COMMERCIAL GROUND LEASE

 

 

COMMERCIAL GROUND LEASE

 

This Commercial Ground Lease (the “Lease”), is dated for reference purposes only as of July 20, 1999, is made by and between THE FIRST AMERICAN FINANCIAL CORPORATION , a California corporation (“Landlord”), and MALIBU CENTERS, INC. , a Delaware corporation (“Tenant”), with reference to the recitals set forth below. All obligations hereunder of Tenant are guaranteed by MALIBU ENTERTAINMENT WORLDWIDE, INC. , a Georgia corporation (“Guarantor”).

 

RECITALS

 

A.             Landlord is the owner of that certain real property (the “Premises”), which legal description is attached hereto and incorporated herein as Exhibit “A,” commonly known as: Mountasia of Willowbrook, 17190 Tomball Parkway, Houston, Texas 77064

 

B.             Landlord desires to lease the Premises to Tenant, and Tenant desires to lease the Premises from Landlord pursuant to the provisions of this Lease.

 

C.             This Lease shall not be effective unless and until Tenant shall deliver a guaranty executed by Guarantor in the form attached hereto as Exhibit “B”.

 

1.

 

DEFINITIONS

 

The following terms, when used in this Lease, shall have the meaning set forth in this Section 1.

 

1.1            Lease Year

 

The term “Lease Year” shall mean the first twelve (12) full calendar months after the Commencement Date (as defined in Section 3) and each subsequent twelve (12) month period thereafter during the term and any Extensions.

 

1.2            Hazardous Material

 

The term “Hazardous Material” means any substance, material, or waste which is toxic, ignitable, reactive, or corrosive and which is or becomes regulated by the local or state governmental authority or the United States Government. The term “Hazardous Material” includes, without limitation, any material or substance which is (i) defined as a “hazardous waste,” “extremely hazardous waste,” “restricted hazardous waste,” “hazardous substance,” or “hazardous material,” by any law, statute, regulation, order, or rule now or hereafter promulgated by any governmental entity, whether local, state, or federal, (ii) oil and petroleum products and their by-products, (iii) asbestos, or asbestos-containing materials, (iv) designated as a “hazardous substance” pursuant to the Federal Water Pollution Control Act, (v) defined as a “hazardous waste” pursuant to the Federal Resource Conservation and Recovery Act, or (vi) defined as a “hazardous substance” pursuant to the Comprehensive Environmental Response, Compensation

 

 

and Liability Act or any other law, statute, regulation, order, or rule now or hereafter promulgated by any governmental entity, whether local, state, or federal.

 

1.3            Environmental Law

 

The term “Environmental Law” shall mean any law, statute, regulation, order, or rule now or hereafter promulgated by any governmental entity, whether local, state, or federal, relating to air pollution, water pollution, noise control, and/or transporting, storing, handling, discharge of or disposal of Hazardous Material, including, without limitation, the following: the Clean Air Act; the Resource Conservation and Recovery Act, as amended by the Hazardous Waste and Solid Waste Amendments of 1984; the Comprehensive Environmental Response Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986; the Toxic Substances Control Act; the Federal Insecticide, Fungicide and- Rodenticide Act, as amended; the Safe Drinking Water Act; OSHA; the Hazardous Liquid Pipeline Safety Act; the Hazardous Materials Transportation Act; and the National Environmental Policy Act, as the same may be amended from time to time.

 

2.

 

PREMISES

 

Landlord leases to Tenant and Tenant leases from Landlord the Premises on the terms and conditions set forth in this lease.

 

2.1            Ownership of Improvements

 

During the term of this Lease, the buildings and other improvements which are permanently affixed to the Premises (the “Improvements”; it being provided that the Premises shall include the Improvements unless the context clearly indicates otherwise) shall be and remain the property of Tenant; upon the expiration or earlier termination of this Lease, the Improvements shall automatically become the property of Landlord without any compensation therefor and Tenant shall execute and deliver all such deeds and instruments of conveyance as may be required to confirm such title in Landlord. All obligations of Tenant hereunder with respect to the Premises shall also be obligations with respect to the Improvements and Landlord shall have no obligations or otherwise (except as expressly set forth herein) with respect to the Improvements (including, without limitation, as to the payment of any Taxes, costs or expenses relating to the same and Tenant shall be solely responsible therefore).

 

2.2            Title and Condition

 

The Premises are demised and let subject to (a) the existing state of the title thereof as of the commencement of the term of this Lease, (b) any state of facts which an accurate survey or physical inspection thereof might show, and (c) all zoning regulations, restrictions, rules and ordinances, building restrictions and other laws and regulations now in effect or hereafter adopted by a governmental authority having jurisdiction. Tenant developed the Premises and sold the Premises to Landlord; Tenant acknowledges that Tenant has inspected the Premises and Tenant accepts the Premises in its existing condition, “AS IS” and subject to all defects and conditions, whether patent or latent, and subject further to all legal requirements such as taxes,

 

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assessments, zoning, use permit requirements and building codes, based solely on Tenant’s own inspection, analysis and evaluation and not in reliance on any representations, warranties or information provided by or on behalf of Landlord. Landlord makes no representation or warranty with respect to the condition of the Premises or its fitness or availability for any particular use, or any related matter.

 

3.

 

TERM OF LEASE

 

The effective date (the “Commencement Date”) of this Lease shall be the date of the recording of the deed transferring ownership of the Premises from Tenant to Landlord. Concurrently with recording the deed, the Memorandum of Lease, a copy of which is attached hereto and incorporated herein as Exhibit “C” shall be recorded. The expiration date of the term shall be last day of the month twenty-four (24) years thereafter (“Term”); the foregoing period of approximately twenty-four years is referred to herein as the “Initial Term”. The Term of Lease may be extended for two (2) additional periods of five (5) years each (“Extension(s)”), commencing at midnight on the date on which the Initial Term or any preceding Extension expires. Each Extension shall be automatic and the parties shall be bound by this Lease for such Extension unless Tenant gives Landlord notice, at least fifteen (15) months prior to the expiration of the Initial Term or preceding Extension, that Tenant does not intend any further Extension to occur, in which case the Initial Term or the Extension shall expire at the end of the Initial Term or the current Extension. References to the Term of the Lease shall include extensions, if any. Except as otherwise expressly stated, the terms and conditions of this Lease shall remain in effect during any Extension, renewal, or holdover of the initial Term.

 

4.

 

MONTHLY BASE RENT

 

4.1            Net-Net-Net Lease: Non-Terminability

 

(a)            This is a completely ABSOLUTE NET LEASE. All costs and expenses arising out of the use and occupancy of the Premises and the Improvements, including, but not limited to, ad valorem taxes, maintenance, and insurance, as set forth below, are payable by Tenant. It is the intention of Landlord and Tenant that the Monthly Base Rent (as defined below) and other sums and charges provided herein shall be absolutely net to Landlord. Tenant shall pay all costs, charges, obligations, assessments, and expenses of every kind and nature against or relating to the operation and/or use of the Premises and the Improvements, which may arise, accrue or become due during the Term hereof, or which may pertain to this transaction, whether or not now customary or within the contemplation of the parties hereto, and which, except for the execution and delivery of this Lease, would have been payable by Landlord.

 

(b)            Except as otherwise expressly provided herein, this Lease shall not terminate, nor shall Tenant have any right to terminate this Lease nor shall Tenant be entitled to any abatement or reduction of rent hereunder, nor shall the obligations of Tenant under this Lease be affected, by reason of (i) any damage to or the destruction of all or any part of the Premises from whatever

 

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cause, (ii) the taking of the Premises or any portion thereof by condemnation, requisition or otherwise for any reason (iii) the prohibition, limitation or restriction of Tenant’s use of all or any part of the Promises, or any interference with such use, (iv) Tenant’s acquisition or ownership of all or any part of the Premises otherwise than pursuant to an express provision of this Lease, or (v) 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 the obligations of Tenant hereunder shall be separate and independent covenants and agreements, that the Monthly Base Rent, the additional rent and all other sums payable by Tenant hereunder shall continue to be payable in all events and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease.

 

(c)            So long as Landlord is not in default beyond expiration of all applicable cure periods, Tenant agrees that it will remain obligated under this Lease in accordance with its terms, and that it will not take any action to terminate, rescind or avoid this Lease, notwithstanding (i) the bankruptcy, insolvency, reorganization, composition, readjustment, liquidations, dissolution, winding-up or other proceeding affecting Landlord or any assignee of Landlord in any such proceeding and (ii) any action with respect to this Lease which may be taken by any trustee or receiver of Landlord or of any assignee of Landlord in any such proceeding or by any court in any such proceeding.

 

Except as otherwise expressly provided herein, and except to the extent such waiver is invalid under applicable law, Tenant waives all rights which may now or hereafter be conferred by law (i) to quit, terminate or surrender this Lease or the Premises or any part thereof, of (ii) to any abatement, suspension, deferment or reduction of the Monthly Base Rent, additional rent or any other sums payable under this Lease.

 

4.2            Monthly Base Rent

 

Tenant shall pay to Landlord as monthly rent the sum of Twenty One Thousand Five Hundred Sixty-Three and No/100 Dollars U.S. ($21,563.00) (the “Monthly Base Rent”) per month. Monthly Base Rent shall be payable by Tenant to Landlord in advance in equal monthly installments on the first day of each calendar month, without prior notice, invoice, demand, deduction, or offset whatsoever, except as expressly set forth herein. Landlord shall have the right to accept all rent and other payments, whether full or partial, and to negotiate checks and payments thereof without any waiver of rights, irrespective of any conditions to the contrary sought to be imposed by Tenant. All rent shall be paid to Landlord at the address to which notices to Landlord are given. The Monthly Base Rent for any partial month shall be prorated based upon a thirty (30) day month. In the event that Tenant receives a written notice from Landlord’s Lender (as defined in Section 13.7) instructing Tenant to pay Monthly Base Rent and all other sums due or payable under this Lease directly to Landlord’s Lender, Tenant shall make such payments to Landlord’s Lender and Tenant is hereby released from liability to Landlord on account of any such payments made by Tenant to Landlord’s Lender.

 

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5.

 

INCREASES IN MONTHLY RENT

 

5.1            Monthly Base Rent Adjustments

 

The capitalized terms used in this Section 5.1 are defined below. Effective on each Adjustment Date, Monthly Base Rent shall be increased by the increases in the CPI with the percentage increase to be determined by multiplying the Monthly Base Rent then in effect by a fraction, the numerator of which shall be the Variable Index and the denominator of which shall be the Base Index. The product thus obtained shall be payable in advance in consecutive monthly installments on the first day of each month until the next Adjustment Date, or the expiration of the Term, as the case may be. Notwithstanding anything contained herein to the contrary, in no event shall the Monthly Base Rent in effect prior to an Adjustment Date be reduced if the change in the percentage change in the CPI is negative. Landlord’s delay or the failure of Landlord, beyond commencement of any Adjustment Date, in computing or billing for these adjustments will not impair the continuing obligation of Tenant to pay the rent adjustments. In applying the foregoing formula for Monthly Base Rent adjustments, the following terms shall have the following meanings:

 

5.1.1         “Adjustment Date” shall mean, as the case may require, every fifth anniversary of the Commencement Date during the Initial Term (and every fifth anniversary of the Commencement Date thereafter during the Term in the event Tenant exercises its option(s) for the Extension(s)); provided, however, if the Commencement Date is other than the first day of the month, then “Adjustment Date” shall mean, as the case may require, the first day of the first month occurring after every fifth anniversary of the Commencement Date.

 

5.1.2         “Base Index” shall mean the CPI for the first month of the first Lease Year.

 

5.1.3         “CPI” shall mean the Consumer Price Index for All Urban Consumers, All Items Index Base Year 1982 - 1984 = 100, as published by the Bureau of Labor Statistics, United States Department of Labor (U.S. City Average), or, if such index is discontinued, the most nearly comparable index published by the Bureau of Labor Statistics or other official agency of the United States Government.

 

5.1.4         “Initial Monthly Base Rent” shall mean the Monthly Base Rent payable by Tenant for the first full calendar month of the first Lease Year.

 

5.1.5         “Variable Index” shall mean the CPI for the month in which the Adjustment Date occurs.

 

6.

 

SUBSTITUTE RENT AND INCREASES

 

This Section was deleted Intentionally

 

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7.

 

SECURITY DEPOSIT

 

This Section was deleted Intentionally

 

8.

 

USE OF THE PREMISES

 

Tenant shall use the Premises for a multi-purpose, interactive entertainment facility and, with the prior written consent of Landlord which shall not be unreasonably withheld, such other uses as permitted by applicable zoning and use regulations and covenants, conditions and restrictions. Tenant has satisfied itself, and represents to Landlord, that such use is lawful and conforms to all applicable zoning and other use regulations, including without limitation all covenants, conditions and restrictions, applicable to the Premises. Tenant shall, at Tenant’s expense, comply promptly with all applicable statutes, ordinances, rules, regulations, orders, covenants and restrictions of record, and requirements in effect during the Term or any part of the Term hereof, regulating the use by Tenant of the Premises, including, without limitation, the obligation at Tenant’s cost, to alter, maintain, or restore the Premises in compliance and conformity with all laws relating to the condition, use, or occupancy of the Premises during the Term (including applicable requirements to the extent set forth in the Americans with Disabilities Act). In the event that the Premises shall cease to be operated primarily for a multipurpose, interactive entertainment facility, other than a temporary interruption of operation for the purpose of remodeling, or reconstruction following damage by casualty, Landlord shall have the right to elect to terminate this Lease by written notice given at anytime thereafter, and upon such termination Tenant’s obligations under this Lease shall cease to accrue, provided Landlord’s right to terminate shall expire six (6) months following Landlord’s receipt from Tenant of written notice of Tenant’s cessation of operation of a multi-purpose, interactive entertainment facility.

 

Landlord and Tenant acknowledge and agree that that certain land area of approximately 2.1570 acres, as more particularly identified on that certain ALTA/ACSM Land Survey for Mountasia of Willowbrook Project Site No. 1 prepared by Bock & Clark’s National Surveyors Network dated as of July 8-10, 1996, and last revised June 7, 1999, as Network Project No. 990267-1, described as “Proposed Future Subdivision – 2.1570 Acres” (the “Excess Acreage”) is part of the Premises demised under this Lease. Notwithstanding anything contained in this Lease to the contrary, Tenant shall not have the right to develop, alter the condition of or conduct its operations on the Excess Acreage without the prior written consent of Landlord unless this Lease has been amended or a new lease in respect of the Excess Acreage has been entered into between Tenant and Landlord to provide for such use of the Excess Acreage as set forth in that Purchase Agreement and Escrow Instructions dated as of May 5, 1999, as amended by that certain First Amendment to Purchase Agreement and Escrow Instructions dated as of June 28, 1999 by and between Tenant and Krausz Companies, Inc., a California corporation.

 

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9.

 

PROPERTY TAXES, ASSESSMENTS AND UTILITIES

 

9.1            Tenant’s Required Payments

 

As additional rent, Tenant shall directly pay not later than forty-five (45) days prior to delinquency, all ad valorem taxes, assessments, license fees, costs incurred pursuant to covenants and restrictions affecting both Landlord’s and Tenant’s interest in the Premises, and other charges (collectively referred to as “Taxes”) levied or assessed against all merchandise, personal property, real property, buildings and improvements, and any other obligations which are or may become a lien or levied against the Premises. Tenant shall provide Landlord with evidence of payment of Taxes promptly upon request. If at any time during the Term, the state in which the Premises are located or any political subdivision of the state, including any county, city, county and city, public corporation, district, or any other political entity or public corporation of that state, levies or assesses against Landlord a tax, fee, or excise on (i) rents, including, if applicable, property taxes, insurance, maintenance, and other costs incurred by Tenant by which Landlord may benefit; (ii) on the square footage of the Premises; (iii) on the act of entering into this Lease; or (iv) on the occupancy of Tenant, or levies or assesses against Landlord any other tax, fee, or excise, however described, including, without limitation, a so-called value added tax, as a direct substitution in whole or in part for, or in addition to, any real property taxes, Tenant shall directly pay before delinquency that tax, fee, or excise. It is the intention of Tenant and Landlord that all new and increased ad valorem assessments, taxes, fees, levies, and charges, and all similar assessments, taxes, fees, levies, and charges be included within the definition of taxes for the purpose of this Lease.

 

9.2            Payments Not Required by Tenant

 

Notwithstanding the foregoing, Tenant shall not be required to pay any municipal, county, state, or federal income or franchise taxes of Landlord, or any inheritance, or transfer taxes of Landlord, except to the extent levied in substitution for Taxes payable under Section 9.1 hereinabove.

 

9.3            Assessments

 

If any assessment for a capital improvement made by public or governmental authority shall be levied or assessed against the Premises, and the assessment is payable either in a lump sum or on an installment basis, then Tenant shall have the right to elect the basis of payment. If Tenant shall elect to pay the assessment on the installment basis, then Tenant shall pay only those installments, which shall become due and payable or which shall accrue during the Term of this Lease.

 

9.4            Utility Payments

 

As additional rent, Tenant shall promptly pay when due all charges for water, gas, electricity, and all other utilities furnished to or used upon the Premises, including all charges for installation, termination, and relocations of such services, whether such payment is to be made to Landlord or directly to the particular utility provider.

 

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9.5            Tenant’s Right to Contest Utility Charges, Contest Taxes and Seek Reduction of Assessed Valuation of the Premises

 

Tenant, at its sole cost, shall have the right, at any time, to seek a reduction in the assessed valuation of the Premises or to contest any taxes or utility charges that are to be paid by Tenant. If Tenant seeks a reduction or contests any taxes or utility charges, the failure on Tenant’s part to pay the taxes or utility charges shall not constitute a default as long as Tenant complies with the provisions of this Section 9. Tenant may use any means allowed by statute to protest property tax assessments or utility charges as defined in this Section 9 as long as Tenant remains current as to all other terms and conditions of this Lease. If, during the protest period, any Lease defaults occur and the protested taxes or assessments have not been paid, then Tenant shall furnish to Landlord a surety bond issued by an insurance company qualified to do business in the state where the Premises are located. The amount of bond shall equal one hundred ten percent (110%) of the total amount of taxes in dispute. The bond shall hold Landlord and the Premises harmless from any damage arising out of the proceeding or contest and shall insure the payment of any judgment that may be rendered.

 

9.6            Landlord Not Required to Join in Proceedings or Contest Brought by Tenant

 

Landlord shall not be required to join in any proceeding or contest brought by Tenant unless the provisions of the law require that the proceeding or contest be brought by or in the name of Landlord or the owner of the Premises. In that case, Landlord shall join in the proceeding or contest or permit it to be brought in Landlord’s name as long as Landlord is not required to bear any cost or incur any liability. Tenant, on final determination of the proceeding or contest, shall immediately pay or discharge any decision or judgment rendered, together with all costs, charges, interest, and penalties incidental to the decision or judgment.

 

10.

 

BUILDING AND IMPROVEMENTS; TRADE FIXTURES

 

10.1          Building and Improvements

 

During the Term of this Lease provided Tenant is not in default, Tenant shall have the right to sell, transfer, convey or mortgage any or all of Tenant’s Property without Landlord’s consent. Tenant shall not demolish or remove the Improvements or any additions, alterations, modifications and replacements thereto unless Tenant immediately thereafter replaces the same with other Landlord-approved (if approval is required pursuant to Section 12.1 hereof) improvements of at least equal value and prior to such demolition or removal provides Landlord with reasonably adequate assurance of its timely replacement of the Improvements to be demolished or removed. All right, title, and interest of Tenant in the Improvements and all additions, alterations, modifications, and replacements thereto and thereof shall cease, expire, and vest exclusively in Landlord effective as of the expiration or any termination of this Lease.

 

10.2          Depreciation and Investment Tax Credit

 

During the Term of this Lease, Tenant alone shall be able to claim depreciation and investment tax credit for taxation purposes (or to permit its subtenants the right to such benefits)

 

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on any building improvements and fixtures and any changes, additions, and alterations therein and thereto and any replacements thereof.

 

10.3          Trade Fixtures

 

Notwithstanding anything contained herein to the contrary, Landlord acknowledges and agrees that the furniture, trade fixtures, equipment, machinery, furnishings, signs, and other articles of personal property (collectively, “Trade Fixtures”) now located or hereafter placed or installed in, on, or about the Premises shall be and remain the property of Tenant (except as hereinafter otherwise provided), Tenant shall have the right, at any time during the Term, at Tenant’s sole cost and expense, to install and affix in, to, or on the Premises, such Trade Fixtures for use in Tenant’s trade or business as Tenant, in its sole and absolute discretion, may deem advisable. Trade Fixtures that can be removed without structural damage to the Premises or any building or improvements thereon shall remain the property of Tenant and may be removed or replaced by Tenant at any time or times prior to the expiration or earlier termination of this Lease, provided Tenant is not in default under this Lease and as further set forth in Section 10.4 following. In the event of such removal, any damage occasioned to the Premises shall be fully repaired at the sole cost and expense of Tenant.

 

10.4          Removal of Trade Fixtures

 

At the expiration or earlier termination of this Lease, provided Tenant is not in default, Tenant, at its election, may remove (i) Tenant’s movable Trade Fixtures and other personal property not permanently affixed to the Premises; and (ii) Tenant’s signs (collectively, “Tenant’s Property”). All leasehold improvements, alterations and additions to the Premises, HVAC equipment, permanently attached lighting fixtures, electric switch boxes, plumbing, restroom fixtures, floor coverings, and other like items which are permanently affixed to the Premises, more commonly defined as fixtures, shall become the property of the Landlord immediately following the expiration, or any termination of this Lease. Any of Tenant’s Property not removed within sixty (60) days following the expiration or earlier termination of this Lease shall be deemed abandoned by Tenant and, at Landlord’s option, shall become the property of Landlord as owner of the real property to which they are affixed. Tenant, at its sole cost and expense, immediately shall repair any damage occasioned to the Premises by the removal of Tenant’s Property. Upon the expiration or earlier termination of this Lease, Tenant shall leave the Premises in a neat and clean condition, free of debris, normal wear and tear excepted.

 

10.5          Waiver of Landlord’s Lien

 

From time to time, some or all of Tenant’s Property may be financed or owned by someone other than Tenant. To the extent that any of Tenant’s Property is financed or owned by someone other than Tenant, Landlord agrees that such Tenant’s Property is not Landlord’s property no matter how the same is affixed to the Premises or used by Tenant and agrees to recognize the rights of the lender, owner or secured creditor or lessor (“Secured Party”) of Tenant’s Property. Landlord hereby waives any claim arising by way of any Landlord’s lien (whether created by statute or by contract, but excluding any judgment lien) or otherwise with respect to Tenant’s Property and agrees, if confirmation of said waiver is requested by Tenant, or Secured Party, to promptly sign and deliver to any such Secured Party a waiver of any lien

 

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Landlord may have on Tenant’s Property (“Landlord’s Lien Waiver”). If said confirmation is requested by Tenant or Secured Party, Landlord agrees to execute and deliver Landlord’s Lien Waiver within fifteen (15) days from Tenant’s or Secured Party’s request therefore or Landlord shall have conclusively deemed to have granted confirmation of Landlord’s Lien Waiver thereafter and Landlord agrees that tenant and any Secured Party may thereafter rely thereon and Landlord shall be estopped from raising any claim of lien on Tenant’s Property. Landlord also agrees that all of Tenant’s Property that is not subject to an interest from Secured Party shall be the property and remain the property of Tenant or Tenant’s assignee or transferee.

 

11.

 

MAINTENANCE OF THE PREMISES

 

11.1          Obligation to Maintain the Premises

 

During the Term of this Lease, Tenant shall, at its own expense, keep and maintain the entire Premises in good order and repair at least equal to the condition at the Commencement Date, including, but not limited to, the interior, exterior, foundations, floors, walls, roof, and structure of the building; and the sidewalks, curbs, walls, trash enclosures, landscaping with sprinkler system (if installed), light standards, and parking areas which are a part of the Premises. Tenant shall make such repairs and replacements as may be necessary. The Premises shall be returned to Landlord at the termination or expiration of this Lease in good condition at least equal to the condition at the Commencement Date, ordinary wear excepted. In the event of destruction of the Premises by fire or casualty, the condition of Premises upon termination of this Lease shall be governed by Section 14 or Section 15 respectively.

 

11.2          Obligation to Keep the Premises Clean

 

Tenant shall keep the Premises, including sidewalks adjacent to the Premises and loading area allocated for the use of Tenant, reasonably clean and free from rubbish and debris at all times. Tenant shall store all trash and garbage within the Premises and arrange for regular pickup and cartage of such trash and garbage at Tenant’s expense.

 

11.3          Compliance with Law

 

Tenant shall, at its sole expense, fully, diligently and in a timely manner comply with and shall cause the Premises to comply with all applicable laws, building codes, regulations, ordinances, rules, directives, covenants, or restrictions of record, the requirements of any applicable insurance underwriter or rating bureau, which relate in any manner to the Premises or any part thereof, including without limitation all conditions imposed upon the development of the Premises (collectively, “ Applicable Requirements ”), without regard to whether such Applicable Requirements are now in effect or become effective hereafter, including those which require the making of any structural, unforeseen or extraordinary changes, whether or not any of the same, involve a change in applicable law or requirements. Tenant shall, within 10 days after receipt of Landlord’s written request (which request shall be made not more often than annually, other than in connection with a sale or refinancing by Landlord as to the Premises in which case

 

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such request may be made at any time), provide Landlord with copies of all permits and other documents, and other information evidencing Tenant’s compliance with any Applicable Requirements specified by Landlord, and shall immediately upon receipt, notify Landlord in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Tenant or the Premises to comply with any Applicable Requirements.

 

12.

 

REPAIRS AND ALTERATIONS

 

12.1          Right to Make Alterations

 

(a)            At all times during the Term of this Lease, except as provided in Section 17, Tenant shall have the right to make alterations, additions, and improvements to the Premises, including the redevelopment of the Premises for a new or related use, as permitted by Section 8. In the event that Tenant shall perform construction, erection, modification, repair, or alteration of the Premises (“Work”), Tenant shall comply with the provisions of this Section 12. Except as specified in Sections 10.1 and 10.4, any Improvements and any alterations, additions, or replacements thereto which may be made or installed by Tenant shall remain upon the Premises and, at the termination or expiration of this Lease, shall be surrendered with the Premises to Landlord. It shall be a condition of the performance of any Work that: (i) the market value of the Premises shall not thereby be lessened, and (ii) all Work shall be done in a workmanlike manner with only high quality building materials and shall comply with all applicable building codes and other applicable laws, ordinances, regulations and orders of all federal, state, county and local governmental agencies having jurisdiction over the Premises and the requirements of any insurance policy required to be maintained by Tenant hereunder and with the orders, rules and regulations of the National Fire Protection Association or any other body exercising similar functions. The Work and all additions, alterations, substitutions and replacements of a value in excess of two hundred thousand dollars ($200,000.00) will be done under the supervision of a certified architect or engineer and shall be performed only by competent and qualified contractors duly licensed under the laws of the State of Texas pursuant to written contracts with such contractors. In the event that Work costing in excess of five hundred thousand dollars ($500,000.00) is to be performed, Landlord may require that Tenant’s contractor furnish performance and lien payment bonds issued by a licensed corporate surety on terms and conditions and in amounts satisfactory to Landlord.

 

12.2          Tenant Shall Not Render Premises Liable For Any Lien

 

(a)            Tenant shall have no right, authority, or power to bind Landlord, or any interest of Landlord in the Premises, or right of lien for the payment of any claim for labor, material, or for any charge or expense incurred to maintain, to repair, or to make alterations, additions, and improvements to the Premises. Tenant shall in no way be considered the agent of Landlord in the construction, erection, modification, repair, or alteration of the Premises. At all times during the Term, Tenant shall keep the Premises and all Improvements now or hereafter located on the Premises free and clear of all liens and claims of liens for labor, services, materials, supplies, or equipment performed on or furnished to the Premises. Notwithstanding the above, Tenant shall

 

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have the right to contest the legality or validity of any lien or claim filed against the Premises. No contest shall be carried on or maintained by Tenant after the time limits in the sale notice of the Premises for any such lien or claim or beyond 30 days after service on Tenant of written request from Landlord to remove such lien unless Tenant (i) shall have duly paid the amount involved under protest; (ii) shall have procured and recorded a lien release bond from a bonding company acceptable to Landlord in an amount not less than one and one-half (1-1/2) times the amount involved; or (iii) shall have procured a stay of all proceedings to enforce collection. Upon a final adverse determination of any contest, Tenant shall pay and discharge the amount of the lien or claim determined to be due, together with any penalties, fines, interest, cost, and expense which may have accrued, and shall provide proof of payment to Landlord. Should Tenant fail to pay and discharge or cause the Premises to be released from any such lien or claim of lien within 30 days after service on Tenant of written request from Landlord to do so, Landlord may pay, adjust, compromise and discharge any such lien or claim of lien on such terms and manner as Landlord may deem appropriate. In such event, Tenant shall, on or before the first day of the next calendar month following any such payment by Landlord, reimburse Landlord for the full amount paid by Landlord in paying, adjusting, comprising, and discharging such lien or claim of lien, including any attorneys’ fees and other costs expended by Landlord, together with interest as provided herein from the date of payment by Landlord to the date of repayment by Tenant.

 

(b)            Landlord shall, at any and all times during the Term, have the right to post and maintain on the Premises and to record as required by law any notice or notices of nonresponsibility provided for by the mechanics’ lien laws of the State of Texas. Tenant shall give Landlord written notice not less than 15 days’ prior to the time Landlord must file and post such notice of non-responsibility for its full force and effect under the law. In the event that Tenant shall perform the Work utilizing only its direct employees, which employees are not hired specially for the performance of the Work, and the value of materials used in performance of the Work, to the extent the same are not fully paid for in advance of delivery to the Premises, is less than twenty-five thousand dollars ($25,000.00), then Tenant need not give Landlord notice as required in this subsection (b).

 

13.

 

INDEMNITY AND INSURANCE

 

13.1          Indemnification

 

Tenant shall indemnify, defend, and protect Landlord, and hold Landlord harmless from any and all loss, cost, damage, expense, liability (including, without limitation, court costs and reasonable attorneys’ fees) incurred in connection with or arising at any time and from any cause whatsoever in or about the Premises, other than damages to the extent caused by the negligence or willful misconduct of Landlord or its agents and employees, including, without limiting the generality of the foregoing: (i) any default by Tenant in the observance or performance of any of the terms, covenants, or conditions of this Lease on Tenant’s part to be observed or performed: (ii) the use or occupancy of the Premises by Tenant or any person claiming by, through, or under Tenant; (iii) the condition of the Premises or any occurrence or happening on the Premises from any cause whatsoever, or (iv) any acts, omissions, or negligence of Tenant or any person

 

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claiming by, through, or under Tenant, or of the contractors, agents, servants, employees, or licensees of Tenant or any such person, in, on, or about the Premises, either prior to or during the Term (including, without limitation, any holdovers in connection therewith), including, without limitation, any acts, omissions, or negligence in the making or performance of any alterations. Tenant further agrees to indemnify and hold harmless Landlord, Landlord’s agents, from the against any and all loss, cost, liability, damage, and expense (including, without limitation, reasonable attorneys’ fees) incurred in connection with or arising from any claims by any persons by reason of injury to persons or damage to property occasioned by any use, occupancy, condition, occurrence, happening, act, omission, or negligence referred to in the preceding sentence. The provisions of this Section shall survive the expiration or sooner termination of this Lease with respect to any claims or liability occurring prior to such expiration or termination, and shall not be limited by reason of any insurance carried by Landlord and Tenant.

 

13.2          Exculpation of Landlord

 

Landlord shall not be liable to Tenant for any damage to Tenant or Tenant’s property for any cause, except for any damage to Tenant or Tenant’s property resulting from the willful acts and negligence of Landlord or its authorized representatives. Tenant waives all claims against Landlord for damage to person or property arising, or asserted to have arisen, for any reason, except that Landlord shall be liable to Tenant for any damage to Tenant resulting from the willful acts and negligence of Landlord and its authorized agents, provided that under no circumstances shall Landlord be liable for any injury to Tenant’s business or for any loss of income or profit. Subject to the foregoing provisions, Landlord agrees to, and does hereby indemnify and hold Tenant and its officers, directors, employees, agents and affiliates and their respective assets free and harmless against and from any and all liabilities, claims, losses, damages, and expenses (including attorneys’ fees and court costs) resulting from or arising out of Landlord’s failure to perform any of Landlord’s obligations under this Lease when and as required by the terms hereof.

 

13.3          Insurance Company Requirement

 

Insurance required by this Lease shall be issued by companies holding a general policyholder’s rating of at least A VII as set forth in the most current issue of Best’s Insurance Guide and authorized to do business in the state in which the Premises are located. If this publication is discontinued, then another insurance rating guide or service generally recognized as authoritative shall be substituted by Landlord.

 

13.4          Insurance Certificate Requirements

 

13.4.1                 Tenant shall deliver to Landlord certificates evidencing the existence and amounts of the insurance with loss payable clauses as required herein. No policy shall be cancelable or subject to reduction of coverage or other modification except after thirty (30) days’ prior written notice to Landlord.

 

13.4.2                 The insurance required to be maintained herein may be carried under blanket policies. The insurance shall provide for payment of loss jointly to Landlord and

 

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Tenant. A stipulated value or agreed amount endorsement deleting the co-insurance provision to the building policy shall be procured.

 

13.5          Minimum Acceptable Insurance Coverage Requirements

 

13.5.1                 Tenant shall, at Tenant’s expense, obtain and keep in full force during the Term of this Lease a policy of combined single limit bodily injury and property damage insurance insuring Tenant (with Landlord as an additional insured) against any liability arising out of the ownership, use, occupancy, or maintenance of the Premises and all of its appurtenant areas. The insurance shall be in an amount not less than Three Million and No/100 Dollars ($3,000,000.00) per occurrence. The policy shall provide blanket contractual liability coverage. In addition, Tenant shall, at Tenant’s expense, obtain and keep in full force during the Term of this Lease an umbrella liability policy in an amount not less, than Ten Million and No/100 Dollars ($10,000,000.00) in excess of primary insurance. The insurance required to be carried by Tenant hereunder shall be primary and not contributory to any other insurance maintained by Landlord.

 

13.5.2                 Tenant shall, at Tenant’s expense, obtain and keep in force during the Term of this Lease a policy or policies of insurance covering loss or damage to the Premises. The insurance shall be in an amount not less than the replacement value of the building(s) less slab, foundation, supports and other customarily excluded improvements against all perils of fire, extended coverage, vandalism, malicious mischief, and special extended perils (“All Risks,” as such term is used in the insurance industry). The policy shall include a code upgrade endorsement. In addition, Tenant shall, at Tenant’s expense, obtain and keep in force during the Term of this Lease a policy or policies of insurance covering loss or damage due to earthquake and/or flood, subject to reasonable and customary limits and provisions for Texas.

 

13.5.3                 Tenant shall also obtain and keep in force during the Term of this Lease a policy of Business Interruption insurance covering loss of income against all perils listed in Section 13.5.2, on an actual loss sustained basis for a period of recovery required (or that would have been required, subject to a maximum of twelve (12) months) to resume normal operations.

 

13.5.4                 Tenant shall also obtain and keep in force during the Term of this Lease a worker’s compensation policy, insuring against and satisfying Tenant’s obligations and liabilities under the worker’s compensation laws of the state in which the Premises are located, including Employer’s Liability insurance, in an amount of not less Five Hundred Thousand and No/100 Dollars ($500,000.00).

 

13.6          Additional Insureds

 

Tenant shall name as additional Insureds on all insurance, Landlord, Landlord’s successor(s), assignee(s), nominee(s), nominator(s), and agents with an insurable interest as follows:

 

[                            , ITS OFFICERS, DIRECTORS, AND ALL SUCCESSOR(S), ASSIGNEE(S), SUBSIDIARIES,

 

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CORPORATIONS, PARTNERSHIPS, PROPRIETORSHIPS, JOINT VENTURES, FIRMS, AND INDIVIDUALS AS HERETOFORE, NOW, OR HEREAFTER CONSTITUTED ON WHICH THE NAMED INSURED HAS THE RESPONSIBILITY FOR PLACING INSURANCE AND FOR WHICH SIMILAR COVERAGE IS NOT OTHERWISE MORE SPECIFICALLY PROVIDED.]

 

13.7          Mortgage Endorsement

 

If requested by Landlord, the policies of insurance required to be maintained hereunder shall bear a standard first mortgage endorsement in favor of any holder or holders of a first mortgage lien or security interest in the Premises (excluding the Improvements) (“Landlord’s Lender”) with loss payable to such holder or holders as their interests may appear.

 

13.8          Renewals, Lapses or Deficiencies

 

Tenant shall, at least thirty (30) days prior to the expiration of such policies, furnish Landlord with renewal certificates of insurance or renewal binders. Should Tenant fail to provide to Landlord the renewals or renewal binders, or in the event of a lapse or deficiency of any insurance coverage specified herein for any reason, Landlord may immediately replace the deficient insurance coverage with a policy of insurance covering the Premises of the type and in the limits set forth above. Upon written notice from Landlord of the placement of insurance, Tenant shall immediately pay to Landlord, as additional rent, an amount equal to the total cost of premiums and expense of such insurance placement. Tenant shall not do or permit to be done anything, which shall invalidate the insurance policies. If Tenant does or permits to be done anything which shall increase the cost of the insurance policies, then upon Landlord’s demand Tenant shall immediately pay to Landlord, as additional rent, an amount equal to the additional premiums attributable to any acts or omissions or operations of Tenant causing the increase in the cost of insurance.

 

13.9          Adjustment of Claims

 

Insurance claims by reason of damage to or destruction of any portion of the Premises shall be adjusted by Tenant, but Landlord and Landlord’s Lender shall have the right to join with Tenant in adjusting any such loss, and Tenant shall provide them both with ample notice and opportunity to do so. If the entire amount of any proceeds paid pursuant to any such claim shall not exceed $100,000 then such proceeds paid pursuant to any such claim shall be paid to Tenant by the recipient thereof but only upon certificates of Tenant, delivered to Landlord from time to time as the work of rebuilding, replacing and repairing the damage or destruction to the Premises required hereunder progresses, each such certificate describing such work for which Tenant is requesting payment, the cost incurred by or payment sought from Tenant in connection therewith and stating that Tenant has not theretofore received payment for such work. If the entire amount of any proceeds paid pursuant to any such claim shall exceed $100,000 then such proceeds paid pursuant to any such claim shall be held in a trust fund or construction disbursement escrow designated by Landlord, which may be administered by Landlord’s Lender or established at a place and with a trustee or administrator of Landlord Lender’s choosing, and disbursed to Tenant

 

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in a commercially reasonable manner that assures the lien free completion of the rebuilding, replacements and repairs; provided, however, that any insurance proceeds remaining after the repair, restoration, reconstruction and/or replacement of the damaged or destroyed buildings or improvements has been completed to the satisfaction of Landlord (the “ Remaining Insurance Proceeds ”) shall be allocated between Tenant and Landlord as follows: (i) that percentage of the Remaining Insurance Proceeds which equals the percentage of the unexpired portion of the Initial Term, at the time the repair, restoration, reconstruction and/or replacement of the damaged or destroyed buildings has been completed, shall belong to and be the sole property of Tenant; and that percentage of the Remaining Insurance Proceeds which equals the percentage of the expired portion of the Initial Term, at the time the repair, restoration, reconstruction and/or replacement of the damaged or destroyed buildings has been completed, shall belong to and be the sole property of Landlord. No payment of any proceeds shall be made to Tenant pursuant to this Section if any default shall have happened and be continuing under this Lease unless and until such default shall have been cured or removed; during the pendency of such default if this Lease has not been terminated, Landlord shall either hold such proceeds in an escrow or similar account for application subject to the provisions hereof or apply the same to the restoration of the Improvements or if the Lease has been terminated Landlord shall retain all such proceeds.

 

13.10        Separate Insurance

 

Tenant shall not obtain or carry separate insurance concurrent in form or contributing in the event of loss with that required in this Section 13 to be furnished by Tenant unless Landlord is included therein as a named insured, with loss payable as in this Lease provided. Tenant shall immediately notify Landlord whenever any such separate insurance is obtained and shall deliver to Landlord the policies or certificates evidencing the same.

 

13.11        Waiver of Subrogation

 

Without affecting any other rights or remedies hereunder, Landlord and Tenant each hereby release and relieve the other, and waive their right to recover damages against the other, for loss of damage to its respective property arising out of or incident to the perils required to be insured against herein and actually so insured. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable thereto. Landlord and Tenant agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Landlord or Tenant, as the case may be, so long as the insurance is not invalidated thereby.

 

14.

 

PARTIAL AND TOTAL DESTRUCTION OF THE PREMISES

 

14.1          Obligation to Repair and Restore

 

In the event any part or all of the Premises shall at any time during the Term of this Lease be damaged or destroyed, regardless of cause, Tenant shall give prompt notice to Landlord. Tenant shall substantially repair and restore the Premises to its original condition, including buildings and all other improvements on the Premises, as soon as circumstances permit. Tenant

 

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shall hold Landlord free and harmless from any and all liability of any nature whatsoever resulting from such damage or destruction, and such repairs and restoration. Tenant, and not Landlord, shall be responsible for paying for any cost of repairs and restoration in excess of the proceeds available from insurance policies procured by Tenant.

 

14.2          Termination of Lease If Repair or Restoration Not Feasible

 

Notwithstanding the provisions of Section 14.1, in the event any substantial portion or all of the Premises shall at any time during the Term of this Lease be damaged or destroyed, regardless of cause, and the Premises cannot be legally repaired or restored to substantially the same condition and use in existence prior to such damage or destruction (Tenant hereby agrees that it shall use its best efforts to so repair or restore the Premises, including, without limitation, applying for and prosecuting all necessary governmental approvals), Tenant shall have the right to terminate this Lease by giving Landlord sixty (60) days written notice of its intention to terminate the Lease, provided that (i) Tenant has maintained all insurance required by this Lease, (ii) the loan by Landlord’s Lender is paid in full prior to such termination and (iii) all insurance proceeds relating to the Premises (including the Improvements), including any excess coverage maintained by Tenant, shall be first applied to the payment in full of the loan by Landlord’s Lender, including, if necessary, the continuation of the debt service payments under said loan until a defeasance is permitted under said loan, and thereafter Tenant shall be entitled to and receive a portion of the remaining insurance proceeds in an amount equal to the product of (a) the remaining insurance proceeds after the loan by the Landlord’s Lender has been paid in full multiplied by (b) the percentage of the unexpired portion of the Initial Term at the time of such damage or destruction and Landlord shall be entitled to and receive a portion of the remaining insurance proceeds in an amount equal to the product of (c) the remaining insurance proceeds after the loan by the Landlord’s Lender has been paid in full multiplied by (d) the percentage equal to the expired portion of the Initial Term at the time of such damage or destruction. In the event of such damage or destruction and the Premises cannot be repaired or restored to substantially the same condition and use in existence prior to such damage or destruction and Tenant elects not to terminate this Lease as provided above, all insurance proceeds relating to the Premises (including the Improvements), including any excess coverage maintained by Tenant, shall be allocated between Tenant and Landlord as follows: Tenant shall be entitled to and receive a portion of the insurance proceeds for such damage or destruction in an amount equal to the product of (w) the insurance proceeds for such damage or destruction multiplied by (x) the percentage of the unexpired portion of the Initial Term at the time of such damage or destruction and Landlord shall be entitled to and receive a portion of the insurance proceeds for such damage or destruction in an amount equal to the product of (y) the insurance proceeds for such damage or destruction multiplied by (z) the percentage equal to the expired portion of the Initial Term at the time of such damage or destruction and Tenant shall not be entitled to any rent abatement.

 

14.3          Damage or Destruction During Last Five Years of Lease Term

 

Notwithstanding the provisions of Sections 14.1 and 14.2, in the event that any part or all of the Premises shall be damaged or destroyed, regardless of cause, during the last five (5) years of the Term, then Tenant may terminate this Lease and shall not be obligated to restore the Premises, provided that (i) Tenant has maintained at least all insurance required by this Lease,

 

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(ii) all insurance proceeds relating to the Improvements, including any excess coverage maintained by Tenant, shall be paid to Landlord prior to such termination and shall be retained by Landlord and (iii) the loan by Landlord’s Lender (defined in Section 13.7) is paid in full prior to such termination. Tenant is not otherwise entitled to any rent abatement during or resulting from any disturbance on or partial or total destruction of the Premises.

 

15.

 

CONDEMNATION

 

15.1          Condemnation Damages

 

In the event of the taking or conveyance of the whole or any part of the Premises by reason of condemnation by any public or independently in seeking damages before the condemning body, each party shall be entitled to the amount awarded respectively to each, except that Landlord and Tenant further agree as follows.

 

15.1.1                 Notwithstanding anything herein to the contrary, the compensation or damages awarded or payable for the taking of the Premises (including, without limitation, the Improvements) shall first be applied to the payment in full of the loan by Landlord’s Lender, including, if necessary, the continuation of the debt service payments under said loan until a defeasance is permitted under said loan;

 

15.1.2                 That percentage of the compensation or damages awarded or payable for the taking of improvements which equals the percentage of the expired portion of the Initial Term at the time of the taking shall belong to and be the sole property of Landlord and the percentage equal to the unexpired portion of the Initial Term at the time of the taking shall belong to and be the sole property of Tenant.

 

15.1.3                 Any portion of the award attributable to Tenant’s furniture, fixtures, and equipment installed in the Premises in accordance with this Lease which are to remain in the Premises as a result of such taking shall belong to Tenant.

 

15.1.4                 All compensation or damages awarded or payable for the taking by eminent domain of any land that is part of the Premises shall be paid to and be the sole property of Landlord free and clear of any claim of Tenant or any person claiming rights to the Premises through or under Tenant.

 

15.1.5                 For purposes of this Section any compensation or damages awarded or payable because of the taking by eminent domain of all or any portion of the Premises shall be allocated between the land and any improvements so taken in accordance with any allocation made by the court in any eminent domain proceeding. If the court does not make any such allocation, or if Landlord should voluntarily convey title to all or a portion of the Premises pursuant to section 15.1.6 below, then that portion of any compensation or damages awarded which is equal to the then fair market value of any land within the Premises that is taken by eminent domain (the “Land Value”) shall be deemed compensation or damages awarded for the taking of such land, and the remainder of any compensation or damages awarded shall be deemed to be compensation or

 

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damages awarded for the taking of any improvements constructed or located on the Premises taken by eminent domain. The Land Value shall be determined as though the Premises were not subject to this Lease or any other lease or encumbrance and shall be established as follows:

 

(i)             Landlord and Tenant shall attempt in good faith to agree on the Land Value. If Landlord and Tenant do not agree on the Land Value within ten business days after such taking, the Land Value shall be determined by appraisal in accordance with paragraphs (ii) through (iv) below.

 

(ii)            Within ten business days after any taking, each party hereto shall deliver to the other a written notice appointing as such party’s appraiser a disinterested person with at least 10 years’ experience as a real estate appraiser, who shall be a member of a recognized society of real estate appraisers and shall have had experience in appraising industrial properties in Houston, Texas and its environs.

 

(iii)           Within ten business days after the appointment of the second of the two appraisers, the two appraisers shall jointly appoint a third appraiser whose qualifications meet the standards set forth above.

 

(iv)           Within 30 days after the appointment of the second appraiser, the first two appraisers shall make their respective determinations of the Land Value and shall submit their appraisal reports to Landlord and Tenant.

 

The Land Value shall be conclusively deemed to be the arithmetic average of the two fair market values shown in the appraisal reports submitted by the first two appraisers; provided, however, that if within 30 days after the appointment of the second appraiser only one appraisal report shall have been submitted, the Land Value shall be conclusively deemed to the fair market value shown in such appraisal report; and provided further that if two appraisal reports are submitted within 30 days after the appointment of the second appraiser and if the difference between the two appraised values is greater than 10% of the higher appraised value, then upon the written request of either Landlord or Tenant made within five business days after the submission of the second appraisal report, the third appraiser shall be instructed to select as the Land Value one of the appraised values determined by the first two appraisers. The value so selected shall be conclusively deemed to be the Land Value.

 

15.1.6                       Landlord reserves the right in its sole discretion to voluntarily convey title to all or a portion of the Premises to a public or quasi-public agency or entity in lieu of and under threat by such agency or entity to take the same by eminent domain proceedings, provided that Landlord shall give Tenant prior notice of intent or willingness to voluntarily convey title. Such voluntary conveyance by Landlord of title to all or a portion of the Premises to a public or quasi-public agency or entity in lieu of and under threat by such agency or entity to take the same by eminent domain proceedings shall be considered a taking of title to all or such portion of the Premises under the power of eminent domain subject to the provisions of this Section 15.

 

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15.2          Termination of Lease Due to Condemnation

 

In the event that the Condemnation materially adversely affects the use, operation or economic viability of the Premises, Tenant may terminate the Lease by giving Landlord sixty (60) days’ written notice of its intention to terminate the Lease after receiving notice of the Condemnation from the condemning authority, provided the loan by Landlord’s Lender is paid in full prior to such termination. The effective date of the termination shall be the actual date of such taking. In the event of termination, the rent for the last month of Tenant’s occupancy shall be prorated and Landlord shall refund to Tenant any rent paid in advance and Tenant shall thereupon be released from its obligation to pay rent.

 

16.

 

ASSIGNMENT AND SUBLETTING

 

16.1          Tenant’s Right of Assignment and Subletting

 

Except as otherwise provided in this Section 16.1, Tenant shall not voluntarily or by operation of law assign its interest in this Lease or in the Premises, or sublease all or any substantial part of the Premises, or allow any other person or entity to occupy all or use any substantial part of the Premises, without first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld. Subject to Section 16.4, Tenant, without the consent of Landlord, shall be permitted to assign its interest in this Lease or sublease all or any substantial part of the Premises to an affiliate of Tenant or to any other entity who acquires all or, substantially all of Tenant’s assets. Any assignment or sublease of all or any substantial part of the Premises without Landlord’s consent (if so required) shall be voidable and, at Landlord’s election, shall constitute a default. It shall not be unreasonable for Landlord to withhold its consent to any proposed assignment or subletting if the proposed transferee does not meet certain criteria, including, but not limited to, the transferee’s financial condition, the nature, quality, and character of the transferee, the identity or business character of the transferee, the nature of the use and occupancy and the transferee’s business experience. It shall be a condition of any transfer of Tenant’s interest under this Lease that Tenant provide Landlord with the written consent of all guarantors of Tenant’s, obligations under this Lease (collectively, the “Guarantors”) to such transfer and the Guarantors’ written acknowledgement of their continuing liability under the guarantees and Lease. In connection with any permitted transfer hereunder, Tenant may provide Landlord with additional direct Guarantor(s) affiliated with such proposed transferee, provided that neither Tenant nor any Guarantor shall be released of their respective obligations under this Lease as the result of any such transfer.

 

16.2          Landlord’s Option to Preserve Subtenancies

 

In the event of Tenant’s surrender of this Lease or the termination of this Lease in any other manner, Landlord may, at its option, either terminate any or all subtenancies or succeed to the interest of Tenant as sublandlord thereunder. No merger shall result from Tenant’s sublease of the Premises under this Section, Tenant’s surrender of this Lease, or the termination of this Lease in any other manner.

 

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16.3          Tenant’s Assignment of All Rent from Subletting as Security for Tenant’s Obligation

 

Intentionally Omitted.

 

16.4          Continuing Obligation of Tenant

 

No transfer permitted by this Section 16 shall release Tenant or change Tenant’s primary liability to pay the rent and to perform all other obligations of Tenant under this Lease, nor shall any transfer release any Guarantor or change any Guarantor’s liability to pay rent or perform any other obligation of Tenant under this Lease. Landlord’s acceptance of rent from any other person is not a waiver of any provision of this Section. Consent to one transfer is not a consent to any subsequent transfer. If Tenant’s transferee defaults under this Lease, Landlord may proceed directly against Tenant without pursuing remedies against the transferee. Landlord may consent to subsequent assignments or modifications of this Lease by Tenant’s transferee, without notifying Tenant or obtaining its consent and without relieving Tenant’s liability under this Lease. No assignment or sublease made as permitted by this Section 16 shall affect or reduce any of the obligations of Tenant hereunder, and all such obligations shall continue in full effect as obligations of a principal and not as obligations of a guarantor or surety, to the same extent as though no assignment or subletting had been made. No sublease or assignment made as permitted by this Section 16 shall impose any obligations on Landlord or otherwise affect any of the rights of Landlord under this Lease. Tenant shall, within 10 days after the execution and delivery of any such assignment, deliver a conformed copy thereof to Landlord, and within 10 days after the execution and delivery of any such sublease, Tenant shall give notice to Landlord of the existence and term thereof, and of the name and address of the sublessee thereunder.

 

16.5          Fees and Costs with Regard to Proposed Assignment or Sublease

 

If Tenant requests Landlord to consent to a proposed assignment or sublease, Tenant shall pay to Landlord, whether or not consent is ultimately given, Landlord’s reasonable attorneys’ fees and other costs incurred in connection with each such request.

 

16.6          Landlord’s Right of Assignment

 

Landlord shall be free at all times, without need of consent or approval by Tenant, to assign its interest in this Lease and/or to convey fee title to the Premises. Each conveyance by Landlord of Landlord’s interest in the Lease or the Premises prior to expiration or termination hereof shall be subject to this Lease and shall relieve the grantor of any further obligations or liability as Landlord, and Tenant shall look solely to Landlord’s successor in interest for all future obligations of Landlord. Tenant hereby agrees to attorn to Landlord’s successors in interest, whether such interest is acquired by sale, transfer, foreclosure, deed in lieu of foreclosure, or otherwise. The term “Landlord” as used in this Lease, so far as covenants and obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner at the time in question of the fee title of the Premises. Without further agreement, the transferee of such title shall be deemed to have assumed and agreed to observe and perform any and all obligations of Landlord hereunder during its ownership of the Premises.

 

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17.

 

DEFAULT

 

17.1          Default

 

Any of the following occurrences or acts shall constitute an event of default (“Event of Default”) under this Lease: (i) if Tenant, at any time during the continuance of this Lease (and regardless of the pendency of any bankruptcy, reorganization, receivership, insolvency or other proceedings, in law, in equity, or before any administrative tribunal, which have or might have the effect of preventing Tenant from complying with the terms of this Lease), shall (a) fail to make any payment of Monthly Base Rent, additional rent or other sum herein required to be paid by Tenant when due, and Tenant shall fail to make any such payment within ten (10) days of written notice to Tenant of such default, provided, however, that after Tenant has failed to timely make such payment on three (3) occasions during the preceding five (5) year period during the term of this Lease, said ten (10) day period shall be reduced to five (5) days for any monetary default thereafter occurring after such payment has become due; or (b) fail to observe or perform any other provision hereof for thirty (30) days after Landlord shall have delivered to Tenant notice of such failure (provided that Landlord shall in no event be required to deliver a notice to Tenant in connection with Tenant’s failure to provide a notice to Landlord as required under this Lease) (further provided, that in the case of any default referred to in this clause (b) which cannot with diligence be cured within such thirty (30) day period, if Tenant shall proceed promptly to cure the same and thereafter shall prosecute the curing of such default with diligence, then the time within which such failure may be cured shall be extended for such period not to exceed an additional sixty (60) days as may be necessary to complete the curing of the same with diligence; provided, however, that Tenant shall not be entitled to cure such breach or default that is not susceptible to cure or that is non-curable according to the terms hereof); or (ii) the abandonment or vacation of the Premises by Tenant; or (iii) any voluntary or involuntary assignment, transfer, encumbrance or subletting of this Lease in violation of the provisions hereof; or (iv) if Tenant shall file a petition in bankruptcy or for reorganization or for an arrangement pursuant to any present or future federal or state bankruptcy law or under any similar federal or state law, or shall be adjudicated a bankrupt or insolvent or shall make an assignment for the benefit of its creditors or shall admit in writing its inability to pay its debts generally as they become due, or if a petition or answer proposing the adjudication of Tenant as a bankrupt or its reorganization under any present or future federal or state bankruptcy law or any similar federal or state law shall be filed in any court and such petition or answer shall not be discharged or denied within 90 days after the filing thereof; or (v) if a receiver, trustee or liquidator of Tenant of all or substantially all of the assets of Tenant or of the Premises shall be appointed in any proceeding brought by Tenant, or if any such receiver, trustee or liquidator shall be appointed in any proceeding brought against Tenant and shall not be discharged within 90 days after such appointment, or if Tenant shall consent to or acquiesce in such appointment.

 

17.2          Remedies

 

Upon the occurrence of any Event of Default, and without the giving of any additional notice not otherwise required hereunder or by law, Landlord may exercise the following rights

 

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and remedies in addition to all other rights and remedies provided by law or equity, either cumulatively or in the alternative:

 

(a)            Terminate this Lease by giving notice thereof to Tenant in which event Tenant shall immediately vacate and deliver possession of the Premises to Landlord and if Tenant fails to do so Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent or other sums owed under this Lease enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises, or any part thereof, by force, if necessary, without being liable for prosecution or any claim of damages therefor, and Tenant hereby agrees to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Premises on satisfactory terms or otherwise, including (i) all reasonable expenses necessary to relet the Premises which shall include the cost of renovating, repairing and altering the Premises for a new tenant or tenants, advertisements and brokerage fees and (ii) any increase in insurance premiums caused by the vacancy of the Premises. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above.

 

(b)            Enter upon and take possession of the Premises and expel or remove Tenant or any other person who may be occupying the Premises, or any part thereof; without having any civil or criminal liability therefor and, without terminating this Lease, Landlord may (but shall be under no obligation to, except in connection with Landlord’s duty, if any, to mitigate its damages) relet the Premises or any part thereof for the account of Tenant, in the name of Tenant or Landlord or otherwise, without notice to Tenant for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease) and on such conditions (which may include concessions or free rent) and for such uses as Landlord in its sole and absolute discretion may determine and Landlord may collect and receive any rents payable by reason of such reletting; and Tenant agrees to pay Landlord on demand all reasonable expenses necessary to relet the Premises which shall include the costs of renovating, repairing and altering the Premises for a new tenant or tenants, advertisements and brokerage fees, and Tenant further agrees to pay Landlord on demand any deficiency that may arise by reason of such reletting. Landlord shall not be responsible or liable for any failure to relet the Premises or any part thereof or for any failure to collect any rent due upon any such reletting. No such re-entry or taking of possession of the Premises by Landlord shall be construed as an election on Landlord’s part to terminate this Lease unless a notice of such termination is given to Tenant pursuant to Section 17.2(a) above.

 

(c)            Enter upon the Premises without having any civil or criminal liability therefor, and do whatever Tenant is obligated to do under the terms of this Lease and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in thus effecting compliance with Tenant’s obligations under this Lease, and Tenant further

 

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agrees that Landlord shall not be liable for any damages resulting to Tenant from such action (Tenant hereby WAIVING any claim against Landlord therefor), EVEN IF CAUSED OR ALLEGED TO BE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF LANDLORD OR ANYONE FOR WHOM LANDLORD IS RESPONSIBLE EXCEPT IF CAUSED BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF LANDLORD OR ANYONE FOR WHOM LANDLORD IS RESPONSIBLE.

 

No repossession of or re-entering on the Premises or any part thereof pursuant to this Section 17.2 and no reletting of the Premises or any part thereof pursuant to this Section 17.2 shall relieve Tenant or any guarantor of its liabilities and obligations hereunder, all of which survive such repossession or re-entering.

 

Landlord shall have the right and option, upon the occurrence and during the continuance of an event of default hereunder, to change the locks and other security devices within or about the Premises without notice to Tenant. Landlord shall have no obligation to provide Tenant access to the Premises subsequent thereto or provide Tenant keys therefor or to post any notices of any kind on the door to the Premises.

 

No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. In addition to other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by applicable law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the covenants, conditions or provisions of this Lease, or to a decree compelling performance of any of the covenants, conditions or provisions of this Lease, or to any other remedy allowed to Landlord at law or in equity.

 

Notwithstanding the preceding provisions of this Section 17.2, Tenant shall not be entitled to receive, nor shall Landlord be obligated to furnish, any notice or opportunity to cure provided for in the preceding provisions of this Section 17.2 with respect to an event of default, and Landlord may proceed to exercise any or all of its rights and remedies in respect of such event of default without furnishing any notice or opportunity to cure, if the same or similar type of event of default shall have occurred two (2) or more times during the immediately preceding twelve (12) month period.

 

In connection with the exercise by Landlord of its rights and remedies in respect of any event of default on the part of Tenant, to the extent (but no further) that Landlord is required by applicable Texas law to mitigate damages, or to use efforts to do so, and such requirement cannot be lawfully and effectively waived (it being the intention of Landlord and Tenant that such requirements be and are hereby WAIVED to the maximum extent permitted by applicable law), Tenant agrees in favor of Landlord that Landlord shall not be deemed to have failed to mitigate damages, or to have used the efforts required by law to do so, because:

 

(1)            Landlord leases other space which is vacant prior to re-letting the Premises;

 

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(2)            Landlord refuses to relet the Premises to any affiliate of Tenant, or any principal of Tenant, or any affiliate of such principal (for purposes hereof, “affiliate” shall mean and refer to any person or entity controlling, under common control with, or controlled by, the party in question);

 

(3)            Landlord refuses to relet the Premises to any person or entity whose creditworthiness Landlord in good faith deems unacceptable;

 

(4)            Landlord refuses to relet the Premises to any person or entity because the use proposed to be made of the Premises by such prospective tenant of a type and nature inconsistent with that of the other tenants of the Premises or because such use would, in the good faith opinion of Landlord, impose unreasonable or excessive demands upon the Premises’ systems, equipment or facilities;

 

(5)            Landlord refuses to relet the Premises to any person or entity, or any affiliate of such person or entity, who has been engaged in litigation with, or who has threatened litigation against, Landlord or any of its affiliates, or whom Landlord in good faith deems to be unreasonably or excessively litigious;

 

(6)            Landlord refuses to relet the Premises because the tenant or the terms and provisions of the proposed lease are not approved by the holders of any liens or security interests in the Premises or any part thereof, or would cause Landlord to breach or be in default of, or to be unable to perform any of its covenants under, any agreements between Landlord and any third party;

 

(7)            Landlord refuses to relet the Premises because the proposed tenant is unwilling to execute and deliver Landlord’s standard lease form without tenant-oriented modifications (it being agreed that this Lease or a lease in form substantially similar to this Lease shall be construed as “Landlord’s standard lease form”) or such tenant requires improvements to the Premises to be paid at Landlord’s cost and expense; or

 

(8)            Landlord refuses to relet the Premises to a person or entity whose character or reputation, or the nature of whose business, Landlord in good faith deems unacceptable;

 

and it is further agreed that each and all of the grounds for refusal set forth in clauses (1) through (8), both inclusive, of this sentence are reasonable grounds for Landlord’s refusal to relet the Premises, or (as to all other provisions of this Lease) for Landlord’s refusal to issue any approval, or take any other action, of any nature whatsoever under this Lease.

 

In the event the waiver set forth in the preceding sentence shall be ineffective, Tenant further agrees in favor of Landlord, to the maximum extent to which it may lawfully and effectively do so, that the following efforts to mitigate damages if made by Landlord (and without obligating Landlord to render such efforts) shall be conclusively deemed reasonable if: Landlord places the Premises on its inventory of available space; Landlord makes such inventory available to brokers

 

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who request same; and Landlord shows the Premises to prospective tenants (or their brokers) who request to see it.

 

17.3          Landlord’s Self-Help

 

If Tenant fails to perform any affirmative duty or obligation under this Lease within ten (10) business days after written notice (or in case of an emergency, without notice), the Landlord may, at its option, perform such duty or obligation on Tenant’s behalf, including the obtaining of reasonably required bonds, insurance policies, or governmental permits, licenses and approvals. The costs and expenses of any such performance by Landlord shall be due and payable by Tenant as additional rent upon Landlord’s written demand. If any check given to Landlord by Tenant shall not be honored by the bank upon which it is drawn, Landlord, at its option, may require that all future payments by Tenant to Landlord be made by bank cashier’s check or wire transfer of immediately available funds.

 

17.4          Intentionally Omitted

 

17.5          No Waiver

 

The waiver by Landlord of any breach by Tenant of any of the provisions of this Lease shall not constitute a continuing waiver or a waiver of any subsequent breach by Tenant either of the same or a different provision of this Lease. No waiver, benefit, privilege or service voluntarily given or performed by either party shall give the other any contractual right by custom, estoppel or otherwise. The subsequent acceptance of rent pursuant to this Lease shall not constitute a waiver of any preceding default by Tenant other than default in the payment of the particular rental payment so accepted, regardless of Landlord’s knowledge of the preceding breach at the time of accepting the rent, nor shall acceptance of rent or any other payment after termination constitute a reinstatement, extension or renewal of the Term or revocation of any notice or other act by Landlord.

 

17.6          Late Charge

 

If Tenant fails to pay within five (5) days of the due date of any payment of rent or other charges which Tenant is obligated to pay to Landlord under this Lease, there shall be a late charge, immediately payable by Tenant as additional rent, in the amount of one percent (1%) of each such obligation. Landlord and Tenant agree that this sum is reasonable to compensate Landlord for accounting and administrative expenses incurred by Landlord. In addition to the late charge, any and all rent or other charges which Tenant is obligated to pay to Landlord under this Lease which are unpaid shall bear interest at an annual rate of the lesser of (a) the highest nonusurious rate permitted by law and (b) eighteen percent (18%) from the date said payment was due until paid, said interest to be payable by Tenant as additional rent. Landlord and Tenant agree that this sum is reasonable to compensate Landlord for the loss of the use of funds.

 

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17.7          Multiple Remedies. No Waiver

 

No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity or by statute or elsewhere provided in this Lease. The failure of Landlord to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or relinquishment thereof for the future. A receipt by Landlord of any Monthly Base Rent, any additional rent or any other sum payable hereunder with knowledge of the breach of any covenant or agreement contained in this Lease shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. In addition to other remedies provided in this Lease, except as expressly otherwise provided, Landlord shall be entitled, to the extent permitted by applicable law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the covenants, agreements, conditions or provision of this Lease, or to a decree compelling performance of any of the covenants, agreements, conditions or provisions of this Lease, or to any other remedy allowed to Landlord at law or in equity.

 

17.8          Tenant Waiver

 

Tenant hereby waives and surrenders for itself and all those claiming under it, including creditors of all kinds, (i) any right and privilege which it or any of them may have under any present or future constitution, statute or rule of law to redeem the Premises or to have a continuance of this Lease for the term hereby demised after termination of Tenant’s right or occupancy by order or judgment of any court or by any legal process or writ, or under the terms of this Lease, or after the termination of the term of this Lease as herein provided, and (ii) the benefits of any present or future constitution, statute or rule of law which exempts property from liability for debt or for distress for rent.

 

17.9          Default by Landlord

 

Landlord shall be in default if Landlord fails to perform any provision of this Lease required of it and the failure is not cured within thirty (30) days after notice has been given to Landlord. If, however, the failure cannot reasonably be cured within the cure period, Landlord shall not be in default of this Lease if Landlord commences to cure the failure within the cure period and diligently and in good faith continues to cure the failure. Notices given under this Section 17.9 shall specify the alleged breach and the applicable Lease provisions. If Landlord shall at any time default beyond the appl