 320 320
Additional paid-in-capital 251,501 251,024
Deferred compensation and receivables from officers (553) (531)
Retained earnings 26,230 25,435
Treasury stock, 55 and 56 shares at cost, respectively (513) (527)
Accumulated other comprehensive loss (1,487) (2,809)
----------- ------------
Total stockholders' equity 275,498 272,912
----------- ------------
Total Liabilities and Stockholders' Equity $ 872,547 $ 901,599
=========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
26 WEEKS ENDED
------------------------------
JULY 25, JULY 26,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
OPERATIONS
Net income $ 795 $ 81
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization 23,198 22,600
Cumulative translation adjustment (48) 295
Minority interest in net loss of joint venture - (975)
Loss on sale or disposal of property and equipment 62 6
Gain on deconsolidation of joint venture (5,001) -
(Increase) decrease in accounts receivable and other current assets (2,813) 2,074
Increase in inventories (51,031) (89,331)
Decrease (increase) in other assets and deferred charges 24 (1,772)
Purchase of property held for resale - (2,854)
Increase in accounts payable - trade 4,480 50,624
Decrease in accrued payroll and other liabilities (28,012) (8,221)
Increase in accrued taxes other than income taxes 2,606 7,796
Decrease in accrued income taxes - (2,953)
(Decrease) increase in other long-term liabilities (31) 2,243
----------- ------------
Net cash used for operations (55,771) (20,387)
----------- ------------
INVESTING
Capital expenditures (15,085) (35,019)
Deconsolidation of joint venture (3,127) -
Other - net 4 6,396
----------- ------------
Net cash used for investing (18,208) (28,623)
----------- ------------
FINANCING
Short-term borrowings 70,998 60,575
Long-term borrowings - 4,189
Proceeds from sale of stock 196 1,836
Proceeds from sale of treasury stock 14 -
Debt issuance costs (1,170) -
Payment of capital lease obligations (415) (309)
----------- ------------
Net cash provided by financing 69,623 66,291
----------- ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,356) 17,281
Cash and cash equivalents at beginning of year 22,946 20,359
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,590 $ 37,640
=========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
<PAGE>
THE SPORTS AUTHORITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements do not include
all information and footnotes necessary for the annual presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current year's presentation.
In the opinion of The Sports Authority, Inc. (the "Company") management, all
adjustments (consisting of normal, recurring accruals) necessary for a fair
presentation of the results for the interim periods have been included.
NOTE 2: INVESTMENTS IN JOINT VENTURES
JAPANESE JOINT VENTURE:
In March 1999, the Company sold 32% of its ownership interest in the
Japanese joint venture Mega Sports Co., Ltd. ("Mega Sports") to its joint
venture partner, JUSCO Co., Ltd. ("JUSCO"). The sale reduced the Company's
ownership of the joint venture from 51% to 19%. In May 1999, JUSCO made an
additional capital contribution to Mega Sports, not matched by the Company,
which further reduced the Company's ownership to 8.4%. As a minority owner, the
Company discontinued consolidation of the joint venture in 1999.
The Company has a license agreement with Mega Sports which permits Mega
Sports to use certain trademarks, technology and know-how of the Company in
exchange for royalty fees of 1.0% of Mega Sports' gross sales in 1999, 1.1% in
2000 and 1.2% in 2001 through 2005. Mega Sports has the option of extending the
agreement for three ten-year periods expiring in 2035. The results of operations
in the second quarter of 1999 include royalty fees of approximately $0.3 million
pursuant to this agreement. In 1998, intercompany royalty fees were eliminated
due to consolidation of the joint venture in the Company's results of
operations.
E-COMMERCE JOINT VENTURE:
In May 1999, the Company and Global Sports Interactive, Inc. ("Global
Sports") formed TheSportsAuthority.com ("TSA.com"), a joint venture which will
operate the e-commerce business of the Company. The Company has an initial
ownership in TSA.com of 19.9%, which will automatically increase, in increments,
up to 49.9% if certain performance criteria are met by either TSA.com or the
6
<PAGE>
THE SPORTS AUTHORITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company. In addition, the Company has an option to purchase additional shares of
TSA.com, up to 49.9%, in certain events.
NOTE 3: RESTRUCTURING RESERVES
STORE CLOSINGS:
In the third quarter of 1998, the Company recorded a pre-tax restructuring
charge of $39.4 million related to the closing of 17 underperforming stores. The
charge included reserves for remaining lease obligations and related costs,
fixed asset write-downs and disposal costs, employee severance payments and
other exit costs. The Company completed 15 store closings in the first quarter
of 1999, and paid approximately $0.4 million in severance to approximately 500
employees. The Company expects to complete the relocation of the remaining two
stores in 2000.
In 1997, the Company recorded a $4.3 million restructuring charge related to
the closing of three stores and two off-site receiving facilities. The store
closings were due primarily to the expiration of leases in 1998 and openings of
new stores in close proximity to the closing locations. Operations of the two
receiving facilities were consolidated into the Company's regional distribution
center ("RDC") in the fourth quarter of 1997. The three stores were closed in
February 1998. Remaining reserves under the 1997 restructuring relate primarily
to the remaining lease obligation for one store.
The following table sets forth the activity in the restructuring reserves
related to the 1998 and 1997 store closing plans.
<TABLE>
<CAPTION>
26 WEEKS ENDED JULY 25, 1999
------------------------------------------------------------
RESERVE AT ASSET RESERVE AT
JANUARY 24, DISPOSALS JULY 25,
(IN THOUSANDS) 1999 PAYMENTS (NET) 1999
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Lease obligations and related costs $ 32,419 $ (3,427) $ - $ 28,992
Fixed assets 9,264 - (7,280) 1,984
Employee severance 671 (487) - 184
Other 661 (647) - 14
------------ ------------ ----------- ------------
Total $ 43,015 $ (4,561) $ (7,280) $ 31,174
============ ============= ============= ============
</TABLE>
7
<PAGE>
THE SPORTS AUTHORITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CORPORATE RESTRUCTURING:
Pursuant to a corporate restructuring in the third quarter of 1998, the
Company recorded $3.9 million in employment contract obligations to several
departing executives. The Company paid $0.4 million against the reserve in the
second quarter of 1999, leaving a remaining reserve of $0.4 million at July 25,
1999.
NOTE 4: EARNINGS PER SHARE
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share"
("EPS"), which requires a dual presentation of basic and diluted EPS. A
reconciliation of the numerators and denominators of the basic and diluted EPS
computations is illustrated below:
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
-------------------------------- -----------------------------
JULY 25, JULY 26, JULY 25, JULY 26,
1999 1998 1999 1998
-------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
BASIC EPS COMPUTATION
Net income $ 2,265 $ 3,827 $ 795 $ 81
-------------- -------------- -------------- -----------
Weighted average common shares 31,949 31,781 31,925 31,711
-------------- -------------- -------------- -----------
Earnings per common share $ .07 $ .12 $ .02 $ -
============== ============== ============== ===========
DILUTED EPS COMPUTATION
Net income $ 2,265 $ 3,827 $ 795 $ 81
Plus Income impact of assumed conversion:
Interest on convertible subordinated notes (a) - - - -
--------------- -------------- -------------- -----------
Income available to common shareholders
+ assumed conversions $ 2,265 $ 3,827 $ 795 $ 81
--------------- -------------- -------------- -----------
Weighted average common shares 31,949 31,781 31,925 31,711
Effect of stock options 98 255 146 246
Shares from subordinated notes
assuming conversion (a) - - - -
--------------- -------------- -------------- -----------
Total Shares 32,047 32,036 32,071 31,957
--------------- -------------- -------------- -----------
Earnings per common share-assuming dilution $ .07 $ .12 $ .02 $ -
============== ============== ============== ===========
</TABLE>
- ------------
(a) The calculation of diluted EPS excludes interest expense and 4,580,964
potential shares related to the conversion rights granted to holders of the
Company's 5.25% Convertible Subordinated Notes, which would have an
antidilutive affect in all periods presented.
8
<PAGE>
THE SPORTS AUTHORITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: COMPREHENSIVE INCOME
In 1998 the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income". Comprehensive income
represents the change in equity arising from non-owner sources, including net
income and other comprehensive income items such as foreign currency translation
adjustments and minimum pension liability adjustments. In the first quarter of
1999 the Company recognized $1.4 million in cumulative translation adjustments
in conjunction with the deconsolidation of Mega Sports. The Company's
comprehensive income was $2.1 million and $0.7 million for the 13 and 26 weeks
ended July 25, 1999, respectively, compared to $3.7 million and $0.4 million for
the same periods in the prior year.
NOTE 6: REPLACEMENT OF REVOLVING CREDIT FACILITY
On April 13, 1999, the Company signed a three year, $200 million revolving
credit agreement with BankBoston Retail Finance Inc. (the "BankBoston Credit
Facility") to replace the Company's existing $160 million Revolving Credit
Facility, which was to mature on April 26, 1999. The BankBoston Credit Facility
is secured by inventory and contains no financial covenants related to operating
results. Borrowings under the new facility bear interest at the election of the
Company at either the Base Rate or the Eurodollar Rate plus 1.75%, both as
defined in the credit agreement. The agreement limits borrowings to a borrowing
base determined largely with reference to eligible inventory balances.
NOTE 7: SUBSEQUENT EVENTS
PURCHASE OF CONVERTIBLE NOTES
In August 1999, the Company purchased on the open market $23.5 million in
principal amount of its 5.25% Convertible Subordinated Notes (the "Notes"), due
in September 2001, for a total purchase price of $14.0 million excluding accrued
interest. The Company issued a total of $149.5 million of Notes in September
1996. The Company's Board of Directors has authorized the purchase of additional
Notes from time to time. The BankBoston Credit Facility permits the Company to
spend up to $20 million in any calendar year to purchase its own securities.
9
<PAGE>
THE SPORTS AUTHORITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SALE-LEASEBACK TRANSACTION
Early in the third quarter, the Company sold three of its owned store sites
to SPI Holdings, LLC ("SPI Holdings") for an aggregate sales price of $19.0
million. Further, the Company has agreed to sell six additional properties for
an aggregate sales price of $32.0 million, subject to the satisfaction of
certain conditions. The Company will continue to operate The Sports Authority
stores in these locations under long-term leases. The proceeds from the sale
will be used to pay down existing debt.
10
<PAGE>
Item 2.
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
JAPANESE JOINT VENTURE OWNERSHIP REDUCTION
In March 1999, the Company reduced its ownership interest in Mega Sports,
its Japanese joint venture. As a minority owner, the Company discontinued
consolidation of the accounts of Mega Sports beginning in fiscal 1999, and
recorded a $5.0 million gain on deconsolidation in the first quarter of 1999.
The decision to reduce its ownership in Mega Sports was based on the Company's
commitment to focus its resources on the profitability and growth of its core
North American operations. (See Note 2 of the Notes to Consolidated Financial
Statements).
E-COMMERCE JOINT VENTURE
In May 1999, the Company and Global Sports Interactive, Inc. formed
TheSportsAuthority.com. This joint venture will operate the Company's e-commerce
business, and is anticipated to launch a Web site by the fourth quarter of 1999.
The site will offer online a wide selection of sporting goods, athletic footwear
and apparel currently available in The Sports Authority stores. Global Sports
will contribute the technological, organizational and working capital
requirements of the joint venture, as well as dedicated marketing funds to
promote online traffic. The Company will contribute its brand name and marketing
reach. (See Note 2 of the Notes to Consolidated Financial Statements).
STORE CLOSINGS
In the third quarter of 1998, the Company recorded a pre-tax restructuring
charge of $39.4 million related to the closing of 17 underperforming stores. The
charge included reserves for remaining lease obligations and related costs,
fixed asset write-downs and disposal costs, employee severance payments and
other store exit costs. The Company completed 15 store closings in the first
quarter of 1999, and expects to complete the relocation of the remaining two
sites in 2000.
In 1997, the Company recorded a $4.3 million restructuring charge related to
the closing of three stores and two off-site receiving facilities. The store
closings were due primarily to the expiration of leases in 1998 and openings of
new stores in close proximity to the closing locations. Operations of the two
receiving facilities were consolidated into the Company's RDC in the fourth
quarter of 1997.
The Company paid $2.7 million in store exit costs in the second quarter of
1999, primarily related to lease obligations. The Company is actively pursuing
the sublease or assignment of these leases, and consummated the assignment of
one lease during the second quarter.
11
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THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
RESULTS OF OPERATIONS
The following table sets forth the Company's income statement data as a percent
of sales for the periods indicated.
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
----------------------------- ----------------------------
JULY 25, JULY 26, JULY 25, JULY 26,
1999 1998 1999 1998
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of merchandise sold, includes
buying and occupancy costs 73.8 73.4 74.0 73.8
----------- ----------- ---------- ----------
Gross margin 26.2 26.6 26.0 26.2
License fees and rental income (0.1) - (0.1) (0.1)
Selling, general and administrative expenses 24.1 23.9 25.4 25.1
Pre-opening expense 0.1 0.6 0.2 0.5
Goodwill amortization 0.1 0.1 0.1 0.1
Corporate restructuring - - (0.1) -
----------- ----------- ---------- ----------
Operating income 2.0 2.0 0.5 0.6
Interest, net 1.0 0.6 1.0 0.7
Gain on deconsolidation - - (0.7) -
----------- ----------- ---------- ----------
Income (loss) before income taxes 1.0 1.4 0.2 (0.1)
Income tax expense 0.4 0.6 0.1 -
Minority interest - (0.1) - (0.1)
----------- ----------- ----------- ----------
Net income 0.6% 0.9% 0.1 % - %
=========== =========== =========== ==========
</TABLE>
The following table sets forth the Company's store openings and closings for the
periods indicated.
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
----------------------------- ----------------------------
JULY 25, JULY 26, JULY 25, JULY 26,
1999 1998 1999 1998
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Beginning number of stores 200 201 226 199
Openings - 5 2 10
Closings - - (15) (3)
Deconsolidation of joint venture - - (13) -
----------- ----------- ------------ ----------
Ending number of stores 200 206 200 206
=========== =========== =========== ==========
</TABLE>
12
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
13 WEEKS ENDED JULY 25, 1999 AND JULY 26, 1998
Sales for the 13 weeks ended July 25, 1999 were $385.5 million, a $41.7
million, or 9.8%, decrease from sales of $427.2 million for the same period in
the prior year. Sales in the prior period include $18.8 million from Mega
Sports, the Company's Japanese joint venture. The Company discontinued
consolidation of Mega Sports in 1999 due to a reduction of its ownership
interest in the joint venture. Additionally, the Company closed 15 stores in the
first quarter of 1999 pursuant to its announced restructuring plans. The prior
period includes sales of $21.2 million from the closed stores.
Excluding the impact of the deconsolidation of Mega Sports and the store
closings, sales decreased $1.7 million, or 0.4%. The decrease resulted from a
decrease in comparable store sales from continuing operations of $31.2 million,
or 8.1%, offset by an increase in sales of $29.5 million, or 7.7%, from stores
opening in 1998 and 1999 which had no comparable sales in the prior period. The
decrease in comparable store sales reflected continued weakness in the key
categories of footwear and golf, which have trended negatively since 1997 and
1998, respectively. Additionally, sales of men's apparel were extremely soft
during the current period. The Company is aggressively pursuing initiatives to
address these trends, including revamping its pricing and buying strategies to
deliver a merchandise assortment that is both price competitive and responsive
to the latest buying trends. The Company is also focused on improved
merchandising and marketing of its kids' categories, which performed well in the
second quarter.
License fees and rental income was $0.3 million, or 0.1% of sales, for the
13 weeks ended July 25, 1999, as compared to $29,000, or less than 0.1% of
sales, for the same period in the prior year. In 1999, license fees included
$0.3 million in royalty fee income under a license agreement between the Company
and Mega Sports. (See Note 2 of the Notes to Consolidated Financial Statements).
Prior to 1999, intercompany royalty fees were eliminated due to consolidation of
Mega Sports in the Company's results of operations. Additionally, the Company
has a license arrangement for the sale of diving merchandise in three stores.
Sales of licensee merchandise are excluded from the Company's total sales.
Cost of merchandise sold, including buying and occupancy, was $284.4
million, or 73.8% of sales, for the thirteen weeks ended July 25, 1999, as
compared to $313.6 million, or 73.4% of sales, for the same period in the prior
year. As a percent of sales, gross margin was 26.2% for the current quarter
compared to 26.6% for the comparable period in the prior year. The 0.4% decrease
in gross margin resulted primarily from the negative leveraging of occupancy
costs. Occupancy costs, which are fixed in nature, increased as a percent of
sales due to lower dales volumes in the second quarter of 1999, versus the same
period in the prior year.
13
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Selling, general and administrative ("SG&A") expenses for the 13 weeks ended
July 25, 1999 were $93.0 million, or 24.1% of sales, as compared to $102.0
million, or 23.9% of sales, for the same period in the prior year. The 0.2% of
sales increase resulted primarily from an increase in advertising expenditures
to generate store traffic.
Pre-opening expense for the 13 weeks ended July 25, 1999 was $0.2 million,
or 0.1% of sales, as compared to $2.5 million, or 0.6% of sales, for the same
period in the prior year. The decrease in expense reflected the reduction in
store openings, from five in the prior period to none in the current period.
Expense in the current period related to one store, which opened in August 1999.
Pre-opening expense consists principally of store payroll expense for associate
training and store preparation prior to opening, as well as grand-opening
advertising expenditures.
Interest, net for the 13 weeks ended July 25, 1999 was $4.0 million, or 1.0%
of sales, as compared to $2.6 million, or 0.6% of sales, for the same period in
the prior year. The increase of $1.4 million was primarily attributable to an
increase in short-term borrowings under the Company's revolving credit
facilities.
Income tax expense was $1.5 million, with an effective tax rate of 39.7%,
for the 13 weeks ended July 25, 1999, as compared to $2.7 million, with an
effective tax rate of 40.9% (excluding the minority interest), for the same
period in the prior year. The decrease in the effective tax rate in the current
period resulted from the increased impact of the Canadian subsidiary's pretax
loss relative to consolidated pretax income, as well as the effect of
deconsolidating the Japanese joint venture in 1999.
As a result of the foregoing factors, net income for the 13 weeks ended July
25, 1999 was $2.3 million, or 0.6% of sales, as compared to $3.8 million, or
0.9% of sales, for the same period in the prior year.
26 WEEKS ENDED JULY 25, 1999 AND JULY 26, 1998
Sales for the 26 weeks ended July 25, 1999 were $742.1 million, a $31.6
million, or 4.1%, decrease from sales of $773.7 million for the same period in
the prior year. Excluding the impact of the deconsolidation of Mega Sports and
the 15 store closing in the first quarter of 1999, sales increased $32.7
million, or 4.7%. Of the 4.7% increase, 8.5%, or $59.5 million, was due to the
inclusion of sales for the stores opened in 1998 and 1999 which had no
comparable store sales in the prior year, offset by a decline in comparable
store sales from continuing operations of 3.8%, or $26.8 million. The comparable
store sales decrease in the first half of 1999 was primarily the result of
disappointing sales in footwear, men's apparel and golf.
14
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
License fees and rental income was $0.8 million for the 26 weeks ended July
25, 1999 and July 26, 1998. In 1999, license fees consisted primarily of royalty
fee income earned under the Company's license agreement with Mega Sports. In
1998, license fees were earned primarily under a license agreement covering the
sale of winter sports merchandise in the Company's North American stores, which
was terminated in August 1998.
Cost of merchandise sold, including buying and occupancy costs, was $549.4
million, or 74.0% of sales, for the 26 weeks ended July 25, 1999, as compared to
$570.8 million, or 73.8% of sales, for the same period in the prior year. The
0.2% of sales increase resulted primarily from the negative leveraging of
occupancy costs as a result of the shortfall in sales in the current period.
SG&A expenses for the 26 weeks ended July 25, 1999 were $188.2 million, or
25.4% of sales, as compared to $194.0 million, or 25.1% of sales, for the same
period in the prior year. The 0.3% of sales increase resulted from an increase
in advertising expenditures in the current period to promote traffic into the
stores.
Pre-opening expense for the 26 weeks ended July 25, 1999 was $1.2 million,
or 0.2% of sales, as compared to $4.3 million, or 0.5% of sales, for the same
period in the prior year. The decrease in pre-opening expense reflected the
decrease in new store openings, from ten stores in the 1998 period to two stores
in the current period. Pre-opening expense in the 1999 period also included
costs related to one store, which opened in August 1999.
Corporate restructuring was ($0.7) million, or (0.1%) of sales, for the 26
weeks ended July 25, 1999. During the third quarter of 1998, the Company
recorded $3.9 million in employment contract obligations to several departing
executives. In the first quarter of 1999, the Company negotiated the settlement
of one contract and reduced the corporate restructuring reserve by $0.7 million.
Interest, net for the 26 weeks ended July 25, 1999 was $7.6 million, or 1.0%
of sales, as compared to $5.3 million, or 0.7% of sales, for the same period in
the prior year. The increase of $2.3 million was primarily attributable to an
increase in short-term borrowings under the Company's revolving credit
facilities.
In the first quarter of 1999, the Company recorded a gain on deconsolidation
of its Japanese joint venture of $5.0 million, or 0.7% of sales. See Note 2 of
the Notes to Consolidated Financial Statements.
15
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Income tax expense for the 26 weeks ended July 25, 1999 was $0.4 million, as
compared to $29,000 in the same period of the prior year. The increase in income
tax expense resulted from the increase in pretax income of $1.2 million,
excluding minority interest, in the 1999 period as compared to the 1998 period.
As a result of the foregoing factors, net income for the 26 weeks ended July
25, 1999 was $0.8 million, or 0.1% of sales, as compared to $81,000, or less
than 0.1% of sales, for the same period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund working capital, to
refurbish older, existing stores, and to open new stores in connection with its
expansion strategy. For the 26 weeks ended July 25, 1999 these capital
requirements were generally satisfied by short-term borrowings under the
Company's revolving credit facilities.
Cash flows generated by operating, investing and financing activities as
reported in the Consolidated Statements of Cash Flows for the 26 weeks ended
July 25, 1999 and July 26, 1998 are summarized below. Net cash and cash
equivalents decreased $4.4 million for the 26 weeks ended July 25, 1999, as
compared to an increase of $17.3 million for the same period in the prior year.
Net cash used for operations was $55.8 million for the 26 weeks ended July
25, 1999, as compared to $20.4 million for the same period in the prior year.
Inventory net of accounts payable increased $46.6 million due to a seasonal
increase in inventory levels and a decrease in the percentage of inventory
financed by accounts payable. Accrued payroll and other liabilities decreased
$28.0 million primarily due to payment of seasonally high year-end accruals and
payment of $4.6 million in store exit costs. These uses of cash were partially
offset by income of $19.4 million before gain on deconsolidation, depreciation
and amortization and income taxes.
Net cash used for investing was $18.2 million for the 26 weeks ended July
25, 1999, as compared to $28.6 million for the same period in the prior year.
Capital expenditures in the first 26 weeks of 1999 totaled $15.1 million, and
included $6.3 million for hardware and software upgrades, $3.3 million for
refurbishment of existing stores, and $3.1 million for three store openings (one
of which opened in August 1999). The remaining capital expenditures of $2.4
million were used for improvements at the RDC and corporate office. The
deconsolidation of Mega Sports resulted in a decrease in cash and cash
equivalents of $4.2 million, partially offset by proceeds of $1.1 million from
the ownership restructuring.
16
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Net cash provided by financing for the 26 weeks ended July 25, 1999 was
$69.6 million, as compared to $66.3 million for the same period in the prior
year. The increase for the 1999 period was due mainly to short-term borrowings
under the Company's revolving credit facilities, offset by $1.2 million in debt
issuance costs related to the BankBoston Credit Facility.
The Company's working capital at July 25, 1999 was $63.5 million, as
compared to $101.6 million at July 26, 1998, a decrease of $38.1 million. The
decrease resulted primarily from an increase in short-term borrowings under the
Company's revolving credit facilities of $62.2 million year over year, offset by
the favorable impact of deconsolidating Mega Sports, which had negative working
capital at July 26, 1998 of $17.6 million.
The Company has substantially cut back its expansion program and plans to
open only three stores in 1999. Two of the planned openings were completed in
the first quarter of 1999, and the third opened in August 1999. All three stores
were financed with operating leases. Due to the reduction in store openings,
1999 capital expenditures are projected to be significantly lower than in prior
years. The Company estimates full year capital expenditures will approximate
$32.6 million, as compared to $84.6 million in 1998.
Early in the third quarter, the Company sold three of its owned store sites
to SPI Holdings, LLC ("SPI Holdings") for an aggregate sales price of $19.0
million. Further, the Company has agreed to sell six additional properties for
an aggregate sales price of $32.0 million, subject to the satisfaction of
certain conditions. The Company will continue to operate The Sports Authority
stores in these locations under long-term leases. The proceeds from the sale
will be used to pay down existing debt.
In August 1999, the Company purchased on the open market $23.5 million in
principal amount of its 5.25% Convertible Subordinated Notes (the "Notes"), due
in September 2001, for a total purchase price of $14.0 million excluding accrued
interest. The Company issued a total of $149.5 million of Notes in September
1996. The Company's Board of Directors has authorized the purchase of additional
Notes from time to time. The BankBoston Credit Facility permits the Company to
spend up to $20 million in any calendar year to purchase its own securities.
The Company believes that anticipated cash flows from operations, borrowings
under the BankBoston Credit Facility and proceeds from the sale-leaseback of
owned store sites will be sufficient to fund working capital and finance capital
expenditures through the next 12 months.
17
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
SEASONALITY AND INFLATION
The Company's business is highly seasonal, with its highest sales and
operating profitability occurring in the fourth quarter, which includes the
holiday selling season. In fiscal 1998, 28.7% of the Company's sales occurred in
the fourth quarter. In the future, changes in the number and timing of store
openings and consumer buying habits, particularly in the holiday selling season,
may change seasonality trends.
Management does not believe inflation had a material effect on the financial
statements for the periods presented.
YEAR 2000
Many information and business systems utilize programming code in which
calendar years are abbreviated as two digits. The Year 2000 issue relates to the
potential for systems to interpret the year 2000 as the year 1900, causing
system failure or unreliability.
The Company began its Year 2000 compliance project in 1997. Analysis of
internal compliance consists of the following phases: assessment of information
and non-information systems; remediation; testing; implementation; and,
contingency planning. The Company is also determining compliance of key vendors
and suppliers, and will incorporate alternate sources of goods and services, as
necessary, in its contingency plan.
The assessment of internal information systems is 100% complete.
The assessment indicated areas of non-compliance primarily in the Company's
inventory management system and certain retail applications. Remediation is 100%
complete. Remediation efforts consist principally of software programming
modifications and, to a lesser extent, hardware replacement. The Company
utilized a team of outside consultants and programmers for programming
modifications and testing. Testing is 100% complete. Implementation of
programming modifications is 90% complete, and is expected to be completed by
the end of the third quarter of 1999. Contingency planning is 85% complete, and
will be completed by the fourth quarter of 1999.
The Company expensed as incurred approximately $0.2 million in Year 2000
compliance costs in the second quarter of 1999, and $2.7 million to date. These
costs relate primarily to outside consulting and programming fees, and exclude
the cost of internal staff hours dedicated to the project. The Company expects
to incur an additional $0.2 million in project costs through project completion.
Total project costs are not anticipated to have a material adverse affect on the
Company's results of operations.
18
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
The Company has completed its assessment of non-information technology such
as signage, time clocks, office equipment and alarm systems and has determined
these systems to be materially compliant. Such determinations were made from
written and verbal communication with vendors as well as internal review and
testing.
The Company has sent surveys to all key vendors and suppliers to determine
Year 2000 compliance. The Company has received responses from 90% of vendors
surveyed, of which 100% have indicated that they are or will be compliant by the
end of 1999. The Company is continuing to evaluate the scope of contingency and
disaster recovery plans to establish alternate sources of merchandise, supplies
and services.
Management believes that conversion of internal business and operating
systems will be completed in a timely manner; however, failure to do so could
have a material impact on the Company's operations. Additionally, there can be
no assurances that the Company's key suppliers or vendors will complete their
conversions in a timely manner. In the event this issue prevents third parties
from timely delivery of inventory or services required by the Company, the
Company's results of operations could be materially adversely affected.
FORWARD LOOKING STATEMENTS
Certain statements under the heading "Management's Discussion and Analysis"
and elsewhere in this Form 10-Q constitute "forward looking statements" made in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. As such, they involve risks and uncertainties that could
cause actual results to differ materially from those set forth in such forward
looking statements. The Company's forward looking statements are based on
assumptions about, or include statements concerning, many important factors,
including without limitation changes in discretionary consumer spending and
consumer preferences, particularly as they relate to sporting goods, athletic
footwear and apparel; seasonal patterns in consumer spending and, in particular,
the level of consumer spending during the fourth quarter; the Company's ability
to effectively implement its strategies, including its merchandising,
distribution, marketing and store expansion and refurbishment strategies;
competitive trends and consolidation within the sporting goods retailing
industry; the growing impact of electronic commerce; and the effect of economic
changes in other countries in which the Company does business. While the Company
believes that its assumptions are reasonable, it cautions that it is impossible
to predict the impact of certain factors which could cause actual results to
differ materially from expected results.
19
<PAGE>
THE SPORTS AUTHORITY, INC.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a co-defendant in two suits related to the sale of
firearms, as disclosed in the Company's Form 10-Q for the quarterly period ended
April 25, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 27, 1999, the
stockholders of the Company (i) elected one Class I Director and three Class II
Directors, (ii) approved the Amended and Restated 1994 Stock Option Plan, (iii)
approved the Performance Unit Plan, and (iv) ratified the appointment of Ernst &
Young LLP as independent accountants for the Company for the fiscal year ending
January 23, 1999. The results of these votes were as follows:
(i)
<TABLE>
<CAPTION>
BROKER
DIRECTOR NOMINEES FOR WITHHELD NON-VOTES
----------------- --- -------- ---------
CLASS I
<S> <C> <C> <C>
Charles H. Moore 28,068,731 583,205 0
CLASS II
Nicholas A. Buoniconti 28,030,540 621,396 0
Cynthia R. Cohen 28,038,800 613,136 0
Steve Dougherty 28,034,837 617,099 0
</TABLE>
Other Directors whose term of office continued after the meeting
are as follows:
<TABLE>
<S> <C>
Class I Julius W. Erving
Martin E. Hanaka
Class III A. David Brown
Carol Farmer
Jack F. Kemp
</TABLE>
20
<PAGE>
THE SPORTS AUTHORITY, INC.
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
<S> <C> <C> <C> <C>
(ii) Amended and Restated 1994 Stock
Option Plan 27,721,608 557,525 72,293 300,510
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- -------- ---------
(iii) Performance Unit Plan 15,285,726 546,119 78,269 12,741,822
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- -------- ---------
(iv) Ratification of Accountants 27,490,327 128,485 50,244 982,880
</TABLE>
21
<PAGE>
THE SPORTS AUTHORITY, INC.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
See Index to Exhibits on Page 24
(b) Reports on Form 8-K:
A Form 8-K, which contained information under Item 5,
was filed on July 14, 1999
22
<PAGE>
THE SPORTS AUTHORITY, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SPORTS AUTHORITY, INC.
Date: September 8, 1999 By: /S/ ANTHONY F. CRUDELE
--------------------------------
Anthony F. Crudele
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
23
<PAGE>
INDEX TO EXHIBITS
SEQUENTIAL
EXHIBITS PAGE NUMBER
- -------- -----------
10.1 Termination Agreement, dated July 14, 1999, between the
Company and William Cappiello.
10.2 Agreement for Purchase and Sale and Leaseback, dated
May 14, 1999, between the Company and SPI Holdings, LLC
10.3 Letter Agreement, dated June 14, 1999, between the Company
and SPI Holdings, LLC, including form of Lease Agreement
attached thereto.
10.4 Second Amendment to Agreement for Purchase and Sale and
Leaseback, dated May 14, 1999, dated as of July 29, 1999.
10.5 Third Amendment to Agreement for Purchase and Sale and
Leaseback, dated May 14, 1999, dated as of August 31, 1999.
27.1 Financial Data Schedule
24
EXHIBIT 10.1
TERMINATION AGREEMENT
July 14, 1999
Mr. William D. Cappiello
Dear Bill:
This letter will confirm our understanding concerning the termination
of your employment with The Sports Authority, Inc. (the "Company").
1. Your employment will terminate effective immediately, by mutual
consent.
2. Your last pay check shall be the one dated July 16, 1999.
Thereafter, the Company will pay to you sixteen (16) bi-weekly severance
payments (the first of which shall be dated July 30, 1999 and the last of which
shall be dated February 18, 2000) equal to your current bi-weekly base salary,
plus a final payment of $12,692.31 on March 3, 2000. In addition, the Company
shall promptly pay your accrued vacation pay and shall promptly reimburse you
for all reasonable business expenses incurred on the Company's behalf prior to
the date hereof, and you shall promptly reimburse the Company for any payments
made by it for your temporary living expenses in South Florida after June 1,
1999. All payments hereunder shall be subject to applicable withholding and
deductions.
3. The payments provided hereunder shall constitute the exclusive
payments due you from, and the exclusive obligation of, the Company upon the
termination of your employment. You shall not be required to mitigate the amount
of any payment or benefit provided for in this agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise. The payments hereunder may not be transferred, assigned or encumbered
in any manner, either voluntarily or involuntarily. In the event of your death,
any payments then or thereafter due hereunder will be made to your estate.
4. In consideration of the obligations of the Company hereunder, you
agree that you shall not, for a period of one year from the date hereof, (a)
directly or indirectly become an employee, director, consultant or advisor of,
or otherwise affiliated with, any retailer of sporting goods, footwear or
apparel with retail outlets in the United States (unless the classes of products
sold by such retailer constitute less than 10% of the total sales by the Company
and its licensees in the United States during the Company's 1998 fiscal year),
(b) directly or indirectly solicit or hire, or encourage the solicitation or
1
<PAGE>
hiring of, any person who was an employee of the Company at any time on or after
the date of this agreement (unless more than six months shall have elapsed
between the last day of such person's employment by the Company and the first
date of such solicitation or hiring), (c) disparage the name, business
reputation or business practices of the Company or any of its officers or
directors, or interfere with the Company's existing or prospective business
relationships, or (d) without the written consent of the Chief Executive Officer
of the Company, disclose to any person other than as required by law or court
order, any confidential information obtained by you while in the employ of the
Company, provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by you) or any specific information or type of
information generally not considered confidential by persons engaged in the same
business as the Company, or information disclosed by the Company by any member
of its Board of Directors or any other officer thereof to a third party without
restrictions on the disclosure of such information.
You acknowledge that these restrictions are reasonable and necessary to
protect the Company's legitimate interests, that the Company would not have
entered into this agreement in the absence of such restrictions, and that any
violation of these restrictions will result in irreparable harm to the Company.
You agree that the Company shall be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages, as well as
an equitable accounting of all earnings, profits and other benefits arising from
any violation hereof, which rights shall be cumulative and in addition to any
other rights or remedies to which the Company may be entitled. You irrevocably
and unconditionally (i) agree that any legal proceeding arising out of this
paragraph may be brought in the United States District Court for the Southern
District of Florida, or if such court does not have jurisdiction or will not
accept jurisdiction, in any court of general jurisdiction in Broward County,
Florida, (ii) consent to the non-exclusive jurisdiction of such court in any
such proceeding, and (iii) waive any objection to the laying of venue of any
such proceeding in any such court. You also irrevocably and unconditionally
consent to the service of any process, pleadings, notices or other papers.
5. You irrevocably and unconditionally release the Company, its
predecessors, successors, and assigns, as well as past and present officers,
directors, and employees, from any and all claims, liabilities, or promises
outside of this agreement, known or unknown, arising out of or relating to your
employment with the Company. You waive these claims on behalf of yourself and on
behalf of your heirs, assigns, and anyone making a claim through you. The claims
waived and discharged include, but are not limited to: (a) employment
discrimination claims (including claims of sex discrimination and/or sexual
harassment) and retaliation under Title VII of the Civil Rights Act of 1964; (b)
age discrimination claims under the Age Discrimination in Employment Act; (c)
State of Florida and County of Broward equal employment opportunity act claims;
(d) disputed wages, including claims for any back wages; (e) wrongful discharge
and/or breach of contract claims; and (f) tort claims, including invasion of
privacy, defamation, fraud, and infliction of emotional distress. You will not
bring any legal action against the Company, its predecessors, successors and
assigns, as well as past and present officers, directors, and employees for any
claim waived and you represent and warrant that you have not filed any such
claim to date.
2
<PAGE>
6. You represent that you understand completely your right to review
all aspects of this agreement with an attorney of your choice, have had the
opportunity to consult with an attorney of your choice, have carefully read and
fully understand all the provisions of this agreement and that you are freely,
knowingly, and voluntarily entering into this agreement and the release
contained herein.
7. You acknowledge that you have been informed of the following rights
available to you under Age Discrimination in Employment Act (ADEA):
(a) You have the right to consult with an attorney before signing this
Agreement;
(b) You do not waive rights or claims under ADEA that might arise after
the date this waiver is executed;
(c) You have twenty-one (21) days from the date you receive this
agreement to consider this agreement;
(d) You have seven days after signing this agreement to revoke it.
8. This agreement shall be governed by and interpreted under the laws
of the State of Florida without giving effect to any conflict of laws
provisions.
9. This agreement sets forth the entire understanding with respect to
the subject matter hereof and supersedes all prior agreements, written or oral
or express or implied, between you and the Company as to such subject matter.
This agreement may not be amended, nor may any provision hereof be modified or
waived, except by an instrument in writing duly signed by you and the Company.
10. If any provision of this agreement, or any application thereof to
any circumstances, is invalid, in whole or in part, such provision or
application shall to that extent be severable and shall not affect other
provisions or applications of this agreement.
Please indicate your agreement by signing below and retain one copy for
you records.
Sincerely,
THE SPORTS AUTHORITY, INC.
By:
------------------------
Witness: Agreed:
- ----------------------------- -----------------------------
Date: ____________, 1999 Date: ____________, 1999
3
EXHIBIT 10.2
AGREEMENT FOR PURCHASE AND SALE
AND LEASEBACK
BETWEEN
SPI HOLDINGS, LLC
AND
THE SPORTS AUTHORITY, INC.
DATED AS OF MAY 14, 1999
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
AND LEASEBACK
THIS AGREEMENT FOR PURCHASE AND SALE AND LEASEBACK ("Agreement") is
made and entered into as of May 14, 1999 (the "Effective Date"), by and between
THE SPORTS AUTHORITY, INC., a Delaware corporation and THE SPORTS AUTHORITY
FLORIDA, INC., a Florida corporation, (with respect to each Building (as defined
below) "Seller" shall mean The Sports Authority Florida, Inc. with respect to
the Buildings located in the State of Florida, and The Sports Authority, Inc.
with respect to the Buildings located outside the State of Florida), and SPI
HOLDINGS, LLC, a Delaware limited liability company or its nominee ("Buyer"), as
follows:
RECITALS
A. Seller is the owner of eight buildings and the ground lessee of one
building in which it is operating retail sporting goods stores, which stores are
located in Braintree, Massachusetts, Norwalk, Connecticut, Arrowhead, Arizona,
Chula Vista, California (which property comprises one building in which Seller
operates a store and leases adjacent premises to Bed, Bath & Beyond), Fresno,
California, and the following four cities in Florida: Boca Raton, East Fort
Lauderdale, Naples and St. Petersburg.
B. Seller desires to sell said eight buildings and related real
property, its ground leasehold interest in the other building, and the personal
property described below to Buyer and to lease such assets back from Buyer, and
Buyer desires to purchase such assets from Seller to lease them back to Seller
(excluding from such lease back the Bed, Bath & Beyond premises in Chula Vista,
California and the outparcel in St. Petersburg, as described below), in
accordance with the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
AGREEMENT
1. PURCHASE AND SALE. Upon and subject to the following terms and
conditions, Seller agrees to sell to Buyer, and Buyer agrees to purchase and
accept from Seller, the following real and personal property (collectively, the
"Property"); (a) all of the real properties upon which the buildings are located
as identified in EXHIBIT A attached to this Agreement, excluding the East Fort
Lauderdale land (the "Land"); (b) all buildings and improvements located on the
Land and the its interest in the
1
<PAGE>
buildings and improvements located on the East Fort Lauderdale land identified
in EXHIBIT A, including all equipment permanently affixed thereto, but excluding
trade fixtures (the "Improvements"); (c) all of Seller's rights in the licenses,
franchises, permits and entitlements (to the extent transferable and related to
the Land and Improvements, rather than the business conducted therein) related
thereto (the "Entitlements"); (d) all of Seller's rights in plans and
specifications with respect to the Improvements, to the extent transferable (the
"Plans"); (e) as to the Chula Vista property, Seller's interest as landlord in
the lease with Bed, Bath & Beyond; and (f) as to the East Fort Lauderdale site,
Seller's ground leasehold interest therein . As used herein, "Building" shall
refer to the Property at a particular location described in EXHIBIT A and shall
include all the Land (or with respect to the East Fort Lauderdale site, Seller's
ground leasehold interest therein), Improvements and the above-described related
assets with respect to such location.
2. ESCROW. Within five (5) business days following the execution of
this Agreement by both Buyer and Seller, Buyer and Seller shall open an escrow
("Escrow") with First American Title Insurance Company ("Escrow Holder") at its
Walnut Creek, California or other office selected by Buyer by delivering a fully
executed copy of this Agreement to Escrow Holder. Escrow Holder will notify both
parties in writing of the date of Opening of Escrow. As used in this Agreement,
the term "Opening of Escrow" shall mean the date on which the Escrow Holder
receives the Initial Deposit in immediately available funds from Buyer after a
copy of this Agreement signed by both Seller and Buyer is delivered to Escrow
Holder. This Agreement shall also constitute instructions to Escrow Holder.
Escrow Holder will require additional escrow instructions ("Additional
Instructions") to complete this transaction and Seller and Buyer agree to
promptly execute and deliver such Additional Instructions to Escrow Holder. If
there is any conflict or inconsistency between the terms and conditions of this
Agreement and the Additional Instructions, this Agreement shall govern unless
the Additional Instructions are jointly executed by both Buyer and Seller, and
specifically state that one or more of the provisions of the Additional
Instructions shall govern.
3. PURCHASE PRICE. The Purchase Price for the Property ("Purchase
Price") shall be Fifty-One Million Five Hundred Thousand Dollars ($51,500,000).
Subject to adjustment as provided in Section 11.3, the Purchase Price shall be
allocated between each Building as shown on EXHIBIT B attached hereto. Based
upon Buyer's determination of the relative values of the respective Buildings
after completion of Buyer's feasibility investigation pursuant to Section 5.2,
Buyer may at least five (5) business days prior to the Closing on each Phase (as
defined at Section 4.1) give notice to Seller and Escrow Holder reallocating the
Purchase Price of each Building within such Phase, provided that the aggregate
Purchase Price for all Buildings within the Phase shall remain unchanged; and
provided further that Seller may reject any such Purchase Price reallocation if
Seller determines in its sole discretion that such
2
<PAGE>
reallocation would adversely affect Seller. The Purchase Price shall be payable
as follows:
3.1 INITIAL DEPOSIT. Within three (3) business days of the
Effective Date, Buyer shall make a deposit of Two Hundred Fifty Thousand Dollars
($250,000) (the "Initial Deposit") into Escrow. Escrow Holder shall place such
deposit and any other funds deposited by Buyer into Escrow in an
interest-bearing account having no penalty for early withdrawal. Interest earned
in such account shall be credited to Buyer. Such Initial Deposit and the
Extension Deposit (as defined in Section 4.2), excluding the interest earned on
either of the foregoing are referred to herein as the "Deposit". After the
Approval Period, the Deposit shall not be refundable, except as expressly
provided in this Agreement. The Deposit shall be credited to the Purchase Price
at the Closing; provided however that if as provided in Section 4.1, there are
phased Closings, the Deposit shall be credited to the Purchase Price at each
such Closing as shown on EXHIBIT B attached hereto, subject to adjustment as
provided in Section 11.3. Each time the Deposit, or a portion thereof, is
released to a party pursuant to the provisions of this Agreement, the interest
earned on the Deposit to the date of such distribution shall be paid to Buyer.
3.2 PAYMENT OF BALANCE OF PURCHASE PRICE. Prior to each
Closing, Buyer shall deposit cash or other immediately available funds into
Escrow in the amount of the Purchase Price for such Closing, less the portion of
the Deposit to be credited to the Purchase Price for such Closing, plus Buyer's
closing costs in the amount determined by Escrow Holder in accordance with
Section 12 of this Agreement.
4. CLOSING OF ESCROW. Subject to the satisfaction of all conditions
precedent to the Closing of Escrow as set forth in this Agreement, the closing
("Closing") of the purchase and sale of the Property shall take place through
Escrow on such date on or after August 17, 1999 as may be designated by Buyer
upon at least seven business days notice to Seller, but in no event later than
August 31, 1999 (the "Outside Closing Date"), subject to extensions by Buyer
under Sections 4.2 and 4.3, and subject to any extension by Seller under Section
5.1.2. The date of the Closing, determined in accordance with this Section 4, is
called the "Closing Date". As used in this Agreement, the terms "Closing" or
"Closing of Escrow" shall refer to the date on which Seller's grant deed (which
is not a general warranty deed) or special warranty deed (whichever is
customarily used in the county in which the Building is located) conveying fee
simple title to the Property (the "Deed") is delivered through Escrow to Buyer
and the Title Company issues its commitment for a Title Policy with respect
thereto, as provided in Section 7 below.
4.1 PHASED CLOSINGS. Subject to the period described above for
Closing of Escrow and the extensions of the Closing Date permitted below, Buyer
may elect to
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Close Escrow in up to three separate phases (each a "Phase"). Subject to such
time limitations, Buyer shall select the Closing Date(s) upon at least seven
days prior notice to Seller and Escrow Holder. If Buyer desires to Close Escrow
in Phases, then at least seven days prior to the each Closing Date, Buyer shall
identify the stores to be included in the Phase for such Closing Date and the
anticipated Closing Date for such Phase. If Buyer elects to close the purchase
contemplated herein in Phases, all Phases must be closed by the Outside Closing
Date; however, such Outside Closing Date may differ as to one or more Phases if
Buyer has extended the Outside Closing Date for such Phase or Phases pursuant to
Section 4.2 and/or Section 4.3.
4.2 EXTENSION OF CLOSING DATE. At the election of Buyer, which
shall be exercised at least seven business days prior to the initial Outside
Closing Date, Buyer may extend such Outside Closing Date by 30 days by paying an
additional deposit (the "Extension Deposit") into Escrow. The Extension Deposit
shall be One Hundred Fifty Thousand Dollars ($150,000) if Buyer elects to extend
the Outside Closing Date as to all nine Buildings. If Buyer elects to extend the
Outside Closing Date for less than all the Buildings, then Extension Deposit
shall be paid as to each Building for which the Outside Closing Date is
extended, such payment to be in the amounts shown on EXHIBIT B attached hereto
(as such amount may be adjusted pursuant to Section 11.3). The election to
extend shall be effective for all Buildings, unless at the time Buyer makes the
Extension Deposit, Buyer notifies Seller that the extension does not apply to
one or more Buildings. Escrow Holder shall place the Extension Deposit in an
interest-bearing account for the benefit of Buyer. The Extension Deposit,
excluding the interest earned thereon, shall be included in the "Deposit" and
shall be non-refundable, except as expressly provided in this Agreement. The
Deposit as so increased shall be credited to the Purchase Price as to each
Building at Closing, such credit to be in the amounts shown on EXHIBIT B (as
such amounts may be adjusted pursuant to Section 11.3). Each time the Deposit,
or a portion thereof, is released to a party pursuant to the provisions of this
Agreement, the interest earned on the Deposit to the date of such distribution
shall be paid to Buyer.
4.3 FURTHER EXTENSION TO ACCOMMODATE LENDERS. In addition to
the extension to which Buyer is entitled under Section 4.2, Buyer may by request
made at least seven business days prior to the then scheduled Outside Closing
Date, further extend the Outside Closing Date for one or more Phases, with such
extension not to exceed 30 days, to enable Buyer's lender for such Phase to
complete its due diligence on the Buildings in such Phase and/or to enable Buyer
and such lender to complete the processing of the loan documents and consummate
Buyer's acquisition loan; provided however that for each Phase, only one
extension under this Section 4.3 shall be allowed, and no such extension shall,
without the approval of Seller which may be given or denied in its sole
discretion, cause the Outside Closing Date to occur later than October 30, 1999.
Buyer shall not be entitled to extend the Outside Closing Date for a Phase
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unless at the time of such extension, (i) Buyer has delivered to Seller a copy
of Buyer's loan commitment (or equivalent loan document) from a third party
financial institution that has sufficient resources to close and fund the loan;
(ii) Buyer has made all deposits with the lender at that time required by such
loan commitment; and (iii) the loan commitment provides for a loan closing date
that is no later than the Outside Closing Date for the Phase, as so extended.
5. BUYER'S INVESTIGATION.
5.1. TITLE. As soon as practicable following the Opening of
Escrow, Escrow Holder shall provide Buyer a standard coverage preliminary title
report for each Building, showing the state of title of the Land for such
Building, together with copies of all documents referred to therein
(collectively, "Title Report"). Any Title Report, title commitment and title
policy for a Building in Florida required under this Agreement shall be issued
by such agent for the Escrow Holder as may be designated by Seller. Seller shall
arrange for the Title Report, title commitment and title policy for any Building
outside of Florida to be issued by or through Escrow Holder's national accounts
department in Fort Lauderdale. Seller will order the Title Reports promptly
after the approval of the Store Lease.
5.1.1 As to each Building, prior to the earlier
to occur of (i) the expiration of the Approval Period, or (ii) 20 days after the
later of Buyer's receipt of (a) the Title Report from Escrow Holder, and (b) a
current ALTA survey is obtained by Buyer pursuant to Section 5.2 below (the
"Survey"), Buyer shall notify Seller and Escrow Holder in writing of any
unacceptable exceptions in the Title Report and Survey. Buyer shall have no
obligation to accept or approve any exceptions to title shown in the Survey or
in the Title Report, except nondelinquent real property taxes and assessments.
If Buyer fails, prior to the earlier of (i) or (ii) above, to approve or
disapprove in writing any exceptions shown in the Survey and Title Report for a
Building, Buyer shall be deemed to have approved the Survey and Title Report as
to such Building.
5.1.2 As to each Building, upon receipt of Buyer's
written notification of any exceptions that are not acceptable to Buyer, Seller
shall have 10 days within which to elect, at Seller's sole discretion, by
written notice to Buyer to clear from the title any exceptions to which Buyer
has objected. Seller's failure to notify Buyer in writing within such 10 day
period shall be deemed Seller's election to not cure such exceptions. If Seller
elects to cure such exceptions or any additional exceptions added subsequent to
the initial date of each Title Report, Seller shall exercise commercially
reasonable efforts to cause same to be removed from record title (or otherwise
rendered acceptable to Buyer) at Seller's expense prior to the Close of Escrow
(provided however that in doing so, Seller shall not be required to expend more
than $15,000 as to any
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Building). If Seller does not elect to cure such exceptions, Buyer may elect
within five days of such 10 day period to either waive its objections and
proceed with the purchase of the Building, or to terminate this Agreement as to
such Building (and upon such termination, the Purchase Price shall be adjusted
pursuant to Section 11.3), in which event Buyer shall be entitled to the prompt
return of the Deposit allocable to such Building, unless Buyer and Seller agree
on a replacement Building pursuant to Section 11. If Seller elects to cure an
exception but notwithstanding Seller's exercise of commercially reasonable
efforts (taking into account the expenditure limit for each Building set forth
above), Seller is unable to do so prior to the date that is seven days prior to
the scheduled Close of Escrow for such Building, Seller may elect to extend the
Outside Closing Date for such Building for up to 60 days to attempt to complete
such cure, provided that such extension does not render Buyer unable to Close
Escrow due to the termination of Buyer's loan commitment for such Building, and
provided further that Seller pays any necessary extension fee if one must be
paid to extend such loan commitment. If Seller is ultimately unable to timely
remove an exception, Buyer may elect to either waive its objection and proceed
with the purchase of the Building, or to terminate this Agreement as to such
Building (in either case, without any recourse against Seller regarding the
existence of such exception), in which event Buyer shall be entitled to the
prompt return of the Deposit allocable to such Building, unless Buyer and Seller
agree on a replacement Building pursuant to Section 11.
5.1.3 Notwithstanding the foregoing provisions
of this Section 5.1, Seller hereby covenants and agrees that all deeds of trust,
tax liens, mechanic's liens and similar monetary encumbrances (except for
nondelinquent real property taxes and assessments) created or suffered by Seller
during Seller's ownership shall all be removed of record from each Building by
Seller prior to or at the Closing of such Building, at Seller's sole cost and
expense.
5.2. FEASIBILITY. During the period commencing on the Opening
of Escrow and ending on the date that is the 45 days after the parties have
reached agreement on the form of the Lease pursuant to Section 10.2, which
period is referred to herein as the "Approval Period", Buyer shall have the
right, as to each Building:
5.2.1. To conduct such independent investigations
as Buyer deems necessary or appropriate concerning the ownership and operation
of the Property and Seller's business thereon. To facilitate Buyer's
investigation of the Property, Seller has, prior to or concurrently with the
execution hereof, delivered to Buyer copies of certain title policies, surveys,
environmental reports and sales reports relating to the Property and as to the
Chula Vista property, a copy of the Bed, Bath & Beyond lease, and all amendments
thereto (the "BB&Y Lease"), and a copy of the East Fort Lauderdale ground lease,
and all amendments thereto (the "EFL Ground Lease"). In addition, at
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reasonable times during working hours, and upon reasonable notice to Seller,
Buyer shall have the right to inspect any of the following items that are in the
possession of Seller and readily available for inspection, and Seller shall,
upon Buyer's request as to specific items identified upon such inspection by
Buyer, make copies thereof for Buyer at Seller's expense:
5.2.1.1.Soils and geologic reports; grading,
engineering and improvement plans (including "as built" drawings); surveys;
physical building reports, including structural and roof reports; and reports
pertaining to any environmental assessments of the Property;
5.2.1.2.Governmental approvals, permits and
certificates of occupancy relating to the ownership and operation of the
Property;
5.2.1.3.Repair records, warranties,
guaranties, service and maintenance contracts, management contracts and similar
agreements relating to the ownership and operation of the Property; and
5.2.1.4.If available, monthly and annual
sales reports for each Building for the most recent three fiscal years or from
store opening, whichever is shorter;
5.2.1.5.If available, "as built" drawings as
to each Building.
All information, reports, items and other materials now or hereafter
furnished by Seller to Buyer or obtained by Buyer from Seller in connection with
the Property (through inspection, copying or otherwise) are collectively called
the "Materials".
5.2.2. To obtain, as to each Building, a current
ALTA survey, a current Phase I environmental report and a current report
regarding the physical condition of the Improvements. Promptly after agreement
of the parties on the form of the Store Lease, Buyer shall order such surveys
and reports as may be desired by Buyer for preparation by third parties. Buyer
shall pay the costs for such surveys and reports and Seller shall reimburse
Buyer for one-half of such costs within 15 days after receipt by Seller from
Buyer of invoices for such costs; provided however that such reimbursement
obligation shall be limited to the costs of such surveys and reports at
reasonable competitive rates. Notwithstanding the foregoing, Seller shall have
no obligation to reimburse Buyer for the costs of the survey and reports for a
Building(s) if Buyer terminates this Agreement as to such Building(s) prior to
the expiration of the Approval Period, unless the basis for such termination by
Buyer is a factor that a reasonably prudent purchaser would determine as
materially adversely affecting the
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marketability of title for such Building(s), or the physical condition of the
improvements for such Building(s), or the financability of the transaction as to
such Building(s), or the value of the Building(s). As to those surveys and
reports ordered by Buyer for which the costs are shared by the parties, such
surveys and reports shall be certified for the benefit of both Buyer and Seller
and copies shall be provided to both Buyer and Seller.
5.2.3. To conduct building inspections, soils and
environmental tests and investigations, and other customary engineering tests,
surveys and inspections regarding the Property, including its structural and
mechanical systems.
` 5.2.4 To review the financial condition of Seller.
To facilitate such review, Seller shall make senior management reasonably
available to Buyer to discuss Seller's plans for attaining and maintaining
profitability.
5.3. RIGHT TO TERMINATE DURING APPROVAL PERIOD. During the
Approval Period, if Buyer disapproves the condition of title to any Building as
set forth in the Survey or Title Report, or, upon investigation of the Building
pursuant to Section 5.2, discovers any matter, condition or occurrence that
would, in Buyer's sole and absolute discretion, adversely affect Buyer's
profitable ownership of the Building, or its ability to finance the Building, or
if for any other reason Buyer does not wish to proceed with the purchase of one
or more of the Buildings, then Buyer may terminate this Agreement as to a
specified Building or Buildings by identifying such Buildings for termination in
the "Approval Notice" described below (and in the event of such termination the
Purchase Price shall be adjusted as provided in Section 11.3); provided however
that if Buyer fails to give any notice prior to the expiration of the Approval
Period, Buyer shall be deemed to have elected to terminate this Agreement. If
this Agreement is terminated (i) Escrow Holder shall refund the Deposit to
Buyer, return to Buyer all interest earned thereon, and return all documents and
instruments to the parties who deposited the same, (ii) Buyer shall pay all of
Escrow Holder's cancellation fees and expenses, and (iii) neither party shall
have any further obligation or liability hereunder, except as to Seller's
reimbursement obligations under Section 5.2.2, Buyer's obligations under Section
5.4 and each party's respective obligations under Section 14 below. Buyer's
election to proceed with the purchase of Buildings shall only be made by Buyer's
delivery to Seller and Escrow Holder, prior to the expiration of the Approval
Period, of written notice approving the purchase of the Buildings which Buyer
has determined are acceptable for purchase, which notice (the "Approval Notice")
shall specify the Buildings that Buyer will purchase and the Building(s), if
any, with respect to which Buyer has elected to terminate this Agreement. If the
Approval Notice specifies one or more Buildings with respect to which Buyer has
elected to terminate this Agreement, then pursuant to Section 11 below, Buyer
and Seller may agree upon replacement Buildings therefor.
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5.4. LICENSE. Seller hereby grants to Buyer and its employees,
agents, and consultants a nonexclusive license to enter upon the Property during
the Approval Period and throughout the term of the Escrow for the purpose of
conducting feasibility studies and physical examinations of the Property
provided, however, that (a) any such entry on the Property shall be upon
reasonable notice to Seller, at reasonable times, and at the sole risk of Buyer,
(b) no invasive inspections, drilling or ground penetrations shall be done
without Seller's prior written consent, which will not be unreasonably withheld,
(c) any entry upon or examination of the Property shall be conducted in such
manner so as not to disrupt the conduct of business on the Property , and (d)
the Property shall not damaged by any such entry and examinations and shall be
restored, at Buyer's expense, to the condition existing immediately prior to any
such entry or examination. Buyer shall indemnify, defend, protect and hold
Seller and the Property free and harmless from and against all loss or liability
(excluding however losses or liabilities arising out of the information revealed
in the results of such investigations and examinations), including Seller's
reasonable attorney and paralegal fees and expenses, arising from or in
connection with any entry by Buyer or its employees, agents and consultants upon
the Property, any examinations or investigations conducted by or at the request
of Buyer, or any mechanics' liens or other liens resulting from any such entry,
examinations or investigations, which indemnity shall survive the termination of
this Agreement. Buyer shall deliver to Seller a general liability insurance
policy (or a certificate evidencing the same) with limits of not less than One
Million Dollars ($1,000,000) combined single limit for bodily injury and
property damage liability in any one occurrence which names Seller as an
additional insured. Buyer shall pay for all work and inspections performed on or
in connection with the Property and shall not permit the creation of any lien in
favor of any contractor, materialman, mechanic, surveyor, architect or laborer.
The recourse of Seller against Buyer under this Section 5.4 is in addition to
the liquidated damages provisions of Section 8.3 and shall not be limited
thereby. Notwithstanding any language to the contrary in this Agreement, Buyer's
obligations under this Section 5.4 shall survive the termination of this
Agreement.
5.5 MATERIALS AND REPORTS. Seller agrees to assign to Buyer at
each Closing, Seller's interests in the Materials prepared by third parties
(excluding the title policies and surveys issued to Seller) for the Buildings
purchased at such Closing, to the extent that such interests are assignable.
Such assignment shall reserve to Seller the nonexclusive right to enforce any
claims that Seller may have under the Materials. All Materials are intended
solely to facilitate and assist Buyer in its own investigation of the Property
and except as expressly set forth in this Agreement, Seller disclaims any
representation or warranty as to the contents of the Materials, or the truth,
accuracy or completeness thereof. In the event that this Agreement is terminated
for any reason other than a default of Seller, Buyer agrees to provide to
Seller, within 10 days of any
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such termination, copies of all surveys, engineering reports and other studies
and reports obtained by Buyer with respect to any portion of the Property not
purchased by Buyer, and to return to Seller all of the Materials relating to any
portion of the Property not purchased by Buyer. Buyer disclaims any warranty as
to any studies, reports and materials provided to Seller pursuant to this
Section 5.
5.6 FLORIDA DISCLOSURES. The following notification is given
pursuant to Section 404.056(6), Florida Statutes: "Radon Gas: Radon is a
naturally occurring radioactive gas that, when it has accumulated in a building
in sufficient quantities, may present health risks to persons who are exposed to
it over time. Levels of radon that exceed federal and state guidelines have been
found in buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county public health unit." Buyer is hereby
notified, as required by Section 553.996, Florida Statutes, that Buyer has the
right to have the energy-efficiency rating determined for each Building
constituting a part of the Property. Buyer acknowledges receipt of a copy of the
energy-efficiency rating information brochure prepared by the State of Florida.
Buyer acknowledges and agrees that any radon testing or energy efficiency rating
determination with respect to the Property or any part thereof shall be at the
Buyer's expense, and that after the Approval Period, the obligations of Buyer
under this Agreement and the Closing are not conditioned on the Buyer's approval
of the results of any radon testing or energy-efficiency rating determination.
5.7 BUYER ACKNOWLEDGMENT. Buyer agrees and acknowledges that
except as expressly contained in this Agreement, (i) neither Seller, nor anyone
acting for or on behalf of Seller, has made any representation, statement,
warranty or promise to Buyer concerning the physical aspects, income potential
or condition of or any other matter with respect to the Property; (ii) subject
to the representations and warranties of Seller set forth in this Agreement,
Buyer is purchasing the Property in an "AS IS" physical condition and in an "AS
IS" state of repair. No person acting on behalf of Seller is authorized to make,
and by execution hereof Buyer acknowledges and agrees that no such person has
made any representation or warranty, except as may be expressly set forth in
this Agreement. Further, except as otherwise expressly provided in this
Agreement, Seller is not liable for or bound in any manner in connection with
any information (including, without limitation, the Materials) which Buyer has
heretofore obtained or hereafter may obtain from Seller, Buyer having the right
to conduct its own investigation with respect to all such information. Except as
otherwise expressly provided in this Agreement, there are no express or implied
warranties given to Buyer and Seller does hereby disclaim any and all warranties
of merchantability and fitness.
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6. REPRESENTATIONS AND WARRANTIES.
6.1 SELLER. The representations and warranties of Seller are
set forth below and in other provisions of this Agreement. Those that are stated
to be made "to the best of Seller's knowledge" or "to Seller's knowledge" or
similar verbiage shall be limited in meaning to the actual (as distinguished
from implied, imputed and constructive) knowledge of Henry Flieck, Debra Steer
and Don Jackson ("Informed Parties"), without inquiry or investigation, and
without imputation to the Informed Parties or Seller of facts and matters
otherwise within the personal knowledge of any other officers or employees of
Seller or third parties. Seller represents and warrants to, and covenants with
Buyer, as follows.:
6.1.1. Seller has not alienated, encumbered,
transferred, optioned, leased, assigned, transferred or otherwise conveyed any
of its interest in the Property except as set forth in the Title Report, nor has
Seller entered into any agreement (other than this Agreement) so to do.
6.1.2 The Sports Authority, Inc. is a corporation
organized, validly existing and in good standing under the laws of the State of
Delaware. The Sports Authority Florida, Inc. is a corporation organized, validly
existing and in good standing under the laws of the State of Florida. Seller has
full capacity, right, power and authority to enter into this Agreement and to
perform its obligations hereunder, and to carry on its business in each of the
Buildings.
6.1.3 This Agreement has been duly authorized by
Seller and the person(s) executing this Agreement on behalf of Seller have the
right, power and authority to do so. This Agreement constitutes the legal, valid
and binding obligation of Seller enforceable against Seller in accordance with
its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium and other principles relating to
or limiting the rights of contracting parties generally. Neither this Agreement
nor the consummation of any of the transactions contemplated hereby violates or
shall violate any provision of any agreement or document to which Seller is a
party or to which Seller is bound. Except as set forth in SCHEDULE 6.1.3 hereto,
no consent from any third party is required before any of the Land and
Improvements may be conveyed to Buyer, and as to the consents described in said
SCHEDULE 6.1.3, Seller covenants and agrees to obtain such consents prior to the
Close of Escrow of each Building affected thereby.
6.1.4 Except as disclosed in any environmental
assessment/report delivered by Seller to Buyer pursuant to Section 5, to the
best of Seller's knowledge, the Property is not in violation, nor has been or is
currently under investigation for violation of any applicable federal, state or
local laws, ordinances, codes, statutes,
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regulations, administrative rules, policies and orders, and other authority
which classify, regulate, list or define hazardous substances, materials,
wastes, contaminants, pollutants and/or Hazardous Materials, as defined below
("Hazardous Materials Laws"). The term "Hazardous Material(s)" shall mean any
toxic or hazardous substance, material or waste or any pollutant or contaminant
or infectious or radioactive material, including but not limited to, those
substances, materials or wastes regulated under any Hazardous Materials Laws,
and any and all of those substances included within the definitions of
"hazardous substances," "hazardous materials," "imminently hazardous chemical
substance or mixture," "toxic substances," "hazardous air pollutant," "toxic
pollutant," or "solid waste" under such laws and other applicable local, state
or federal law for the protection of health or the environment, or which are
classified as hazardous or toxic substances, materials or wastes, pollutants or
contaminants, as defined, listed or regulated by any federal, state or local
law, including, without limitation, (i) trichloroethylene, tetrachloroethylene,
perchloroethylene and other chlorinated solvents, (ii) any petroleum products or
fractions thereof, (iii) asbestos, (iv) polychlorinated biphenyls, (v) flammable
explosives, (vi) urea formaldehyde and (vii) radioactive materials and waste.
Except as disclosed in any environmental assessment/report delivered by Seller
to Buyer pursuant to Section 5, neither Seller nor, to the best of Seller's
knowledge, any third party has used, generated, manufactured, stored or disposed
in, at, on, under or about the Property or transported to or from the Property
any Hazardous Materials in violation of applicable law. Except as disclosed in
any environmental assessment/report delivered by Seller to Buyer pursuant to
Section 5, to the best of Seller's knowledge, there has been no discharge,
migration or release of any Hazardous Materials from, into, on, under or about
the Property in violation of applicable laws; and, to the best of Seller's
knowledge, there is not now, nor has there ever been on or in the Property
underground storage tanks.
6.1.5 To the best of Seller's knowledge, Seller
is not in default under, and Seller has received no notice that any event has
occurred which with the giving of notice or the passage of time, or both, would
constitute a default under any agreement, covenant, condition, restriction,
lease, easement, encumbrance or instrument pertaining to or affecting title to,
or Seller's right to occupy, or the ability of Seller to continue the operation
of Seller's business upon, the Property; provided however Seller has disclosed
to Buyer certain facts relating to the Bed Bath & Beyond use and improvements at
the Chula Vista Building, as referenced in that certain Agreement dated November
16, 1998 between Seller and Bed Bath & Beyond.
6.1.6 To the best of Seller's knowledge, the real
property of which the Building is a part is zoned to permit Seller's business as
conducted thereon. To the best of Seller's knowledge, there is no suit, action
or arbitration, or legal, administrative, or other proceeding or governmental
investigation, formal or informal,
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including but not limited to eminent domain or condemnation proceeding, a
proceeding to establish a new assessment district or increase the assessments
imposed by an existing assessment district, or a zoning change proceeding,
pending or threatened, which affects the Property.
6.1.7 To the best of Seller's knowledge, there
are no lawsuits, claims, proceedings or investigations pending or threatened
against or affecting the Property or Seller (as to the latter, which would
adversely affect Seller's ability to complete the transaction contemplated in
this Agreement) nor, to the best of Seller's knowledge, is there any basis for
any of the same, and there are no lawsuits or proceedings pending in which
Seller is the plaintiff or claimant and which pertain to or affect title to, or
Seller's right to occupy of, or the ability of Seller to continue the operation
of Seller's business upon, the Property.
6.1.8 Except as disclosed in the Materials, to
the best of Seller's knowledge, the Property is in good condition and is free of
material defects, and has been maintained in first class condition in accordance
with good industry practices for the maintenance of similar properties.
6.1.9 To the best of Seller's knowledge, as to
each Building, neither Seller nor the Building is in violation of any covenants,
conditions and restrictions, reciprocal easement agreements or other similar
agreements, including, those that govern the shopping center (if any) of which
any Building is a part; provided however Seller has disclosed to Buyer certain
facts relating to the Bed Bath & Beyond use and improvements at the Chula Vista
Building, as referenced in that certain Agreement dated November 16, 1998
between Seller and Bed Bath & Beyond. To the best of Seller's knowledge, Seller
has not received any notices asserting any such violation by Seller or the
Building.
6.1.10 To the best of Seller's knowledge, Seller
has not received notice from Seller's insurance carriers of any defects or
inadequacies in the Property, or any portion thereof, which would adversely
affect the insurability of the Property or the cost of any such insurance.
Seller has not received notice of, and to the best of Seller's knowledge, there
are no pending insurance claims with respect to any portion of the Property,
other than claims that may have arisen in the normal course of, and relating to,
the conduct by Seller of its retail store operations thereon.
6.1.11 To the best of Seller's knowledge, Seller
has no knowledge of (a) any existing damage to the Buildings arising from
seismic activities, and (b) except as to the Buildings in California and
Massachusetts, any recent seismic activity affecting the Property or any active
fault bisecting, underlying or adjacent to the Property.
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6.1.12 Neither Seller, nor any entity or person
that directly or indirectly owns or controls Seller is bankrupt or insolvent
under any applicable Federal or state standard, nor has any such party filed for
protection or relief under any applicable bankruptcy or creditor protection
statute nor has any such party been threatened by creditors with an involuntary
application of any applicable bankruptcy or creditor protection statute. Seller
is not entering into the transactions described in this Agreement with an intent
to defraud any creditor or to prefer the rights of one creditor over any other.
Seller and Buyer have negotiated this Agreement at arms-length and the
consideration to be paid represents fair value for the assets to be transferred.
6.2 BUYER. Buyer makes the following representations,
warranties and covenants to Seller:
6.2.1 The party executing this Agreement as Buyer
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer has the right, power and
authority to enter into this Agreement and to perform its obligations hereunder,
and the person(s) executing this Agreement on behalf of Buyer have the right,
power and authority to do so.
6.2.2 This Agreement constitutes the legal, valid
and binding obligation of Buyer enforceable against Buyer in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium and other principles relating to or limiting
the rights of contracting parties generally. This Agreement does not violate any
provision of any material agreement or document to which Buyer is a party or to
which Buyer is bound.
6.3 SURVIVAL OF WARRANTIES. All representations, warranties
and covenants of Seller and Buyer in this Agreement shall as to each Close of
Escrow survive such Close of Escrow for three (3) years and terminate
thereafter, without the necessity of a separate written certificate regarding
same.
7. TITLE POLICY. At each Closing, as to each Building included in such
Closing, Escrow Holder shall be prepared or committed to deliver to Buyer a
standard American Land Title Association ("ALTA") owner's (or leasehold owner's
in connection with the East Fort Lauderdale site) policy of title insurance
("Title Policy"), dated as of the Closing Date, insuring Buyer in an amount
equal to the Purchase Price for such Building, and showing title as to such
Building vested in Buyer subject only to (i) nondelinquent real property taxes
and assessments; (ii) the printed exceptions and exclusions contained in the
Title Policy; (iii) all exceptions shown on the Title Report for such Building
and approved by Buyer; (iv) the Lease described in Section 10 below and
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the Subordination and Non-Disturbance Agreement; and (v) all other matters
approved in writing by Buyer.
8. DEFAULT; ESCROW CANCELLATION. Neither Buyer nor Seller shall be in
default under this Agreement unless the party asserting default gives written
notice describing such default and within three (3) days after such notice is
received, the party who is asserted to be in default fails to commence the cure
of such default, or having timely commenced such cure, thereafter fails to
diligently complete such cure; provided however a party shall be in default if a
monetary breach is not cured by such party within said three (3) day period. If
either party defaults with respect to its obligations hereunder, or if Escrow is
not in a condition to close by the agreed Closing Date, Escrow Holder shall
continue to comply with the instructions contained herein until a written demand
has been made by a party entitled to do so for the cancellation of Escrow, as
described below. Escrow Holder shall notify the other party of any such demand.
8.1. CHARGES. If the Closing of Escrow fails to occur as to a
Building due to Seller's default, Seller shall pay all Escrow cancellation
charges. If the Closing of Escrow fails to occur as to a Building due to Buyer's
default, Buyer shall pay all Escrow cancellation charges. If the Close of Escrow
fails to occur as to a Building for any reason other than the foregoing, except
as otherwise specifically set forth in this Agreement, Buyer and Seller shall
each pay one-half (1/2) of any Escrow cancellation charges, and, upon such
payment and subject to the survival of the indemnities set forth at Sections 5.4
and 14, each party shall release the other party from all liability hereunder
for the failure of the Close of Escrow to occur. "Escrow cancellation charges"
means all normal and customary fees, charges and expenses incurred by Escrow
Holder as well as all normal and customary expenses related to the services of
Escrow Holder in connection with title matters relating to this Escrow
(including, without limitation, all title search and examination charges and
commitment cancellation charges).
8.2. BUYER'S DEPOSIT. Except as otherwise provided in this
Agreement, if the Closing of Escrow fails to occur as to a Building due to any
reason other than Buyer's default hereunder, Buyer shall be entitled to the
prompt refund of the Deposit as to such Building, together with all interest
earned thereon.
8.3. SELLER'S DAMAGES IF BUYER DEFAULTS. BUYER AND SELLER
AGREE THAT IF THE CLOSING OF ESCROW FAILS TO OCCUR AS TO A BUILDING OR BUILDINGS
DUE TO THE DEFAULT OF BUYER, IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO
FIX SELLER'S ACTUAL DAMAGES FOR, AMONG OTHER ITEMS, TAKING OR HAVING SUCH
PROPERTY OFF THE MARKET, AND BUYER AND SELLER AGREE THAT THE AMOUNT OF BUYER'S
DEPOSIT FOR
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SUCH BUILDING(S) IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES IF BUYER FAILS TO
PERFORM ALL OF BUYER'S OBLIGATIONS UNDER THIS AGREEMENT. IN ADDITION, BUYER
DESIRES TO LIMIT THE AMOUNT OF DAMAGES FOR WHICH BUYER MIGHT BE LIABLE SHOULD
BUYER BREACH THIS AGREEMENT, AND SELLER DESIRES TO AVOID THE COSTS AND LENGTHY
DELAYS THAT WOULD RESULT IF SELLER WERE REQUIRED TO FILE A LAWSUIT TO COLLECT
ITS DAMAGES FOR A BREACH OF THIS AGREEMENT. THEREFORE, IF THE CLOSING OF ESCROW
FAILS TO OCCUR AS TO A BUILDING OR BUILDINGS DUE TO THE DEFAULT OF BUYER, THEN
THIS AGREEMENT AND THE ESCROW SHALL BE TERMINATED AND CANCELED AS TO SUCH
BUILDING(S). IN SUCH EVENT, (A) ESCROW HOLDER SHALL RETURN ALL DOCUMENTS AND
INSTRUMENTS AS TO SUCH BUILDING(S) TO THE PARTIES WHO DEPOSITED SAME, (B) ALL
TITLE AND ESCROW CANCELLATION CHARGES SHALL BE CHARGED TO BUYER, AND (C) ESCROW
HOLDER SHALL DELIVER TO SELLER THE DEPOSIT AS TO SUCH BUILDING(S) AS LIQUIDATED
DAMAGES AND, EXCEPT FOR THE LIABILITY OF BUYER UNDER SECTIONS 5.4 AND 14 (WHICH
SHALL CONTINUE IN FULL FORCE AND EFFECT AND SHALL NOT BE AFFECTED OR LIMITED BY
THIS SECTION 8.3), SUCH LIQUIDATED DAMAGES SHALL BE SELLER'S SOLE AND EXCLUSIVE
REMEDY IN THE EVENT OF BUYER'S DEFAULT AS TO SUCH BUILDING(S). THIS SECTION 8.3
SHALL NOT LIMIT OR APPLY TO SELLER'S REMEDIES WITH RESPECT TO ANY POST-CLOSING
DEFAULT.
THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE
PROVISIONS OF THIS SECTION 8.3 AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO
BE BOUND BY ITS TERMS.
--------------- -----------------
Buyer's Initials Seller's Initials
8.4 BUYER'S DAMAGES IF SELLER DEFAULTS. If the Closing of
Escrow fails to occur as to a Building due to Seller's default, Buyer shall be
entitled to the prompt refund of the Deposit as to such Building, together with
all interest earned thereon, and Buyer may elect to (i) sue Seller to
specifically enforce Buyer's rights hereunder, and/or (ii) recover from Seller
all costs reasonably incurred by Buyer and payable to bona fide third parties
with respect to Buyer's efforts to purchase such Building, including without
limitation, costs incurred in Buyer's investigation and evaluation of the
Property, fees and costs paid to attorneys and consultants, and fees and costs
pertaining to Buyer's efforts to finance its purchase of such Building
(including without limitation loan commitment fees and costs not in excess of
1.5% of the Purchase Price of such Building), such reimbursement to be made by
Seller to Buyer within 30 days after Buyer has delivered to Seller reasonably
satisfactory evidence of such fees and costs.
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Except as to the items referenced in clause (ii) above (which, other than
Buyer's elective right to sue in the alternative for specific performance under
clause (i), Buyer agrees shall be the sole and exclusive remedies available to
Buyer), Buyer hereby waives any right to sue Seller for damages if the Closing
of Escrow fails to occur as to a Building due to Seller's default.
9. CONDITIONS TO CLOSING OF ESCROW.
9.1 BUYER'S CONDITIONS TO CLOSING OF ESCROW. The obligation of
Buyer to purchase the Property under this Agreement is conditioned upon and
subject to the satisfaction, or written waiver by Buyer, on or before the date
set for the Closing, of all the conditions precedent set forth below in this
Section 9.1, which conditions as to each Building are for the exclusive benefit
of Buyer. Should any such condition not be so satisfied or waived by Buyer, then
Buyer may elect to terminate this Agreement and the Escrow in its entirety, or
as to the Building(s) affected thereby, in which event the relevant provisions
of Section 8 shall apply. However, if Buyer elects to Close as to a Building
despite the nonsatisfaction of a condition with respect thereto, Buyer shall not
have any recourse against Seller in connection with such nonsatisfaction. The
conditions precedent to Buyer's obligation to purchase each Building are as
follows:
9.1.1. TITLE POLICY. Escrow Holder is prepared to
issue the Title Policy for such Building, subject only to the matters described
in Section 7;
9.1.2 LEASE. Seller shall have executed and
deposited with Escrow Holder, for delivery to Buyer at each Closing, the Store
Lease (as defined in Section 10) for each Building (or relevant portion thereof
with respect to the Chula Vista and St. Petersburg sites, and as to East Fort
Lauderdale, the Store Lease shall constitute a sublease between Buyer and
Seller) that is the subject of such Closing, and with respect to such Store
Lease, Seller shall have executed and deposited with Escrow Holder, for
recordation at such Closing, a subordination, nondisturbance and attornment
agreement satisfactory to Buyer's lender and substantially in the form of
EXHIBIT C attached hereto (the "SNDA"). With respect to each Store Lease, and if
applicable, the reciprocal covenants and easements affecting the shopping center
of which the Building is a part, Seller shall have executed and delivered to
Buyer's lender one or more estoppel certificates. The form of such
certificate(s) shall be agreed upon between Buyer and Seller during the Approval
Period and upon reaching agreement as to same, such form(s) shall be attached to
this Agreement as EXHIBIT D (the "Estoppel").
9.1.3 CHULA VISTA/BB&Y. As to the Chula Vista
Building, Bed Bath & Beyond shall have provided a subordination, nondisturbance
and attornment agreement and an estoppel, both to be in form consistent with Bed
Bath & Beyond's obligations to do so under the BB&Y Lease. Seller shall use
commercially reasonable
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efforts to cause Bed Bath & Beyond to provide such agreement and estoppel. Buyer
acknowledges that Seller has disclosed to Buyer that Bed Bath & Beyond is
entitled to certain rent credits under the BB&Y Lease for certain improvements
that Bed Bath & Beyond constructed on the leased premises. Buyer and Seller have
taken such rent credits into consideration in agreeing upon the Purchase Price
for the Chula Vista Building.
9.1.4 ASSIGNMENT OF LEASES. As to the Chula
Vista Building, Seller shall have executed and delivered to Escrow Holder an
Assignment and Assumption of Lease, in form reasonably acceptable to Buyer and
Seller, pursuant to which Seller assigns its interest in the BB&Y Lease. As to
the East Fort Lauderdale Building, Seller shall have executed and delivered to
Escrow Holder an Assignment and Assumption of Lease, in form reasonably
acceptable to Buyer and Seller, pursuant to which Seller assigns its interest in
the EFL Ground Lease.
9.1.5. REPRESENTATIONS AND WARRANTIES. As a
condition to the Buyer's obligation to consummate the transaction contemplated
hereby, each of the representations and warranties of Seller in this Agreement
must be true and correct in all material respects on the Closing Date. Prior to
the Closing, Seller shall be entitled to state in writing exceptions to any
representations and warranties, in which case Buyer may (i) terminate this
Agreement if such exceptions are not reasonably acceptable or (ii) elect to
close this transaction notwithstanding such exceptions, in which event the
representations and warranties shall be deemed to have been modified to reflect
the written exceptions. In the event that Buyer shall, prior to the Closing,
discover any information that would render or indicate that any of the
representations and warranties are untrue or breached in any material respect,
Buyer shall promptly notify Seller in writing.
9.1.6 NO ADVERSE CHANGE IN FINANCIAL POSITION.
There shall not have occurred a material adverse change in the financial
condition of Seller.
9.2 SELLER'S CONDITIONS TO CLOSING OF ESCROW. The obligation
of Seller to sell each Building under this Agreement is conditioned upon and
subject to the satisfaction, or written waiver by Seller, on or before the date
set for each Closing, of the conditions precedent set forth below in this
Section 9.2, which conditions are for the exclusive benefit of Seller. Should
such condition not be so satisfied or waived by Seller, then Seller may elect to
terminate this Agreement and the Escrow as to such Building, in which event the
relevant provisions of Section 8 shall apply. The conditions precedent to
Seller's obligation to sell each Building at a Closing are as follows:
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9.2.1. LEASES; ASSIGNMENTS. Buyer shall have
executed and deposited with Escrow Holder for delivery to Seller at each
Closing, the Store Lease (as defined in Section 10 below) for each Building (or
relevant portion thereof with respect to the Chula Vista and St. Petersburg
sites, and as to East Fort Lauderdale, the Store Lease shall constitute a
sublease between Buyer and Seller) that is the subject of such Closing, and with
respect to such Store Lease, Buyer's lender and Buyer (if required) shall have
executed and deposited the SNDA with Escrow Holder, for recordation at such
Closing. Also, as to the Chula Vista Building, Buyer shall have executed and
delivered to Escrow Holder an Assignment and Assumption of Lease, in form
reasonably acceptable to Buyer and Seller, pursuant to which Buyer assumes the
interests of the landlord under the BB&Y Lease. As to the East Fort Lauderdale
Building, Buyer shall have executed and delivered to Escrow Holder an Assignment
and Assumption of Lease, in form reasonably acceptable to Buyer and Seller,
pursuant to which Buyer assumes the interests of the landlord under the EFL
Ground Lease.
9.2.2 PERFORMANCE OF MATERIAL OBLIGATIONS; GOOD
STANDING AND AUTHORITY. Buyer shall have performed all of the material
obligations required of Buyer under this Agreement and shall have provided to
Seller's reasonable satisfaction evidence that Buyer is in good standing and has
qualified to do business in the State in which the pertinent Property is
located, and that Buyer has duly authorized this transaction.
9.2.3 NON-DISTURBANCE AGREEMENT. The fee owner
of the East Fort Lauderdale site and Buyer shall have executed and delivered to
Escrow Holder a Non-Disturbance Agreement in the form of Exhibit "B" to the
amendment to the EFL Ground Lease dated May 26, 1994 (the "EFL
Non-Disturbance").
9.2.4 DELIVERIES BY BUYER. Buyer shall have
caused to be delivered to Escrow Holder all of the items required to be
delivered pursuant to Section 12.2.
9.2.5. REPRESENTATIONS AND WARRANTIES. As a
condition to the Seller's obligation to consummate the transaction contemplated
hereby, each of the foregoing representations and warranties of Buyer must be
true and correct in all material respects on the Closing Date. Prior to the
Closing, Buyer shall be entitled to state in writing exceptions to the foregoing
representations and warranties, in which case Seller may (i) terminate this
Agreement if such exceptions are not reasonably acceptable or (ii) elect to
close this transaction notwithstanding such exceptions. In the event that Seller
shall, prior to the Closing, discover any information that would render or
indicate that any of the representations and warranties are untrue or breached
in any material respect, Seller shall promptly notify Buyer in writing.
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10. LEASE OF PROPERTY. Prior to the Close of Escrow of each Phase,
Buyer and Seller shall enter into separate leases (each, a "Store Lease") for
each Building (or relevant portion thereof with respect to the Chula Vista and
St. Petersburg sites) in such Phase.
10.1 BASIC TERMS OF LEASE. Each Store Lease shall be a fully
triple net lease without offset rights except as specified therein, in
financable form. The Store Lease shall provide for a 20 year term with four 5
year renewal options, a full pass through of taxes, maintenance, repair and
replacement costs, insurance and operating expenses, increases in base rent
every 60 months in the amount of the percentage increase in the consumer price
index during the previous 60 month period (determined in accordance with a
formula to be agreed upon by Buyer and Seller and set forth in the form of Store
Lease), but no such increase shall exceed 10%, and base rent increases at the
beginning of each renewal term in the amount of the percentage increase in the
consumer price index during the previous 60 month period (determined in
accordance with a formula to be agreed upon by Buyer and Seller and set forth in
the form of Store Lease), but no such increase shall exceed 12.5%. The initial
base rent under each Store Lease shall be as set forth on EXHIBIT B.
10.2 AGREEMENT ON FORM OF LEASE. Buyer and Seller shall
negotiate in good faith to agree upon the form of the Store Lease and upon
reaching agreement as to same, such form of lease shall be attached to this
Agreement as EXHIBIT E. If Buyer and Seller are not able to agree on the form of
the Store Lease on or before June 1, 1999, this Agreement shall terminate unless
the parties, each in its sole discretion, agree to extend such date. If this
Agreement is terminated due to the parties' failure to agree upon the form of
the Store Lease, the Deposit shall be immediately returned to Buyer and the
provisions of Section 8.1 shall govern as to Escrow cancellation costs.
10.3 GROUPINGS OF LEASES. Seller acknowledges that while this
transaction has been structured in a manner such that each Store will be under
separate lease rather than a master lease of all Stores from Buyer to Seller,
Buyer's purchase of the Buildings and the lease back of same to Seller are an
integrated transaction as to the Florida Buildings, and an integrated
transaction as to the Buildings not in Florida, and that it is a material
consideration to Buyer in completing this transaction that all the leases as to
the Florida Buildings, and all leases as to the Buildings outside of Florida,
will be maintained in effect as though the parties had entered into a master
lease arrangement for each such group of Buildings. Accordingly, Seller agrees
that the leases will include language that provides that in the event of
bankruptcy, insolvency or similar proceedings in which Seller is a party, Seller
must accept or reject, (i) as a group, all leases of the Buildings within the
Florida group, and (ii) as a group, all leases of the Buildings outside the
Florida group, such that each lease for a Building within each group shall be
treated the same as all other leases for Buildings within such group.
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10.4 ST. PETERSBURG OUTPARCEL. The parties acknowledge that
the Land upon which Seller's St. Petersburg store is located includes an
"outparcel" for future development. Notwithstanding any other provision of this
Agreement, upon the Close of Escrow of Buyer's purchase of such Land, the Store
Lease for such site shall exclude the outparcel and Seller shall have no further
interest in the outparcel, except as to reciprocal access and parking rights
which shall be created through the Store Lease if the outparcel is not a
separate legal parcel, or through an easement and operating agreement if the
outparcel has been subdivided from the portion of the land upon which Seller's
St. Petersburg store is located. If an easement and operating agreement is
necessary, it shall be prepared by Buyer for approval by Seller at least 30 days
prior to the Closing Date, which approval shall not be unreasonably withheld.
10.5 CHULA VISTA. Notwithstanding any other provision of this
Agreement, The Store Lease for the Chula Vista site shall not include the
property that is subject to the BB&Y Lease and Seller shall have no further
interest in such property, except as to reciprocal access and parking rights
which shall be created through the Store Lease if the Bed Bath & Beyond site is
not a separate legal parcel, or through an easement and operating agreement if
the Bed Bath & Beyond site has been subdivided from the portion of the land upon
which Seller's Chula Vista store is located. If an easement and operating
agreement is necessary, it shall be prepared by Buyer for approval by Seller at
least 30 days prior to the Closing Date, which approval shall not be
unreasonably withheld.
11. SUBSTITUTION, DELETION AND ADDITION OF BUILDINGS.
11.1 SUBSTITUTION OF BUILDING(S). Subject to the agreement of
Buyer and Seller, which may be given or denied in each party's sole and absolute
discretion, during the Approval Period (a) the parties may agree to substitute
for one Building a different store property owned and operated by Seller, and
(b) the parties may agree to add one or more additional store properties owned
and operated by Seller to this transaction. Furthermore, if Buyer has elected
not to purchase one or more Buildings pursuant to Section 5.3 above, then
subject to the agreement of Buyer and Seller, which may be given or denied in
each party's sole and absolute discretion, the parties may agree to substitute
for each such Building a different store property owned and operated by Seller.
11.2 DELETION OF ONE BUILDING. After the Approval Period, due
to financing considerations or other factors, Buyer may find it necessary or
desirable to delete a single Building from this Agreement. Accordingly and
notwithstanding any provisions herein to the contrary, Buyer shall have the
unilateral right after the Approval Period to terminate this Agreement as to one
Building that Buyer had
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become obligated to purchase. If Buyer gives Seller notice of such termination,
(a) Buyer and Seller may agree, which agreement may be given or denied in each
party's sole and absolute discretion, to substitute a different store property
owned and operated by Seller for the deleted Building, and (b) Buyer shall be
entitled to the prompt return of the Deposit (and interest earned thereon) for
the deleted Building if Buyer and Seller do not agree on a replacement Building.
11.3 ADJUSTMENT OF PURCHASE PRICE. If pursuant Section 5,
Section 11.1, Section 11.2 or any other provision of this Agreement, one or more
store properties are deleted, substituted and/or added, the Purchase Price shall
be adjusted to reflect the change in the transaction, and if pursuant thereto a
store property is deleted and as a consequence thereof, such deletion would have
an adverse affect upon Seller's aggregate profit from the sale of all the
Buildings that initially constitute the Property (the "Initial Aggregate
Profit", which profit information has been shared among Seller and Buyer by a
written schedule prepared on May 10, 1999), then after deletion of the Building,
and after taking into account any substitution of another Building therefor, if
the aggregate profit from the sale of all Buildings that then constitute the
Property is less than the Initial Aggregate Profit, the purchase prices and
Deposits for such Buildings that then constitute the Property shall be adjusted
proportionately or on such other basis as Buyer and Seller may agree so that the
aggregate profit from the sale of such Buildings is equal to the Initial
Aggregate Profit. Concurrent with such adjustments, the fixed rents for each of
the remaining Buildings shall be adjusted so that the same 10.9 capitalization
rate the parties used to arrive at the Purchase Price initially set forth in
this Agreement is maintained. If pursuant to Section 11.1 a Building is added
without a Building being deleted pursuant to Section 11.2, the purchase price
and rent for such additional Building shall be established using said 10.9
capitalization rate. Upon the substitution and/or deletion of a Building, the
information contained in EXHIBITS A AND B shall be updated to reflect the
foregoing adjustments and this Agreement shall be amended as appropriate to
reflect such change(s) in the transaction. Effective upon the execution of any
such amendment, the parties shall be deemed to have made the representations and
warranties set forth in the Agreement as to the substituted and/or additional
property(ies).
12. COSTS AND PRORATIONS.
12.1. ESCROW AND OTHER COSTS. Seller and Buyer shall each pay
one-half the costs of the Title Policy premiums, Escrow Holder's fees and costs,
and all recording costs (excluding any costs of recording Buyer's mortgages or
deeds of trust and any other financing documents, which costs shall be borne
solely by Buyer). Seller shall pay the costs of (i) the title search, (ii) all
documentary transfer taxes, and (iii) mortgage taxes; provided however that if
Buyer's mortgage on any Building exceeds 75% of the Purchase Price for such
Building, Buyer shall pay the excess mortgage taxes on any
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such loan. Notwithstanding the foregoing, if Buyer shall terminate this
Agreement as to any Building(s) as a result of any matter affecting title the
does not render title unmarketable or materially adversely affect the
financability of the Building(s), Buyer (and not Seller) shall pay the costs of
the title search. Buyer shall pay the cost of title insurance for the
policy(ies) to be issued to Buyer's lender(s). Buyer and Seller shall each bear
their own respective legal fees and accounting costs, if any, outside of Escrow.
Except as otherwise expressly provided in this Agreement, Buyer shall bear all
other costs in connection with its investigation and examination of the Property
and obtaining and closing any financing.
12.2. PRORATIONS. Except as provided in Section 12.3, there
shall be no proration of property taxes, operating expenses, CAM charges or
similar items with respect to the Property, as pursuant to the Store Leases,
Seller will remain fully responsible for payment of same, and pursuant to the
BB&Y Lease, Bed Bath & Beyond will remain fully responsible for payment of same
as to its store. Notwithstanding the foregoing, if there is an REA recorded
against the St. Petersburg outparcel, then CAM charges or similar items with
respect thereto shall be prorated as of the Closing Date for such property,
pursuant to the procedures for prorations for Chula Vista described in Section
12.3.
12.3 CHULA VISTA PRORATIONS. With respect to periods of time
subsequent to the Closing Date, Seller shall deliver to Buyer an accounting for
and possession and control via credits to Buyer on the Closing statement, of the
following with respect to the BB&Y Lease: unforfeited deposits paid to Seller
and any other money held by Seller for the account of BB&Y, including all
security, utility, key, damage, and other deposits and prepaid rents paid to
Seller by BB&Y (collectively the "Tenant Deposits"). Buyer shall receive a
credit against the Purchase Price only for those Tenant Deposits which are in
the custody, possession or control of Seller or its agents. All other rental
income and operating expenses of the Property, including, without limitation,
maintenance, management, and other service charges, and all other normal
operating charges with respect to the Property shall be prorated on the Closing
statement as of the Closing Date. Prorations of expenses shall be based on the
bills for the current period, if available. If any bill for the current period
is not available, the proration shall be based on the bill for the prior period
or such other estimate as may be reasonably acceptable to Seller and Buyer. Any
proration based on an estimate will be re-prorated based on actual numbers as
soon as reasonably practicable, and any adjustments based on such reprorations
shall be promptly paid by the Seller or Buyer, as the case may be, to the other
party. Buyer shall be entitled to collect all rentals, receipts, and other
revenues under the BB&Y Lease from and after the Closing Date, and such amounts
shall be credited first to currently due charges and thereafter to delinquent
charges in the order of their maturity (most recent delinquencies first). Any
such rentals, receipts, and other revenues under the BB&Y Lease (including,
without limitation, common area
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charges and other amounts payable by Bed, Bath & Beyond after year-end or other
reconciliations) which relate in whole or part to any period prior to the
Closing Date for such property shall be remitted by Buyer to Seller promptly
after collection by Buyer. Buyer agrees to bill Bed, Bath & Beyond for any
amounts payable under the BB&Y Lease that relate to periods prior to the Closing
Date promptly after demand from Seller, or as soon thereafter as is permitted
under the terms of the BB&Y Lease. Buyer also agrees to provide Seller copies of
any correspondence or statements pertaining to the reconciliation of taxes,
common area charges and other amounts payable by the tenant under the BB&Y Lease
to the extent such reconciliations include any periods prior to the Closing Date
for the Chula Vista property.
13. ITEMS TO BE DELIVERED AT THE CLOSING.
13.1. SELLER'S DELIVERIES. At the Closing, Seller shall
deliver or cause to be delivered to Buyer the following items as to each
Building to be conveyed to Buyer at such Closing:
13.1.1. The Title Policy;
13.1.2. The Deed executed and acknowledged by
Seller, in a form reasonably acceptable to both Buyer and Seller, which Deed
shall state that the conveyance is subject to the items of exception identified
in the Title Policy, or in the case of the East Fort Lauderdale site, an
Assignment and Assumption of the EFL Ground Lease, including an indemnification
of Buyer for all liabilities and obligations of the lessee thereunder that
arise, accrue or relate to the period prior to the Closing Date for such
Building (in form reasonably acceptable to Buyer and Seller);
13.1.3. Two originals of a Bill of Sale and
Assignment Agreement in a form reasonably acceptable to both Buyer and Seller
(the "Bill of Sale and Assignment") executed by Seller transferring to Buyer all
of Seller's rights in the Plans and Entitlements;
13.1.4. Four originals of the Store Lease, executed
by Seller;
13.1.5. The SNDA and the EFL Non-Disturbance,
executed and acknowledged by Seller;
13.1.6. A memorandum of lease or notice of lease, in
a form reasonably acceptable to both Buyer and Seller (the "Notice of Lease"),
duly executed and acknowledged by Seller;
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13.1.7. An assignment of the Bed Bath & Beyond
Lease, including an indemnification of Buyer for all liabilities and obligations
of the landlord thereunder that arise, accrue or relate to the period prior to
the Closing Date for such Building. Such assignment and indemnification shall by
its terms expressly exclude all liabilities and obligations of Seller under that
certain Agreement dated November 16, 1998 between Seller and Bed Bath & Beyond.
13.1.8. Buyer-Seller Closing statement; and
13.1.9. Other items reasonably requested by Escrow
Holder, Buyer's legal counsel, or Buyer's lender as administrative requirements
for consummating the Closing.
13.2. BUYER'S DELIVERIES. At least one business day prior
to Closing, Buyer shall deliver to the Escrow Holder:
13.2.1. The cash sum required by Section 3.2;
13.2.2. Two originals of the Bill of Sale and
Assignment executed by Buyer;
13.2.3. Four originals of the Store Lease, executed
by Buyer;
13.2.4. The SNDA, executed and acknowledged by
Buyer and Lender, and the EFL Non-Disturbance, executed and acknowledged by
Buyer and the lessor under the EFL Ground Lease;
13.2.5. The Notice of Lease, duly executed and
acknowledged by Buyer;
13.2.6 An assumption of the Bed Bath & Beyond
Lease, including an indemnification of Seller for all liabilities and
obligations of the landlord thereunder that arise, accrue or relate to the
period from and after the Closing Date for such Building, excluding however,
liabilities and obligations under that certain Agreement dated November 16, 1998
between Seller and Bed Bath & Beyond.
13.2.7 An assumption of the EFL Ground Lease,
including an indemnification of Seller for all liabilities and obligations of
the lessee thereunder that arise, accrue or relate to the period from and after
the Closing Date for said Building;
13.2.8. The Buyer-Seller Closing statement; and
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13.2.9. Other items reasonably requested by the
Escrow Holder, Seller's legal counsel, or Buyer's lender as administrative
requirements for consummating the Closing.
14. BROKERS AND FINDERS.
14.1 Buyer and Seller agree that the execution of this
Agreement was not induced or procured through any person, firm or corporation
acting as a broker or finder, except Atlantic Retail Properties ("Broker"), to
whom Seller shall pay a commission pursuant to separate agreement with Broker.
Buyer agrees to indemnify, defend, protect and hold Seller harmless from any
damage, claim, liability or expense resulting from any claim by any person, firm
or corporation other than Broker, based upon their having acted as a broker or
finder for or in connection with this transaction on behalf of Buyer. Subject to
Section 14.2, Seller agrees to indemnify, defend, protect and hold Buyer
harmless from any damage, claim, liability or expense resulting from any claim
by Broker or any other person, firm or corporation based upon their having acted
as a broker or finder for or in connection with this transaction on behalf of
Seller.
14.2 Seller has disclosed to Buyer that Seller has entered
into a February 4, 1999 listing agreement with Tourtelot Brothers, Inc.,
Realtors ("Tourtelot") with respect to the St. Petersburg outparcel. Subject to
the Close of Escrow of Buyer's purchase of the St. Petersburg outparcel, Buyer
shall be solely responsible for any commission payable to Tourtelot under the
February 4 agreement with respect to such purchase, and Buyer shall indemnify
and hold Seller harmless with respect thereto. It is Buyer's intention to
negotiate with Tourtelot as to the amount of such commission or to arrange for
the termination of the February 4 listing agreement in consideration of Buyer
entering into a new agreement with Tourtelot to market the St. Petersburg
outparcel on behalf of Buyer. Seller agrees to cooperate with and assist Buyer
in Buyer's efforts to reach a satisfactory arrangement with Tourtelot.
14.3 Notwithstanding any language to the contrary in this
Agreement, the indemnities contained in this Section 14 shall survive the
termination of this Agreement and the Closing.
15. WAIVER, CONSENT AND REMEDIES. Either party may specifically and
expressly waive in writing any breach by the other party of any provision of
this Agreement, but no such waiver shall constitute a further or continuing
waiver of any preceding or succeeding breach of the same or any other provision.
The consent by one party to any act by the other for which such consent was
required shall not be deemed to imply consent or waiver of the necessity of
obtaining such consent for the same or any similar acts in the future. No waiver
or consent shall be implied from silence or any failure of a party to act,
except as otherwise specified in this Agreement.
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<PAGE>
16. CONDEMNATION AND CASUALTY.
16.1 CONDEMNATION. If all or any material portion of any
Building, or any interest therein, is taken prior to the Closing as a result of
condemnation (including the filing of any notice of intended condemnation or
proceedings in the nature of eminent domain), at the election of Buyer by
written notice to Seller delivered within 15 days of receipt by Buyer or notice
of such condemnation, but no later than the Outside Closing Date, this Agreement
and the Escrow shall be deemed immediately terminated as to such Building, and
the entire award from the condemning authority shall be the sole property of
Seller, and Buyer hereby irrevocably assigns to Seller all of Buyer's right,
title and interest in and to any and all such awards. If an immaterial portion
of any Building is taken prior to the Closing or if Buyer does not so elect to
terminate this Agreement upon a material taking, then, at or following the
Closing, the entire award shall be payable in accordance with the terms of the
Lease for such Building, and Seller shall at Close of Escrow assign all of its
rights in any such award to Buyer subject to the provisions of the Lease. If
this Agreement and the Escrow are terminated as to one or more Buildings
pursuant to this Section, then, notwithstanding any contrary provisions of this
Agreement, Seller shall pay all Escrow cancellation charges, and the Deposit
allocable to such Building(s) shall be returned to Buyer. The foregoing election
of Buyer shall be based on Buyer's business judgment, exercised in its sole and
absolute discretion.
16.2 CASUALTY. If a Building, or any part thereof, suffers
"minor damage" (as hereinafter defined) following the Execution Date but prior
to Closing from fire or other casualty, Seller shall repair the same prior to
the Closing, or as soon thereafter as is practicable, at Seller's sole cost and
expense, and if required by Buyer's lender, the Closing Date shall be extended
until the damage is fully repaired. If the Building, or any part thereof,
suffers "major damage" (as hereinafter defined) prior to Closing from fire or
other casualty, then Buyer may either (i) terminate this Agreement as to such
Building, whereupon the Deposit allocable to such Building shall be refunded to
Buyer, and neither party shall have any further rights or obligations pursuant
to this Agreement, except for the indemnities under Section 5.4 and Section 14,
or (ii) consummate the Closing, whereupon Seller's rights, if any, in the
proceeds of any insurance covering such damage shall be assigned to Buyer at
Closing (but the provisions of the Store Lease as to such Building shall become
applicable as though such casualty had occurred after the Closing and such
proceeds shall be made available to Seller to repair the damage), with no
reduction or abatement in the Purchase Price. For purposes of this Agreement,
major damage to a Building shall mean damage or destruction, the cost of
repairing which is $100,000 or more, and minor damage or destruction shall mean
damage or destruction, the cost of repairing which is less than
27
<PAGE>
$100,000. The foregoing elections of Buyer shall be based on Buyer's business
judgment, exercised in its sole and absolute discretion.
17. HAZARDOUS MATERIALS INDEMNITY. From and after the Close of Escrow
as to each Building, Seller shall exonerate, indemnify, protect, defend (with
counsel reasonably approved by Buyer) and hold harmless Buyer (or its assignee
permitted under Section 19.10 below, if a Building is acquired by a permitted
assignee), and its agents, employees, officers, directors, shareholders,
partners, attorneys, accountants, affiliates, successors and assigns, from and
against, and shall reimburse Buyer with respect to, any and all fines,
penalties, costs, cleanup charges and assessments levied or assessed against
Buyer by any local, state or federal governmental entity, together with any and
all claims, demands, causes of action, loss, damage, liabilities, costs and
expenses (including reasonable attorneys' fees and court costs) of every kind or
character, known or unknown, fixed or contingent, asserted against or incurred
by Buyer at any time after the Closing Date and from time to time thereafter (a
"Claim") by reason of, or arising from, the presence of any Hazardous Materials
or any other environmental contamination on, under, about or within the Building
and which arises out of or is related to (i) the violation of any applicable
federal, state or local environmental law with respect to the Building by Seller
or anyone occupying or using the Building during Seller's ownership thereof; or
(ii) the "release" or "threatened release" of any Hazardous Materials at, under
or from the Building, or any portion or portions thereof, during Seller's
ownership of the Building by Seller, its agents, invitees, employees,
contractors, subcontractors, licensees, or anyone occupying or using the
Building or portions thereof during Seller's ownership, or Seller's failure to
remove any Hazardous Substances released by such parties during such period. If
Buyer receives actual notice of the existence of a Claim for which indemnity is
provided hereunder, it shall promptly advise Seller in writing of that Claim and
shall provide Seller the opportunity to retain legal counsel (who shall be
reasonably approved by Buyer) to defend such claim. This Section 17 shall
survive the Closing for all purposes and shall not be deemed to have merged into
any of the documents executed or delivered at Closing.
18. COOPERATION.
18.1. FURTHER DOCUMENTS AND ACTS. Each of the parties hereto
agrees to cooperate in good faith with each other, and to execute and deliver
such further documents and perform such other acts as may be reasonably
necessary or appropriate to consummate and carry into effect the transactions
contemplated under this Agreement.
18.2 OPERATIONS PENDING CLOSING. Seller shall diligently
continue the normal management and operation of each Building and the business
conducted on it
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<PAGE>
and shall maintain each Building until Closing of escrow in good condition and
repair; provided that each of the foregoing obligations of Seller shall be
subject to relief for "force majeure" events.
19. MISCELLANEOUS.
19.1. SUCCESSORS AND ASSIGNS. Subject to Section 19.10 below,
each and all of the covenants and conditions of this Agreement shall inure to
the benefit of and shall be binding upon the respective heirs, executors,
administrators, successors and assigns of Buyer and Seller.
19.2. ATTORNEYS' FEES. If any legal action is instituted
between any two or more of Seller, Buyer or Escrow Holder in connection with
this Agreement, then the prevailing party shall be entitled to recover from the
losing party all of its costs and expenses, including court costs and reasonable
attorneys' fees.
19.3. NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be (as elected by the person giving such notice) hand delivered by
messenger or courier service, or transmitted by facsimile with confirming copy
by United States mail or by messenger or courier service:
To Buyer: SPI Holdings, LLC
One Maritime Plaza, Suite 1460
San Francisco, CA 94111
Attention: Dennis J. Wong
Facsimile No.: (415) 391-9142
With Copy to: Morgan, Miller & Blair
1676 N. California Blvd., Suite 200
Walnut Creek, CA 94596
Attention: Gilbert C. Berkeley
Fax: (925) 943-1106
To Seller: The Sports Authority
3383 North State Road 7
Fort Lauderdale, FL 33319
Attention: Henry Flieck
Fax: (954) 714-1862
With Copy to: The Sports Authority
3383 North State Road 7
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<PAGE>
Fort Lauderdale, FL 33319
Attention: Michelle Gluck
Fax: (954) 714-1862
With Copy to: Sherry A. Stanley
Coll Davidson Smith Salter & Barkett, P.A.
201 S. Biscayne Blvd., Suite 3200
Miami, FL 33131
Fax: (305) 374-7296
Escrow Holder: First American Title Guaranty Company
1850 Mr. Diablo Blvd., Suite 300
Walnut Creek, CA 94596
Attention: Kat Van Steenhuyse
Telephone: 925 927-2163
Telecopier: 925 927-2180
Each notice shall be deemed delivered (1) on the date delivered if by personal
delivery, and (2) on the date of transmission by facsimile with confirmation. By
giving to the other parties at least ten (10) days' written notice, the parties
to this Agreement and their respective successors and assigns shall have the
right from time to time and at any time during the term of this Agreement to
change their respective addresses and each shall have the right to specify as
its address any other address.
19.4. GENDER AND NAME. In this Agreement (unless the context
requires otherwise), the masculine, feminine and neuter genders and the singular
and plural shall be deemed to include one another, as appropriate.
19.5. ENTIRE AGREEMENT. This Agreement and its exhibits
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof, and the final, complete and exclusive expression of the
terms and conditions thereof. All prior agreements, representations,
negotiations and understandings of the parties hereto, oral or written, express
or implied, are hereby superseded and merged herein.
19.6. CONSTRUCTION OF AGREEMENT. The provisions of this
Agreement shall not be construed in favor of or against either party, but shall
be construed as if both parties fully participated in the drafting of this
Agreement.
19.7. AMENDMENTS. No addition to or modification of any
provision contained in this Agreement shall be effective unless fully set forth
in writing by both Buyer and Seller.
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<PAGE>
19.8. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida as though the
parties hereto were residents of such State and had negotiated and executed this
Agreement in Florida.
19.9. INVALIDITY OF PROVISION. If any provision of this
Agreement as applied to either party or to any circumstance shall be determined
to be void or unenforceable for any reason, the same shall in no way affect (to
the maximum extent permissible by law) any other provision of this Agreement, or
the validity or enforceability of the Agreement as a whole.
19.10. ASSIGNMENT. Buyer has informed Seller that for purposes
of acquiring and financing the acquisition of the Property, each Building will
be placed in a single purpose, single asset limited partnership or limited
liability company. It is agreed that Buyer may, without the consent of Seller,
as to each Building assign its rights under this Agreement to one or more
entities in which SPI Holdings, LLC, Dennis J. Wong, Stephen R. Wong and/or
Richard D. Squires hold, in the aggregate, an average interest of 30% or
greater. Except as so permitted, neither this Agreement nor any portion hereof,
or right, entitlement, or obligation hereunder is assignable by either party
without the prior written consent of the other party, which shall not be
unreasonably withheld or delayed; provided however that Seller may without
Buyer's consent assign its rights and obligations hereunder to any party that
acquires substantially all of the assets of Seller.
19.11. TIME REFERENCES. In the event that the day on which
Buyer or Seller is required to take any action under the terms of this Agreement
is not a business day, such action shall be taken on the next succeeding
business day. Whenever notice, approval or disapproval must be given to Escrow
Holder and Escrow Holder is closed on the last day for taking such action, then
the parties shall have until the first following day Escrow Holder is open to
take such action.
19.12. VENUE. Any action, suit or proceeding arising out of,
based on or in connection with this Agreement or the transactions contemplated
hereby may be brought only in the courts, whether State of Florida or United
States District Court, located in the Southern District of Florida, and each
party covenants and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of any such court, that the action, suit
or proceeding is brought in an inconvenient forum, that the venue of the action,
suit or proceeding is improper, or that this Agreement or the subject matter
hereof may not be enforced in or by such court.
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<PAGE>
19.13. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and each counterpart shall be deemed to be an original
document. Delivery of the executed Agreement may be accomplished by facsimile
transmission, and if so, the facsimile copy shall be deemed an executed original
counterpart of the Agreement. All executed counterparts together shall
constitute one and the same document, and any signature pages, including
facsimile copies thereof, may be assembled to form a single original document.
19.14 PROHIBITION OF RECORDING. If any attempt to record this
Agreement or any memorandum thereof or any reference hereto in the public
records is made by Buyer or any agent or representative of Buyer, other than
with respect to an action for specific performance brought by Buyer asserting a
default hereunder by Seller, the same shall constitute a default of this
Agreement by Buyer (which shall not be subject to any cure rights elsewhere
provided for default), and Seller shall have the right to terminate this
Agreement, in which event, Escrow Holder shall deliver the Deposit to Seller and
the parties shall be relieved of any further liability or obligation hereunder
except as otherwise provided in Sections 5.4 and 14.
19.15 TIME OF ESSENCE. Time is of the essence with
respect to all provisions of this Agreement.
19.16. NO PUBLICITY. Buyer shall not issue any press releases,
install signage or other notices on the Property, advertise to the public or
otherwise engage in any publicity concerning this Agreement and the transaction
contemplated hereunder without the prior written consent of Seller, which
consent shall not be unreasonably withheld by Seller after the Close of Escrow.
19.17 COASTAL CONSTRUCTION CONTROL LINE. Because Buyer may
obtain its own updated survey, Buyer hereby waives the requirements of Section
161.57, Florida Statutes which would otherwise require the Seller to furnish an
affidavit or survey locating any coastal construction control line on the Land.
19.18 CONFIDENTIALITY AND BUYER'S INVESTIGATION/USE OF
INFORMATION. Buyer covenants and agrees that: (i) all information provided to it
by or on behalf of Seller in connection with the Property or resulting from
Buyer's inspections of the Property and review of relevant materials prior to
the Closing will be held in confidence by it, its agents and employees and shall
be delivered to its lenders, consultants, accountants, and other advisors only
if such party agrees to maintain the confidentiality of such information; and
(ii) except as otherwise expressly provided herein, Seller has made no
representation or warranty regarding the accuracy or completeness of the
materials provided to Buyer and Buyer will conduct Buyer's own due diligence
inquiry with respect to the Property.
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<PAGE>
19.19 WAIVER OF JURY TRIAL. BUYER AND SELLER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED ON THIS AGREEMENT OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT RELATED THERETO, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PARTY HERETO OR TO ANY RELATED DOCUMENT. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE SELLER AND BUYER ENTERING INTO THIS AGREEMENT. THIS
WAIVER SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT OR THE CLOSING OF THE
TRANSACTION CONTEMPLATED HEREUNDER.
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of
the date and year first above written.
BUYER:
SPI HOLDINGS, LLC
a Delaware imited liability company
By______________________________
Dennis J. Wong, Manager
SELLER:
THE SPORTS AUTHORITY, INC., a
Delaware corporation
By: _____________________
Name:_____________________
Title:____________________
By: _____________________
Name:_____________________
Title:____________________
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<PAGE>
THE SPORTS AUTHORITY FLORIDA,
INC., a Florida corporation
By: _____________________
Name:_____________________
Title:____________________
By: _____________________
Name:_____________________
Title:____________________
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<PAGE>
EXHIBIT A
ADDRESSES
OF THE STORE PROPERTIES
<TABLE>
<CAPTION>
Store # Store Name Address
<S> <C> <C>
#111 E. Fort Lauderdale, FL" 1901 N. Federal Hwy., Ft. Lauderdale, FL 33305
#114 Boca Raton, FL 20851 State Road 7, Boca Raton, FL 33428
#205 St. Petersburg, FL 3700 Tyrone Blvd., St. Petersburg, FL 33710
#252 Naples, FL 2505 Pine Ridge Road, Naples, FL 34109
#709 Arrowhead, AZ 7360 West Bell Road, Glendale, AZ 85301
#751 Chula Vista, CA 390 East H St., Chula Vista, CA 91910
#763 Fresno, CA 7572 N. Blackstone Ave., Fresno, CA 93720
#829 Norwalk, CT 444 Connecticut Ave., Norwalk, CT 06854
#859 Braintree, MA 250 Grossman Dr., Braintree, MA 02184
</TABLE>
35
<PAGE>
EXHIBIT B
PURCHASE PRICE ALLOCATIONS
AND BASE RENTS
<TABLE>
<CAPTION>
SQUARE INITIAL TOTAL NET PURCHASE PRORATA PRORATA TOTAL
STORE FEET RENT RENT PRICE INITIAL DEPOSIT EXTENSION DEPOSIT DEPOSIT
- --------------------- ------ ------- --------- ----------- --------------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Arrowhead, Az 40,700 $ 10.00 $ 407,000 $ 3,734,000 $ 18,126 $ 10,876 $ 29,002
Chula Vista: TSA 44,447 $ 12.00 $ 533,724 $ 4,896,550 NA NA NA
Chula Vista: Bed, B 40,000 $ 9.50 $ 380,000 $ 3,486,239 NA NA NA
Total Chula Vista 84,477 NA $ 913,724 $ 8,383,000 $ 40,694 $ 24,417 $ 65,111
Fresno, CA 42,673 $ 12.00 $ 512,076 $ 4,698,000 $ 22,806 $ 13,683 $ 36,489
Boca Raton, FL 43,176 $ 15.00 $ 647,640 $ 5,940,001 $ 28,835 $ 17,301 $ 46,136
E Fort Lauderdale, FL 49,917 $ 8.50(1) $ 424,295 $ 3,892,500 $ 18,896 $ 11,337 $ 30,233
Naples, FL 43,025 $ 13.00 $ 559,325 $ 5,131,500 $ 24,910 $ 14,946 $ 39,856
St. Petersburg, FL 42,500 $ 10.00 $ 425,000 $ 3,899,000 $ 18,927 $ 11,356 $ 30,283
Norwalk, CT 44,963 $ 19.25 $ 865,538 $ 7,940,000 $ 38,544 $ 23,126 $ 61,670
Braintree, MA 42,958 $ 20.00 $ 859,160 $ 7,882,000 $ 38,262 $ 22,957 $ 61,219
Total 434,389 $5,613,757 $51,500,000 $250,000 $150,000 $400,000
$250,000 $150,000 $400,000
</TABLE>
Footnote: (1) in addition to the triple net rent of $8.50 psf. Tenant shall also
pay the underlying ground rent to the ground lessor.
36
<PAGE>
EXHIBIT C
FORM OF SUBORDINATION, NONDISTURBANCE
AND ATTORNMENT AGREEMENT
37
<PAGE>
UPON RECORDATION
RETURN TO:
_______________________
_______________________
_______________________
Attention:_____________
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the
"Agreement") is made as of the ____ day of ________ by and between
_______________________., having an address at
_________________________("Lender") and ___________________., having an address
at ______________________ ("Tenant").
RECITALS:
A. Tenant is the holder of a leasehold estate in the property known as
______________, located at ________________________________, as more
particularly described on Schedule A (the "Property") under and pursuant to the
provisions of a certain lease dated_____________ between _____________________ (
"Landlord") and Tenant ("Lease");
B. The Property is or is to be encumbered by one or more mortgages,
deeds of trust, or deeds to secure debt or similar security agreements
(collectively, the "Security Instrument") from Landlord, or its successor in
interest, in favor of Lender; and
C. Tenant has agreed to subordinate the Lease to the Security
Instrument and to the lien thereof and Lender has agreed to grant
non-disturbance to Tenant under the Lease on the terms and conditions
hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, the parties hereto mutually agree as follows:
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<PAGE>
1. SUBORDINATION. The Lease shall be subject and subordinate in all
respects to the lien and terms of the Security Instrument, to any and all
advances to be made thereunder and to all renewals, modifications,
consolidations, replacements and extensions thereof. Notwithstanding anything in
the contrary provided in the Security Agreement (or any renewal, modification,
consolidation, replacement or extension thereof), insurance and condemnation
proceeds shall be applied and disbursed in accordance with the terms of the
Lease.
2. NONDISTURBANCE. So long as Tenant is not in default, beyond
applicable notice and cure periods, in the payment of rents and other charges as
specified in the Lease and is not otherwise in default, beyond applicable notice
and cure periods, of any of its obligations and covenants pursuant to the Lease,
Lender agrees for itself and its successors in interest and for any other person
acquiring title to the Property through a foreclosure (an "Acquiring Party"),
that Tenant's possession of the premises as described in the Lease will not be
disturbed during the term of the Lease, as said term may be extended pursuant to
the terms of the Lease or as said premises may be expanded as specified in the
Lease, by reason of a foreclosure. For purposes of this agreement, a
"foreclosure" shall include (but not be limited to) a sheriff's or trustee's
sale under the power of sale contained in the Security Instrument, the
termination of any superior lease of the Property and any other transfer of the
Landlord's interest in the Property under peril of foreclosure, including,
without limitation to the generality of the foregoing, an assignment or sale in
lieu of foreclosure.
3. ATTORNMENT. Tenant agrees to attorn to, accept and recognize any
Acquiring Party as the landlord under the Lease pursuant to the provisions
expressly set forth therein for the then remaining balance of the term of the
Lease, and any extensions thereof as made pursuant to the Lease. The foregoing
provision shall be self-operative and shall not require the execution of any
further instrument or agreement by Tenant as a condition to its effectiveness.
Tenant agrees, however, to execute and deliver, at any time and from time to
time, upon the request of the Lender or any Acquiring Party any reasonable
instrument which may be necessary or appropriate to evidence such attornment.
4. NO LIABILITY. Notwithstanding anything to the contrary contained
herein or in the Lease, it is specifically understood and agreed that neither
the Lender, any receiver nor any Acquiring Party shall be:
(a) liable for any act, omission, negligence or default of any
prior landlord (other than to cure defaults of a continuing nature with respect
to the maintenance or repair of the demised premises or the Property); provided,
however, that any Acquiring Party shall be liable and responsible for the
performance of all
39
<PAGE>
covenants and obligations of landlord under the Lease accruing from and after
the date that it takes title to the Property; or
(b) except as set forth in (a), above, liable for any
failure of any prior landlord to construct any improvements;
(c) subject to any offsets, credits, claims or defenses which
Tenant might have against any prior landlord except with respect to the
misapplication of any insurance or condemnation proceeds, receipt from Tenant of
rent or additional rent made not more than one month in advance, and receipt
from Tenant of estimated taxes, insurance premiums and operating expenses; or
(d) bound by any rent or additional rent which is payable on a
monthly basis and which Tenant might have paid for more than one (1) month in
advance to any prior landlord; or
(e) be liable to Tenant hereunder or under the terms of the
Lease beyond its interest in the Property, the rents and income from the
Property, and condemnation or insurance proceeds attributable to the Property,
and proceeds from the sale of the Property.
Notwithstanding the foregoing, Tenant reserves its rights to any and
all claims or causes of action against such prior landlord for prior losses or
damages and against the successor landlord for all losses or damages arising
from and after the date that such successor landlord takes title to the
Property.
5. RENT. Tenant has notice that the Lease and the rents and all other
sums due thereunder have been assigned to Lender as security for the loan
secured by the Security Instrument. In the event Lender notifies Tenant of the
occurrence of a default under the Security Instrument and demands that Tenant
pay its rents and all other sums due or to become due under the Lease directly
to Lender, Tenant shall honor such demand and pay its rent and all other sums
due under the Lease directly to Lender or as otherwise authorized in writing by
Lender. Landlord hereby irrevocably authorizes Tenant to make the foregoing
payments to Lender upon such notice and demand, and releases Tenant from any
liability with respect to payments so made.
6. LENDER TO RECEIVE NOTICES. Tenant shall notify Lender of any default
by Landlord under the Lease which would entitle Tenant to cancel the Lease, and
agrees that, notwithstanding any provisions of the Lease to the contrary, no
notice of cancellation thereof in connection with any Landlord's default shall
be effective unless Lender shall have received notice of default giving rise to
such cancellation and shall have failed within sixty (60) days after receipt of
such notice to cure such default, or if such default cannot be cured within
sixty (60) days, shall have failed
40
<PAGE>
within sixty (60) days after receipt of such notice to commence and thereafter
diligently pursue any action necessary to cure such default. Nothing contained
in this Section 6, however, shall limit any other rights and remedies of Tenant
against Landlord (including, without limitation, self-help and offset rights) as
provided in the Lease.
7. NOTICES. All notices or other written communications hereunder shall
be deemed to have been properly given (i) upon delivery, if delivered in person
with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day
(hereinafter defined) after having been deposited for overnight delivery with
any reputable overnight courier service, or (iii) three (3) Business Days after
having been deposited in any post office or mail depository regularly maintained
by the U.S. Postal Service and sent by registered or certified mail, postage
prepaid, return receipt requested, addressed to the receiving party at its
address set forth above, and:
if to Tenant:
to the attention of:___________________________; and
if to Lender:
to the attention of:____________________________, at
_____________________________________________________
or addressed as such party may from time to time designate by written notice to
the other parties. For purposes of this Paragraph 7, the term "Business Day"
shall mean any day other than Saturday, Sunday or any other day on which banks
are required or authorized to close in New York, New York.
Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.
8. SUCCESSORS. The obligations and rights of the parties pursuant to
this Agreement shall bind and inure to the benefit of the successors, assigns,
heirs and legal representatives of the respective parties. In addition, Tenant
acknowledges that all references herein to Landlord shall mean the owner of the
landlord's interest in the Lease, even if said owner shall be different than the
Landlord named in the Recitals.
9. DUPLICATE ORIGINALS; COUNTERPARTS. This Agreement may be executed in
any number of duplicate originals and each duplicate original shall be deemed to
be an original. This Agreement may be executed in several counterparts, each of
which counterparts shall be deemed an original instrument and all of which
together shall constitute a single Agreement. The failure of any party hereto to
41
<PAGE>
execute this Agreement, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.
IN WITNESS WHEREOF, Lender and Tenant have duly executed this Agreement
as of the date first above written.
LENDER:
BY:__________________________________
NAME:
TITLE:
TENANT:
BY:___________________________________
NAME:
TITLE:
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<PAGE>
The undersigned accepts and agrees to
the provisions of Paragraph 5 hereof.
LANDLORD:
__________________________________
BY:
__________________________________
NAME:
TITLE:
43
<PAGE>
SCHEDULE A
(PROPERTY DESCRIPTION)
<PAGE>
EXHIBIT D
FORM OF ESTOPPEL CERTIFICATE
44
<PAGE>
EXHIBIT E
FORM OF STORE LEASE
45
<PAGE>
SCHEDULE 6.1.3
LIST OF THIRD PARTY CONSENTS AND APPROVALS
NECESSARY TO CLOSE ESCROW
1. The consent of BankBoston under a Loan and Security Agreement dated
April 13, 1999.
2. The approval of the ground lessor under the EFL Ground Lease with
respect to the sublease (the Store Lease) between Buyer and Seller, pursuant to
which Buyer will lease back to Seller the East Fort Lauderdale Building.
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EXHIBIT 10.3
June 14, 1999
Dennis J. Wong
SPI Holdings, LLC
One Maritime Plaza, Suite 1460
San Francisco, CA 94111
Re: Agreement for Purchase and Sale and Leaseback dated as of
May 14, 1999 (the "Agreement") between The Sports Authority,
Inc. and The Sports Authority Florida, Inc. ("Seller") and SPI
Holdings, LLC ("Buyer")
Dear Dennis:
Unless otherwise defined herein, all capitalized terms used in this
letter shall have the meanings ascribed to them in the captioned Agreement. In
connection with the Agreement, Seller and Buyer hereby agree as follows:
1. The form of the Lease Agreement attached hereto shall constitute the
form of the Store Lease. Accordingly, the attached form of Lease Agreement shall
be attached to the Agreement as EXHIBIT E thereto. Neither Seller nor Buyer
shall have any further right to terminate the Agreement under Section 10.2
thereof, and the parties hereby irrevocably waive and relinquish such
termination right.
2. Section 4.1 of the Agreement is hereby amended to insert the word
"business" after the word "seven" appearing in the fourth and sixth lines
thereof.
3. The "Approval Period", as defined in Section 5.2 of the Agreement,
shall end on July 29, 1999.
4. As specified in Section 5.2 of the Agreement, under certain
circumstances the Seller is not obligated to reimburse the Buyer for one-half of
the costs of the surveys and reports obtained by Buyer pursuant to Section 5.2.
In order to determine if such circumstances exist, Seller shall not be obligated
to pay to Buyer one-half of the costs that are otherwise reimbursable under
Section 5.2 of the Agreement until 15 days after the expiration of the Approval
Period.
<PAGE>
5. The reference to Section 12.2 contained in Section 9.2.4 of
the Agreement is hereby amended to refer to Section 13.2.
6. The Agreement is hereby amended to renumber the existing Section
13.2.9 as Section 13.2.10 and to add the following provision as a new Section
13.2.9:
13.2.9. All documents required to be executed by Buyer
pursuant to the Store Lease (including, without limitation, a
declaration of restrictions with respect to the property subject to the
BB&Y Lease and the St. Petersburg outparcel and all such documents as
may reasonably be requested by Seller pursuant to Section 3.6 of the
Store Lease in connection with any REA (as defined in the Store Lease))
and an assumption of the obligations of the Seller under any REA; and
7. The Agreement is hereby amended so that the SNDA to be executed in
connection with the Chula Vista site shall contain the following provision as
Section 4(c) thereof:
(c) subject to any offsets, credits, claims or defenses which
Tenant might have against any prior landlord except with respect to the
misapplication of any insurance or condemnation proceeds, receipt from
Tenant of rent or additional rent made not more than one month in
advance, receipt from Tenant of estimated taxes, insurance premiums and
operating expenses, and the recovery of the pro rata share of insurance
premiums payable by the landlord to the Tenant; or
To the extent of any conflict between this letter and the Agreement,
the terms of this letter shall govern and control. Except as otherwise expressly
provided herein, all terms and provisions of the Agreement shall remain in full
force and effect, without modification. The waiver of jury trial provisions
contained in Section 19.19 of the Agreement shall apply to this letter.
The agreements set forth herein shall be effective upon the execution
this letter by Seller and Buyer. This letter may be executed in counterparts and
all of such executed counterparts shall constitute one agreement.
Very truly yours,
THE SPORTS AUTHORITY, INC.,
a Delaware corporation
By:__________________________________________
Henry Flieck, as Executive Vice President
Growth and Development
[signatures continued on next page]
<PAGE>
Dennis J. Wong
June 14, 1999
Page 3
THE SPORTS AUTHORITY, INC.,
a Florida corporation
By:__________________________________________
Henry Flieck, as Executive Vice President
Growth and Development
The undersigned Buyer hereby agrees to all of the terms and provisions of the
foregoing letter.
Date: June __, 1999
SPI HOLDINGS, LLC, a Delaware
limited liability company
By:_____________________________
Dennis J. Wong, Manager
<PAGE>
LEASE AGREEMENT
[STORE LOCATION--CITY/STATE]
THIS LEASE AGREEMENT made as of __________, 1999, by and between [SPI
NOMINEE] ("Landlord"), and [THE SPORTS AUTHORITY, INC., a Delaware corporation]
OR AS TO FLA. SITES [THE SPORTS AUTHORITY FLORIDA, INC., a Florida corporation],
having its principal office at 3383 North State Road 7, Fort Lauderdale, FL
33319 ("Tenant").
In consideration of the rents and provisions herein stipulated to be
paid and performed, Landlord and Tenant hereby covenant and agree as follows:
1. DEMISE OF PREMISES. Landlord hereby demises and lets to Tenant and
Tenant hereby takes and leases from Landlord for the term and upon the
provisions hereinafter specified the following described property ("Leased
Premises"): (i) the lot or parcel of land described in EXHIBIT A attached hereto
and made a part hereof, together with the easements (including easement rights,
licenses and other rights appurtenant to or otherwise afforded the Leased
Premises or any owner or occupant thereof under the REA, as defined below, if
any, but excluding the voting or consent rights of such owner), and other rights
and appurtenances thereto ("Land"); (ii) the buildings, structures and other
improvements on the Land (collectively, the "Improvements"); and (iii) the
machinery and equipment which is attached to the Improvements in such a manner
as to become fixtures under applicable law, together with all additions and
accessions thereto, substitutions therefor and replacements thereof permitted by
this Lease, excepting therefrom all Trade Fixtures (collectively, the
"Equipment").
2. CERTAIN DEFINITIONS.
"Additional Rent" shall mean all amounts, costs, expenses, liabilities
and obligations which Tenant is required to pay pursuant to, the terms of this
Lease other than Basic Rent.
"Alteration" or "Alterations" shall mean any or all changes, additions
(whether or not adjacent to or abutting any then existing buildings), expansions
(whether or not adjacent to or abutting any then existing buildings),
improvements, reconstructions, removals or replacements of any of the
Improvements or Equipment, both interior or exterior, and ordinary and
extraordinary.
"Basic Rent" shall mean Basic Rent as defined in Section 6.
"Basic Rent Payment Dates" shall mean the Basic Rent Payment Dates as
defined in Section 6.
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"Commencement Date" shall mean the Commencement Date as defined in
Section 5.
"Condemnation" shall mean a Taking and/or a Requisition.
"Default Rate" shall mean the Default Rate as defined in Section 19.3.
"Equipment" shall mean the Equipment as defined in Section 1 (which
excludes all Trade Fixtures).
"Event of Default" shall mean an Event of Default as defined in
Section 19.1.
"Impositions" shall mean the Impositions as defined in Section 8.
"Improvements" shall mean the Improvements as defined in Section 1.
"Insurance Requirement" or "Insurance Requirements" shall mean, as the
case may be, any one or more of the terms of each insurance policy required to
be carried by Landlord and Tenant under this Lease and the requirements of the
issuer of such policy.
"Land" shall mean the Land as defined in Section 1.
"Law" shall mean any applicable constitution, statute or rule of law.
"Leased Premises" shall mean the Leased Premises as defined in
Section 1.
"Legal Requirement" or "Legal Requirements" shall mean, as the case may
be, (a) any one or more of all present and future laws, codes, ordinances,
orders, judgments, decrees, injunctions, rules, regulations and requirements,
even if unforeseen or extraordinary, of every duly constituted governmental
authority or agency, and (b) and all covenants, restrictions and conditions now
of record, which in the case of either (a) or (b) are applicable to Tenant,
Landlord (with respect to the repair, maintenance or condition of the Leased
Premises) or to all or any part of or interest (other than liens) in Leased
Premises, or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction of the Leased Premises, even
if compliance therewith (i) necessitates structural changes or improvements
(including changes required to comply with the Americans with Disabilities Act)
or results in interference with the use or enjoyment of the Leased Premises or
(ii) requires Tenant to carry insurance other than as required by the provisions
of this Lease.
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"Lender" shall mean an entity identified as such in writing to Tenant
which makes a Loan to Landlord, secured by a Mortgage and evidenced by a Note or
which is the holder of the Mortgage and Note as a result of an assignment
thereof.
"Loan" shall mean a loan made by a Lender to Landlord secured by a
Mortgage and evidenced by a Note.
"Mortgage" shall mean a first priority mortgage, deed of trust or
similar security instrument hereafter executed covering, the Leased Premises
from Landlord to Lender.
"Net Award" shall mean the entire award payable to Landlord by reason
of a Condemnation, less any actual and reasonable expenses incurred by Landlord
in collecting such award.
"Net Proceeds" shall mean the entire proceeds of any insurance required
under Sections 14.2.1, 14.2.2 and 14.2.4, less any actual and reasonable
expenses incurred by Landlord in collecting such proceeds; provided however that
Net Proceeds shall exclude any amounts paid to Tenant for Tenant's trade
fixtures, equipment and other personal property of Tenant.
"Note" or "Notes" shall mean a Promissory Note or Notes hereafter
executed from Landlord to Lender, which Note or Notes will be secured by a
Mortgage and an assignment of leases and rents.
"Permitted Encumbrances" shall mean those covenants, restrictions,
reservations, liens, conditions, encroachments, easements and other matters of
title that affect the Leased Premises as of the date of Landlord's acquisition
thereof as reflected in the title policy issued in favor of Landlord upon its
acquisition of the Leased Premises.
"Replaced Equipment" or "Replacement Equipment" shall mean the Replaced
Equipment and Replacement Equipment, respectively, as defined in Section 11.3.
"Reciprocal Easement Agreement" or "REA" shall mean any reciprocal
easement agreement, easement and operating agreement, covenants, conditions and
restrictions, and/or condominium governing document that is included in the
Permitted Encumbrances or that is hereafter approved by Tenant, which approval
shall not be unreasonably withheld, and that is recorded against the Land and
adjacent property(ies) for the common benefit of the Land and such
property(ies), including, without limitation, any Shopping Center of which the
Leased Premises are a part.
"Requisition" shall mean any temporary condemnation or confiscation of
the use or occupancy of the Leased Premises by any governmental authority, civil
or military,
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<PAGE>
whether pursuant to an agreement with such governmental authority
in settlement of or under threat of any such requisition or confiscation, or
otherwise.
"Restoration" shall mean the Restoration as defined in Section 13.5.
"Security Instruments shall mean the Security Instruments as defined
in Section 3.3.
"Shopping Center" shall mean the shopping center commonly known as
_______________, of which the Leased Premises are a part.
"State" shall mean the State or Commonwealth in which the Leased
Premises is situated.
"Taking" shall mean any taking of the Leased Premises in or by
condemnation or other eminent domain proceedings pursuant to any law, general or
special, or by reason of any agreement with any condemnor in settlement of or
under threat of any such condemnation or other eminent domain proceedings or by
any other means, or any defacto condemnation.
"Term" shall mean the Term as defined in Section 5.
"Trade Fixtures" shall mean all fixtures, equipment and other items of
personal property (whether or not attached to the Improvements) which are owned
by Tenant and used in the operation of the business conducted on the Leased
Premises.
3. TITLE AND CONDITION; REA COMPLIANCE.
3.1 The Leased Premises are demised and let subject to (i) the
Permitted Encumbrances, (ii) all Legal Requirements and Insurance Requirements,
including any existing violation of any thereof, and (iii) the condition of the
Leased Premises as of the commencement of the Term; without representation or
warranty by Landlord except that Landlord represents and warrants title against
the lawful claims of others arising from the acts of Landlord (subject however
to the Permitted Exceptions); it being understood and agreed, however, that the
recital of the Permitted Encumbrances herein shall not be construed as a revival
of any thereof which for any reason may have expired.
3.2 EXCEPT FOR THE LIMITED WARRANTY OF TITLE CONTAINED IN
SECTION 3.1, LANDLORD LEASES AND WILL LEASE AND TENANT TAKES AND WILL TAKE THE
LEASED PREMISES "AS IS", AND TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING
AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE,
NOR SHALL LANDLORD BE DEEMED TO HAVE MADE,
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<PAGE>
ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE
LEASED PREMISES, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO ITS FITNESS FOR
USE OR PURPOSE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, AS TO THE
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, AS TO
LANDLORD'S TITLE THERETO, OR AS TO VALUE, COMPLIANCE WITH SPECIFICATIONS, USE,
CONDITION, MERCHANTABILITY, QUALITY, DESCRIPTION, DURABILITY OR OPERATION, IT
BEING AGREED THAT ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. Tenant
acknowledges that the Leased Premises are of its selection and to its
specifications, that the Leased Premises have been inspected by Tenant and are
satisfactory to it, and that Landlord has made no representations or warranties
with respect to the Leased Premises except for the limited warranty of title
contained in Section 3.1. In the event of any defect or deficiency in any of the
Leased Premises of any nature, whether patent or latent, Landlord shall not have
any responsibility or liability with respect thereto or for any incidental or
consequential damages (including strict liability in tort), except as otherwise
expressly provided herein. The provisions of this Section 3.2 have been
negotiated, and the foregoing provisions are intended to be a complete exclusion
and negation of any warranties by Landlord, express or implied, with respect to
any of the Leased Premises, arising pursuant to the uniform commercial code or
any other law now or hereafter in effect or otherwise, except for the limited
warranty of title contained in Section 3.1.
3.3 Tenant acknowledges that Landlord has provided to Tenant a
copy of the preliminary title report for the Leased Premises prepared by First
American Title Insurance Company dated as of ________, 1999, Tenant confirms
that Tenant has examined such title report prior to the execution and delivery
of this Lease and has found such title to the Leased Premises to be satisfactory
for the purposes contemplated by this Lease. Except for the acquisition loan to
Landlord from _____________________, as evidenced by a mortgage or deed of trust
against the Leased Premises, and related security documents (such documents,
together with any modifications thereto or other security documents hereafter
executed by Landlord, are collectively called the "Security Instruments"),
Landlord represents to Tenant that Landlord has not created or incurred
exceptions to title to the Leased Premises that are not reflected in such title
report.
3.4 Landlord hereby assigns, without recourse or warranty
whatsoever, to Tenant, (a) all claims against third parties for damages to the
Leased Premises to the extent that such damages are Tenant's responsibility to
repair pursuant to the provisions of this Lease, and (b) all warranties,
guaranties and indemnities, express or implied, and similar rights which
Landlord may have against any manufacturer, seller, engineer, contractor or
builder in respect of any of the Leased Premises, including, but not limited to,
any rights and remedies existing under contract or pursuant to the Uniform
Commercial Code (which claims and rights are
5
<PAGE>
collectively referred to in this Section 3.4 as the "Assigned Rights"). Such
assignment is nonexclusive, as Landlord retains the right in common with Tenant
to enforce the Assigned Rights, and such assignment shall remain in effect until
the termination of this Lease. Landlord shall also retain the right to enforce
any Assigned Rights in the name of Tenant upon the occurrence of an Event of
Default. Landlord hereby agrees to execute and deliver at Tenant's expense such
further documents, including powers of attorney, as Tenant may reasonably
request in order that Tenant may have the full benefit of the assignment
effected or intended to be effected by this Section 3.4.
3.4.1 Any monies received by Landlord with respect to the
Assigned Rights, whether during or after the Term, that relate to damages and/or
repairs that are Tenant's responsibility to repair pursuant to the provisions of
this Lease shall be made available by Landlord to Tenant to make such repairs,
or if Tenant has made such repairs, for reimbursement of the costs thereof. Any
monies collected or received by Tenant under any of the Assigned Rights shall be
held in trust by Tenant and applied solely to Tenant's repair obligations with
respect to the items for which such funds are recovered, and to the extent that
such funds exceed such obligations, they shall be promptly paid over to Landlord
to be held in trust and made available, if necessary, for subsequent repairs by
Tenant of such items.
3.4.2 Upon the termination of this Lease, Tenant's
interest in the Assigned Rights shall automatically revert to Landlord, subject
to Tenant's right, pursuant to Section 3.4.1, to reimbursement of repair costs
previously incurred by Tenant from monies subsequently received by Landlord.
Notwithstanding such reversion, Tenant shall retain the right to pursue any
claims against third parties that relate to damages and/or repairs that Tenant
repaired during the Term pursuant to the provisions of this Lease. The foregoing
provision of reversion shall be self-operative and no further instrument of
reassignment shall be required. In confirmation of such reassignment Tenant
shall execute and deliver promptly any certificate or other instrument which
Landlord may reasonably request.
3.5 Subject to compliance with the REA, Landlord agrees
to enter into, at Tenant's expense, such easements, covenants, waivers,
approvals or restrictions for utilities, parking or other matters as are
desirable for operation of the Leased Premises or properties adjacent thereto
(collectively, "Easements") as reasonably requested by Tenant, subject to
Lender's and Landlord's approval of the form thereof, not to be unreasonably
withheld or delayed; provided, however, that no such Easement shall result in
any diminution in the value or utility of the Leased Premises for use as a
retail site and further provided that no such Easement shall render the use of
the Leased Premises dependent upon any other property or condition the use of
the Leased Premises upon the use of any other property, each of which Tenant
shall certify to Landlord and Lender in writing delivered with Tenant's request
with respect to such Easement. If either Landlord or Lender shall fail to
approve or disapprove the form of any such Easements, within a period of thirty
(30) days from their respective receipt of
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<PAGE>
same, then either Landlord or Lender, as the case may be, shall be deemed to
have approved the form of any such Easement, provided that such request makes
reference to such thirty (30) day deemed approval period.
3.6 Tenant agrees that while this Lease is in effect (i)
Tenant shall comply with all of the terms and conditions of any REA affecting
the Leased Premises, and (ii) Tenant shall perform all obligations of the owner
of the Leased Premises under, and pay all expenses which such owner may be
required to pay under any REA, but only to the extent such obligations pertain
to the Leased Premises. Landlord shall cooperate with Tenant by providing such
authorizations under the REA as may be necessary to enable Tenant to perform
such REA obligations of Landlord. Promptly after the request of Tenant, Landlord
shall execute such documents as may be reasonably be requested by Tenant in
connection with any REA so that to the extent permitted by such REA (a) Tenant
is entitled to directly receive any notices under the REA, (b) Tenant is named
as a co-insured under any insurance policies required to be maintained by any
other party under the REA, (c) Tenant is afforded the benefit all rights,
easements, licenses and benefits afforded to the Leased Property under each REA
(but not the right to give approvals or consents of the owner of the Leased
Property), and (d) Tenant is able to directly enforce the REA and to directly
exercise all rights and remedies in connection with any breach of the REA by any
other party. Subject to such cooperation by Landlord, Tenant further covenants
and agrees to indemnify, defend and hold harmless Landlord and Lender against
any claim, loss or damage suffered by Landlord or Lender by reason of Tenant's
failure to perform any obligations under the REA pertaining to the Leased
Premises that are reasonably subject to performance by Tenant or pay any
expenses as required under any REA that are allocable to the Leased Premises or
comply with the terms and conditions of any REA pertaining to the Leased
Premises as hereinabove provided during the Term of this Lease. If from time to
time there are obligations of the owner of the Leased Premises under the REA for
which Tenant is not responsible pursuant to the foregoing provisions of this
Section 3.6, Landlord shall perform such obligations and Tenant shall cooperate
with Landlord's performance of same. In furtherance of the foregoing, if Tenant
from time to time becomes aware of any such obligation to be performed by
Landlord, Tenant shall provide Landlord with notice thereof.
3.7 Landlord shall not (i) modify or amend any REA or other
covenant, condition or restriction affecting the Leased Premises or impose any
additional covenant, condition or restriction upon the Leased Premises, or (ii)
grant any consent or waiver thereunder that would materially affect the rights
of Tenant or the Leased Premises without in either case obtaining the consent of
Tenant, which shall not be unreasonably withheld.
4. USE OF LEASED PREMISES, QUIET ENVIRONMENT.
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4.1 Tenant may use the Leased Premises as a retail store
that sells sports, recreational and fitness equipment, goods, clothing and
footwear, including the rental thereof and provision of services related thereto
(including entertainment incidental thereto). Subject to (i) the restrictions on
use set forth at Section 4.1.1 below, (ii) any Permitted Encumbrances, including
without limitation, use restrictions set forth in any REA, but excluding
restrictions in any Security Instruments, and (iii) Landlord's prior written
consent, which shall not be unreasonably withheld, Tenant may use the Leased
Premises for any other lawful purpose, so long as such other lawful purpose
would not (A) have a material adverse effect on the value of the Leased
Premises, (B) materially increase the likelihood that Tenant, Landlord or Lender
would incur liability under any provisions of the Act referred to in Section 26
of this Lease, or (C) result in or give rise to any material environmental
deterioration or degradation of the Leased Premises. In no event shall the
Leased Premises be used for any purpose which shall violate any of the
provisions of any Permitted Encumbrance (excluding Security Instruments) or any
covenants, restrictions or agreements hereafter created by or consented to by
Tenant applicable to the Leased Premises. Tenant agrees that with respect to the
Permitted Encumbrances (excluding Security Instruments) and any covenants,
restrictions or agreements hereafter created by or consented to by Tenant,
Tenant shall observe, perform and comply with and carry out the provisions
thereof required therein to be observed and performed by Landlord to the extent
that such provisions are reasonably subject to performance by Tenant.
4.1.1 Unless Landlord shall consent otherwise in
writing, which consent may be given or withheld in Landlord's sole and absolute
discretion, the Leased Premises shall not be used for any of the following
purposes: an establishment selling or exhibiting pornographic materials, a
massage parlor, a body or fender shop, a funeral parlor, a bowling alley, a
billiard parlor (other than incidental uses within what is primarily a retail
store of which it is a part), an automobile showroom, automotive filing station,
a car wash, an amusement gallery (other than incidental uses within what is
primarily a retail store of which it is a part), an off-track betting parlor, a
theater (other than incidental to a retail store of which it is a part), a flea
market or any store which primarily sells merchandise commonly known as
"clearance", "second-hand", "factory reject", "floor model", "overstocked",
"distressed", "bankruptcy", "fire sale" or "damaged" merchandise, an
establishment providing primarily live or pre-recorded entertainment of any
type, a roller skating rink, dance hall, discotheque or any other business
providing primarily a place of recreation to its customers (except for a health
club within what is primarily a retail store of which it is a part), or a
warehouse (other than for retail sales at the premises).
4.2 Tenant shall not permit any unlawful occupation, business
or trade to be conducted on the Leased Premises or any use to be made thereof
contrary to applicable Legal Requirements or Insurance Requirements. Tenant
shall not use, occupy or permit any of the Leased Premises to be used or
occupied, nor do or permit
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anything to be done in or on any of the Leased Premises, in a manner which would
(i) make void or voidable any insurance which Tenant is required hereunder to
maintain then in force with respect to any of the Leased Premises unless Tenant
obtains substitute insurance in compliance with the requirements of this Lease,
(ii) render Tenant unable to obtain any insurance which Tenant is required to
furnish hereunder, or (iii) cause any injury or damage to any of the
Improvements unless pursuant to Alterations permitted under Section 12 hereof.
4.3 Subject to all of the provisions of this Lease, so
long as no Event of Default exists hereunder, Landlord covenants to do no act to
disturb the peaceful and quiet occupation and enjoyment of the Leased Premises
by Tenant.
5. TERM.
5.1 Subject to the provisions hereof, Tenant shall have
and hold the Leased Premises for an initial term commencing on the date that
Landlord acquires title to the Leased Premises from Tenant (the "Commencement
Date"), which the parties anticipate will occur on or about _________, 1999, and
ending on January 31, 2020 (the "Expiration Date") (such initial term, together
with any Renewal Term which comes into effect as hereinafter provided, and
subject to any early termination of this Lease, is referred to herein as the
"Term").
5.2 Tenant shall have the option to extend the Term of this
Lease on all the provisions contained in this Lease, except for Basic Rent, for
four (4) consecutive five (5) years periods ( each, a "Renewal Term") following
expiration of the initial Term or a Renewal Term, as the case may. Provided that
no Event of Default exists as to Tenant when Tenant exercises such option,
Tenant may exercise each such option by giving notice of exercise of the option
to Landlord at least twelve (12) months and not earlier than fifteen (15) months
before the expiration of the initial Term or the current Renewal Term, as the
case may be. The rights and obligations of Landlord, Tenant and Lender during
any Renewal Term shall be subject to all of the provisions of this Lease, and
all such provisions shall continue in full force and effect, except that the
Basic Rent for each Renewal Term shall be increased in the manner set forth in
EXHIBIT B attached hereto.
5.2.1 It is the intention of the parties that
Tenant's right to extend the Term of this Lease not be lost through Tenant's
inadvertent failure to give notice of exercise of an option to extend the Term
as provided herein. Accordingly, if Tenant fails to notify Landlord of its
exercise of an option, such option shall nevertheless remain in full force and
effect for a period of thirty (30) days after Landlord's delivery to Tenant of a
subsequent written notice setting forth the expiration date of the Lease and
advising Tenant that notice of exercise of such option has not been received.
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5.2.2 Notwithstanding the foregoing, if Landlord
at any time not earlier than sixteen (16) months before the expiration of the
initial Term or the current Renewal Term, nor later than twelve and one-half
(12.5) months prior to the expiration of the initial Term or the current Renewal
Term, as the case may be, notifies Tenant of the date by which Tenant must
exercise Tenant's option to extend the Term and if Tenant thereafter fails to
timely exercise such option, then Section 5.2.1 shall not apply and Tenant must
exercise its option, if at all, at least twelve (12) months before the
expiration of the initial Term or the current Renewal Term, as the case may be.
6. RENT.
6.1 Tenant shall pay to Landlord (or to Lender, if
directed by Landlord), as minimum annual rent for the Leased Premises during the
Term, the monthly amounts set forth in EXHIBIT B attached hereto ("Basic Rent"),
commencing on the Commencement Date and on the first day of each month
thereafter during the Term (the "Basic Rent Payment Dates"). Tenant shall pay
the same at Landlord's address set for notices under this Lease, or at such
other place as Landlord from time to time may designate to Tenant in writing, in
funds which are legal tender for the payment of public or private debts in the
United States of America, and if required by Lender, by deposit to such account
in such bank as Lender shall designate from time to time. If the Commencement
Date shall occur other than on the first day of a month, Basic Rent for the
period from and including the Commencement Date through the last day of the
first partial month shall be paid on the Commencement Date, prorated on a daily
basis based upon the actual days in the month for each day from and including
the Commencement Date through and including the last day of such month.
6.2 Tenant shall pay and discharge before the imposition
of any fine, interest or penalty may be added thereto for late payment thereof,
as Additional Rent, all other amounts and obligations which Tenant assumes or
agrees to pay or discharge pursuant to this Lease, including without limitation,
all payments relating to the Leased Premises due under any REA, together with
every fine, penalty, interest and cost which may be added by the party to whom
such payment is due for nonpayment or late payment thereof. In the event of any
failure by Tenant to pay or discharge any of the foregoing, Tenant shall pay any
fine, interest or penalty imposed for such failure, and if such failure
continues for ten (10) business days after Landlord gives written notice thereof
to Tenant, Landlord shall have all rights, powers and remedies provided herein,
by law or otherwise, in the event of nonpayment of Basic Rent.
6.3 If any installment of Basic Rent is not paid within
five (5) business days after the Basic Rent Payment Date, Tenant shall pay to
Landlord a late charge equal to five percent (5%) of such overdue payment (the
"Late Charge"), which Late Charge shall constitute Additional Rent under this
Lease. If any payment of Additional Rent that is directly payable to Landlord
under this Lease is not paid by the due date for such payment and if such
failure to pay continues for a period of ten (10)
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days after Landlord has given Tenant notice of Tenant's failure to timely pay,
Tenant shall pay to Landlord the Late Charge on the overdue amount, which Late
Charge shall constitute Additional Rent under this Lease. Tenant acknowledges
that Landlord will incur costs and damages in the event of a late payment, that
the it would be impractical or difficult to fix Landlord's actual damages in
such event, and that the Late Charge is a reasonable estimate of such damages
and not a penalty for Tenant's failure to make timely payment.
6.4 Landlord and Tenant agree that this Lease is a true
lease and does not represent a financing arrangement. Each party shall reflect
the transactions represented by this Lease in all applicable books, records and
reports (including, without limitation, income tax filings) in a manner
consistent with "true lease" treatment rather than "financing" treatment.
6.5 As of the Commencement Date, Tenant is the sole
tenant occupying the Leased Premises and, except as otherwise expressly provided
in this Lease, is solely responsible for providing and paying for the operation,
maintenance, repair and onsite management of the Leased Premises.
7. NET LEASE; NON-TERMINABILITY.
7.1 This is a net Lease and Basic Rent, Additional Rent and
all other sums payable hereunder by Tenant shall be paid, except as otherwise
expressly set forth in this Lease, without notice, demand, setoff, counterclaim,
recoupment, abatement, suspension, deferment, diminution, deduction, reduction
or defense.
7.2 Except as otherwise expressly provided in this Lease,
this Lease shall not terminate, and Tenant shall not have any right to terminate
this Lease, during the Term. Except as otherwise expressly provided in this
Lease, Tenant shall not be entitled to any setoff, counterclaim, recoupment,
abatement, suspension, deferment, diminution, deduction, reduction or defense of
or to Basic Rent, Additional Rent or any other sums payable under this Lease;
and except as otherwise expressly provided in this Lease, the obligations of
Tenant under this Lease shall not be affected by any interference with Tenant's
use of any of the Leased Premises by anyone other than Landlord or its
successors or assigns for any reason, including but not limited to the
following: (i) any damage to or destruction of any of the Leased Premises by any
cause whatsoever, (ii) any Condemnation, (iii) the prohibition, limitation or
restriction of Tenant's use of any of the Leased Premises, (iv) Tenant's
acquisition of ownership of any of the Leased Premises; (v) (vi) any latent or
other defect in, or any theft or loss of any of the Leased Premises, (vii) the
breach of any warranty of any seller or manufacturer of any of the Equipment, or
(viii) any other cause, whether similar or dissimilar to the foregoing, any
present or future Law to the contrary notwithstanding. It is the intention of
the parties hereto that, except as otherwise expressly provided in this Lease,
the obligations of Tenant under this Lease shall be separate and
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independent covenants and agreements, and that Basic Rent, Additional Rent and
all other sums payable by Tenant hereunder shall continue to be payable in all
events (or, in lieu thereof, Tenant shall pay amounts equal thereto), and that,
except as otherwise expressly provided in this Lease, the obligations of Tenant
under this Lease shall continue unaffected, unless this Lease shall have been
terminated pursuant to an express provision of this Lease.
7.3 Tenant agrees that it shall remain obligated under this
Lease in accordance with its provisions and that, except as otherwise expressly
provided herein, it shall not take any action to terminate, rescind or avoid
this Lease, notwithstanding (i) the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting Landlord provided that this Lease is not rejected by or on
behalf of Landlord, or (ii) the exercise of any remedy, including foreclosure,
under the Mortgage, so long as the rights of Tenant under this Lease are not
disturbed as a result of such exercise.
7.4 Except as otherwise expressly stated in this Lease, this
Lease is the absolute and unconditional obligation of Tenant. Tenant waives all
rights which are not expressly stated in this Lease but which may now or
hereafter otherwise be conferred by Law (i) to quit, terminate or surrender this
Lease or any of the Leased Premises, (ii) to any setoff, counterclaim,
recoupment, abatement, suspension, deferment, diminution, deduction, reduction
or defense of or to Basic Rent, Additional Rent or any other sums payable under
this Lease, except as otherwise expressly provided in this Lease, and (iii) for
any statutory lien or offset right against Landlord or its property.
8. PAYMENT OF IMPOSITIONS; COMPLIANCE WITH LEGAL REQUIREMENTS AND
INSURANCE REQUIREMENTS.
8.1 Subject to the provisions of Section 18 hereof relating
to contests and the provisions of Section 8.2, Tenant shall, before interest or
penalties are due thereon, pay and discharge (all of the following, but
excluding the items excluded pursuant to Section 8.2, being herein collectively
called the "Impositions"): all taxes of every kind and nature (including real,
ad valorem, and personal property taxes) on or with respect to the Leased
Premises; all charges and/or taxes allocable to the Leased Premises for any
easement or agreement maintained for the benefit of the Leased Premises; all
general and special assessments, levies, permits, inspection and license fees on
or with respect to the Leased Premises; all costs and fees incurred by Landlord
in challenging the amount of taxes or assessments (provided however that if no
Event of Default exists, Tenant shall have no obligation to reimburse or pay
costs or fees incurred by Landlord in any contest by Landlord unless Tenant
consents to such contest, which consent shall not be unreasonably withheld); all
water and sewer rents and other utility charges on or with respect to the Leased
Premises; and all other public charges and/or taxes whether of a like or
different nature, even if unforeseen or
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extraordinary, imposed or assessed upon or with respect to the Leased Premises,
prior to or during the Term and allocable to the Term, against Landlord, Tenant
or any of the Leased Premises as a result of or arising in respect of the
occupancy, leasing, use, maintenance, operation, management, repair or
possession thereof, or any activity conducted on the Leased Premises, or the
Basic Rent or Additional Rent, including without limitation, any sales tax,
occupancy tax or use tax levied by any governmental body on or with respect to
such Basic Rent or Additional Rent, but excluding all items excluded from
Impositions under Section 8.2. If received by Landlord, Landlord shall promptly
deliver to Tenant any bill or invoice with respect to any Imposition.
8.2 Nothing herein shall obligate Tenant to pay, and the
term "Impositions" shall exclude, federal, state or local (i) documentary stamp
taxes, intangibles taxes, transfer and other taxes incurred as the result of a
conveyance, encumbrance, assignment of Landlord's interest or foreclosure by or
against (or suffered by) Landlord, (ii) payroll, franchise, capital stock or
similar taxes if any, of Landlord, (iii) taxes on the gross receipts or revenues
of Landlord, income, excise, profits or other taxes, if any, of Landlord,
determined on the basis of or measured by its income or gross receipts (unless
the taxes referred to in clauses (ii) and (iii) are in lieu of or a substitute
for any other tax or assessment upon or with respect to any of the Leased
Premises which, if such other tax or assessment were in effect at the
commencement of the Term, would be payable by Tenant) (iv) any estate,
inheritance, succession, gift, capital levy or similar taxes, (v) any interest,
charge or penalty for late payment by Landlord of any Impositions for which
estimated payments are being made by Tenant to Landlord, or (vi) taxes and
assessments allocable, when prorated on a daily basis, to any period after the
Term, provided that Tenant is not occupying the Leased Premises during such
period. Notwithstanding the foregoing, if an increase in Impositions is imposed
against the Leased Premises due to a conveyance, encumbrance, assignment of
Landlord's interest, or foreclosure by or against (or suffered by) Landlord (a)
more than once during the first five (5) year period after Landlord acquires
title to the Leased Premises, or (b) during any five (5) year period after the
date of any previous such increase in Impositions, then Tenant's obligation to
pay such increase in Impositions shall be abated during any such five (5) year
period.
8.3 In the event that any assessment against any of the
Leased Premises may be paid in installments, Landlord shall elect to pay such
assessment in the maximum allowable number of installments and Tenant shall be
liable only for those installments (or portions thereof) which become due and
payable during and are allocable to the Term.
8.4 If the Leased Premises are separately assessed, Tenant
may pay the Impositions directly. If the Leased Premises are not separately
assessed, Tenant shall pay the Impositions allocable to the Leased Premises
(which allocation shall be based upon the rentable square footage of the Leased
Premises in proportion to the rentable square footage of all buildings within
the assessment parcel) to Landlord as Additional
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Rent as provided in Section 8.4.3. Notwithstanding the foregoing provisions of
this Section 8.4, if an Event of Default has occurred, then upon the request of
Landlord, Tenant shall perform its obligations to pay Impositions hereunder by
making payments to Landlord as provided in Section 8.5.1.
8.4.1 If Tenant is paying the Impositions
directly, Tenant shall prepare and file all tax reports required by governmental
authorities which relate to the Impositions. Tenant shall deliver to Landlord
and to Lender within thirty (30) days after receipt thereof copies of all
settlements and notices received by Tenant pertaining to the Impositions which
may be issued by any governmental authority and, within thirty (30) days after
payment by Tenant, receipts for payments of all Impositions made during each
calendar year of the Term. Tenant shall receive the benefit of any refunds,
credits, incentives and abatements allowed by the taxing authorities for the
Impositions paid by Tenant, net of any reasonable costs incurred by Landlord in
obtaining such benefit.
8.4.2 If Landlord is paying the Impositions
directly, Landlord shall prepare and file all tax reports required by
governmental authorities which relate to the Impositions, and Landlord shall
deliver to Tenant and to Lender, within thirty (30) days after receipt thereof,
copies of all settlements, notices and receipts pertaining to the Impositions
which may be issued by any governmental authority, and within thirty (30) days
after payment thereof by Landlord, evidence of payment of all Impositions made
during each calendar year of the Term.
8.4.3 If Section 8.5.1 does not apply, and the
Leased Premises are not separately assessed, then upon Landlord's receipt of the
tax bill for each tax year, Landlord shall provide a copy of same to Tenant with
a statement of Tenant's allocable share thereof, and on the later of 30 days
after Tenant's receipt of such statement or 30 days prior to the due date for
payment of the Imposition, Tenant shall pay Tenant's share thereof to Landlord.
Subject to Landlord's receipt of Tenant's timely payment of Tenant's share of
the Impositions, Landlord shall timely pay the Impositions directly for the
entire assessed parcel.
8.5 If upon the occurrence of an Event of Default, Landlord
has elected to directly pay the Impositions rather than to have Tenant directly
do so, then on or before October 31 of each year or as soon thereafter as is
practicable, Landlord shall furnish to Tenant a statement setting forth the
estimated Impositions for the subsequent calendar year.
8.5.1 If an Event of Default has occurred and
Landlord has elected to directly pay the Impositions rather than to have Tenant
directly do so, then on each Basic Rent Payment Date, Tenant shall pay in
advance to Landlord one-twelfth (1/12th) of the most recent estimated
Impositions; provided, however, that if such statement is not given in October,
Tenant shall continue to pay to Landlord one-twelfth
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(1/12th) of the estimated Impositions of the previous calendar year until the
month after such statement is given.
8.5.2 Monies paid by Tenant to Landlord pursuant
to this Section 8.5. shall be placed in a separate interest-bearing account with
interest to accrue for the benefit of Tenant; provided however that Landlord's
obligation to do so shall be subject to the requirements of Lender, as the
Landlord and Tenant acknowledge that the funds may be placed in a impound
account established by Landlord with Lender that is not interest-bearing.
8.5.3 If at any time, but no more than once each
calendar year, it appears to Landlord that the actual Impositions for any
calendar year during the Term will exceed the estimated Impositions set forth in
Landlord's statement, Landlord shall have the right by notice to Tenant to
revise the estimated Impositions for such year and subsequent payments thereof
shall, commencing with the first month after which Tenant receives such notice
(but no earlier than 20 days after Tenant's receipt of such notice), be
increased based upon such revised statement. Notwithstanding the foregoing,
Impositions actually incurred and paid by Landlord, but not theretofor billed to
Tenant, as invoiced by Landlord shall be paid by Tenant within thirty (30) days
after receipt of Landlord's invoice.
8.5.4 Within one hundred twenty (120) days after
the end of each calendar year during the Term, Landlord shall furnish to Tenant
a statement of the actual Impositions for such calendar year. If the estimated
Impositions paid by Tenant during such calendar year is (x) less than the actual
Impositions for such period as shown on Landlord's statement, then Tenant shall
pay the difference to Landlord within 30 days after the date of Landlord's
statement, or (y) more than the actual Impositions for such period, then Tenant
shall be allowed a credit on future payments of Rent and Additional Rent,
including estimated Impositions, for the amount of such excess until the entire
credit shall have been utilized, or, if the statement is given by Landlord with
respect to the calendar year in which the Term expires, Landlord shall pay such
excess to Tenant together with such statement.
8.6 If Landlord is paying Impositions directly and the
amount thereof may be reduced by early payment of such Impositions, Landlord
shall establish the amounts required to be paid to Landlord pursuant to Section
8.4.3 or Section 8.5, as applicable, so that the amounts paid by Tenant to
Landlord will be sufficient to make early payment of such Impositions. Provided
that Landlord receives timely payment from Tenant of such adjusted amounts,
Landlord shall make early payment of such Impositions (both for the Leased
Premises and the entire assessed parcel, if the Leased Premises are not
separately assessed) and the benefit of such early payment shall inure to the
benefit of Tenant. Provided that Landlord receives timely payment from Tenant as
required herein, any interest, penalties, or late charges resulting from
Landlord's
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failure to pay any Imposition or otherwise comply with the provisions
of this Section 8.6 shall be paid solely by Landlord.
8.7 Subject to the provisions of Section 18 hereof, Tenant
shall promptly comply with and conform to all of the Legal Requirements and
Insurance Requirements.
9. LIENS; RECORDING AND TITLE.
9.1 Subject to the provisions of Section 18 hereof, Tenant
shall not, directly or indirectly, create or permit to be created or to remain,
and shall promptly discharge, any lien on Landlord's interest in the Leased
Premises, on the Basic Rent, Additional Rent or on any other sums payable by
Tenant under this Lease, other than the Mortgage, the Permitted Encumbrances and
any mortgage, lien, encumbrance or other charge created by or resulting from any
act or omission by Landlord or those claiming by, through or under Landlord
(except Tenant). Notice is hereby given that Landlord shall not be liable for
any labor, services or materials furnished or to be furnished to Tenant, or to
anyone holding any of the Leased Premises through or under Tenant, and that no
mechanic's or other liens for any such labor, services or materials shall attach
to or affect the interest of Landlord in and to any of the Leased Premises.
Notwithstanding anything in this Lease to the contrary, Tenant shall have the
right, without notice to or the consent of Landlord, to encumber all or any
portion of Tenant's interest in the Leased Premises (but excluding any interest
of Landlord in the Leased Premises) and Tenant's interest in Trade Fixtures,
inventory, receivables and/or other tangible or intangible property located on,
in, arising from or otherwise relating to the Leased Premises.
9.2 Each of Landlord and Tenant shall execute, acknowledge
and deliver to the other a written Memorandum or Notice of this Lease to be
recorded in the appropriate land records of the jurisdiction in which the Leased
Premises is located, in order to give public notice and protect the validity of
this Lease. In the event of any discrepancy between the provisions of said
recorded Memorandum or Notice of this Lease and the provisions of this Lease,
the provisions of this Lease shall prevail.
9.3 Nothing in this Lease and no action or inaction by
Landlord shall be deemed or construed to mean that Landlord has granted to
Tenant any right, power or permission to do any act or to make any agreement
which may create, give rise to, or be the foundation for, any right, title,
interest or lien in or upon the estate of Landlord in any of the Leased
Premises.
10. RELEASE; INDEMNIFICATION.
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10.1 Landlord and Tenant, on their own behalf and on behalf
of anyone claiming under or through either one by way of subrogation, hereby
release and waive all rights of recovery and causes of action against each other
and their respective subsidiaries, parents, affiliates, officers, directors,
shareholders, partners, beneficial owners, trustees, and members (collectively,
for purposes of this Section 10, their "Affiliates") from any and all liability
for any loss or damage to property or resulting from damage to such property
(and, in either case, any resulting loss of business or rental income), whether
caused by the negligence or fault of the other party, which is insured under (i)
the "All-Risk" property insurance required to be maintained hereunder, (ii) any
other insurance required to be maintained hereunder, and (iii) any other
insurance policy now or hereafter issued to Landlord or Tenant.
10.1.1 Landlord and Tenant shall cause each
insurance policy carried by either of them insuring the Leased Premises or the
contents thereof to provide that the insurer waives all rights of recovery by
way of subrogation or otherwise against the other party hereto (and all of such
other party's Affiliates) in connection with any loss or damage which is covered
by such policy or that such policy shall otherwise permit, and shall not be
voided by the releases provided for in this Section 10.1.
10.1.2 In the event either Landlord or Tenant
maintains a deductible (as either may be permitted hereunder), then the
self-insuring party or the party maintaining the deductible hereby releases the
other party from any liability arising from any event which would have been
covered had (i) the required insurance been obtained and/or (ii) the deductible
not been maintained.
10.2 Except as otherwise provided in Section 10.1, Tenant
covenants to defend and indemnify Landlord and its Affiliates and hold Landlord
and its Affiliates harmless (except for loss or damage (i) resulting from the
acts or omissions of Landlord, its agents, contractors, licensees, tenants
(other than Tenant), occupants or employees, or (ii) for which any of the
respective parties listed in the foregoing clause (i) may be statutorily liable)
from and against any and all claims, actions, damages, liability and expense,
including reasonable attorneys' fees, (a) in connection with loss of life,
personal injury and/or damage to property arising from or out of any occurrence
in or upon the Leased Premises, or any part thereof during the Term, or (b)
occasioned by any act or omission of Tenant, its agents, contractors, employees
and licensees during the Term.
10.3 Except as otherwise provided in Section 10.1, Landlord
covenants to defend and indemnify Tenant and its Affiliates and hold Tenant and
its Affiliates harmless (except for loss or damage resulting from the acts or
omissions of Tenant, its agents, contractors, licensees or employees) from and
against any and all claims, actions, damages, liability and expense, including
reasonable attorneys' fees, (a) in connection with loss of life, personal injury
and/or damage to property arising from or
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out of any occurrence during the Term in or upon (i) those portions of the
Leased Premises maintained by Landlord (if any), and (ii) the adjacent
properties of Landlord (if any), or any part thereof, or (b) occasioned by any
act or omission of Landlord, its agents, contractors and employees during the
Term.
10.4 The following procedures shall be applicable with
respect to all indemnity provisions of this Lease:
10.4.1 Any party entitled to indemnification under
this Lease (an "Indemnitee") agrees that upon its obtaining knowledge of any
facts which the Indemnitee recognizes to be the basis for a claim for indemnity
(a "Claim") under the provisions of this Lease (including, without limitation,
the receipt of any demand, assertion, claim, action or proceeding, judicial or
otherwise), it will give reasonably prompt notice thereof in writing to the
other party to this Lease (the "Indemnitor") together with a statement of all
information respecting such Claim as it shall then have. The Indemnitor shall
not be obligated to indemnify the Indemnitee for the increased amount of any
Claim which would otherwise have been payable under this Lease to the extent
that the increase resulted from the lack of notice required by this provision.
10.4.2 The Indemnitor is entitled at its cost and
expense to contest, defend by all appropriate legal proceedings, handle and
settle any Claim with respect to which it is called upon to indemnify the
Indemnitee under the provisions of this Lease; provided, however, that notice of
the intention to do so shall be delivered by the Indemnitor to the Indemnitee
within a reasonable time in light of the circumstances then existing. Any
contest may be conducted in the name and on behalf of the Indemnitor or
conducted in the name and on behalf of the Indemnitee, if necessary, as may be
determined by the Indemnitor. Any contest shall be conducted by attorneys
engaged by the Indemnitor (which shall be reasonably acceptable to the
Indemnitee), but the Indemnitee shall have the right to participate in the
proceedings and to be represented by attorneys of its own choosing at its own
cost and expense. If the Indemnitee joins in any contest, however, the
Indemnitor shall have full authority to determine all action to be taken;
provided however that the Indemnitor shall have no authority to reject a
settlement offer that is fully covered by insurance unless Indemnitee agrees to
reject such offer. If the Indemnitor does not elect to contest a Claim, handle
the Claim or negotiate a settlement thereof, the Indemnitor shall be bound by
the result obtained by the Indemnitee. The Indemnitee shall take such
commercially reasonable actions as may be requested by Indemnitor to resolve,
settle or compromise the asserted Claim at the cost and expense of the
Indemnitor.
10.4.3 If requested by the Indemnitor, the
Indemnitee agrees to cooperate with the Indemnitor and its counsel in contesting
any Claim which the Indemnitor elects to contest or, if appropriate, in making
any counterclaim against the person asserting the Claim, or any cross-complaint
against any person, and further agrees to take any other action as reasonably
may be requested by the Indemnitor to
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reduce or eliminate any loss for which the Indemnitor would have responsibility,
but the Indemnitor will reimburse the Indemnitee for any reasonable expenses
incurred by it in so cooperating or acting at the request of the Indemnitor.
10.4.4 The Indemnitee shall provide reasonable
advance written notice to the Indemnitor of any meeting with all persons
(including governmental authorities) asserting any Claim and any meetings with
representatives (including counsel) of such persons. Indemnitor and its counsel
shall have the opportunity to be present at and participate in such meetings,
and Indemnitor shall have the right to determine the action to be taken in or
with respect to any such meeting.
10.4.5 The Indemnitor shall pay to the Indemnitee
the amount to which the Indemnitee may become entitled by reason of the
provisions of this Lease within 30 business days after the amount owed is
finally determined either by mutual agreement of Landlord and Tenant, pursuant
to any settlement of any Claim reached by the Indemnitor, or pursuant to the
final unappealable judgment of a court of competent jurisdiction.
10.5 The respective rights and obligations of Landlord and
Tenant under this Section 10 shall survive any termination of this Lease.
11. MAINTENANCE AND REPAIR.
11.1 Tenant shall at all times maintain the Leased Premises
(including, without limitation, the roof, landscaping, walls, footings,
foundations and structural components of the Leased Premises) and the Equipment
in first class condition and repair (taking into account the age of the
Improvements). Except as otherwise expressly provided in this Lease, Tenant
shall promptly make all repairs and replacements of every kind and nature,
including repairs and reconstruction after damage or destruction, whether
foreseen or unforeseen, which may be required to be made upon or in connection
with the Leased Premises in order to keep and maintain the Leased Premises in
first class condition and repair (taking into account the age of the
Improvements), and in compliance with all Legal Requirements.
11.1.1 Tenant shall do or cause others to do all
shoring of the Leased Premises or of foundations and walls of the Improvements
and every other act necessary or appropriate for preservation and safety
thereof, by reason of or in connection with any excavation or other building
operation upon any of the Leased Premises, whether or not Landlord shall, by
reason of any Legal Requirements or Insurance Requirements, be required to take
such action or be liable for failure to do so.
11.1.2 Unless Landlord has elected to maintain and
repair the Exterior Area pursuant to Section 11.6 and such election remains in
effect, and except as otherwise expressly provided in this Lease (i) Landlord
shall not be required to
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make any repair, whether foreseen or unforeseen, or to maintain any of the
Leased Premises or adjacent property in any way, and (ii) Tenant hereby
expressly waives the right to make repairs at the expense of the Landlord, which
right may be provided for in any Law now or hereafter in effect. Nothing in the
preceding sentence shall be deemed to excuse Landlord for responsibility for
repairs arising from Landlord's default under this Lease or its negligence or
intentional misconduct, nor to preclude Tenant from being entitled to insurance
proceeds or condemnation awards for Restoration pursuant to Sections 13.5, 14.7
and 14.8 of this Lease.
11.1.3 Tenant shall, in all events, make all
repairs for which it is responsible hereunder promptly, and all repairs shall be
in a good, proper and workmanlike manner, such that the Leased Premises are
maintained in first class condition (taking into account the age of the
Improvements). All repairs by Tenant shall be made in conformity with the
provisions of Section 12.
11.1.4 Tenant's obligations for Restoration under
this Lease, shall be to restore the Improvements, subject to Legal Requirements,
to a condition that, as nearly as practicable, is at least as good as the
condition of such Improvements before the damage, destruction or condemnation
(as the case may be), in accordance with the provisions of Section 12 below.
However, notwithstanding anything to the contrary provided in this Lease, so
long as the Improvements after any rebuilding, repair or restoration shall have
a value not less than the value prior to the damage, destruction or
condemnation, Tenant shall have the right to modify the layout and construction
of the Improvements in accordance with plans and specifications that have been
approved by Landlord (which approval shall not be unreasonably withheld) and (i)
are substantially similar to the plans and specifications for the prototype of
stores that Tenant is then constructing elsewhere, or (ii) are otherwise
acceptable to Landlord in its reasonable discretion (it being agreed that a
multi-tenant building would be permitted but that a special, single purpose
building would not be permitted).
11.2 Tenant shall make all Alterations, including
structural alterations, necessary to maintain the Leased Premises in compliance
with all Legal Requirements. In the event that any Improvement shall violate any
Legal Requirements or Insurance Requirements, Tenant shall take such action as
shall be necessary to remove such violation, including, if necessary, any
Alteration. Any such repair or Alteration shall be made in conformity with the
provisions of Section 12. Notwithstanding the foregoing, Tenant shall have no
obligation under this Section 11 to make Alterations that (i) are the
responsibility of Landlord if Landlord has undertaken the maintenance of the
Exterior Area pursuant to Section 11.6 below, (ii) result from Landlord's
default, (iii) are covered by Landlord's indemnity under Section 10.2, or (iv)
involves the removal of Hazardous Substances not introduced to the Leased
Premises by Tenant or others acting by or for Tenant, including without
limitation, its employees, agent, contractors, subcontractors, customers and
invitees.
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11.3 Tenant shall from time to time replace with other
operational equipment or parts (the "Replacement Equipment") any of the
Equipment (the "Replaced Equipment") which shall have become unusable for the
purpose for which it is intended, or been lost, stolen, damaged or destroyed, or
been taken by a Condemnation (if Restoration of the Leased Premises is required
to be made by Tenant pursuant to Section 13.5). All Replacement Equipment shall
become the property of Landlord, shall be free and clear of all liens and rights
of others and shall become a part of the Equipment as if originally demised
herein.
11.4 Tenant shall promptly repair at its sole cost and
expense all damage to the Leased Premises caused by the removal of Trade
Fixtures, Equipment, Replaced Equipment or other personal property of Tenant or
the installation of Replacement Equipment.
11.5 If Tenant shall be in default under any of the
provisions of this Section 11, Landlord may after thirty (30) days written
notice given to Tenant and failure of Tenant to cure during said period (subject
to extension during periods of remodeling, reconstruction and/or repair), or if
Tenant has commenced such cure within said thirty (30) day or extended period,
Tenant's failure to diligently complete such cure, but without notice in the
event of an emergency (although Landlord shall make a good faith effort to
notify Tenant by telephone and/or facsimile in the event of an emergency), do
whatever is necessary to cure such default as may be appropriate under the
circumstances for the account of and at the expense of Tenant. In the event of
an emergency Landlord shall notify Tenant of the situation by phone or other
available communication. All reasonable sums so paid by Landlord and all
reasonable costs and expenses (including, without limitation, attorneys' fees
and expenses) so incurred, together with interest thereon at the Default Rate
from the date of payment or incurring the expense, shall constitute Additional
Rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord
on demand.
11.6 Notwithstanding the provisions of Section 11.1, in the
event of (i) an Assignment (as defined in Section 17.1, but excluding an
Assignment for which Landlord's consent is not required pursuant to Section
17.5), or (ii) a Sublease (as defined in Section 17.1) of 75% or more of the
building on the Leased Premises, or (iii) Tenant's failure to maintain the
Exterior Area (as defined below) in a first class condition (subject to ordinary
wear and tear and taking into account the age of the Improvements) and if within
thirty (30) days after Landlord gives notice thereof to Tenant (subject to
extension during periods of remodeling, reconstruction and/or repair), Tenant's
failure to commence such maintenance and thereafter diligently cure such
previous failure, or (iv) a Lender acquiring Landlord's interest in the Leased
Premises and such Lender as successor Landlord exercising the following option,
then Landlord may, at Landlord's option, perform the operation, maintenance,
repair, replacement and management of the exterior portions of the Leased
Premises, excluding the exterior of the building thereon (the "Exterior Area"),
by providing
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thirty (30) days' written notice to Tenant of Landlord's exercise of such
option. If Landlord elects to manage and maintain the Exterior Area, Tenant
shall abide by such reasonable regulations with respect thereto as Landlord may
promulgate from time to time. If pursuant to this Section 11.6, Landlord elects
to manage and maintain the Exterior Area, Landlord may at any time thereafter
provide notice to Tenant that Landlord has elected to terminate its management
and maintenance of the Exterior Area, and Tenant shall, thirty (30) days after
its receipt of such notice, resume Tenant's operation, maintenance, repair,
replacement and management of the Exterior Area. Subsequent thereto, in the
event of a new Assignment or Sublease, or if Tenant subsequently fails to
maintain the Exterior Area in a first class condition (subject to ordinary wear
and tear and taking into account the age of the improvements), and if within
thirty (30) days after Landlord gives notice thereof to Tenant, Tenant fails to
commence such maintenance and thereafter diligently cure such previous failure,
then Landlord may, at Landlord's option, again perform the operation,
maintenance, repair, replacement and management of the Exterior Area, by
providing thirty (30) days' written notice to Tenant of Landlord's exercise of
such option.
11.6.1 If Landlord elects to perform the operation,
maintenance, repair, replacement and management of the Exterior Area, Landlord
shall be obligated to repair, replace and manage the Exterior Area in accordance
with the same standards as would otherwise be applicable to Tenant under this
Section 11, and Tenant shall pay the Operating Expenses therefor. As used
herein, "Operating Expenses" shall mean and include all costs paid and incurred
by Landlord for the operation, maintenance, repair and replacement of the
Exterior Area during the Term, plus a property management fee not to exceed the
then prevailing market rate property management fee charged by unrelated third
parties for providing such services to similar properties in the geographic area
of the Leased Premises; provided however, in no event shall the Operating
Expenses include any costs or fees allocable to any period after the Term of
this Lease. Notwithstanding anything to the contrary provided herein, Operating
Expenses shall not include items of fees or costs to the extent (a) such items
are reimbursed or are reimbursable (under insurance proceeds, by any third
party, or otherwise), (b) such items are covered under any applicable warranty
or guaranty; (c) such items are necessary due to the neglect of Landlord or the
breach of its obligations under this Lease, or (d) such items have been
disproportionately allocated to the Leased Premises or the Tenant. Landlord
agrees to engage contractors at commercially competitive rates in connection
with all components of the Operating Expenses. At any time that Tenant has been
able to obtain a substantially equivalent quote from a qualified contractor for
any significant Operating Expense item or items at a cost of at least 10% less
than the price then being incurred for such Operating Expense item or items,
then Landlord shall, within 30 days after receipt of Tenant's notice (together
with a copy of the quote), either (i) engage said contractor to perform such
portion of the maintenance, repair or replacement, or (ii) thereafter calculate
the Operating Expenses for the item or items covered by the quote, and for the
period for which the quote
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would be applicable, at the rate provided in the notice from Tenant, regardless
of whether Landlord engages said contractor.
11.6.2 As soon as practicable after Landlord
elects to perform the operation, maintenance, repair and management of the
Exterior Area, and on or before December 31 of each year thereafter, Landlord
shall furnish to Tenant a statement setting forth the estimated Operating
Expenses for the subsequent calendar year. On each Basic Rent Payment Date,
Tenant shall pay in advance to Landlord one-twelfth (1/12th) of the most recent
estimated Operating Expenses; provided, however, that if such statement is not
given in December, Tenant shall continue to pay to Landlord one-twelfth (1/12th)
of the estimated Operating Expenses of the previous calendar year until the
month after such statement is given. Within one hundred twenty (120) days after
the end of each calendar year during the Term, Landlord shall furnish to Tenant
a statement of the actual Operating Expenses for such calendar year which shall
itemize the actual amount of the Operating Expenses and, upon the request of
Tenant, Landlord shall provide to Tenant supporting documentation with respect
thereto. If the estimated Operating Expenses paid by Tenant during such calendar
year is (x) less than the actual Operating Expenses for such period as shown on
Landlord's statement, then Tenant shall pay the difference to Landlord within 30
days after the date of Landlord's statement, or (y) more than the actual
Operating Expenses for such period, then Tenant shall be allowed a credit on
immediately succeeding future payments of Basic Rent and Additional Rent,
including estimated Operating Expenses, for the amount of such excess until the
entire credit has been utilized, or, if the statement is given by Landlord with
respect to the calendar year in which the Term expires, Landlord shall pay such
excess to Tenant together with such statement. Notwithstanding the foregoing,
Operating Expenses actually incurred and paid by Landlord, but not theretofor
billed to Tenant, as invoiced by Landlord shall be paid by Tenant within thirty
(30) days after receipt of Landlord's invoice.
11.6.3 Within twelve (12) months after Tenant's
receipt of Landlord's statement of actual annual Operating Expenses, Tenant or
Tenant's authorized agent shall have the right to inspect the books and records
of Landlord relating to Operating Expenses after giving reasonable prior written
notice to Landlord for the purpose of verifying Landlord's statement of
Operating Expenses. If Tenant has an audit performed of such books and records
by a certified public accountant reasonably approved by Landlord prior to the
audit, and such audit reveals an overstatement of Operating Expenses by
Landlord, the amount overstated shall be credited to the next due payments of
Basic Rent and Additional Rent, including Operating Expenses, or if at the time
of such audit, this Lease has terminated, then the amount of the overpayment
shall be reimbursed to Tenant by Landlord within thirty (30) days of receipt by
Landlord of the audit report; provided however that if the audit reveals an
overstatement of Operating Expenses of more than four percent (4%), then
Landlord shall within thirty (30) days after receipt of such audit reimburse
Tenant for
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the cost of such audit. If Tenant does not have an audit performed within twelve
(12) months of receipt of Landlord's statement of actual annual Operating
Expenses, such annual statement shall be deemed correct.
11.6.4 If Landlord elects to perform the operation,
maintenance, repair and management of the Exterior Area and thereafter fails to
perform any of such items in the manner required under this Lease, Tenant shall
give Landlord written notice thereof, specifying with particularity the breach
claimed by Tenant. Landlord shall have the right to cure such breach during the
30-day period following receipt of Tenant's notice hereunder; provided however
that if Landlord commences to cure such breach within such 30-day period and
thereafter diligently prosecutes the same to completion, Landlord shall not be
in default hereunder. If the Leased Premises are subject to a Mortgage, Tenant
shall serve Lender concurrent copies of any notices of default served on
Landlord hereunder, and if Landlord fails to complete any cure within the cure
period(s) provided above, Lender shall have an additional period of thirty (30)
days after the expiration of any such cure period(s) to cure any default of
Landlord. Notwithstanding such additional cure period of Lender, if Landlord
fails to cure any Landlord breach within the cure period(s) described above,
Tenant shall have the right, but not the obligation, to cure such breach and
recover, as provided below, the costs reasonably incurred by Tenant.
Furthermore, if the breach of Landlord materially adversely affects Tenant's use
and enjoyment of the Leased Premises and if Landlord has not cured such breach
during the 30 day period following receipt of Tenant's notice hereunder, then
notwithstanding any continuing efforts of Landlord to cure such breach, Tenant
may itself elect to cure Landlord's default and recover from Landlord, as
provided below, the costs thereby reasonably incurred by Tenant. If Landlord (or
Lender) fails to cure any Landlord breach within the cure period(s) described
above, Tenant, as its sole and only recourse for any such breach, shall have the
right to (i) resume its prior operation, maintenance, repair and management of
the Exterior Area, and/or (ii) pursuant to Section 19.4, recover from Landlord
the reasonable costs incurred by Tenant in curing Landlord's failure to maintain
and repair the Exterior Area and the right to setoff against the next due
payments of Basic Rent and Additional Rent the amounts payable by Landlord to
Tenant hereunder until Tenant shall have setoff the entire amount. Furthermore,
notwithstanding the cure periods provided to Landlord and Lender above, if such
breach by Landlord creates an emergency or an immediate threat to the safety of
persons or property on the Leased Premises, Tenant after attempting to provide
telephonic and/or facsimile notice to Landlord of such breach and the emergency
or threat to safety created thereby, may elect to cure such breach and upon
doing so, Tenant shall be entitled pursuant to Section 19.4 to recover from
Landlord the reasonable costs thereby incurred by Tenant. If pursuant to this
Section 11.6.4, Tenant resumes its operation, maintenance, repair and management
of the Exterior Area, Landlord shall have no right under Section 11.6 to
re-elect to take back such responsibilities unless (x) Tenant thereafter fails
to maintain the Exterior Area in a first class condition (subject to ordinary
wear and tear and taking into account the age of the improvements), and within
thirty (30) days after Landlord
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gives notice thereof to Tenant, Tenant fails to commence such maintenance and
thereafter diligently cure such failure, or (y) an Event of Default occurs as to
Tenant.
11.6.5 If Landlord elects to perform the operation,
maintenance, repair, replacement and management of the Exterior Area pursuant to
this Section 11.6, except in the event of an emergency (and then only as
necessary to respond to the emergency and after reasonable notice to Tenant
under the circumstances and in such instance with Landlord taking reasonable
measures to minimize interference) Landlord shall not schedule or authorize
repairs, maintenance or replacements to the Exterior Area (except for routine
maintenance items) during the months of April, August, November and December.
Landlord shall use reasonable and good faith efforts to stage, sequence and
perform any repair, maintenance or replacements to the Exterior Area to minimize
the disruption of and interference with Tenant's business and operations. Upon
commencement of such repair, maintenance or replacement, the work shall be
diligently prosecuted to completion. Except in the event of an emergency, if any
such work to the Exterior Area is likely to significantly adversely affect the
conduct of Tenant's business on the Leased Premises, Landlord shall schedule
such work in a manner reasonably acceptable to Tenant. Accordingly, for any work
that is likely to significantly adversely affect the conduct of Tenant's
business on the Leased Premises, at least ten (10) days prior to the
commencement thereof, Landlord shall provide a schedule of the scope of work to
be performed and the timing thereof to Tenant, for Tenant's approval within five
(5) days of the receipt thereof (which approval shall not be unreasonably
withheld and shall be deemed given if not denied within said five (5) day
period).
[11.6.6 The leases for Chula Vista and St. Petersburg will
also provide that contemporaneously with the execution thereof, landlord shall
execute and record a declaration of restrictions (in form and substance
reasonably acceptable to tenant) against the St. Petersburg outparcel and
balance of the Chula Vista site, as the case may be, that (a) until such time as
tenant has discontinued for a period of six months or more operating a sporting
goods retail business from the leased premises as the primary retail business
therein (subject to temporary interruptions for restoration, remodeling or
repairs), prohibits the occupancy or use of such property by any person or
entity (including, without limitation, landlord, all successive owners, and any
lessee, sublessee, assignee, licensee or other occupant of all or any portion of
the property) for the sale of sporting goods. For purposes hereof, "sporting
goods" shall include, with limitation, men's, women's and children's athletic
sportswear (unless sold within a store that is primarily a clothing store),
athletic footwear, roller skates (in-line or otherwise) roller blades, ice
skates, bicycles, fitness equipment, golf and racquet equipment, camping
equipment, marine, fishing and hunting gear, water sports equipment, ski
equipment and apparel, team sports equipment and apparel, sports related
paraphernalia and memorabilia, sports licenses products, sports related books
and videos, and general sports, fitness and recreational merchandise; provided
however that foregoing provision shall not restrict the use of space for the
sale of sporting goods in a store where the display of sporting goods (whether
individually or in the aggregate) occupies no more than the lesser of 2.000
square feet or 10% if the floor space
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of the retail operations therein; (b) during the term, without the prior written
consent of tenant (which consent may be withheld by tenant in its sole and
absolute discretion), any of the uses identified in section 4.1.1 of this lease
and any uses (to be specified in the declaration) that would have a material
adverse affect on the value of the leased premises or materially increase the
likelihood that any environmental contamination affecting the leased premises
might occur; provided, however, that while the current bed bath & beyond lease
is in effect, any use of the property that is permitted under the bed bath &
beyond lease without the approval of the landlord shall not constitute a
violation of the declaration of restrictions; (c) requires the owner of the
property to maintain the property in a first class condition (subject to
ordinary wear and tear and taking into account the age of the improvements); (d)
provides for regular hours of common area lighting and prohibits the erection of
barriers to visibility, and (e) in connection with the St. Petersburg outparcel,
grants easements for ingress, egress, common areas, parking utility lines, etc.,
as appropriate, for the benefit of the leased premises and such outparcel. The
areas of parking on the leased premises that may be used by the St. Petersburg
outparcel, however, shall be limited to the areas reasonably agreed upon by
tenant and landlord.
The declaration shall provide that tenant shall have the right to
enforce the declaration of restrictions, and for the award of attorneys' fees
and costs to the prevailing party in connection with any litigation concerning
the declaration. The leases shall provide that while the landlord is the owner
of the property subject to the declaration, landlord shall comply with, and use
its best efforts to enforce compliance by others with, the declaration. The
Chula Vista lease shall provide that while the bed bath & beyond lease is in
effect, the landlord shall use its best efforts to enforce the provisions
regarding the use and occupancy of the premises demised thereby (including,
without limitation, the provisions of sections 7 and 23(b) of the Bed Bath &
Beyond lease).
The leases for Chula Vista and St. Petersburg shall also provide that
landlord shall have the sole right to make protected use designations, similar
in nature to the exclusive sporting goods use protection given to tenant, for
the benefit of any tenants that occupy space on property adjacent to the leased
premises, provided however, that (a) landlord shall not have the right to make a
protected use designation for sporting goods use while the foregoing exclusive
use clause continues in effect for the benefit of tenant; (b) landlord shall not
have the right to make a protected use designation that would restrict tenant,
(or its successors, assigns or sublessess) from selling goods or services then
being sold at the leased premises and or which conflicts with any existing use
of the leased premises or any protected use contained in any rea or in any
assignment of the lease or any sublease approved by landlord in accordance with
the provisions of section 17; and (c) a protected use designation for apparel
may be granted only in connection with the one or more of the following: (i)
"niche" or specialty apparel such as, but not limited to, big and tall apparel,
maternity clothing, formal attire, men's business attire, or similar limited
categories (but not for broad categories such as men's clothing); (ii) women's
apparel on an "off-price" or discounted basis (such as ross dress for less and
loehmans) for stores of at least 20,000 square feet of floor area; and (iii)
men's apparel on an "off-price " or discounted basis (such as men's wearhouse)
for stores of at least 10,000 square feet of floor area; provided that a
protected use designation may not be granted which individually or in
combination with other previously-granted protected use designations would have
the effect
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of precluding tenant from engaging primarily in the sale of general
apparel items. Any protected use designation so granted by landlord shall
terminate if the holder thereof discontinues the protected use for a period of
six months or more (subject to temporary interruptions for restoration,
remodeling or repairs).
11.7 If Tenant pursuant to Sections 11.1, 11.2 or 11.3 is
required to incur costs to make repairs or improvements of a capital nature (as
determined under generally accepted accounting principles) during the last two
years of the Term, it is agreed that Landlord rather than Tenant shall be
responsible to make such repairs or improvements of a capital nature. In such
event, or if Landlord pursuant to Section 11.6 maintains the Exterior Area and
incurs costs to make repairs or improvements of a capital nature (as determined
under generally accepted accounting principles), the costs of such capital
repairs or improvements shall be amortized over the aggregate number of months
reasonably determined by Landlord to be the projected useful life of such
capital improvements or repairs, with interest included in the calculation of
such amortization at the Prime Rate (as defined at Section 19.4.4) plus 1.5%.
11.7.1 If Landlord incurs such costs, the portion
of the costs as so amortized that are allocable on a monthly basis to the
remainder of the Term (including any Renewal Term(s) if Tenant elects to extend
the Term pursuant to Section 5.2) shall be included in monthly Operating
Expenses under Section 11.6.1. The balance of the amortized costs allocable to
the portion of the useful life after the end of the Term shall not be included
in the Operating Expenses recoverable from Tenant.
11.7.2 Each time that Landlord incurs costs that
it asserts are to be amortized pursuant to this Section 11.7, Landlord shall
within 90 days thereafter provide to Tenant an accounting of such costs and
Landlord's reasonable determination of the projected useful life of such capital
improvements or repairs, and Landlord shall provide an amortization schedule
thereof.
12. ALTERATIONS.
12.1 Tenant shall not make any Alterations without first
obtaining the written consent of Landlord, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, subject to compliance with
any REA, Tenant may make Alterations without Landlord's prior written consent if
the cost of such Alterations does not exceed One Hundred Thousand Dollars
($100,000.00) and if such Alterations do not affect the structural integrity of
the Leased Premises. In making any Alterations, whether or not Landlord's
consent is required, Tenant shall comply with the provisions of Section 12.2.
12.2 Tenant agrees that in connection with any Alteration:
(i) the fair market value of the Leased Premises shall not be lessened after the
completion of any such Alteration, or its structural integrity impaired; (ii)
the Alteration and any
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Alteration theretofore made or thereafter to be made shall not in the aggregate
reduce the gross floor area of the Improvements by more one percent (1%) of such
gross floor area; (iii) all such Alterations shall be performed in a good and
workmanlike manner, and shall be expeditiously completed in compliance with all
Legal Requirements; (iv) all work done in connection with any such Alteration
shall comply with all Insurance Requirements; (v) Tenant shall promptly pay all
costs and expenses of any such Alteration, and shall promptly discharge all
liens filed against any of the Leased Premises arising out of the same; (vi)
Tenant shall procure and pay for all permits and licenses required in connection
with any such Alteration; (vii) all such Alterations shall be the property of
Landlord and shall be subject to this Lease; (viii) if a building permit is
required for the Alterations, such Alterations shall be made under the
supervision of an architect, engineer, or licensed contractor and, if required
to obtain such building permit, in accordance with plans and specifications
which shall be submitted to Landlord (for informational purposes only unless
consent to the Alterations is required) prior to the commencement of the
Alterations, which plans and specification shall be resubmitted, for consent or
informational purposes as the case may be, if Tenant makes changes (excluding
minor, immaterial changes) thereto, and (ix) upon completion of all Alterations
for which a building permit is required, if plans are required to be submitted
to obtain such permit, "as built" drawings of such Alterations shall be provided
by Tenant to Landlord.
12.3 Subject to the foregoing provisions of this
Section 12, Tenant, at its sole cost and expense may install a satellite dish
and other communications equipment on the Leased Premises, including without
limitation, the roof of the Building. Should Tenant elect to install a satellite
dish or other communications equipment on the roof of the Building, Tenant shall
install the satellite dish and other equipment in accordance with all applicable
laws and regulations and in accordance with sound construction practices. Tenant
agrees to use any specified roofing contractor required to comply with the
existing roof warranties and to install the satellite dish and other equipment
so as not to void any applicable roof warranties. Tenant shall report any
damages to the roof arising from such installations or the subsequent removal of
the satellite dish and equipment. Tenant may replace or remove any satellite
dish installed on the roof or any other equipment. Tenant, at its sole cost,
shall remove the satellite dish and related equipment from the roof upon
expiration or termination of this Lease.
12.4 With respect to any Alteration or Restoration that
Tenant is permitted or required to perform under this Lease, upon the request of
Tenant and upon Tenant having provided Landlord such information, plans and
specifications with respect thereto as Landlord may reasonably request, Landlord
shall, at no cost or liability to Landlord, join in such applications for
building permits and other governmental approvals as may be required to enable
Tenant to perform such Alteration or Restoration.
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13. CONDEMNATION.
13.1 Tenant, promptly after obtaining knowledge of the
institution of any proceeding for Condemnation, shall notify Landlord thereof
and Landlord shall be entitled to participate in any Condemnation proceeding at
its own cost and expense. Landlord, promptly after obtaining knowledge of the
institution of any proceeding for Condemnation, shall notify Tenant thereof and
Tenant shall have the right to participate in such proceedings at its own cost
and expense. Subject to the provisions of this Section 13 and Section 15, Tenant
hereby irrevocably assigns to Lender or to Landlord, in that order, any award or
payment in respect of any Condemnation of the Leased Premises, provided that
(except as hereinafter provided) nothing in this Lease shall be deemed to assign
to Landlord or Lender any award relating to any award or payment on account of
the Trade Fixtures, for moving expenses and out-of-pocket expenses incidental to
the move, for the loss of goodwill, and for any other damages that may be
separately pursued by Tenant without lessening the award payable to Landlord, to
the extent Tenant shall have a right to make a separate claim therefor against
the condemnor, it being agreed however, that Tenant shall in no event be
entitled to any payment that reduces the award to which Landlord is or would be
entitled for the condemnation of the Leased Premises.
13.2 If the entire Leased Premises is taken in any
Condemnation, this Lease shall terminate on the first to occur of the date that
fee title to, or physical possession of, the Leased Premises is taken by the
governmental authority that has made such Condemnation.
13.3 The provisions of this Section 13.3 and Section 13.4
below shall govern a partial Taking.
13.3.1 If a portion of the building constructed on
the Land would not be available to Tenant after a Taking has occurred and
Restoration completed, then effective upon the Taking of such portion of the
building, the Basic Rent shall be reduced by a percentage that equals the
percentage loss in the gross square footage of the building. For example, if the
original gross square footage of the building had been 45,000 square feet, and
after the Taking and the Restoration, the remaining building is 38,250 square
feet, the Basic Rent shall be reduced to 85% of the amounts set forth in EXHIBIT
B attached hereto.
13.3.2 If a portion of the Land or any ingress or
egress previously available to the Leased Premises would not be available to
Tenant after a Taking has occurred and Restoration completed, then effective
upon the Taking of such portion of the Land or such ingress or egress to the
Leased Premises, the Basic Rent shall be reduced by a percentage that equals the
percentage loss in the fair market rental value of the Leased Premises as a
consequence of such Taking. In making such determination, the fair market rental
value of the Leased Premises prior to the Taking
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(and exclusive of this Lease) shall be determined, and the fair market rental
value of the Leased Premises after the Taking (and exclusive of this Lease)
shall be determined. Thereupon, the Basic Rent shall be multiplied by a fraction
which equals the post-Taking fair market rental value divided by the pre-Taking
fair market rental value. Accordingly, if the post-Taking fair market rental
value were 85% of the pre-Taking fair market rental value, then the Basic Rent
would be reduced by 15%.
13.3.3 The fair market rental value of the Leased
Premises shall be determined as follows. Within forty-five (45) days after
either Landlord or Tenant have been notified of the institution of any
proceeding for Condemnation, Landlord shall notify Tenant and Lender of
Landlord's reasonable opinion of the post-Taking fair market rental value and
the pre-Taking fair market rental value of the Leased Premises. If Landlord,
Tenant and Lender do not agree as to such fair market rental values within
thirty (30) days of Tenant's and Lender's receipt of Landlord's notice, the fair
market rental value shall be determined pursuant to appraisal as set forth
below.
13.3.4 If Landlord, Tenant and Lender do not agree
as to such fair market rental values within the above-described thirty (30) day
period, then not later than twenty-five (25) days after the expiration of such
thirty (30) day period, Landlord and Tenant shall each select a qualified real
estate appraiser with at least ten years of full time commercial appraisal
experience in the area in which the Leased Premises are located, and the two
appraisers so selected shall appraise the pre-Taking and post-Taking fair market
rental values of the Leased Premises. If only one of Landlord and Tenant timely
appoint an appraiser, then the single appraiser so appointed shall alone
determine, by a written appraisal report, the pertinent fair market rental
values of the Leased Premises.
13.3.5 If two appraisers are appointed, they shall
each prepare written appraisals and submit them to one another, Landlord and
Tenant within twenty (20) days of the appointment of the second appraiser. If
only one appraiser timely submits its written appraisal report, then such
written appraisal report shall establish the pertinent fair market rental values
of the Leased Premises. If both appraisers timely submit reports, they shall
meet promptly and attempt to agree upon the fair market rental values of the
Leased Premises. If they are unable to agree within ten (10) days of the date
the last report was timely submitted, and if the higher of the two written
appraisals does not exceed the lower by more than ten percent (10%), the two
appraisals shall be averaged to determine the post-Taking fair market rental
value and the pre-Taking fair market rental value.
13.3.6 If the two appraisals differ by more than
ten percent (10%), the two appraisers shall select a third person similarly
qualified to act as a third appraiser; provided however that if the two
appraisers are unable to agree on a third person to act as an appraiser, the
third appraiser shall be selected by Lender, or if there is not a Lender or the
Lender does not select an appraiser within thirty (30) days, then
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such third appraiser shall be selected by lot from two names submitted by each
of the two other appraisers. The third appraiser, no matter how selected, shall
be a person who has not previously provided appraisal services for either
Landlord or Tenant.
13.3.7 The third appraisal shall be completed
within fifteen (15) days of the selection of the third appraiser, and if two of
the three appraisers agree, their determination shall be the post-Taking fair
market rental value and the pre-Taking fair market rental value. However, if no
two agree, then the post-Taking fair market rental value and the pre-Taking fair
market rental value shall be determined by averaging the two appraisals that are
closest in value.
13.3.8 Landlord and Tenant shall each pay the
appraiser it selects and one-half (1/2) of the costs and expenses of the third
appraiser, if a third appraiser is necessary.
13.4 Notwithstanding the provisions of Section 13.3, if (a)
more than ten percent (10%) of the building constructed on the Land would not be
available to Tenant, or (b) more than ten percent (10%) of the Land would not be
available to Tenant, or (c) a material portion of the ingress or egress to the
Leased Premises would not be available to the Leased Premises, and if as a
consequence thereof, it would not be commercially feasible for Tenant to
continue to conduct its business in the Leased Premises after a Restoration were
completed, then Tenant shall have the right to terminate this Lease by giving
notice of termination to Landlord, which notice must be given within thirty (30)
days after the determination is made, as provided below, that it would no longer
be commercially feasible for Tenant to continue the conduct its business in the
Leased Premises. In the event of such termination, Tenant shall not be obligated
for Restoration of the Leased Premises.
13.4.1 If either party determines in its reasonable
business judgment exercised in good faith that after a Taking or proposed
Taking, and assuming Restoration of the Leased Premises were completed, that it
would not be commercially feasible for Tenant to continue to conduct its
business in the Leased Premises, such party shall so notify the other within
thirty (30) days of the determining party's receipt of notice of such Taking or
proposed Taking; provided however that if it is not reasonably determinable at
the time of receipt of such notice that it would not be commercially feasible
for Tenant to continue to conduct its business in the Leased Premises, then
either party shall notify the other of such determination promptly after making
such determination. The party so notified shall thereupon determine within
thirty (30) days of its receipt of such notice, whether in its reasonable
business judgment exercised in good faith, it agrees with the notifying party.
If Landlord and Tenant do not agree, then the matter shall be submitted for
determination by an independent third party in accordance with Section 13.4.3.
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13.4.2 If Landlord gives notice to Tenant that
Landlord believes that it would not be commercially feasible for Tenant to
continue to conduct its business in the Leased Premises and Tenant notifies
Landlord within thirty (30) days of receipt of such notice from Landlord that
Tenant believes that it will be commercially feasible for Tenant to continue to
conduct its business in the Leased Premises, such determination of Tenant shall
be binding on the parties; provided however, that if Tenant in good faith
determines that the information currently available as to such Taking is not
sufficient to make a determination of whether it would be commercially feasible
for Tenant to continue to conduct its business in the Leased Premises, then such
determination shall be deferred until sufficient information is available. If
within thirty (30) days after such information is available, either party
asserts that it would not be commercially feasible for Tenant to continue to
conduct its business in the Leased Premises and the parties do not agree as to
such determination (provided however that if Landlord gives notice to Tenant
that Landlord believes that it would not be commercially feasible for Tenant to
continue to conduct its business in the Leased Premises and Tenant notifies
Landlord within thirty (30) days of receipt of such notice from Landlord that
Tenant believes that it will be commercially feasible for Tenant to continue to
conduct its business in the Leased Premises, such determination of Tenant shall
be binding on the parties), then the matter shall be submitted for determination
by an independent third party in accordance with Section 13.4.3.
13.4.3 The independent third party to decide any
dispute under Sections 13.4.1 or 13.4.2 shall be a commercial real estate broker
who specializes in power retail leasing, with at least 10 years recent
experience in such leasing (a "Qualified Broker"). If Landlord and Tenant are
unable to agree on one Qualified Broker within fifteen (15) days after the end
of said thirty (30) day period, then each shall within ten (10) days thereafter
select a Qualified Broker and the two selected Qualified Brokers shall promptly
meet to appoint a third Qualified Broker who alone shall determine the matter;
provided however that if only one party selects a Qualified Broker within such
ten (10) day period, then such Qualified Broker shall be deemed agreed upon by
the parties. The single Qualified Broker selected as provided above shall
promptly determine the matter and immediately report such determination
concurrently to Landlord and Tenant.
13.4.4 If pursuant to the foregoing provisions it
is determined that it is no longer commercially feasible for Tenant to continue
the conduct of its business in the Leased Premises, then either party may notify
the other within thirty (30) days of such determination that such party has
elected to terminate this Lease. If timely notice of termination is given, such
termination shall be effective upon the Taking, if the notice is timely given
prior thereto, or if the notice of termination is timely given, but is given
after the Taking, then such termination shall be effective sixty (60) days after
such notice is given.
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13.5 In the event of a Condemnation of any part of the
Leased Premises which does not result in a termination of this Lease, promptly
after such Condemnation, Tenant shall commence and diligently continue to
restore the Leased Premises as nearly as possible to a value not less than the
value immediately prior to such Condemnation, in conformity to plans and
specifications approved by Landlord which approval shall not be unreasonably
withheld, in accordance with the provisions of this Lease, including but not
limited to the provisions of Sections 11.1, 12.2 and 15 (such restoration
following a Condemnation and restoration following a casualty is, as the context
shall require, herein called a "Restoration"). The Net Award of such
Condemnation shall be made available for Restoration pursuant to the provisions
of Section 15. If there is no required Restoration, the Net Award shall be
retained by Landlord. If Restoration is required, then upon completion of the
Restoration, the remainder of the Net Award, if any, shall be paid to and
retained by Landlord. The Net Award or portion thereof so retained by Landlord
(or paid to Lender, whichever as between them shall be entitled thereto) shall
not be applied to Basic Rent or Additional Rent (as in the case of excess
insurance proceeds after Restoration) pursuant to Section 15.6.
13.6 Upon the payment to Landlord or Lender of the Net
Award of a Taking which falls within the provisions of Section 13.5, Landlord
and Lender shall, to the extent received, make that portion of the Net Award
equal to the cost of Restoration (the "Restoration Award") available to Tenant
for Restoration, in accordance with the provisions of Section 15. After
completion of the Restoration, the balance of the Net Award shall be retained by
Landlord or Lender (whichever, as between them shall be entitled thereto) and
shall not be applied to Basic Rent or Additional Rent (as in the case of excess
insurance proceeds after Restoration) pursuant to Section 15.6.
13.7 No agreement with any condemnor in settlement of or
under threat of any Condemnation shall be made by either Landlord or Tenant
without the written consent of the other, and of Lender, if the Leased Premises
are then subject to a Mortgage, which consent shall not be unreasonably withheld
or delayed; provided however that if either Landlord or Tenant have separate
claims that do not affect the other or the amount of proceeds available for
Restoration, they may settle such claims without the prior consent of the other
or, in the case of Tenant, the Lender.
13.8 If the provisions of this Lease pertaining to
condemnation or casualty are inconsistent with pertinent laws of the state in
which the Leased Premises are located, Landlord and Tenant confirm that the
provisions of this Lease are to be enforced to the maximum extent possible, and
in furtherance thereof, Tenant hereby waives the benefit of any such laws.
14 INSURANCE; REPAIR OF DAMAGE AND DESTRUCTION.
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[Note: Insurance provisions for the Chula Vista location will
be modified to reflect that the leased premises are in a single building
occupied by multiple tenants. Subject to approval of lender, such provisions
will require tenant to carry casualty insurance on the entire building and
liability insurance on the common areas and to recover from landlord its prorata
share (based upon relative leasable square footage) of the costs thereof.
Landlord shall reimburse such costs to tenant within 30 days of receipt of
evidence of payment of same by tenant and tenant shall have a right of offset if
not timely paid by landlord. Notwithstanding the foregoing, upon an assignment
or sublet by tenant that requires landlord's consent under this lease, landlord
may elect to directly obtain such casualty insurance on the building and
liability insurance on the common areas and to recover from tenant its prorata
share (based upon relative leasable square footage) of the costs thereof. If
landlord does so, tenant's payment of such costs shall be in accordance with the
provisions of section 14.9.]
14.1 Tenant shall maintain at its sole cost and expense the
following insurance with respect to the Leased Premises:
14.1.1 Contractual and comprehensive commercial
general liability insurance for the mutual benefit of Landlord (as an additional
insured) and Tenant against claims for bodily injury, death or property damage
occurring on, in or about the Leased Premises, or arising from Tenant's or
Tenant's agents use of the Leased Premises, which insurance shall be written on
a so-called "Occurrence Basis," and shall provide minimum protection with a
combined single limit in an amount not less than Five Million ($5,000,000)
Dollars (or in such increased limits from time to time (but no more than once in
any five year period) reasonably requested by Landlord or Lender to reflect
declines in the purchasing power of the dollar. Such insurance shall be primary
and not contributing to any insurance available to Landlord, and Landlord's
insurance (if any) shall be in excess thereto. Such insurance shall specifically
insure Tenant's performance of the indemnity, defense and hold harmless
agreements set forth in this Lease, although such obligations of Tenant shall
not be limited to the amount of the insurance. Tenant shall be responsible for
determining that the amount of insurance maintained by Tenant is sufficient for
Tenant's purposes.
14.1.2 Worker's compensation insurance covering
all persons employed by Tenant on the Leased Premises in connection with any
work done on or about any of the Leased Premises for which claims for death or
bodily injury could be asserted against Landlord, Tenant or the Leased Premises.
14.1.3 Whenever Tenant shall be engaged in making
any Alteration, repairs or construction work of any kind (collectively, "Work")
on the Leased Premises, Tenant shall obtain or cause its contractor to obtain
completed value builder's risk insurance when the estimated cost of the Work in
any one instance exceeds the sum of One Hundred Thousand Dollars ($100,000.00)
and such insurance
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is available (unless such coverage is provided under the insurance maintained
pursuant to Section 14.2), and Tenant or its contractor shall obtain worker's
compensation insurance or other adequate insurance coverage covering all persons
employed in connection with the Work, whether by Tenant, its contractors or
subcontractors and with respect to whom death or bodily injury claims could be
asserted against Landlord
14.2 Tenant shall at its sole cost and expense maintain the
following insurance on the Leased Premises, provided however that upon an Event
of Default, Landlord may elect to itself maintain such insurance and Tenant
shall pay the costs thereof, as provided below.
14.2.1 Insurance against loss or damage to the
Improvements and Equipment under a fire and broad form of all risk extended
coverage insurance policy, which shall include flood insurance if available and
if such insurance is customarily maintained for similar commercial properties,
and which shall include earthquake insurance and/or insurance against wind,
hurricanes and similar casualties if available and if such insurance is
customarily maintained for similar commercial properties, or if lenders
generally require landlords to cause any such insurance to be maintained. Such
insurance shall be in amounts not less than the actual replacement cost of the
Improvements and Equipment (excluding footings and foundations and other parts
of the Improvements which are not insurable) as determined from time to time by
agreement of Landlord and Tenant, or as determined by the insurer or insurers or
by an appraiser selected by Landlord. Such insurance policies may contain usual
and customary exclusions, retention and deductible amounts.
14.2.2 Insurance against loss or damage from
explosion of any steam or pressure boilers or similar apparatus located in or
about the Improvements in an amount not less than the actual replacement cost of
the Improvements and Equipment (excluding footings and foundations and other
parts of the Improvements which are not insurable).
14.2.3 Business interruption insurance insuring
Tenant, but naming Landlord and Lender as loss payee or mortgagee, as
appropriate, in an amount sufficient to pay Basic Rent and Additional Rent for a
period of twelve months. All proceeds received from such insurance (after
deduction of the costs of collection, if any) shall be applied to the payment of
Basic Rent and Additional Rent, as such payments become due, until such proceeds
fully so applied, or if not so fully applied upon termination of the Lease, the
balance shall be paid by Landlord to Tenant.
14.2.4 Within thirty (30) days after written request
of Landlord (if Tenant is at such time maintaining the insurance required under
Section 14.2), such additional and/or other insurance with respect to the
Improvements located on the
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Leased Premises and in such amounts as is customarily required by Lender for
similar properties and/ or at the time is customarily carried by prudent owners
or tenants with respect to improvements similar in character, location and use
and occupancy to the Improvements located on the Leased Premises. If Landlord is
maintaining the insurance required under Section 14.2 rather than Tenant, and
Tenant at any time believes that Landlord should obtain insurance under this
Section 14.2.4 that Landlord is not at the time carrying, Tenant shall provide
written notice of same to Landlord with a request that Landlord obtain such
insurance coverage, the estimated cost thereof, and confirmation that Tenant
will pay such cost. Provided that such insurance is available and Tenant pays
the cost thereof, Landlord shall obtain and maintain such additional insurance.
Furthermore, if Tenant at any time believes that any policy deductible on
insurance carried by Landlord is too large, Tenant may request that Landlord
reduce the amount of such deductible and, subject to Tenant paying the increase
in premiums resulting therefrom, Landlord shall exercise commercially reasonable
efforts to reduce such deductible to the amount requested by Tenant.
14.2.5 While Tenant is maintaining insurance
pursuant to this Section 14.2, Landlord shall not carry additional insurance
that would reduce the protection afforded by the insurance carried by Tenant.
14.3 The insurance required by Sections 14.1 and 14.2
shall be written by companies having a rating of "A" or better for claims paying
ability assigned by Moody's Investors Service, Inc. and Standard & Poor's Rating
Group or a general policy rating of "A-" or better and a financial class of VIII
or better assigned by A. M. Best Company, Inc., if available from such
companies, and all such companies shall be approved, authorized or licensed to
provide insurance in the State. The insurance policies (i) shall be in amounts
sufficient at all times to satisfy any coinsurance requirements thereof, (ii)
shall (except for the worker's compensation insurance referred to in Section
14.1.3 and the rent loss insurance referred to in Section 14.2.3) name Landlord,
Tenant and any Lender as additional insured parties, as their respective
interests may appear, and (iii) shall provide that the insurer waives all rights
of recovery by way of subrogation against the other party to this Lease and its
affiliates in connection with damage covered by the policy and shall permit (and
not be voided by) the releases contained in Section 14.10.
14.4 Each insurance policy referred to in Sections 14.2, if
requested by Lender, shall contain standard non-contributory mortgagee clauses
in favor of any Lender which holds a Mortgage on the Leased Premises. Each such
policy maintained by Tenant shall provide that it may not be canceled except
after thirty (30) days prior notice to Landlord and any Lender. Each such policy
maintained by Landlord shall provide that it may not be canceled except after
thirty (30) days prior notice to Tenant and any Lender. Each policy shall also
provide that any losses otherwise payable thereunder shall be payable
notwithstanding any act or omission of Landlord or
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Tenant which might, absent such provision, result in a forfeiture of all or a
part of such insurance payment.
14.5. Each party shall renew or replace each insurance
policy that such party is required to or has elected to maintain pursuant to
Section 14.2. Each party shall deliver to the other party and Lender a
certificate or other evidence (reasonably satisfactory to the other party and
Lender) of the existing policy and such renewal or replacement policy at least
thirty days prior to the Policy Expiration Date (as hereinafter defined) of each
policy. Each such policy shall provide that it shall not expire until the other
party and Lender shall receive a notice from the insurer to the effect that a
policy will expire on a date (the "Policy Expiration Date") which shall be
thirty (30) days following the date of the receipt by the other party and Lender
of such notice. In the event of Tenant's failure to comply with any of the
foregoing requirements of this Section 14.5 within five (5) business days of the
giving of written notice by Landlord to Tenant, Landlord shall be entitled to
procure such insurance. Any sums expended by Landlord in procuring such
insurance shall be Additional Rent and shall be repaid by Tenant, together with
interest thereon at the Default Rate, from the time of payment by Landlord until
fully paid by Tenant immediately upon written demand therefor by Landlord. In
the event of Landlord's failure to comply with any of the foregoing requirements
of this Section 14.5 within five (5) business days of the giving of written
notice by Tenant to Landlord, Tenant shall be entitled to procure such
insurance. Any sums expended by Tenant in procuring such insurance shall be
repaid by Landlord, together with interest thereon at the Default Rate, from the
time of payment by Tenant until fully paid by Landlord immediately upon written
demand therefor by Tenant. In addition to the right to recover such sums from
Landlord, Tenant shall have the right to setoff against the next due payments of
Basic Rent and Additional Rent the amounts payable by Landlord to Tenant
hereunder until Tenant shall have setoff the entire amount.
14.6 Any insurance which Landlord or Tenant obtains pursuant
to Section 14 may be carried under a "blanket" policy or policies covering other
properties or liabilities of such party or their affiliates, provided that such
"blanket" policy or policies otherwise comply with the provisions of this
Section 14. In the event any such insurance is carried under a blanket policy,
the insuring party shall deliver to the other party and Lender evidence of the
issuance and effectiveness of the policy, the amount and character of the
coverage with respect to the Leased Premises and the presence in the policy of
provisions of the character required in the above sections of this Section 14.
14.7 In the event of any casualty loss to the Leased
Premises, Tenant shall give Landlord immediate notice thereof. Landlord shall
adjust, collect and compromise any and all claims (excluding claims relating to
Tenant's trade fixtures, equipment and other personal property), with the
consent of Lender and Tenant, not to be unreasonably withheld or delayed. If the
estimated cost of Restoration or repair
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shall be One Hundred Thousand Dollars ($100,000.00) or less, all Net Proceeds of
any insurance carried under Section 14.2 (except Section 14.2.3) shall be paid
over to Tenant, provided that Tenant (or the guarantor of the Tenant's
obligations under this Lease, if any) at such time shall have a tangible net
worth of, and if a publicly traded company a market capitalization of, not less
than $100,000,000, and in all other events to an escrow holder agreed upon by
Landlord and Tenant and reasonably satisfactory to Lender, or if they are unable
to agree, to a federally insured bank or other financial institution to act as
trustee, selected by Landlord and reasonably satisfactory to Lender (the escrow
holder, bank or financial institution so selected is referred to herein as
"Trustee"). If the Leased Premises shall be covered by a Mortgage, Lender, if it
so desires, shall be the Trustee. Each insurer is hereby authorized and directed
to make payment under said policies directly to such Trustee instead of to
Landlord and/or Tenant; and Tenant and Landlord each hereby appoints such
Trustee as its attorney-in-fact to endorse any draft therefor for the purposes
set forth in this Lease. In the event of any casualty (whether or not insured
against) resulting in damage to the Leased Premises or any part thereof, Tenant
shall nevertheless continue and there shall be no abatement or reduction of
Basic Rent, Additional Rent or any other sums payable by Tenant hereunder;
provided however that the net proceeds received from the insurance described in
Section 14.2.3 (after deducting therefrom any reasonable costs of collection)
shall be applied to the payment of Basic Rent and Additional Rent, as such
payments become due. Tenant shall have the right to settle all insurance claims
relating to Tenant's trade fixtures, equipment and other personal property
without the participation or consent of Landlord, and all such insurance
proceeds shall be paid directly to Tenant and Landlord shall have no interest
therein.
14.8 The Net Proceeds of such insurance payment shall be
retained by the Trustee and promptly after such casualty, Tenant, as required in
Sections 11.1 and 12, shall commence and diligently continue to perform the
Restoration to the Leased Premises. Upon payment to the Trustee of such Net
Proceeds, the Trustee shall, to the extent available, make the Net Proceeds
available to Tenant for Restoration, in accordance with the provisions of
Section 15. Tenant shall, whether or not the Net Proceeds are sufficient for the
purpose, promptly repair or replace the Improvements and Equipment in accordance
with the provisions of Section 11 and the Net Proceeds of such loss shall
thereupon be payable to Tenant, subject to the provisions of Section 15 hereof;
provided however that if there is a shortage in Net Proceeds that results from
Landlord's failure (when Landlord is maintaining casualty insurance hereunder
rather than Tenant) to maintain the correct replacement coverage, Landlord shall
provide funds for Restoration in an amount equal to such shortage caused by
Landlord's said failure. Notwithstanding the foregoing provisions of this
Section 14.8 or other provisions of this Lease, if the casualty to the Leased
Premises occurs during the last twenty-four (24) months of the Term and the
costs of repair exceed $100,000, Tenant may elect to terminate this Lease by
giving notice of such termination to Landlord within thirty (30) days of the
occurrence of such casualty, and if Tenant so
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terminates this Lease, Tenant shall have no obligation for Restoration and the
Net Proceeds shall be paid directly to Landlord, or if required by Lender, to
Lender.
14.9 If pursuant to Section 14.2, Landlord elects to obtain
the insurance required hereunder, Landlord covenants to continuously maintain
such insurance. Furthermore, if Landlord so elects to obtain the insurance
required thereunder, Tenant shall perform its obligation to pay for the
insurance acquired by Landlord pursuant to Section 14.2 by making payments to
Landlord, as Additional Rent, as provided below. As soon as practicable after
Landlord obtains such insurance, and on or before December 31 of each year
thereafter, Landlord shall furnish to Tenant a statement setting forth the
estimated aggregate insurance premiums (the "Premiums") for the subsequent
calendar year. On each Basic Rent Payment Date, Tenant shall pay in advance to
Landlord one-twelfth (1/12th) of the most recent estimated Premiums; provided,
however, that if such statement is not given in December, Tenant shall continue
to pay to Landlord one-twelfth (1/12th) of the estimated Premiums of the
previous calendar year until the month after such statement is given. Within 120
days after the end of each calendar year, Landlord shall furnish to Tenant a
statement of the actual Premiums for such calendar year. If the estimated
Premiums paid by Tenant during such calendar year is (x) less than the actual
Premiums for such period, Tenant shall pay the difference to Landlord within 30
days after the date of Landlord's statement, or (y) more than the actual
Premiums for such period, Tenant shall be allowed a credit on immediately
succeeding future payments of Basic Rent and Additional Rent, including
estimated Premiums, for the amount of such excess until the entire credit has
been utilized, or, if the statement is given by Landlord with respect to the
calendar year in which the Term expires, Landlord shall pay such excess to
Tenant together with such statement. If at any time it appears to Landlord that
the actual Premiums for any calendar year will exceed the estimated Premiums set
forth in Landlord's statement, Landlord shall have the right by notice to Tenant
to revise the estimated Premiums for such year and subsequent payments thereof
shall, commencing with the first month after which Tenant receives such notice
(but no earlier than twenty (20) days after Tenant's receipt of such notice), be
increased based upon such revised statement. Furthermore, if Landlord is
required by Lender or the insurance company to pay the annual premium for any
insurance in advance, Tenant shall pay the full amount thereof to Landlord
within thirty (30) days after receipt of Landlord's invoice for such premium and
Tenant shall thereupon be relieved of the obligation to make monthly payments of
estimated Premiums. If pursuant to its rights under this Lease, Tenant
terminates the Lease as a consequence of any casualty for which insurance is
carried under Section 14.2, then Tenant's obligations hereunder to reimburse
Landlord for Premiums shall include the reimbursement of any deductibles for
such insurance reasonably approved by Tenant (Tenant shall be deemed to have
approved any deductible amount which is customary for similar buildings in the
location of the Leased Premises, or any deductible amount with respect to which
Tenant has notice and has not objected to Landlord within 30 days of receipt of
such notice).
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14.10 During the Term, Landlord shall obtain a "Lessor's
Risk" coverage commercial general liability insurance policy with respect to the
Leased Premises, which coverage shall be with dollar amounts and limits simlar
to the insurance reqiured to be carried by Tenant pursuant to Section 14.1.1.
Such insurance shall specifically insure Landlord's performance of the
indemnity, defense and hold harmless agreements set forth in this Lease,
although such obligations of Landlord shall not be limited to the amount of the
insurance. Tenant shall pay for the insurance acquired by Landlord pursuant to
this Section 14.10 by making payments to Landlord, as Additional Rent, for the
costs thereof in the manner provided in Section 14.9. Notwithstanding the
foregoing, Tenant shall not be responsible to pay any increases in premiums
resulting from (a) any negligence of Landlord, intentional breach of this Lease,
or wilfull misconduct by Landlord, and (b) if Landlord obtains such insurance
through a "blanket" policy, any problems or events occuring on other properties
included in such "blanket" policy.
15. RESTORATION. Net Proceeds and the Restoration Award (the
aggregate of which being herein defined as the "Restoration Fund"") shall be
disbursed by the Trustee in accordance with the following conditions:
15.1 If the cost of Restoration will exceed One Hundred
Thousand Dollars ($100,000.00), then prior to commencement of the Restoration,
the architect, general contractor(s), and plans and specifications for the
Restoration shall be approved by Landlord, which approval shall not be
unreasonably withheld, in accordance with the provisions of this Lease,
including but not limited to the provisions of Sections 11.1, 12.2 and 13.5.
15.2 At the time of any disbursement, no Event of Default
shall exist and no mechanics' or materialmen's liens shall have been filed and
remain undischarged or unbonded.
15.3 Disbursements shall be made from time to time in an
amount not exceeding the hard and soft cost of the work and costs incurred since
the last disbursement upon receipt of (i) satisfactory evidence, including
architects' certificates of the stage of completion, of the estimated cost of
completion and of performance of the work to date in a good and workmanlike
manner in accordance with the contracts, plans and specifications, (ii) partial
releases of liens, and (iii) other reasonable evidence of cost and payment so
that Landlord can verify that the amounts disbursed from time to time are
represented by work that is completed in place or delivered to the site and free
and clear of mechanics' lien claims.
15.4 Each request for disbursement shall be accompanied by a
certificate of Tenant describing the work, materials or other costs or expenses,
for which payment is requested, stating the cost incurred in connection
therewith and stating that Tenant has not previously received payment for such
work or expense and
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the certificate to be delivered by Tenant upon completion of the work shall, in
addition, state that the work has been substantially completed and complies with
the applicable requirements of this Lease. The Trustee may retain ten percent
(10%) of the Restoration Fund until the Restoration is complete.
15.5 The Restoration Fund shall be kept in a separate
interest-bearing federally insured account by the Trustee or by Lender, with the
interest earned thereon to be added to the Restoration Fund.
15.6 Prior to commencement of Restoration and at any time
during Restoration, if the estimated cost of Restoration, as reasonably
determined by Landlord, exceeds the amount of the Net Proceeds and the
Restoration Award available for such Restoration, the amount of such excess
shall be paid by Tenant to the Trustee to be added to the Restoration Fund;
provided however that if there is a shortage in Net Proceeds that results from
Landlord's failure (when Landlord is maintaining casualty insurance hereunder
rather than Tenant) to maintain the correct replacement coverage, Landlord shall
pay funds to the Trustee for Restoration in an amount equal to such shortage
caused by Landlord's said failure. Any sums in the Restoration Fund which remain
after the completion of Restoration shall, up to the amounts so advanced by
Tenant, be paid to Tenant, and any remaining funds shall be paid to Landlord and
applied to the next due payments of Basic Rent and Additional Rent, until so
applied in full; provided however that if there is a Lender and if Lender so
requires, such funds shall be placed in escrow with Lender and applied to the
next due payments of Basic Rent and Additional Rent, until so applied in full.
For purposes of determining the source of funds, with respect to the disposition
of funds remaining after the completion of Restoration, the Net Proceeds or the
Restoration Award shall be deemed to be disbursed prior to any amount added by
Tenant.
16. SUBORDINATION TO FINANCING.
16.1 Subject to the provisions of Section 16.2, Tenant
agrees that this Lease shall at all times be subject and subordinate to the lien
of any Mortgage and Tenant agrees, upon demand, without cost, to execute a
Subordination Non-Disturbance Attornment Agreement with Lender, in a form
substantially similar to that attached hereto as EXHIBIT __, or if requested by
Landlord, on such other form as may be reasonably acceptable to Tenant.
16.2 Except as expressly provided in this Lease by reason
of the occurrence of an Event of Default, Tenant's tenancy and Tenant's rights
under this Lease shall not be disturbed, terminated or otherwise adversely
affected, nor shall this Lease be affected, by any default under any Mortgage,
and in the event of a foreclosure or other enforcement of any Mortgage, or sale
in lieu thereof, the purchaser at such foreclosure sale shall be bound to Tenant
for the Term of this Lease and any Renewal Term, the rights of Tenant under this
Lease shall expressly survive, and this
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Lease shall in all respects continue in full force and effect so long as no
Event of Default has occurred and is continuing. Provided no Event of Default
has occurred and is continuing, Tenant shall not be named as a party defendant
in any such foreclosure suit, except as may be required by law for the purpose
of effecting the remedies available to Lender under the Mortgage, but not for
the purpose of terminating the rights of Tenant under this Lease.
16.3 Notwithstanding the provisions of Section 16.1, the
holder of any Mortgage to which this Lease is subject and subordinate shall have
the right, at its sole option, at any time, to subordinate and subject the
Mortgage, in whole or in part, to this Lease by recording a unilateral
declaration to such effect.
16.4 At any time prior to the expiration of the Term, at
the election and upon demand of any owner of the Leased Premises, or of a Lender
who has granted non-disturbance to Tenant and has recognized and affirmed that
this Lease shall continue to be binding on such owner or Lender consistent with
Section 16.2 above, Tenant agrees to attorn, from time to time, to any such
owner or Lender, upon the terms and conditions of this Lease, for the remainder
of the Term. The provisions of this Section 16.4 shall inure to the benefit of
any such owner or Lender, shall apply notwithstanding that, as a matter of law,
this Lease may terminate upon the foreclosure of the Mortgage, shall be
self-operative upon any such demand, and no further instrument shall be required
to give effect to said provisions.
16.5 With respect to any Subordination, Non-Disturbance
and Attornment Agreement described in Section 16.1, provided such agreement
contains provisions relating to non-disturbance in accordance with the
provisions of Section 16.2, Tenant hereby agrees for the benefit of Lender that
(i) no amendment or modification of this Lease shall be effective against Lender
without the prior written consent of Lender, which shall not be unreasonably
withheld, conditioned or delayed, (provided, however, Lender, in Lender's sole
discretion may withhold or condition its consent to any amendment or
modification which would or could (A) alter in any way the amount or time for
payment of any Basic Rent, Additional Rent or other sum payable hereunder, (B)
alter in any way the absolute and unconditional nature of Tenant's obligations
hereunder or materially diminish any such obligations, (C) result in any
termination hereof prior to the end of the initial term except in accordance
with this Lease, or (D) otherwise, in Lender's reasonable judgment, materially
affect the rights or obligations of Landlord or Tenant hereunder), (ii) without
the prior written consent of Lender which may be withheld in Lender's sole
discretion, Tenant shall not cancel or surrender or seek to cancel or surrender
the Term hereof except in accordance with the express terms of this Lease, or
enter into any agreement with Landlord to do so (the parties agreeing that the
foregoing shall not be construed to affect the rights or obligations of Tenant,
Landlord or Lender with respect to any termination permitted under the express
terms of this Lease), or (iii) Tenant will not
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pay any installment of Basic Rent more than one (1) month in advance of the due
date thereof or otherwise than in the manner provided for in this Lease.
17. ASSIGNMENT, SUBLEASING.
17.1 Subject to Section 17.5 hereof, Tenant shall not sell,
assign, or otherwise transfer all or any part of the Leased Premises or Tenant's
leasehold estate hereunder (each such act is referred to herein as an
"Assignment"), or sublet the Leased Premises or any portion thereof or permit
the Leased Premises to be occupied by anyone other than Tenant (each such act is
referred to herein as a "Sublease") without Landlord's prior written consent in
each instance, which consent shall not be unreasonably withheld and shall be
given or withheld within thirty (30) days after Tenant's delivery of request
therefor, together with all information required to be provided to Landlord
under Section 17.2. Notwithstanding the foregoing, Tenant may, without such
transaction being deemed a Sublease hereunder, enter into concessionaire
arrangements with one or more persons for an aggregate of up to ten percent
(10%) of the rentable square footage of the Leased Premises; provided that such
arrangements do not involve construction of demising walls or other improvements
that physically separate the portion of the Leased Premises occupied by any
concessionaire from the retail business operations of Tenant.
17.2 Tenant shall have no right to enter into an
Assignment or a Sublease unless Tenant shall have first requested in writing
Landlord's consent to such Assignment or Sublease. Any request by Tenant for
Landlord's consent to a specific Assignment or Sublease shall include (a) the
name of the proposed assignee, subtenant or occupant, (b) the nature of the
proposed assignee's, subtenant's or occupant's business to be carried on in the
Leased Premises, (c) a copy of the proposed Assignment or Sublease, or an
executed letter of intent that includes all material terms of the proposed
transaction (provided however that if a letter of intent is provided rather than
the proposed Assignment or Sublease, Landlord's consent may be given subject to
Tenant's providing Landlord a copy of the subsequently executed Assignment or
Sublease), and (d) such financial information as Landlord may reasonably request
concerning the proposed assignee, subtenant or occupant or its business. Tenant
shall reimburse Landlord for Landlord's reasonable attorneys' fees for the
review and documentation of any proposed Assignment or Sublease within thirty
(30) days after Landlord gives notice to Tenant of the amount thereof, together
with reasonable documentation supporting such fees.
17.3 Without limiting the circumstances under which it
may be reasonable for Landlord to withhold its consent to an Assignment or
Sublease, it is expressly agreed that it shall be reasonable for Landlord to
withhold its consent if Landlord reasonably determines that (i) the value of the
Leased Premises are likely to be materially adversely affected during the Term
as a result of such Assignment or Sublease, or (ii) the financial condition of
the proposed new tenant or subtenant at the
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time of the proposed Assignment or Sublease is, in the reasonable opinion of
Landlord, insufficient to meet the obligations of Tenant being assigned to such
new tenant or subtenant.
17.4 Each Sublease of the Leased Premises or any part
thereof shall be subject and subordinate to the provisions of this Lease. No
Assignment or Sublease shall affect or reduce any of the obligations of Tenant
hereunder, and all such obligations shall continue in full force and effect as
obligations of a principal and not as obligations of a guarantor, as if no
assignment or sublease had been made. Notwithstanding any assignment or
subletting Tenant shall continue to remain liable and responsible for the
payment of the Basic Rent and Additional Rent and the performance of all its
other obligations under this Lease. No assignment or sublease shall impose any
obligations on Landlord under this Lease except as otherwise provided in this
Lease. Tenant agrees that in the case of an assignment of the Lease, Tenant
shall, within fifteen (15) days after the execution and delivery of any such
assignment, deliver to Landlord (i) a duplicate original of such assignment in
recordable form and (ii) an agreement executed and acknowledged by the assignee
in recordable form wherein the assignee assumes and agrees to observe and
perform all of the terms and provisions of this Lease on the part of the Tenant
to be observed and performed from and after the date of such assignment. In the
case of a sublease, Tenant shall, within fifteen (15) days after the execution
and delivery of such sublease, deliver to Landlord a duplicate original of such
sublease.
17.5 Any sale or other transfer in one transaction, or in
an integrated or related series of transactions, of a majority of (i) the
partnership or membership interests in Tenant or any beneficial interest
therein, if Tenant is a partnership or limited liability company, or (ii) the
capital stock in Tenant, or any beneficial interest therein, if Tenant is a
corporation, shall be an Assignment for purposes of this Lease; provided however
that the foregoing provision shall not apply if Tenant is a publicly traded
company or other publicly traded entity, or a wholly-owned subsidiary thereof.
Notwithstanding anything to the contrary contained in this Section 17, Tenant
may assign or sublet the Leased Premises, or any portion thereof, without
Landlord's consent, to any entity which controls, is controlled by or is under
common control with Tenant, or to any entity resulting from the merger or
consolidation with Tenant, or to any entity which acquires all or substantially
all the assets of Tenant as a going concern, and any such Assignment shall not
be subject to the provisions of Section 17.7 below.
17.6 Each Assignee of Tenant's interest hereunder shall
assume all obligations of Tenant under this Lease and shall become and remain
liable jointly and severally with Tenant for the payment of Basic Rent and
Additional Rent, and for the performance of all the terms, covenants, conditions
and agreements herein contained on Tenant's part to be performed under this
Lease.
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17.7 Landlord's right to a portion of excess rent as
specified in this Section 17.7 is expressly reserved from the grant of Tenant's
leasehold estate, and Landlord shall have such right to such portion of the
excess rent in the event of any Assignment or Sublease by any succeeding
subtenant or assignee, regardless of whether (i) the instrument effecting any
such Assignment or Sublease provides such right to Landlord, or (ii) Landlord
has approved such an instrument which fails to provide such right to Landlord.
If Landlord consents to any Assignment or Sublease, then Tenant shall pay to
Landlord within five (5) business days after Tenant's receipt thereof, 50% of
any and all "net consideration" received by Tenant on account of such
transaction, howsoever the same may be denominated, and in the case of
Subleases, to the extent that such consideration exceeds the pro rata portion of
the Basic Rent, Additional Rent and other charges payable by Tenant hereunder
attributable to the sublet portion of the Leased Premises, based on the net
rentable area of the Leased Premises and the net rentable area of the Leased
Premises sublet; provided however that in calculating the "net consideration",
the following items shall first be deducted from the consideration received by
Tenant: (a) the reasonable costs paid by Tenant for improvements (including
Trade Fixtures and Equipment) installed or made by Tenant for the specific
subtenant or assignee in question, and (b) reasonable leasing commissions,
attorneys' fees and all other reasonable costs paid by Tenant in connection with
such assignment or subletting.
17.8 Upon the occurrence of an Event of Default under this
Lease, Landlord shall have the right to collect and enjoy all rents and other
sums of money payable under any Sublease, and Tenant hereby irrevocably and
unconditionally assigns such rents and money to Landlord, which assignment may
be exercised upon and after (but not before) the occurrence of an Event of
Default. Landlord shall apply any such funds received under a Sublease to
Tenant's obligations and liabilities under this Lease.
18. PERMITTED CONTESTS.
18.1 After prior written notice to Landlord, Tenant shall
not be required to (a) pay any Imposition, (b) comply with any Legal Requirement
(c) discharge or remove any lien referred to in Sections 9 or 12, or (d) take
any action with respect to any violation referred to in Section 11.1 so long as
Tenant shall contest, in good faith and at its expense, the existence, the
amount or the validity thereof, the amount of the damages caused thereby, or the
extent of its or Landlord's liability therefor, by appropriate proceedings,
which proceedings shall during the pendency thereof operate to prevent (i) the
collection of, or other realization upon, the Imposition or lien so contested,
(ii) the sale, forfeiture or loss of any of the Leased Premises, any Basic Rent
or any Additional Rent to satisfy the same or to pay any damages caused by the
violation of any such Legal Requirement or by any such violation, (iii) any
interference with the use or occupancy of any of the Leased Premises, (iv) any
interference with the payment of any Basic Rent or any Additional Rent, and (v)
the
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cancellation of any fire or other insurance policy unless prior to the effective
date of such cancellation, the policy is replaced by a substitute policy that
complies with the requirements of this Lease. Subject to the foregoing, and at
no cost or liability to Landlord, Landlord shall to the extent necessary to
enable Tenant to initiate and process such contest, join in such contest and
cooperate with Tenant with respect thereto.
18.2 In no event shall Tenant pursue any contest with
respect to any Imposition, Legal Requirement, lien, or violation, referred to
above in such manner that exposes Landlord or Lender to (a) criminal liability,
penalty or sanction, (b) any civil liability, penalty or sanction for which
Tenant has not made provisions reasonably acceptable to Landlord and Lender or
(c) defeasance of its interest in the Leased Premises.
18.3 Tenant agrees that each such contest shall be promptly
and diligently prosecuted to a final conclusion, except that Tenant shall, have
the right to attempt to settle or compromise such contest through negotiations.
Tenant shall pay and save Lender and Landlord harmless against any and all
losses, judgments, decrees and costs (including all reasonable attorneys' fees
and expenses in connection with any such contest and shall, promptly after the
final determination of such contest, fully pay and discharge the amounts which
shall be levied, assessed, charged or imposed or be determined to be payable
therein or in connection therewith, together with all penalties, fines,
interest, costs and expenses thereof or in connection therewith, and perform all
acts the performance of which shall be ordered or decreed as a result thereof.
19. DEFAULT PROVISIONS.
19.1 The occurrence of any one or more of the following
events (any such event, after the expiration of any specified notice and/or cure
period, being specified herein as a "failure" or "default") shall constitute an
Event of Default under this Lease:
19.1.1 a failure by Tenant to make any payment of
Basic Rent, Additional Rent or other sum herein required to be paid by Tenant
which continues unremedied for a period of ten (10) days after written notice
("Nonpayment Notice") thereof given to Tenant by Landlord or Lender or Lender's
designee;
19.1.2 failure by Tenant to perform and observe,
or a violation or breach of, any other provision in this Lease and such default
shall continue for a period of thirty (30) days after written notice thereof is
given by Landlord or Lender or Lender's designee to Tenant or if such default is
of such a nature that it cannot reasonably be cured within such period of thirty
(30) days, such period shall be extended for such longer time as is reasonably
necessary provided that Tenant has
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commenced to cure such default within said period of thirty (30) days and is
actively, diligently and in good faith proceeding with continuity to remedy such
default;
19.1.3 Tenant or any guarantor of Tenant's
obligations hereunder shall (i) voluntarily be adjudicated a bankrupt or
insolvent, (ii) or voluntarily consent to the appointment of a receiver or
trustee for itself or for any other Leased Premises, (iii) voluntarily file a
petition seeking relief under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, or (iv) voluntarily file a general
assignment for the benefit of creditors;
19.1.4 A court shall enter an order, judgment or
decree appointing, with the voluntary consent of Tenant or any guarantor of
Tenant's obligations hereunder, a receiver or trustee for Tenant or any
guarantor of Tenant's obligations hereunder or for the Leased Premises or
approving a petition filed against Tenant or any guarantor of Tenant's
obligations hereunder which seeks relief under the bankruptcy or other similar
laws of the United States or any State, and such order, judgment or decree shall
remain in force, undischarged or unstayed, 90 days after it is entered;
19.1.5 Tenant or any guarantor of Tenant's
obligations hereunder shall in any insolvency proceedings be liquidated or
dissolved or shall voluntarily commence proceedings towards its liquidation or
dissolution; or
19.1.6 The estate or interest of Tenant in the
Leased Premises shall be levied upon or attached in any proceeding and such
estate or interest is about to be sold or transferred or such process shall not
be vacated or discharged within 90 days after such levy or attachment.
19.2 REMEDIES PROVISIONS ARE SUBJECT TO REVIEW BY LOCAL
COUNSEL TO LANDLORD AND TENANT, BUT WILL BE SUBSTANTIALLY AS FOLLOWS, UNLESS
INCONSISTENT WITH THE LAWS OF THE STATE IN WHICH THE LEASED PREMISES ARE
LOCATED. On the occurrence of an Event of Default, Landlord shall have the right
either (i) except as otherwise expressly provided in this Lease, to terminate
this Lease or Tenant's right to possession of the Leased Premises, and at any
time thereafter recover possession of the Leased Premises, or any part thereof,
and expel and remove therefrom Tenant and any other person occupying the same,
by any lawful means, and again repossess and enjoy the Leased Premises without
prejudice to any of the remedies that Landlord may have under this Lease, or at
law or equity by reason of the Event of Default or of such termination, or (ii)
to continue this Lease in effect for so long as Landlord does not so terminate
Tenant's right to possession, and enforce all Landlord's rights and remedies
under this Lease, including the right to recover Fixed Rent and Additional
Charges as they become due. Acts of maintenance, preservation or efforts to
lease the Leased Premises, the appointment of a receiver upon application of
Landlord to protect Landlord's interest under this Lease, or re-entry or
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taking of possession of the Leased Premises by Landlord hereunder, shall not
constitute an election to terminate this Lease or Tenant's right to possession
unless specific written notice of such termination is given to Tenant hereunder.
Notwithstanding any releting without termination, Landlord may at any time
thereafter elect to terminate this Lease pursuant to this Section 19.2. Provided
Tenant cooperates with Landlord, Landlord agrees to make reasonable efforts to
mitigate its damages arising from an Event of Default by Tenant.
19.2.1 If Landlord terminates this Lease pursuant
to this Section 19.2, Landlord may, except as otherwise expressly provided in
this Lease, exercise all rights and remedies available to a landlord at law or
in equity, including, without limitation, the right to recover from Tenant: (i)
the worth at the time of award of the unpaid Rent and other amounts payable by
Tenant hereunder which had been earned at the time of termination; (ii) the
worth at the time of award of the amount by which the unpaid Rent and such other
amounts which would have been earned after termination until the time of the
award exceeds the amount of loss of Rent and such other amounts that could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid Rent and such other amounts for the balance of the term after
the time of the award exceeds the amount of loss of Rent and such other amounts
that could be reasonably avoided; and (iv) any other amount necessary to
compensate Landlord for all the direct costs proximately caused by Tenant's
failure to perform its obligations under this Lease or which, in the ordinary
course of things, would be likely to result therefrom, including without
limitation, the reasonable costs of releting and the reasonable costs of
improvements made to the Lease Premises to accomplish such releting. The "worth
at the time of award" of the amount referred to in clause (iii) shall be
computed by discounting such amount at the rate of seven percent (7%) per annum,
or if such rate is not allowed under applicable law, then at the discount rate
of the Federal Reserve Bank of San Francisco, California, plus one percent (1%).
As used herein, "time of award" shall mean either the date upon which Tenant
pays to Landlord the amount recoverable by Landlord as hereinabove set forth, or
the date of entry of any determination, order or judgment, of any court or other
legally constituted body determining the amount recoverable, whichever first
occurs.
19.2.2. For purposes of this Section 19.2, unpaid
Rent and other amounts which would have accrued and become payable under this
Lease shall consist of the sum of: (i) the total Basic Rent for the balance of
the Term, plus (ii) a computation of Additional Rent for the balance of the
Term.
19.2.3 Notwithstanding the foregoing provisions of
this Section 19.2, Landlord may not terminate this Lease or Tenant's right to
posssession, or recover damages for the balance of the Term, for an Event of
Default described in Section 19.1.2 or for Tenant's failure to timely pay
Additional Rent, without first allowing Tenant to require mediation of such
matter, and if the matter is mediated as provided herein, affording Tenant the
additional cure periods provided in Section
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19.2.4. Accordingly, upon Landlord giving Tenant a written notice of default
pursuant to Section 19.1.2, Tenant may within 30 days of receipt of such notice
deliver a notice of mediation to Landlord. Promptly after Landlord's receipt of
such mediation notice, the parties shall attempt in good faith to settle the
matter by mediation in the City in which the Leased Premises are located (unless
the parties agree on another location) under the Commercial Mediation Rules of
the American Arbitration Association ("AAA"). Such mediation shall be held
within 10 days of the appointment of the mediator by the AAA. The fees and costs
of the mediator shall be advanced by Tenant, provided that if Tenant fails to do
so, Landlord shall have no obligation hereunder to mediate. If the matter is
settled through mediation and such resolution does not include a determination
that but for the cure rights of Tenant set forth in Section 19.2.4, Landlord
would be entitled to terminate this Lease, Landlord shall reimburse to Tenant
one-half of the fees and costs of the mediator.
19.2.4 If (i)the parties participate in a
mediation described in Section 19.2.3 and (ii)upon completion of the mediation,
the parties have not resolved the matter in dispute with an agreement that no
Event of Default had occurred, or if an Event of Default had occurred, such
Event of Default does not entitle Landlord to terminate this Lease, then Tenant
shall have the opportunity to cure its default as follows: (a) if the Event of
Default is Tenant's failure to pay Additional Rent, Tenant shall have ten (10)
days after the completion of the mediation to cure such default; and (b) if the
Event of Default is described in Section 19.1.2, Tenant shall have thirty (30)
days after the completion of the mediation to cure such default, provided
however that if such default is of such a nature that it cannot reasonably be
cured within such period of thirty (30) days, such period shall be extended for
such longer time as is reasonably necessary provided that Tenant has commenced
to cure such default within said period of thirty (30) days and is actively,
diligently and in good faith proceeding with continuity to remedy such default.
19.3 Landlord and Tenant agree that upon the occurrence of
any Event of Default by Tenant, the remedies provisions of this Lease are
intended to supersede any common law or statutory rights that Landlord may have
to accelerate the Basic Rent and Additional Rent due under this Lease, and
Landlord hereby waives any such statutory or common law rights. Subject to
Landlord's continuing ability to enforce the remedies provided in this Lease
upon an Event of Default by Tenant, Landlord's waiver hereunder shall apply to
all such rights of acceleration whether same are currently available under
existing statutes or common law(s) or whether such rights of acceleration are
hereafter available under future statutes or common law(s). Furthermore,
notwithstanding any provision to the contrary in this Lease, the amount of any
Net Proceeds and Net Award received by Landlord which, but for the occurrence of
such Event of Default, would otherwise be available to Tenant for Restoration,
shall be applied to reduce the liability of Tenant under this Lease as to such
Restoration.
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19.4 If Landlord fails to perform any of its obligations
under this Lease, Tenant shall give Landlord written notice thereof, specifying
with particularity the breach claimed by Tenant. Landlord shall have the right
to cure such breach during the 30 day period following receipt of Tenant's
notice hereunder; provided however that if Landlord commences to cure such
breach within such 30 day period and thereafter diligently prosecutes the same
to completion, Landlord shall not be in default hereunder. If the breach of
Landlord materially adversely affects Tenant's use and enjoyment of the Leased
Premises and if Landlord has not cured such breach during the 30 day period
following receipt of Tenant's notice hereunder, then notwithstanding any
continuing efforts of Landlord to cure such breach, Tenant shall have the right,
but not the obligation, to cure such breach.
19.4.1 If the Leased Premises are subject to a
Mortgage, Tenant shall serve Lender Fconcurrent copies of any notices of default
served on Landlord hereunder, and if Landlord fails to complete any cure within
the cure period(s) provided above, Lender shall have an additional period of
thirty (30) days after the expiration of any such cure period(s) to cure any
default of Landlord. Notwithstanding such additional cure period of Lender, if
Landlord fails to cure any Landlord breach within the cure period(s) described
above, Tenant shall have the right, but not the obligation, to cure such breach.
19.4.2 If pursuant to the foregoing provisions
Tenant cures any breach of Landlord, the reasonable costs and expenses incurred
by Tenant in connection with such cure (including attorneys' fees incurred with
respect thereto, if any), together with interest thereon at the Default Rate (as
defined in Section 19.4.4) from the respective date(s) of Tenant's payment of
each item of cost or expense, shall be payable by Landlord upon demand, and if
not paid within thirty (30) days of written notice of demand (which shall
include satisfactory evidence of Tenant's payment of such cost or expense), in
addition to the right to recover such sums from Landlord, Tenant shall have the
right to setoff against the next due payments of Basic Rent and Additional Rent
the amounts payable by Landlord to Tenant hereunder until Tenant shall have
setoff the entire amount. Tenant shall look solely to Landlord's interest in the
Leased Premises, the rent and income therefrom, any condemnation or insurance
proceeds attributable to the Leased Premises, and the proceeds from any sale or
disposition of the Leased Premises for the recovery of any judgment against
Landlord, and neither Landlord nor its partners, members, managers, directors,
officers or shareholders shall be personally liable for any such judgment.
19.4.3 If Landlord or Lender fail to cure a
breach of Landlord within the cure periods permitted above, and if the nature of
the breach of Landlord materially adversely affects Tenant's use and enjoyment
of the Leased Premises, Tenant may, in addition to its remedies described above,
terminate this Lease; provided however that if Landlord's breach is its failure
to operate, maintain, repair and manage the Exterior Area pursuant to Section
11.6, then Tenant shall not be
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entitled to terminate this Agreement and its sole remedies shall be to (i)
resume its prior operation, maintenance, repair and management of the Exterior
Area, and/or (ii) pursuant to this Section 19.4, recover from Landlord the
reasonable costs incurred by Tenant in curing Landlord's failure to maintain and
repair the Exterior Area, plus interest at the Default Rate.
19.4.4 The "Default Rate shall mean a rate of
interest equal to two (2%) percent per annum above the then current Prime Rate,
as hereinafter defined (the "Default Rate") computed from the date a payment was
due to and including the date of payment. The term "Prime Rate" shall mean the
prime rate of interest published in the Wall Street Journal or its successor,
from time to time.
20. ADDITIONAL RIGHTS OF LANDLORD AND TENANT; PREVAILING PARTY.
20.1 Except as otherwise expressly provided in this Lease,
No right or remedy conferred upon or reserved to Landlord in this Lease is
intended to be exclusive of any other right or remedy and each and every right
and remedy shall be cumulative and in addition to any other right or remedy
contained in this Lease. No course of conduct, nor any delay or failure by
Landlord or Tenant to enforce its rights under this Lease shall be construed as
a waiver, modification or relinquishment thereof. In addition to the other
remedies provided in this Lease, Landlord and Tenant shall be entitled, to the
extent permitted by applicable law, to injunctive relief in case of the
violation or attempted or threatened violation of any of the provisions of this
Lease, or to specific performance of any of the provisions of this Lease.
20.2 Tenant hereby waives and surrenders for itself and all
those claiming under it, including creditors of all kinds, any right and
privilege which it or any of them may have under any present or future law to
redeem any of the Leased Premises or to have a continuance of this Lease after
termination of this Lease or of Tenant's right of occupancy or possession
pursuant to any court order or any provision hereof.
20.3 Landlord hereby waives any right to distrain or levy
upon Trade Fixtures or any property of Tenant and any Landlord's lien or similar
lien upon Trade Fixtures and any other property of Tenant regardless of whether
such lien is created or otherwise. Landlord agrees at the request of Tenant to
execute a waiver of any Landlord's or similar lien for the benefit of any
present or future holder of a security interest in or lessor of any of Trade
Fixtures or any other personal property of Tenant, which waiver shall be in form
reasonably acceptable to Landlord.
20.4 Landlord acknowledges and agrees in the future to
acknowledge (in a written form reasonably satisfactory to Tenant) to such
persons and entities at such times and for such purposes as Tenant may
reasonably request that the Trade Fixtures are Tenant's property and not part of
the Improvements (regardless of
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whether or to what extent such Trade Fixtures are affixed to the Improvements)
or otherwise subject to the terms of this Lease.
20.5 Each of Tenant and Landlord (herein called "Paying
Party") agrees to pay to the other party (herein called "Demanding Party") any
and all reasonable costs and expenses incurred by the Demanding Party in
connection with any litigation or other action instituted by the Demanding Party
to enforce the obligations of the Paying Party under this Lease, to the extent
that the Demanding Party has prevailed in any such litigation or other action.
Any amount payable by Tenant to Landlord pursuant to this Section 20.5 shall be
due and payable by Tenant to Landlord as Additional Rent. Amounts payable by
Landlord to Tenant shall be due immediately upon determination that Tenant is
entitled thereto, and at Tenant's election, may be credited by Tenant against
next due payments of Rent and Additional Rent until such credit is fully
utilized. As used in this Section, "costs and expenses" shall include, without
limitation, reasonable attorneys' fees at trial, on appeal and on any petition
for review, and in any proceeding in bankruptcy, in addition to all other sums
provided by law.
20.6 If Landlord should fail to pay to Tenant any sums
owing from Landlord to Tenant under this Lease within thirty (30) days after
receipt by Landlord of written demand therefor from Tenant specifying the amount
payable and the Section(s) under this Lease pursuant to which Landlord is
responsible to make such payment, Landlord shall pay to Tenant the Default Rate
on the amount unpaid, computed from the date such payment was first due Tenant
to and including the date of payment.
21. NOTICES. All notices, demands, requests, consents, approvals,
offers, statements and other instruments or communications required or permitted
to be given pursuant to the provisions of this Lease (collectively "Notice" or
"Notices") shall be in writing and shall be deemed to have been given for all
purposes (i) three (3) days after having been sent by United States mail, by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the other party at its address as stated below, or (ii) one (1) day
after have been sent by Federal Express, United Parcel or other nationally
recognized air courier service.
To Landlord: c/o SPI Holdings, LLC
One Maritime Plaza, Suite 1460
San Francisco, CA 94111
Attention: Dennis J. Wong
With Copy to: Morgan, Miller & Blair
1676 N. California Blvd., Suite 200
Walnut Creek, CA 94596
Attention: Gilbert C. Berkeley
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To Tenant: The Sports Authority
3383 North State Road 7
Fort Lauderdale, FL 33319
Attention: Executive Vice President/Growth
and Development
With Copy to: The Sports Authority
3383 North State Road 7
Fort Lauderdale, FL 33319
Attention: Sr. Vice President & Gen. Counsel
With Copy to: The Sports Authority
3383 North State Road 7
Fort Lauderdale, FL 33319
Attention: Property Administrator
With Copy to: The Sports Authority
3383 North State Road 7
Fort Lauderdale, FL 33319
Attention: Vice President Real Estate
If any Lender shall have advised Tenant by Notice in the manner aforesaid that
it is the holder of a Mortgage and states in said Notice its address for the
receipt of Notices, then simultaneously with the giving of any Notice by Tenant
to Landlord, Tenant shall send a copy of such Notice to Lender in the manner
aforesaid. For the purposes of this Section 21, any party may substitute its
address by giving fifteen days' notice to the other party in the manner provided
above. Any Notice may be given on behalf of any party by its counsel. If any
permitted assignee or subtenant shall have requested Landlord by Notice in the
manner aforesaid that such assignee or subtenant desires copies of Notices given
by Landlord to Tenant under this Lease and states in said Notice its address for
the receipt of Notices, then simultaneously with the giving of any Notice by
Landlord to Tenant, Landlord shall send a copy of such Notice to such assignee
or subtenant in the manner aforesaid.
22. ESTOPPEL CERTIFICATES. Landlord and Tenant shall at any time and
from time to time, upon not less than fifteen (15) days' prior written request
by the other, execute, acknowledge and deliver to the other a statement in
writing, certifying (i) that this Lease is unmodified and in full effect (or, if
there have been modifications, that this Lease is in full effect as modified,
setting forth such modifications), (ii) the dates to which Basic Rent payable
hereunder has been paid, (iii) that to the knowledge of the signer of such
certificate no default by either Landlord or Tenant exists hereunder or
specifying each such default of which the signer may have knowledge, (iv) the
remaining Term hereof, (v) with respect to a certificate signed on behalf of
Tenant, that
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to the knowledge of the signer of such certificate, there are no proceedings
pending or threatened against Tenant before or by any court or administrative
agency which if adversely decided would materially and adversely affect the
financial condition and operations of Tenant or if any such proceedings are
pending or threatened to said signer's knowledge, specifying and describing the
same, and (vi) such other matters as may reasonably be requested by the party
requesting the certificate. It is intended that any such statements may be
relied upon by Lender, the recipient of such statements or their assignees or by
any prospective purchaser, assignee or subtenant of the Leased Premises.
23. RECAPTURE; SURRENDER AND HOLDING OVER
23.1 If Tenant should fail for 180 days to
continuously and uninterruptedly operate and keep adequately stocked and staffed
its business operated on the Leased Premises (excluding closures due to
Alterations, Restorations, substantial repairs, casualties, condemnation,
Landlord's default and acts of God), while such failure shall not be a default
of Tenant under this Lease, Landlord may nevertheless after such failure, at its
sole and absolute discretion, elect to terminate this Lease. Notwithstanding the
foregoing, Landlord may not terminate this Lease if (a) Tenant at least 90 days
prior to the end of said 180 day period notifies Landlord of Tenant's intention
to market the Leased Premises to an assignee or subtenant; (b) prior to the end
of said 180 period, Tenant delivers to Landlord a request for its consent
pursuant to Section 17 to an Assignment or a Sublease of at least 50% of the
Leased Premises; (c) Landlord thereupon consents to such Assignment or Sublease
in accordance with Section 17; and (d) the assignee or subtenant either (i)
within 60 days after the end of said 180 day period commences ordinary business
operations in the Leased Premises, or (ii) applies for a building permit within
60 days after the end of said 180 day period for any Alterations necessary for
such assignee's or subtenant's occupancy, and such assignee or subtenant
thereafter diligently attempts to obtain such building permit, and upon
obtaining the permit diligently constructs such Alterations to completion, and
within 30 days of such completion, commences ordinary business operations in the
Leased Premises. Subject to the foregoing, if Landlord elects to terminate this
Lease, such election shall be effective on the date Landlord's notice of
termination is delivered to Tenant provided that Tenant has previously vacated
the Leased Premises, or if Tenant has not, then such termination shall be
effective thirty (30) days after such notice has been given to Tenant. Upon such
termination, neither Landlord nor Tenant shall have liability under this Lease
for matters arising thereafter, provided that Tenant shall be obligated to
surrender the Leased Premises in the manner and condition required by Section
23.2 and Tenant shall on the termination date pay Landlord all sums then due and
owing under this Lease.
23.2 Upon the expiration or earlier termination of this
Lease, Tenant shall peaceably leave and surrender the Leased Premises (except as
to any portion
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thereof with respect to which this Lease has previously terminated) to Landlord.
Tenant shall remove from the Leased Premises on or prior to such expiration or
earlier termination the Trade Fixtures and personal property which is owned by
Tenant or third parties other than Landlord, and Tenant at its expense shall ,
on or prior to such expiration or earlier Termination, repair any damage caused
by such removal. Trade Fixtures and personal property not so removed at the end
of the Term or within thirty days after the earlier termination of the Term for
any reason whatsoever shall become the property of Landlord, and Landlord may
thereafter cause such property to be removed from the Leased Premises. The
reasonable cost of removing and disposing of such property and repairing any
damage to any of the Leased Premises caused by such removal shall be borne by
Tenant. Landlord shall not in any manner or to any extent be obligated to
reimburse Tenant for any property which becomes the property of Landlord as a
result of such expiration or earlier termination.
23.3 Any holding over by Tenant of the Leased Premises
after the expiration or earlier termination of the Term of this Lease or any
extensions thereof, with the consent of Landlord, shall operate and be construed
as tenancy from month to month only, at one hundred fifteen percent (115%) of
the Basic Rent reserved herein or as otherwise agreed in writing by the parties,
and upon the same terms and conditions as contained in this Lease.
Notwithstanding the foregoing, any holding over without Landlord's consent shall
be a tenancy at sufferance and shall entitle Landlord to collect Basic Rent at a
rate of one hundred fifty percent (150%) of the Basic Rent previously in effect,
and Landlord may exercise all rights and remedies provided by law or in equity,
including the remedies of Section 19.2. In connection with any holding over
without Landlord's consent, Tenant shall indemnify, defend and hold harmless
Landlord against any claim, loss or damage suffered by Landlord by reason of
Tenant's failure timely vacate the Leased Premises.
24. NO MERGER OF TITLE. There shall be no merger of this Lease nor of
the leasehold estate created by this Lease with the fee estate in or ownership
of any of the Leased Premises by reason of the fact that the same person,
corporation, firm or other entity may acquire or hold or own, directly or
indirectly, (a) this Lease or the leasehold estate created by this Lease or any
interest in this Lease or in such leasehold estate and (b) the fee estate or
ownership of any of the Leased Premises or any interest in such fee estate or
ownership. No such merger shall occur unless and until all persons,
corporations, firms and other entities having any interest in (i) this Lease or
the leasehold estate created by this Lease and (ii) the fee estate in or
ownership of the Leased Premises or any part thereof sought to be merged shall
join in a written instrument effecting such merger and shall duly record the
same.
25. DEFINITION OF LANDLORD.
25.1 Anything contained herein to the contrary
notwithstanding, any claim based on or in respect of any liability of Landlord
under this Lease shall be
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enforced only against the Landlord's interest in the Leased Premises, the rents
and income from this Lease, any condemnation or insurance proceeds attributable
to the Leased Premises, and proceeds from the sale of the Leased Premises, and
shall not be enforced against the Landlord individually or personally.
25.2 The term "Landlord" as used in this Lease so far as
covenants or obligations on the part of Landlord are concerned, shall be limited
to mean and include only the owner or owners of the Leased Premises at the time
in question and in the event of any transfer or transfers of the title of the
Leased Premises, the Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) shall be automatically freed and
relieved from and after the date of such transfer and conveyance of all personal
liability as respects the performance of any covenants or obligations on the
part of Landlord contained in this Lease thereafter to be performed provided
that upon or promptly after any such transfer by Landlord (excluding a transfer
that may occur through or under threat of foreclosure, Landlord shall deliver to
Tenant a copy of a fully executed assumption agreement whereby the transferee
assumes, subject to the limitations in Section 25.1, Landlord's obligations and
liabilities under the Lease from and after the date of transfer. Tenant shall be
under no obligation to pay Basic Rent, Additional Rent or any other sums due and
payable pursuant to the provisions of this Lease to the transferee and Tenant
shall be under no obligation to amend any insurance certificates to name the
transferee (and its mortgagee, as applicable) until Tenant receives written
notice of such transfer from Landlord (together with a copy of the fully
executed assumption agreement, if required above) and notice from the transferee
(i) that it has succeeded to the interest of Landlord, (ii) of the new address
for the remittance of monetary payments and (iii) of the notice address for the
transferee. The notice shall be provided to Tenant at least ten (10) days prior
to the Tenant having any obligation to pay Basic Rent, Additional Rent or any
other sums due and payable pursuant to the provisions of this Lease to such
transferee and at least fifteen (15) days prior to Tenant having any obligation
to amend such insurance certificates to name such transferee (and its mortgagee,
as applicable).
26. HAZARDOUS SUBSTANCES.
26.1 Tenant shall not on, about, or under the Leased
Premises, make, release, treat or dispose of any "hazardous substances" as that
term is defined in the Comprehensive Environmental Response, Compensation and
Liability Act, and the rules and regulations promulgated pursuant thereto, as
from time to time amended, 42 U.S.C. Section 9601 ET SEQ. (the "Act"); but the
foregoing shall not prevent the storage or use or disposal of any hazardous
substances in accordance with applicable laws and regulations. Tenant represents
and warrants that it will at all times comply with the Act and any other
federal, state or local laws, rules or regulations governing "Hazardous
Materials". "Hazardous Materials" as used herein shall mean all chemicals,
petroleum, crude oil or any fraction thereof, hydrocarbons, polychlorinated
biphenyls
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(PCBs), asbestos, asbestos containing materials and/or products, urea
formaldehyde, or any substances which are classified as "hazardous" or "toxic"
under the Act; hazardous waste as defined under the Solid Waste Disposal Act, as
amended 42 U.S.C. Section 6901 ET SEQ.; air pollutants regulated under the Clean
Air Act, as amended, 42 U.S.C. Section 7401, ET SEQ.; pollutants as defined
under the ' Clean Water Act, as amended, 33 U.S.C. Section 1251, ET SEQ., any
pesticide as defined by Federal Insecticide, Fungicide, and Rodenticide Act, as
amended, 7 U.S.C. Section 136, ET SEQ., any hazardous chemical substance or
mixture or imminently hazardous substance or mixture regulated by the Toxic
Substances Control Act, as amended, 15 U.S.C.Section 2601, et Seq., any
substance listed in the United States Department of Transportation Table at 45
CFR 172. 10 1; any chemicals included in regulations promulgated under the above
listed statutes; any explosives, radioactive material, and any chemical or other
substance regulated by federal, state or local statutes similar to the federal
statutes listed above and regulations promulgated under such federal, state or
local statutes.
26.2 To the extent required by the Act and/or any federal,
state or local laws, rules or regulations governing Hazardous Materials, Tenant
shall remove any hazardous substances (as defined in the Act) and Hazardous
Materials (as defined above) arising out of Tenant's occupancy of the Leased
Premises during the Term. In addition to, and without limiting Section 10 of
this Lease Tenant shall and hereby does agree to defend, indemnify and hold
Lender and Landlord, their officers, directors, shareholders, partners,
beneficial owners, trustees, members and employees, harmless from and against
any and all causes of actions, suits, demands or judgments of any nature
whatsoever, losses, damages, penalties, expenses, fees, claims, costs (including
response and remedial costs), and liabilities, including, but not limited to,
reasonable attorneys' fees and costs of litigation, arising out of the use of or
operations in the Leased Premises by Tenant or anyone occupying or using the
Leased Premises during the Term and connected with (i) the violation of any
applicable federal, state or local environmental law with respect to the Leased
Premises by Tenant or anyone occupying or using the Leased Premises during the
Term; or (ii) the "release" or "threatened release" during the Term by Tenant,
its agents, invitees, employees, contractors, subcontractors, licensees, or
anyone occupying or using the Leased Premises, or failure of Tenant to remove,
as required by this Section 26, of "hazardous substances" (as defined in the
Act) and Hazardous Materials (as defined above) at or from the Leased Premises
or any portion or portions thereof released by such persons during the Term.
26.3 Tenant shall not install any underground storage tank
at the Leased Premises. Tenant shall not store combustible or flammable
materials on the Leased Premises without Landlord's prior written consent, which
may be withheld in Landlord's sole and absolute discretion, unless such
materials are incidental to the business conducted on the Leased Premises. Any
permitted storage shall be in compliance with the Act and all other federal,
state or local laws, rules or regulations
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governing Hazardous Materials.
26.4 To the extent required by the Act and/or any federal,
state or local laws, rules or regulations governing Hazardous Materials,
Landlord shall be responsible for the disposition, treatment and/or removal of
any Hazardous Materials on, under or about the Leased Premises to the extent
that Tenant is not responsible for such disposition, treatment and/or removal
pursuant to the foregoing provisions of this Section 26. In addition to, and
without limiting Section 10 of this Lease Landlord shall and hereby does agree
to defend, indemnify and hold Tenant, its officers, directors, shareholders,
partners, beneficial owners, trustees, members and employees, harmless from and
against any and all causes of actions, suits, demands or judgments of any nature
whatsoever, losses, damages, penalties, expenses, fees, claims, costs (including
response and remedial costs), and liabilities, including, but not limited to,
reasonable attorneys' fees and costs of litigation, that arise out of (i) the
violation of any applicable federal, state or local environmental law with
respect to the Leased Premises by Landlord, its agents, employees, contractors
or subcontractors; or (ii) the "release" or "threatened release" by Landlord,
its agents, employees, contractors or subcontractors, or failure of Landlord to
remove, as required by this Section 26, of "hazardous substances" (as defined in
the Act) and Hazardous Materials (as defined above) at or from the Leased
Premises or any portion or portions thereof released by such persons during the
Term or (iii) the failure of Landlord to dispose of, treat or remove Hazardous
Substances that the Landlord is obligated to dispose of, treat or remove
pursuant to this Section 26.4; provided however that Landlord shall not be
liable to Tenant hereunder for consequential damages for loss of business by
Tenant if such loss of business arises from the acts or omissions of third
parties.
27. ENTRY BY LANDLORD. Landlord and its authorized representatives
shall have the right upon reasonable notice (which shall be not less than two
(2) business days except in the case of emergency) to enter the Leased Premises
at all reasonable business hours (and at all other times in the event of an
emergency): (a) for the purpose of inspecting the same or for the purpose of
doing any work under Sections 11.5 or 11.6, and may take all such action thereon
as may be necessary or appropriate for any such purpose (but nothing contained
in this Lease or otherwise shall create or imply any duty upon the part of
Landlord to make any such inspection or do any such work), and (b) for the
purpose of showing the Leased Premises to prospective purchasers and mortgagees
and, at any time within twelve (12) months prior to the expiration of the Term
of this Lease for the purpose of showing the same to prospective tenants. No
such entry shall constitute an eviction of Tenant but any such entry shall be
done by Landlord in such reasonable manner as to minimize any disruption of
Tenant's business operation.
28. STATEMENTS. On or before April 30 of each year, Tenant shall submit
to Landlord for the year ending January 31 of such year, a report of the annual
sales for the store operated on the Leased Premises, which sales report shall
include
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information on sales for the fiscal year and each month of such year. If Tenant
or any guarantor of this Lease ("Guarantor") is a public company, Tenant or
Guarantor shall submit to Landlord and Lender, when filed with the Securities
and Exchange Commission, copies of the Forms 10Q and 10K of Tenant or Guarantor.
If at any time either Tenant or Guarantor is no longer a public company, Tenant
shall submit to Landlord and Lender or its designee (a) any financial statements
of Tenant or Guarantor (as the case may be) which are provided by Tenant or
Guarantor to its lenders, and (b) the annual (audited if so prepared) financial
report and quarterly (audited if so prepared) financial reports within one
hundred twenty (120) days following the close of each fiscal year (in the case
of annual reports) or fiscal quarter (in the case of quarterly reports) of
Tenant or Guarantor.
29. TRADEMARKS. Landlord agrees and acknowledges that all right,
title and interest in and to the trade names, trademarks and service marks "THE
SPORTS AUTHORITY" and "THE SPORTS AUTHORITY, LTD.", including any related
logotypes, designs and trade dress, any replacement or secondary mark, and the
trademark applications and registrations therefor (herein collectively,
"Tenant's Trademarks"), are the sole and exclusive property of Tenant or its
licensor(s). Landlord and anyone claiming, through or under the Landlord shall
not use Tenant's Trademarks or any trademark, service mark or trade name
confusingly similar to Tenant's Trademarks now or in the future except with
Tenant's prior written authorization, which Tenant may withhold in its sole
discretion. Landlord agrees not to directly or indirectly challenge, attack or
impair Tenant's right, title and interest in Tenant's Trademarks and to always
follow Tenant's instructions concerning proper use of Tenant's Trademarks,
including ceasing use as directed by Tenant if necessary. All goodwill
associated with the use of Tenant's Trademarks shall inure to the Tenant or its
licensor(s). Landlord shall not in any manner represent that it has any
ownership interest in Tenant's Trademarks and Landlord specifically acknowledges
that any use of Tenant's Trademarks permitted by Tenant shall not create in
Landlord any right, title or interest therein.
30. SIGNS. Tenant shall be entitled to erect any signage on the
Leased Property that is permitted by law. Construction and/or installation of
signage shall be deemed an Alteration under Section 12 of this Lease. Upon the
request of Tenant, Landlord shall take all such actions as may be reasonably be
requested by Tenant to insure the Tenant is entitled to the maximum allowable
signage (including, without limitation, all signage afforded to the Leased
Premises pursuant to any REA), and Landlord shall cooperate with Tenant in
obtaining all necessary approvals in connection with any such signage; provided,
however, that Tenant shall reimburse Landlord for all costs and expenses
incurred by Landlord in complying with the requirements of this sentence. Tenant
agrees to comply with the laws and regulations affecting signage at the Leased
Premises, and with the provisions of the REA (if any), as the same exist now and
throughout the Term. Any construction by Tenant under
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this Section 30 shall be subject to the provisions of Sections 12.1, 12.2 and
12.4 of this Lease.
31. NO USURY. The intention of the parties being to conform strictly
to the applicable usury laws, whenever any provision herein provides for payment
by Tenant to Landlord of interest at a rate in excess of the legal rate
permitted to be charged, such rate herein provided to be paid shall be deemed
reduced to such legal rate.
32. POOL OF LEASES. As a material consideration to Landlord and
inducement to Landlord to enter into this Lease, Tenant has agreed with Landlord
that this Lease is one of a pool of leases identified in EXHIBIT C hereto, and
that in the event of any bankruptcy or insolvency proceedings involving Tenant
or Tenant's interest in this Lease, the Leased Premises, or any of the leases or
premises described in such pool of leases, all such leases (including this
Lease) shall be treated as one lease for purposes of any election made by Tenant
to accept or reject any lease included in such pool of leases. By the foregoing,
it is intended and agreed that no election, determination or decision to reject
this Lease or any other lease in the pool of leases shall be effective unless
the same such election, determination or decision is made as to all leases in
such pool of leases.
33. SEPARABILILITY. Each and every covenant and agreement contained
in this Lease is, and shall be construed to be, a separate and independent
covenant and agreement, and the breach of any such covenant or agreement by
Landlord shall not discharge or relieve Tenant from its obligation to perform
the same, except as otherwise expressly provided in this Lease. If any term or
provision of this Lease or the application thereof to any provision of this
Lease or the application thereof to any person or circumstances shall to any
extent be invalid and unenforceable, the remainder of this Lease, or the
application of such term or provision to person or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected thereby,
and each term and provision of this Lease shall be valid and shall be enforced
to the extent permitted by law.
34. MISCELLANEOUS.
34.1 The section headings in this Lease are used only for
convenience in finding the subject matters and are not part of this Lease or to
be used in determining the intent of the parties or otherwise interpreting this
Lease.
34.2 As used in this Lease the singular shall include the
plural as the context requires and the following words and phrases shall have
the following meanings: (i) "including" shall mean "including but not limited
to"; (ii) "provisions" shall mean "provisions, terms, agreements, covenants
and/or conditions"; (iii) "lien" shall mean "lien, charge, encumbrance; title
retention agreement, pledge, security
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interest, mortgage and/or deed of trust"; and (iv) "obligation" shall mean
"obligation, duty, agreement, liability, covenant or condition".
34.3. Any act which Landlord is permitted to perform under
this Lease may be performed at any time and from time to time by Landlord or any
person or entity designated by Landlord. Subject to the provisions of Section
17, any act which Tenant is permitted to perform under this Lease may be
performed at any time and from time to time by Tenant or any person or entity
designated by Tenant.
34.4. This Lease may be modified, amended, discharged or
waived only by an agreement in writing signed by the party against whom
enforcement of any such modification, amendment, discharge or waiver is sought.
34.5 Subject to the provisions of Section 17 regarding
assignment and subletting by Tenant, the terms, covenants and conditions
contained in this Lease shall bind and inure to the benefit of Landlord and
Tenant and, except as otherwise provided herein, their respective personal
representatives and successors and assigns; provided, however, that upon the
sale, assignment or transfer by Landlord (or by any subsequent landlord) of its
interest in the Leased Premises, including any transfer upon or in lieu of
foreclosure or by operation of law, Landlord (or subsequent landlord) shall be
relieved from all subsequent obligations or liabilities under this Lease as
provided in Section 25.2.
34.6 This Lease will be simultaneously executed in several
counterparts, each of which when so executed and delivered shall constitute an
original, fully enforceable counterpart for all purposes.
34.7 Unless otherwise expressly provided in this Lease, all
consents and approvals to be given by Landlord or Tenant may be withheld for any
reason or no reason, at such party's sole discretion, and any such action shall
not be deemed inconsistent with any covenant of good faith and fair dealing
otherwise implied by law to be a part of this Lease. Tenant agrees to reimburse
Landlord for all reasonable out-of-pocket expenses incurred by Landlord in
reviewing any request for consent or approval, including without limitation,
fees of attorneys and architects retained by Landlord to assist in such review.
Whenever the consent or approval of Landlord is required pursuant to a specific
provision of this Lease, unless such provision expressly states otherwise, such
consent or approval shall be deemed to have been given if Landlord does not deny
such request for consent or approval within thirty (30) days after receipt of
the written request of Tenant; provided however that no such consent or approval
shall be deemed given unless the request for consent or approval states in
capitalized underlined language, placed on the first page thereof, that pursuant
to Section 34.7 of the Lease, Landlord's consent or approval shall be deemed
given if no denial of such consent or approval is made by Landlord within thirty
(30) days of receipt of such request.
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34.8 Each of Landlord and Tenant represents and warrants to
the other that it has not entered into any agreement or incurred or created any
obligation which might require the other to pay any broker's commission,
finder's fee or other commission or fee relating to the leasing of the Leased
Premises, and each of Landlord and Tenant shall defend, indemnify and hold
harmless the other from and against any claims for any such commissions or fees
by anyone claiming by or through the indemnifying party.
34.9 This Lease shall be governed by and construed
according to the laws of the State in which the Leased Premises is located. Any
actions or proceedings brought under this Lease, or with respect to any matter
arising under or out of this Lease, shall be brought and tried only in courts
located in the State in which the Leased Premises are located (excepting
appellate courts).
34.10 The terms of this Lease are intended by the parties
as a final expression of their agreement with respect to the Leased Premises and
the transaction described herein, and may not be contradicted by evidence of any
prior or contemporaneous agreement, arrangement, understanding or negotiation
(whether oral or written). The parties further intend that this Lease constitute
the complete and exclusive statement of its terms, and no extrinsic evidence
whatsoever may be introduced in any judicial proceeding involving this Lease.
The language in all parts of this Lease shall in all cases be construed as a
whole and in accordance with its fair meaning and not restricted for or against
any party.
34.11 The Landlord and Tenant hereby waive the right to a
trial by jury in connection with any litigation arising as a result of this
Lease, any documents now or hereafter executed in connection with this Lease,
any course of dealing, statements (whether oral or written) or actions of either
Landlord or Tenant. The foregoing waiver is a material inducement for the
execution of this Lease by Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have caused this
instrument to be executed under seal as of the day and year first above written.
LANDLORD:
[SPI HOLDINGS, LLC
a Delaware limited liability company]
Witness: ________________ By___________________________
[Dennis J. Wong, Manager]
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Witness: ________________
TENANT:
THE SPORTS AUTHORITY a
Delaware corporation
Witness: ________________ By:_________________________________
Name:_______________________________
Title:______________________________
Witness: ________________ By:_________________________________
Name:_______________________________
Title:______________________________
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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
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EXHIBIT B
BASIC RENT DURING TERM
AND RENEWAL TERMS
1. Basic Rent for the first five (5) years (the first 60 full
calendar months) of the initial Term shall be at the annual rate of
_____________________ Dollars ($__________), in monthly installments of
$__________ each. If the first month of the Term is a partial month, the monthly
installment shall be prorated on the basis of the number of days in such month.
2. Basic Rent for years six (6) through ten (10) of the initial Term
shall be at an annual rate equal to the lesser of (x) the Adjusted Rental (as
defined below), but in no event less than the Basic Rent in effect in year five
(5), or (y) [110% of the Basic Rent in effect in year five (5)], payable in
equal monthly installments.
3. Basic Rent for years eleven (11) through fifteen (15) of the initial
Term shall be at an annual rate equal to the lesser of (x) the Adjusted Rental
(as defined below), but in no event less than the Basic Rent in effect in year
ten (10), or (y) [121% of the Basic Rent in effect in year five (5)], payable in
equal monthly installments.
4. Basic Rent for years sixteen (16) through twenty (20) of the initial
Term shall be at an annual rate equal to the lesser of (x) the Adjusted Rental
(as defined below), but in no event less than the Basic Rent in effect in year
fifteen (15), or (y) [133.1% of the Basic Rent in effect in year five (5)],
payable in equal monthly installments.
5. Basic Rent for the first Renewal Term shall be at the annual rate of
[112.5% of the amount provided in clause (y) of Paragraph 4 above], in monthly
installments of $_____________, each.
6. Basic Rent for the second Renewal Term shall be at the annual rate
of [112.5%] of foregoing Basic Rent ] ____________ Dollars ($_________), in
monthly installments of $_____________, each.
7. Basic Rent for the third Renewal Term shall be at the annual rate of
[112.5% of foregoing Basic Rent] _____________ Dollars ($__________), in monthly
installments of $__________, each.
8. Basic Rent for the fourth Renewal Term shall be at the annual rate
of [112.5% of foregoing Basic Rent] _____________ Dollars ($__________), in
monthly installments of $____________, each.
65
<PAGE>
ADJUSTED RENTAL shall mean an amount equal to the product of (a) the Basic Rent
in effect immediately prior to the date of the adjustment, and (b) 2.5 times the
CPI Fraction. Computation of Adjusted Rental shall be made as soon as
practicable after the CPI for the applicable period is published or otherwise
made available, and Landlord shall give Tenant notice of the applicable
adjustment in Basic Rent.
The CPI FRACTION shall be determined as follows: Landlord, in its sole
discretion shall select any two years of the previous five year period for
purposes of identifying the percentage increase in the CPI, and the amount so
determined shall be divided by two and then multiplied by five. For example, if
the CPI increases by 1% in each of the first two years of the five year period,
decreases by 1% in the third year, and increases by 1.25% in year four and by
1.75% in year five, Landlord would select years four and five and the CPI
Fraction would therefore be 7.5% (1.25% +1.75% =3%; 3% divided by 2 = 1.5%;
1.5% x 5 = 7.5%).
The CPI shall mean the "Consumer Price Index" each year for the month in which
the Commencement Date occurs as published by the Bureau of Labor Statistics of
the United States Department of Labor (1982-84=100), U.S. City Average, or any
successor index thereof. The percentage increase in the CPI shall be computed on
an annual basis from year to year for purposes of determining the CPI Factor. If
the CPI is converted to a different standard reference base or otherwise
revised, then whenever the determination of a CPI figure is called for herein,
it shall be made with the use of such conversion factor, formula or table for
converting the CPI as may be published by the U. S. Department of Labor, Bureau
of Labor Statistics, or if not published by said organization, as may be
published by Prentice-Hall, Inc. or any other nationally recognized publisher of
similar statistical information. If the CPI ceases to be published on a monthly
basis, then the most recent month to the month in which the Commencement Date
occurs for which the CPI is published shall be used in lieu of such specified
month. If the CPI ceases to be published, and there is no successor thereto,
such other index as Landlord and Tenant shall agree upon in writing shall be
substituted for the CPI.
66
<PAGE>
EXHIBIT C
LIST OF LEASES IN POOL UNDER
SECTION 32
67
EXHIBIT 10.4
SECOND AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND LEASEBACK BETWEEN
SPI HOLDINGS, LLC AND THE SPORTS AUTHORITY, INC.
This Second Amendment ("Amendment") to that certain Agreement for
Purchase and Sale and Leaseback dated as of May 14, 1999 (the "Purchase
Agreement"), by and between THE SPORTS AUTHORITY, INC, a Delaware corporation,
and THE SPORTS AUTHORITY FLORIDA, INC., collectively as "Seller," and SPI
HOLDINGS, LLC, a Delaware limited liability company or its nominee, as "Buyer,"
as previously amended by that certain letter agreement dated June 14, 1999 (the
"First Amendment"), is made to be effective as of the 29th day of July, 1999.
For the purposes of this Amendment, the Purchase Agreement together with the
First Amendment are collectively referred to herein as the "Agreement."
1. INCORPORATION. The terms and provisions of this Amendment are hereby
incorporated by this reference in the Agreement as though fully set forth
therein.
2. DEFINITIONS. Terms not otherwise defined in this Amendment shall
have the meanings ascribed to them in the Agreement.
3. EXTENSION OF FINAL DATE FOR EXPIRATION OF APPROVAL PERIOD FOR
CERTAIN BUILDINGS. Seller and Buyer agree that the date for the expiration of
the Approval Period with respect to each of the Buildings located in Arrowhead,
Arizona, Chula Vista, California, East Fort Lauderdale, Florida, and Fresno,
California (the "Four Buildings"), shall be extended to the date that is 30 days
following the earlier to occur of (i) the date on which Buyer receives from
Seller either (x) a fully-executed amendment to the EFL Ground Lease
substantially in the form attached hereto as Exhibit "A" and incorporated herein
(the "EFL Ground Lease Amendment"), or (y) a fully-executed amended and restated
version of the EFL Ground Lease (the "Amended and Restated EFL Ground Lease")
containing the lender protection provisions substantially in the form contained
in the EFL Ground Lease Amendment, or (ii) the date on which Seller and Buyer
mutually agree in writing to the substitution of another property for the East
Fort Lauderdale Building if Seller is unsuccessful in obtaining either the EFL
Ground Lease Amendment or the Amended and Restated EFL Ground Lease, as provided
for above, but in no event later than September 30, 1999. Notwithstanding the
provisions of Section 11 of the Purchase Agreement, in the event that Seller,
after using its reasonable good faith efforts, is unsuccessful in obtaining
either the EFL Ground Lease Amendment or the Amended and Restated EFL Ground
Lease, Buyer and Seller SHALL agree to substitute a different store property
owned and operated by Seller for the deleted East Fort Lauderdale Building;
provided, however, that Seller's good faith efforts shall not be deemed to
include the obligation to pay any sums to the lessor under the EFL Ground Lease,
other than for the attorneys' fees incurred by the lessor under the EFL Ground
Lease in connection with the review and negotiation of the EFL Ground Lease
Amendment or the Amended and Restated EFL
<PAGE>
Ground Lease in an amount not to exceed Five Thousand and No/100 Dollars
($5,000.00). In such event, Seller and Buyer agree to cooperate in good faith in
reaching agreement on the selection of a substitute store property. In addition
to the extension of the date for the expiration of the Approval Period with
respect to each of the Four Buildings, Buyer shall also have until the new
expiration date of the Approval Period (as provided for above) for the Chula
Vista and Fresno Buildings to provide Seller the written notifications of any
unacceptable exceptions in the Title Reports and Surveys for such two Buildings.
4. TIMING AND EXTENSION OF CLOSING. Subject to the satisfaction of all
conditions precedent to the Closing of Escrow as set forth in the Agreement, the
Closing of Escrow for each of the Four Buildings shall take place through
Escrow, and shall occur within 30 days of the date of the expiration of the
Approval Period with respect to such Four Buildings, as extended by Section 3 of
this Amendment (the "Extended Outside Closing Date"). At the election of Buyer,
which shall be exercised at least seven business days prior to the Extended
Outside Closing Date, Buyer may extend such Extended Outside Closing Date by 30
days by paying an additional deposit (the "Four Buildings Extension Deposit")
into Escrow. The Four Buildings Extension Deposit shall be equal to the sum of
the amounts designated on EXHIBIT B to the Agreement for the Prorata Extension
Deposits for the Four Buildings, if Buyer elects to extend the Extended Outside
Closing Date as to all of the Four Buildings. If Buyer elects to extend the
Extended Outside Closing Date for less than all of the Four Buildings, then the
applicable Prorata Extension Deposit shall be paid as to each of the Four
Buildings for which the Extended Outside Closing Date is extended, with each
such payment to be in the respective amount shown on EXHIBIT B attached to the
Agreement (as such amounts may be adjusted pursuant to Section 11.3 of the
Agreement). The election to extend shall be effective for all of the Four
Buildings, unless at the time Buyer makes the Four Buildings Extension Deposit,
Buyer notifies Seller that the extension does not apply to one or more of the
Four Buildings. Escrow Holder shall place the Four Buildings Extension Deposit
in an interest-bearing account for the benefit of Buyer. The Four Buildings
Extension Deposit, excluding the interest earned thereon, shall be included in
the "Deposit" and shall be non-refundable, except as expressly provided in the
Agreement with respect to the Extension Deposit. The portion of the Deposit
allocable to the Four Buildings as so increased shall be credited to the
Purchase Price as to each of the Four Buildings at Closing, such credit to be in
the amounts shown on EXHIBIT B (as such amounts may be adjusted pursuant to
Section 11.3 of the Agreement).
5. CONFLICTS. In the event of any conflict between the terms and
provisions of this Amendment and those of the Agreement, the terms and
provisions of this Amendment shall control.
6. EFFECT. Except as modified hereby, the Agreement shall remain in
full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the 29th day of July, 1999.
"SELLER" "BUYER"
THE SPORTS AUTHORITY, INC., SPI HOLDINGS, LLC
a Delaware corporation a Delaware limited liability company
By:____________________
Name:__________________
Title:_________________ By_______________________
Dennis J. Wong, Manager
By:____________________
Name:__________________
Title:_________________
THE SPORTS AUTHORITY FLORIDA, INC.,
a Florida corporation
By:____________________
Name:__________________
Title:_________________
By:____________________
Name:__________________
Title:_________________
SPI Sports Authority: 1999 Purchase Transaction:
Docs: 2nd Amdt PSA v.1 7522.10
<PAGE>
EXHIBIT "A" TO SECOND AMENDMENT TO
AGREEMENT FOR PURCHASE AND SALE AND LEASEBACK
BETWEEN SPI HOLDINGS, LLC AND THE SPORTS AUTHORITY, INC.
SECOND AMENDMENT TO 99-YEAR LEASE
THIS SECOND AMENDMENT TO 99-YEAR LEASE (herein referred to as the
"Amendment") made as of July __, 1999 by Judith Antweiler, Individually and as
Trustee of the of the Robert Rickel Trust A, and Helen Rickel, Individually,
whose address is 2121-B North Federal Highway, Fort Lauderdale, Florida 33305
(herein referred to as the "Ground Lessor"), and THE SPORTS AUTHORITY, INC., a
Delaware corporation, having its principal office at 3383 North State Road 7,
Ft. Lauderdale, Florida 33319.
WITNESSETH:
WHEREAS, Robert Rickel and Helen Rickel, his wife as lessor (herein the
"Ground Lessor"), and Stanley Kirk, as lessee, were parties to certain
Ninety-Nine Year Leases recorded April 16, 1958 in Official Records Book 1200,
Page 500 and Official Records Book 1200, Page 538, each of the Public Records of
Broward County, Florida (herein collectively called the "Ground Lease"), wherein
Ground Lessor leased to the lessee therein, Ground Lessor's right, title and
interest in and to certain land (hereinafter called the "Property") situate in
Fort Lauderdale, Broward County, State of Florida, and being more particularly
described on EXHIBIT "A", attached hereto and made a part hereof; and
WHEREAS, the lessee's right, title and interest in and to the Ground
Lease was assigned to The Stouffer Corporation by virtue of that certain
Assignment of Leases recorded in Official Records Book 1866, Page 591, of the
Public Records of Broward County, Florida; and
WHEREAS, the lessee's right, title and interest in and to the Ground
Lease was further assigned to Anacapri, Inc., a Florida corporation, by virtue
of that certain Assignment of Lease, recorded in Official Records Book 11557,
Page 5, of the Public Records of Broward County, Florida; and
WHEREAS, the lessee's right, title and interest in and to the Ground
Lease was further assigned to Anacapri Limited Partnership, a Florida limited
partnership, by virtue of that certain Assignment of Lease recorded in Official
Records Book 13932, Page 912, of the Public Records of Broward County, Florida;
and
<PAGE>
WHEREAS, the lessee's right, title and interest in and to the Ground
Lease was acquired by FNB Properties, Inc., a Florida corporation (hereinafter
called "FNB), by virtue of that certain Amended Certificate of Title recorded in
Official Records Book 19856, Page 536, of the Public Records of Broward County,
Florida; and
WHEREAS, FNB as "Seller", and Southern Centers Associates, a Florida
general partnership, as "Buyer" (hereinafter called "Southern"), entered into a
Contract For Purchase and Sale dated February 22, 1994 for the purchase by
Southern of FNB's interest and rights under the Ground Lease and all
improvements located thereon, including the Anacapri Hotel (hereinafter called
the "Purchase Contract"); and
WHEREAS, Southern assigned all of its right, title and interest to the
Purchase Contract to Bayshore Developers, Inc., a Florida corporation (herein
called "Bayshore"), and Bayshore thereafter assigned all of its right, title and
interest in and to the Purchase Contract to The Sports Authority, Inc., a
Delaware corporation (hereinafter called "Sports Authority"), and Ground Lessor
and Sports Authority entered into that certain Amendment to 99-Year Lease dated
as of May 26, 1994. The Ground Lease as amended is referred to herein as the
"Lease".
WHEREAS, Sports Authority desires to amend the Lease to facilitate the
ability of Sports Authority, its successors and permitted assigns under the
Lease to finance their leasehold interest therein, as hereinafter provided, and
the Ground Lessor has consented thereto.
NOW, THEREFORE, in connection of these presents and for other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. The Lease is amended by inserting the following new Article as
Article XXXVIII thereof:
LENDER PROTECTION PROVISIONS:
The terms "Lender", "Loan", "Mortgage" shall have the following
meanings: (a) "Lender" shall mean an entity identified as such in writing to
Lessor which makes a Loan to Lessee, secured by a Mortgage and evidenced by a
Note or which is the holder of the Mortgage and Note as a result of an
assignment thereof; (b) "Loan" shall mean a loan made by a Lender to Lessee
secured by a Mortgage and evidenced by a Note; and (c) "Mortgage" shall mean a
first priority mortgage, deed of trust or similar security instrument from
Lessee to Lender hereafter executed covering Lessee's leasehold estate in the
demised premises.
Lessor consents to the encumbrance of Lessee's leasehold estate and
interest in the demised premises ("Leasehold Estate") by a Mortgage in favor of
Lender. Lessor further agrees that the consent of Lessor shall not be required
in connection with (a) Lender's transfer or assignment of all or any portion of
its interest in the Loan and/or
<PAGE>
Mortgage to any party; and (b) the assignment of Lessee's interest in the
Leasehold Estate at a duly and properly conducted foreclosure sale, or an
assignment of Lessee's interest in the Leasehold Estate made in lieu of a
foreclosure sale. Lessor acknowledges that this Lease shall not be affected by
lender's acquisition of the Leasehold Estate or the assignment thereof as
provided above. Any subsequent assignment of the Leasehold Estate shall be
subject to the provisions of Article XIII hereof, which provides for free
assignability, subject to compliance with the conditions therein stated.
Lessor shall give written notice of any default by Lessee to Lender
concurrently with the delivery of such notice to Lessee. Such notices shall be
given to Lender in the manner required under Article XXVI, to such address as
Lender may provide to Lessor from time to time. No notice of termination of the
Lease shall be effective against Lender unless a copy of such notice is
delivered to Lender concurrently with the delivery of such notice to Lessee.
Lessor agrees that if there is a default under the Lease, before Lessor
shall exercise any right to terminate the Lease, Lender shall have the right,
but not the obligation, to perform any term, covenant, condition or agreement
and to remedy the default, (a) for a period of 30 days after the period for cure
of such default granted to Lessee under the Lease if the default is the failure
to timely pay rent or other monetary sums due under the Lease, and (b) if the
default is other than the payment of rent or other monetary sums, for a period
of 60 days after the time period for cure of such default granted to Lessee
under the Lease; provided however that in the event the default is of such a
nature that it cannot reasonably be cured by Lender within said 60 days, the
cure period shall be extended for a reasonable time to complete such cure
provided that Lender notifies Lessor within said 60 day period that it is
undertaking the cure of such default and thereafter Lender undertakes and
diligently pursues such cure to completion. If, due to the nature of such
default, Lender cannot effect a cure until possession of the demised premises
has been obtained, Lender's cure period shall not commence to run until
possession or control of the demised premises is obtained, provided Lender
notifies Lessor within the aforesaid 60 days period that it is undertaking the
cure of such default, and provided that Lender then diligently pursues its
remedies under the Mortgage to gain possession of the premises, and further
provided that all material obligations that that can be performed without
possession of the Premises are performed. Lessor agrees to accept performance by
Lender of any term, covenant, obligation or condition of the Lease on Lessee's
part to be kept or performed, with the same force and effect as though performed
by Lessee.
Lessor agrees that Lender shall not be obligated to cure defaults of
Lessee that are not reasonably susceptible of being cured by Lender including,
without limitation, the failure of Lessee to keep books and records or deliver
statements, the failure of Lessee to comply with the time requirements under the
Lease, the bankruptcy, insolvency or similar event relating to Lessee, or the
failure of Lessee to give required
<PAGE>
notices or certificates, and all such defaults which are not susceptible to cure
by Lender shall be deemed waived as against Lender. As used herein defaults that
are "not susceptible of being cured" shall mean those that are incapable of
being performed by any party other then Lessee, or that by their nature are not
physically or legally capable of being cured by Lender, including those
specifically mentioned above.
Subject to the terms and conditions of this Article, the rights and
interests of Lender under the Loan and Mortgage shall at all times be subject
and subordinate to the rights and interests of Lessor under the Lease, and
nothing herein shall be construed to encumber or subordinate Lessor's fee
interest in the demised premises or Lessor's reversionary right in the demised
premises and the improvements and fixtures thereon, to Lender or to the Mortgage
or other instruments securing the Loan. While neither the Lease nor Lessor's
interest in the Property are subordinate to the Mortgage, Lessor and Lessee
agree that while the Mortgage is outstanding, the disposition of all proceeds
from insurance carried by Lessee shall be subject to the disbursement provisions
of the Mortgage, rather than the provisions of Article IX of the Lease.
Lessor and Lessee agree that they shall not modify or amend this Lease
without Lender's prior written consent, which shall not be unreasonably
withheld, and any amendment or modification without Lender's prior written
consent shall not be effective against Lender.
Upon assignment by Lender of this Lease and the Leasehold Estate,
Lender shall have no liability for obligations accruing after the date of such
assignment. If Lender becomes the Lessee under the Lease, Lender's liability
thereunder during such period as the Lease is in full force and effect shall be
limited to its interest in the subleased premises.
Lessor agrees that Lessee may finance and refinance Lessee's interest
in the premises, from time to time without obtaining the consent of Lessor,
through any Lender, and that the terms and conditions set forth in this
Agreement in favor of a Lender shall apply to and for the benefit of the
Lender(s) of such financing and refinancing if Lessor is provided written notice
of such Lender(s). Upon such notice, all references to "Lender" in this Article
shall mean and refer to such lender(s) and all references to "Loan" shall mean
and refer to such lender's or lenders' loan or loans.
In the event this Lease is rejected or terminated in any proceedings
involving the insolvency or bankruptcy of Lessee, upon the request of Lender
made to Lessor within 30 days after such rejection or termination, Lessor shall
enter into a new lease with Lender or Lender's assignee or nominee on the same
terms and conditions as the Lease.
Lessor, upon the request of Lender, shall provide an estoppel
certificate to Lender in the form reasonably requested by Lender, covering the
matters described in
<PAGE>
Article XXXIV hereof and such other matters pertaining to the Lease as may be
reasonably requested by Lender.
NOTE: IF LESSOR'S INTEREST IN THE PROPERTY IS ENCUMBERED AT THE TIME
THE LEASE AMENDMENT IS ENTERED INTO, LESSOR'S MORTGAGEE MUST EXECUTE A
RECOGNITION AGREEMENT IN FORM ACCEPTABLE TO LESSEE AND LENDER CONFIRMING THAT
SUCH MORTGAGEE WILL RECOGNIZE LESSEE'S INTEREST IN THE LEASE AND LENDER'S
MORTGAGE INTEREST THEREIN, IN THE EVENT OF A FORECLOSURE OF THE FEE INTEREST IN
THE PROPERTY.
EXHIBIT 10.5
THIRD AMENDMENT TO AGREEMENT FOR
PURCHASE AND SALE AND LEASEBACK BETWEEN
SPI HOLDINGS, LLC AND THE SPORTS AUTHORITY, INC.
This Third Amendment to Agreement for Purchase and Sale and Leaseback
("Amendment") is made as of August 31. 1999, by and between THE SPORTS
AUTHORITY, INC, a Delaware corporation, and THE SPORTS AUTHORITY FLORIDA, INC.,
collectively as "Seller," and SPI HOLDINGS, LLC, a Delaware limited liability
company or its nominee, as "Buyer,". Buyer and Seller have previously entered
into that certain Agreement for Purchase and Sale and Leaseback dated as of May
14, 1999, as amended by that certain letter agreement dated June 14, 1999, and
that certain Second Amendment to Agreement for Purchase and Sale and Leaseback
dated as of July 29, 1999, (the "Second Amendment"). The Agreement for Purchase
and Sale and Leaseback, as so amended, is referred to herein as the "Agreement".
1. INCORPORATION. The terms and provisions of this Amendment are hereby
incorporated by this reference in the Agreement as though fully set forth
therein.
2. DEFINITIONS. Terms not otherwise defined in this Amendment shall
have the meanings ascribed to them in the Agreement.
3. FINAL DATE FOR EXPIRATION OF APPROVAL PERIOD FOR CERTAIN BUILDINGS.
Seller and Buyer agree that the date for the expiration of the Approval Period
with respect to each of the Buildings located in Arrowhead, Arizona, Chula
Vista, California, E. Fort Lauderdale and Fresno, California (the "Four
Buildings"), shall be the later of (a) the date established for expiration of
the Approval Period for such Buildings under Section 3 of the Second Amendment,
or (b) September 30, 1999. In addition to the extension of the date for the
expiration of the Approval Period with respect to each of the Four Buildings,
Buyer shall also have until the expiration date of the extended Approval Period
to provide Seller the written notifications of any unacceptable exceptions in
the Title Reports and Surveys for the Chula Vista and Fresno Buildings.
4. TIMING AND EXTENSION OF CLOSING. Subject to the satisfaction of all
conditions precedent to the Closing of Escrow as set forth in the Agreement, the
Closing of Escrow for the St. Petersburg and Norwalk Buildings shall occur on or
before September 30, 1999. Subject to the satisfaction of all conditions
precedent to the Closing of Escrow as set forth in the Agreement, the Closing of
Escrow for each of the Four Buildings shall take place through up to four
separate Escrows, each of which shall occur within 30 days of the date of the
expiration of the Approval Period with respect to such Four Buildings, as
extended by Section 3 of this Amendment (the "Extended Outside Closing Date").
At the election of Buyer, which shall be exercised at least seven
1
<PAGE>
business days prior to the Extended Outside Closing Date, Buyer may extend such
Extended Outside Closing Date by 30 days by paying an additional deposit (the
"Four Buildings Extension Deposit") into Escrow. The Four Buildings Extension
Deposit shall be equal to the sum of the amounts designated on EXHIBIT B to the
Agreement for the Prorata Extension Deposits for the Four Buildings, if Buyer
elects to extend the Extended Outside Closing Date as to all of the Four
Buildings. If Buyer elects to extend the Extended Outside Closing Date for less
than all of the Four Buildings, then the applicable Prorata Extension Deposit
shall be paid as to each of the Four Buildings for which the Extended Outside
Closing Date is extended, with each such payment to be in the respective amount
shown on EXHIBIT B attached to the Agreement. The election to extend shall be
effective for all of the Four Buildings, unless at the time Buyer makes the Four
Buildings Extension Deposit, Buyer notifies Seller that the extension does not
apply to one or more of the Four Buildings. Escrow Holder shall place the Four
Buildings Extension Deposit in an interest-bearing account for the benefit of
Buyer. The Four Buildings Extension Deposit, excluding the interest earned
thereon, shall be included in the "Deposit" and shall be non-refundable, except
as expressly provided in the Agreement with respect to the Extension Deposit.
The Deposit as so increased shall be credited to the Purchase Price as to each
of the Four Buildings at Closing, such credit to be in the amounts shown on
EXHIBIT B (as such amounts may be adjusted pursuant to Section 11.3 of the
Agreement).
5. PHASED CLOSINGS. Subject to the provisions of Section 4 of this
Amendment as to dates by which Escrow must close on the remaining Buildings,
Section 4.1 of the Agreement is deleted and it is agreed that Buyer may close
Escrow on each of the remaining Buildings on separate Closing Dates.
6. ADJUSTED RENT SCHEDULE.
6.1 It is agreed that the Basic Rent for each of the Buildings
which Buyer purchases from Seller after the date of this Amendment shall be as
set forth in the Rent Schedule attached hereto. Accordingly, Exhibit B to the
Agreement is hereby amended to reflect as to each of such Buildings the Basic
Rent as shown on such Rent Schedule. The net effect of the foregoing adjustments
to Basic Rent shall be to increase the rent for each year during the initial
Term by the amount shown on the attached Rent Schedule as the annual "Rent
Adjustment" for each such Building. The foregoing adjustments shall be in effect
only during the initial Term. Such adjustments shall not affect the Basic Rent
during any Renewal Term, so that Basic Rent during each Renewal Term shall be in
the amounts established by the Agreement prior to this Amendment.
6.2 If and only if Buyer closes escrow on all three of the St.
Petersburg, Norwalk and E. Ft. Lauderdale Buildings, then the Leases for the
Braintree, Boca Raton and Naples Buildings shall be amended effective as of
September 1, 1999, to increase the Basic Rent for each such Building to the
amount shown on the Rent Schedule attached
2
<PAGE>
hereto. Such adjustments shall be in effect only during the initial Term and
shall not affect the Basic Rent during any Renewal Term. Basic Rent during each
Renewal Term shall be in the amounts established by the Lease prior to such
amendment. By way of example, Exhibit B to the Lease for Braintree would be
amended as shown on the mark-up of said Exhibit B attached hereto. If Buyer
closes escrow on all three of the St. Petersburg, Norwalk and E. Ft. Lauderdale
Buildings, concurrent with or promptly after the close of escrow of the last of
the three such Buildings (the "Third Closing Date"), Buyer shall deliver to
Seller amendments to each of the Leases for the Braintree, Boca Raton and Naples
Buildings, executed in duplicate by the respective Landlords of such Buildings.
Promptly upon receipt of such amendments, Seller shall cause the amendments to
be executed by The Sports Authority Florida, Inc. or The Sports Authority, Inc.,
as applicable, and return to Buyer one fully executed original of each
amendment. Each of the lease amendments shall be in the form attached as Exhibit
X hereto, modified to reflect the correct Landlord as to each of the three
Buildings. As such rental increase shall be effective as of September 1, 1999,
within 15 days after the Third Closing Date, Seller shall pay to the respective
landlords under the three Leases, the amount of the increase in Basic Rent for
the period commencing September 1, 1999 through the last day of the month in
which the Third Closing Date occurs, and all subsequent payments of Basic Rent
during the initial Term shall reflect such increases in Basic Rent.
7. MATERIAL ADVERSE CHANGE. In consideration for Seller entering into
this Amendment, Buyer agrees that from the date of the Agreement through the
date of this Amendment, there has not occurred a material adverse change in the
financial condition of Seller. The text of Section 9.1.6 shall be amended to
read in full: "There shall not have occurred a material adverse change in the
financial condition of Seller after the date of the Third Amendment to this
Agreement."
8. CONFLICTS. In the event of any conflict between the terms and
provisions of this Amendment and those of the Agreement, the terms and
provisions of this Amendment shall control.
3
<PAGE>
9. EFFECT. Except as modified hereby, the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first above written.
"SELLER" "BUYER"
THE SPORTS AUTHORITY, INC., SPI HOLDING, LLC
a Delaware corporation a Delaware limited liability company
By:__________________
Name:________________ By
Title:_______________ ----------------------------------
Dennis J. Wong, Manager
THE SPORTS AUTHORITY FLORIDA,
INC., a Florida corporation
By:_________________
Name:_______________
Title:______________
SPI Sports Authority: 1999 Purchase Transaction:
Docs: 3rd Amdt PSA v.5 7522.10
4
<PAGE>
<TABLE>
<CAPTION>
TSA
ADJUSTED RENT SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------
PROPERTY ORIGINAL TOTAL RENT RENT ADJUSTMENT NEW TOTAL RENT ORIGINAL RENT NEW RENT PER SF
PER SF
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Arrowhead $407,000.00 $40,700.00 $447,700.00 $10.00 $11.00
Chula Vista $533,724.00 $44,477.00 $578,201.00 $12.00 $13.00
Fresno $512,076.00 $42,673.00 $554,749.00 $12.00 $13.00
Boca Raton $647,640.00 $75,558.00 $723,198.00 $15.00 $16.75
E. Ft. Lauderdale $424,295.00 $84,858.90 $509,153.40 $8.50 $10.20
Naples $559,325.00 $61,525.75 $620,850.75 $13.00 $14.43
St. Petersburg $425,000.00 $42,500.00 $467,500.00 $10.00 $11.00
Norwalk $865,538.00 $56,203.75 $921,741.50 $19.25 $20.50
Braintree $859,160.00 $42,958.00 $902,118.00 $20.00 $21.00
TOTAL $5,233,758.00 $491,454.40 $5,725,211.65 $14.54
</TABLE>
5
<PAGE>
BRAINTREE
EXHIBIT B
BASIC RENT DURING TERM
AND RENEWAL TERMS
1. Basic Rent for the first five (5) years (the first 60 full calendar
months) of the initial Term shall be at the annual rate of $859,160 [REVISED TO
$902,118.00], in monthly installments of $71,596.67 [REVISED TO $75,176.50]
each. If the first month of the Term is a partial month, the monthly installment
shall be prorated on the basis of the number of days in such month.
2. Basic Rent for years six (6) through ten (10) of the initial Term
shall be at an annual rate equal to the lesser of (x) the Adjusted Rental (as
defined below), but in no event less than the Basic Rent in effect in year five
(5), or (y) $945,076.00[REVISED TO $988,034.00], payable in equal monthly
installments.
3. Basic Rent for years eleven (11) through fifteen (15) of the initial
Term shall be at an annual rate equal to the lesser of (x) the Adjusted Rental
(as defined below), but in no event less than the Basic Rent in effect in year
ten (10), or (y) $1,039,583.60[REVISED TO $1,082,541.60], payable in equal
monthly installments.
4. Basic Rent for years sixteen (16) through twenty (20) of the initial
Term shall be at an annual rate equal to the lesser of (x) the Adjusted Rental
(as defined below), but in no event less than the Basic Rent in effect in year
fifteen (15), or (y) $1,143,541.90[REVISED TO $1,186,499.90], payable in equal
monthly installments.
5. Basic Rent for the first Renewal Term shall be at the annual rate of
$1,286,484.60, in monthly installments of $107,207.05, each.
6. Basic Rent for the second Renewal Term shall be at the annual rate
of $1,447,295.10, in monthly installments of $120,607.92, each.
7. Basic Rent for the third Renewal Term shall be at the annual rate of
$1,628,206.90, in monthly installments of $135,683.90, each.
8. Basic Rent for the fourth Renewal Term shall be at the annual rate
of $1,831,732.70, in monthly installments of $152,644.39, each.
6
<PAGE>
ADJUSTED RENTAL shall mean an amount equal to the product of (a) the Basic Rent
in effect immediately prior to the date of the adjustment, and (b) 2.5 times the
CPI Fraction. Computation of Adjusted Rental shall be made as soon as
practicable after the CPI for the applicable period is published or otherwise
made available, and Landlord shall give Tenant notice of the applicable
adjustment in Basic Rent.
The CPI FRACTION shall be determined as follows: Landlord, in its sole
discretion shall select any two years of the previous five year period for
purposes of identifying the percentage increase in the CPI, and the amount so
determined shall be divided by two and then multiplied by five. For example, if
the CPI increases by 1% in each of the first two years of the five year period,
decreases by 1% in the third year, and increases by 1.25% in year four and by
1.75% in year five, Landlord would select years four and five and the CPI
Fraction would therefore be 7.5% (1.25% +1.75% =3%; 3% divided by 2 = 1.5%; 1.5%
x 5 = 7.5%).
The CPI shall mean the "Consumer Price Index" each year for the month in which
the Commencement Date occurs as published by the Bureau of Labor Statistics of
the United States Department of Labor (1982-84=100), U.S. City Average, or any
successor index thereof. The percentage increase in the CPI shall be computed on
an annual basis from year to year for purposes of determining the CPI Factor. If
the CPI is converted to a different standard reference base or otherwise
revised, then whenever the determination of a CPI figure is called for herein,
it shall be made with the use of such conversion factor, formula or table for
converting the CPI as may be published by the U. S. Department of Labor, Bureau
of Labor Statistics, or if not published by said organization, as may be
published by Prentice-Hall, Inc. or any other nationally recognized publisher of
similar statistical information. If the CPI ceases to be published on a monthly
basis, then the most recent month to the month in which the Commencement Date
occurs for which the CPI is published shall be used in lieu of such specified
month. If the CPI ceases to be published, and there is no successor thereto,
such other index as Landlord and Tenant shall agree upon in writing shall be
substituted for the CPI.
7
<PAGE>
EXHIBIT X
LEASE AMENDMENT
THIS LEASE AMENDMENT ("Amendment") dated as of , 1999, is entered into
by and between TSA/SPI BOCA RATON, LLC, a Florida limited liability company, as
landlord ("Landlord") and THE SPORTS AUTHORITY FLORIDA, INC. a Florida
corporation, as tenant("Tenant").
RECITALS
A. Landlord and Tenant have entered into that certain Lease Agreement,
dated on or about August 12, 1999 (the "Lease") pursuant to which Landlord has
leased to Tenant and Tenant has leased from Landlord that certain real property
more particularly described in Exhibit A of the Lease.
B. Landlord and Tenant desire to amend the Lease in certain respects,
as set forth below.
NOW, THEREFORE, for mutual consideration, the receipt and adequacy of
which is hereby acknowledged, Landlord and Tenant hereby amend the Lease as
follows:
AGREEMENT
1. BASIC RENT. Effective as of September 1, 1999, Exhibit B of the
Lease is hereby deleted in its entirety and replaced with Schedule A attached
hereto and incorporated herein. Pursuant to separate agreement, the increase in
Basic Rent accruing from September 1, 1999 through the end of the month in which
this Amendment is executed shall be paid by Tenant within 15 days of the date of
this Amendment.
2. MISCELLANEOUS.
2.1. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
1
<PAGE>
2.2. Except as amended or modified herein, all the terms of
the Lease shall remain in full force and effect and shall apply with the same
force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first written above.
LANDLORD:
SPI/TSA BOCA RATON, LLC
a Florida limited liability company
Witness: ________________ By__________________________________________
Richard D. Squires, Manager
Witness: ________________ By__________________________________________
TENANT:
THE SPORTS AUTHORITY FLORIDA, INC.,
a Florida corporation
Witness: ________________ By:__________________________________________
Name:_____________________________________
Title:____________________________________
Witness: ________________ By:__________________________________________
Name:_____________________________________
Title:____________________________________
2
<PAGE>
SCHEDULE A
EXHIBIT B
BASIC RENT DURING TERM
AND RENEWAL TERMS
1. Basic Rent for the first five (5) years (the first 60 full calendar
months) of the initial Term shall be at the annual rate of $723,198.00, in
monthly installments of $60,266.50 each. If the first month of the Term is a
partial month, the monthly installment shall be prorated on the basis of the
number of days in such month.
2. Basic Rent for years six (6) through ten (10) of the initial Term
shall be at an annual rate equal to the lesser of (x) the Adjusted Rental (as
defined below), but in no event less than the Basic Rent in effect in year five
(5), or (y) $787,962.00, payable in equal monthly installments.
3. Basic Rent for years eleven (11) through fifteen (15) of the initial
Term shall be at an annual rate equal to the lesser of (x) the Adjusted Rental
(as defined below), but in no event less than the Basic Rent in effect in year
ten (10), or (y) $859,202.40, payable in equal monthly installments.
4. Basic Rent for years sixteen (16) through twenty (20) of the initial
Term shall be at an annual rate equal to the lesser of (x) the Adjusted Rental
(as defined below), but in no event less than the Basic Rent in effect in year
fifteen (15), or (y) $937,566.84, payable in equal monthly installments.
5. Basic Rent for the first Renewal Term shall be at the annual rate of
$969,759.95, in monthly installments of $80,813.33, each.
6. Basic Rent for the second Renewal Term shall be at the annual rate
of $1,090,979.94 in monthly installments of $90,915.00 each.
7. Basic Rent for the third Renewal Term shall be at the annual rate of
$1,227,352.43, in monthly installments of $102,279.37, each.
8. Basic Rent for the fourth Renewal Term shall be at the annual rate
of $1,380,771.48, in monthly installments of $115,064.29, each.
3
<PAGE>
ADJUSTED RENTAL shall mean an amount equal to the product of (a) the Basic Rent
in effect immediately prior to the date of the adjustment, and (b) 2.5 times the
CPI Fraction. Computation of Adjusted Rental shall be made as soon as
practicable after the CPI for the applicable period is published or otherwise
made available, and Landlord shall give Tenant notice of the applicable
adjustment in Basic Rent.
The CPI FRACTION shall be determined as follows: Landlord, in its sole
discretion shall select any two years of the previous five year period for
purposes of identifying the percentage increase in the CPI, and the amount so
determined shall be divided by two and then multiplied by five. For example, if
the CPI increases by 1% in each of the first two years of the five year period,
decreases by 1% in the third year, and increases by 1.25% in year four and by
1.75% in year five, Landlord would select years four and five and the CPI
Fraction would therefore be 7.5% (1.25% +1.75% =3%; 3% divided by 2 = 1.5%; 1.5%
x 5 = 7.5%).
The CPI shall mean the "Consumer Price Index" each year for the month in which
the Commencement Date occurs as published by the Bureau of Labor Statistics of
the United States Department of Labor (1982-84=100), U.S. City Average, or any
successor index thereof. The percentage increase in the CPI shall be computed on
an annual basis from year to year for purposes of determining the CPI Factor. If
the CPI is converted to a different standard reference base or otherwise
revised, then whenever the determination of a CPI figure is called for herein,
it shall be made with the use of such conversion factor, formula or table for
converting the CPI as may be published by the U. S. Department of Labor, Bureau
of Labor Statistics, or if not published by said organization, as may be
published by Prentice-Hall, Inc. or any other nationally recognized publisher of
similar statistical information. If the CPI ceases to be published on a monthly
basis, then the most recent month to the month in which the Commencement Date
occurs for which the CPI is published shall be used in lieu of such specified
month. If the CPI ceases to be published, and there is no successor thereto,
such other index as Landlord and Tenant shall agree upon in writing shall be
substituted for the CPI.
4
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-23-2000
<PERIOD-START> JAN-25-1999
<PERIOD-END> JUL-25-1999
<CASH> 18,590
<SECURITIES> 0
<RECEIVABLES> 49,695
<ALLOWANCES> (1,173)
<INVENTORY> 392,760
<CURRENT-ASSETS> 459,872
<PP&E> 460,291
<DEPRECIATION> (150,715)
<TOTAL-ASSETS> 872,547
<CURRENT-LIABILITIES> 396,369
<BONDS> 0
0
0
<COMMON> 320
<OTHER-SE> 275,178
<TOTAL-LIABILITY-AND-EQUITY> 872,547
<SALES> 385,550
<TOTAL-REVENUES> 385,892
<CGS> 284,394
<TOTAL-COSTS> 284,394
<OTHER-EXPENSES> 93,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,029
<INCOME-PRETAX> 3,758
<INCOME-TAX> 1,493
<INCOME-CONTINUING> 2,265
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,265
<EPS-BASIC> 0.07
<EPS-DILUTED> 0.07
</TABLE>
